Case Name: The OHIO CASUALTY INSURANCE CO., Plaintiff-Appellant, v. FORD MOTOR COMPANY, Defendant-Appellee
Court: United States Court of Appeals for the Sixth Circuit
Jurisdiction: United States
Decision Date: 1974-08-23
Citations: 502 F.2d 138
Docket Number: No. 73-1435
Parties: The OHIO CASUALTY INSURANCE CO., Plaintiff-Appellant, v. FORD MOTOR COMPANY, Defendant-Appellee.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 502
Pages: 138–144

Head Matter:
The OHIO CASUALTY INSURANCE CO., Plaintiff-Appellant, v. FORD MOTOR COMPANY, Defendant-Appellee.
No. 73-1435.
United States Court of Appeals, Sixth Circuit.
Submitted Dec. 7, 1974.
Decided Aug. 23, 1974.
Paul C. Weick, Circuit Judge, dissented and filed opinion.
Charles N. Myers, Jr., Hamilton, Kramer, Myers & Summers, Columbus, Ohio, on brief, for plaintiff-appellant.
Vorys, Sater, Seymour & Pease, Edgar A. Strause, Columbus, Ohio, on brief, for defendant-appellee.
Before WEICK, McCREE, and MILLER, Circuit Judges.

Opinion:
McCREE, Circuit Judge.
This appeal requires us to decide whether, under Ohio law, the six-year statute of limitations, governing actions upon contracts, express or implied, or the two-year statute of limitations, governing actions for bodily injury or injury to personal property, applies in an action for indemnification against an automobile manufacturer brought by an insurance company, subrogated to the rights of its insured, who was compelled to respond to third persons for personal injury and property damage allegedly caused by a defect in one of the manufacturer's vehicles. The district court held that the two-year statute of limitations applied and dismissed the complaint on defendant's motion. We determine that the six-year statute of limitations is applicable and reverse.
Under Ohio decisional law, which is applicable in this diversity case, "The period of limitation within which an action must be commenced is determined from the nature of the demand and the ground of the action as set out in the pleadings." State ex rel. Lien v. House, 144 Ohio St. 238, 58 N. E.2d 675 (1944). See also Ohio Casualty Insurance Co. v. Capolino, 44 O.L. Abs. 564, 65 N.E.2d 287, 289 (1945).
The complaint alleged that the brakes on the insured's truck failed because of a defect, and that the truck went out of control and caused extensive personal injury and property damage to third persons; that Ford Motor Company, the manufacturer, was "primarily liable" for all damages; and that appellant is entitled to indemnification for payments it made in settlement of damage claims when Ford failed to act after having been given notice and an opportunity to defend.
All the settlement payments were made more than two years before the complaint was filed, but, with one exception, all were made within six years of the commencement of the action. Although the parties disagree about which statute of limitations applies, they agree that the applicable statute began to run when each payment was made. Appellant's Brief at 6; Appellee's Brief at 24. See 28 O.Jur.2d, Indemnity § 2. See generally 20 A.L.R. 2d 925. Of course, the insurance company, as subrogee, has no greater rights against Ford — no longer time in which to commence an action — than the insured would have had if he, instead of the insurance company, had paid the claims and sued appellee for indemnification. 50 O.Jur.2d, Subrogation § 26.
The "ground of the action pleaded," see State ex rel. Lien v. House, supra, is "[if] one secondarily liable for a wrongful injury is compelled to respond in damages to the injured person, he may recoup his loss, upon an implied contract of indemnity, from the one who actually created the danger or perpetrated the wrong." 28 O.Jur.2d Indemnity § 12 (emphasis added). This rule applies not only when a formal judgment is rendered, Maryland Casualty Co. v. Frederick, 142 Ohio St. 605, 53 N.E.2d 795 (1944), but also when the party vicariously or secondarily liable is compelled to settle a claim, after giving notice and an opportunity to defend to the party primarily liable. Globe Indemnity v. Schmitt, 142 Ohio St. 595, 53 N.E.2d 790 (1944). And an action for indemnification based upon primary and secondary liability may be brought in Ohio whether or not there exists in fact a contractual relationship between the parties. Burns v. Pennsylvania Rubber & Supply Co., 117 Ohio App. 12, 189 N. E.2d 645, 22 Ohio Op.2d 451 (1961). See also Aetna Casualty & Surety Co. v. Buckeye Union Casualty Co., 157 Ohio St. 385, 105 N.E.2d 568 (1952).
The cause of action for indemnification based on primary and secondary liability is considered to be an action arising under an "implied contract." Maryland Casualty Co. v. Frederick, supra; 28 O.Jur.2d Indemnity § 12. And the Ohio courts have held that an action arising under an "implied contract" for indemnification is governed by the six-year statute of limitations. Poe v. Dixon, 60 Ohio St. 124, 54 N.E. 86 (1899); Ohio Casualty Insurance Co. v. Capolino, 44 O.L.Abs. 564, 65 N.E.2d 287 (1945); 28 O.Jur.2d Indemnity § 19, p. 326. We conclude that these authorities require reversal of the district court's decision.
We are not persuaded by appellee's argument that this action is governed by the two-year statute of limitations because the "real purpose" of the action is to recover for personal injury and property damage. See, e. g., Andrianos v. Community Traction Co., 155 Ohio St. 47, 97 N.E.2d 549 (1951); Mahalsky v. The Salem Tool Company, 461 F.2d 581 (6th Cir. 1972); Tomle v. New York Central Railroad, 234 F.Supp. 101 (N. D.Ohio 1964). These cases were actions to gain compensation for personal injury or property damage. Here, the "real purpose" of the action is not to recover compensation for damage incurred in the automobile accident but, instead, to obtain indemnification for monies paid to the injured third persons who suffered the damage. This difference is dispositive. In Ohio Casualty Insurance Co. v. Capolino, supra, for example, the plaintiff insurer agreed to indemnify an employer for any loss caused by the negligence of his employees acting in the scope of their employment. Following a motor vehicle accident involving the negligence of employee Capolino, the insurance company paid a damage claim to an injured third person and then proceeded to bring an action against Capolino for indemnification on the theory that he was primarily liable. The court held the action was governed by the six-year statute of limitations for implied contracts and was not barred by the two-year limitations period governing actions for personal injury or property damage. See also Schulz v. Allstate Ins. Co., 17 Ohio Misc. 83, 244 N.E.2d 546 (1968). As in this case, the underlying basis for the implied contract of indemnification was the payment of a tort claim for personal injury and property damage arising from an automobile accident.
We reject appellee's argument that the six-year statute of limitations governs an action for indemnification only when there is contractual privity between the parties. Although the court in Capolino mentioned the contractual relations between the negligent employee and the insured employer as one basis for the "implied contract" of indemnification, the court also relied upon the broader rule that "A person who, without fault, has become subject to tort liability for the unauthorized act and wrongful conduct of another, is entitled to indemnity from the other for expenditures properly made in the discharge of such liability." Ohio Casualty Insurance Co. v. Capolino, supra 65 N.E.2d at 289 ,quoting Restatement of Restitution, p. 418. We have found nothing in Ohio law indicating that, for purposes of determining the applicable statute of limitations in indemnification actions based on primary and secondary liability, a distinction should be drawn between eases involving parties in privity of contract and those where the parties in fact have no contractual relationship. In either case, the reason for recognizing an "implied contract" of indemnification is not that an agreement to indemnify is implied in fact but, instead, that equitable principles of fairness require the party primarily liable to compensate a party only secondarily or vicariously liable who has been compelled to pay damages that the former should in equity bear. In either case, the existence or non-existence of privity of contract is immaterial in determining the applicable statute of limitations. Cf. Perry County v. Newark S. & R. Co., 43 Ohio St. 451, 2 N.E. 854 (1885); Hansen v. City of New York, 43 Misc.2d 1048, 252 N.Y.S.2d 695 (1964).
Accordingly, we hold that under Ohio law, the six-year statute of limitations applies to an action for indemnification arising where a party secondarily liable has been compelled to pay damages that should have been borne by a party primarily liable, even if the parties are not in fact in privity of contract.
Reversed and remanded for proceedings not inconsistent with this opinion.
. Ohio Revised Code § 2305.07.
. Ohio Revised Code § 2305.10.