Price v. Shell Oil Co.

• Decision Date: 25 March 1970
• Docket Number: S.F. 22694
• Citation: 85 Cal.Rptr. 178,466 P.2d 722,2 Cal.3d 245
• Court: California Supreme Court
• Parties: , 466 P.2d 722 Merton PRICE, Plaintiff and Respondent, v. SHELL OIL COMPANY, Defendant, Cross-Complainant and Appellant, Flying Tiger Line, Inc., Cross-Defendant and Respondent, Pacific Employers Insurance Company, Intervener and Respondent.

Page 178

85 Cal.Rptr. 178

2 Cal.3d 245, 466 P.2d 722

Merton PRICE, Plaintiff and Respondent, v. SHELL OIL COMPANY, Defendant, Cross-Complainant and Appellant Flying Tiger Line, Inc., Cross-Defendant and Respondent Pacific Employers Insurance Company, Intervener and Respondent.

S.F. 22694.

Supreme Court of California,

In Bank.

March 25, 1970.

O'Connor, Cohn & Lynch and Cyril Viadro, San Francisco, for defendant, cross-complainant and appellant.

Werchick & Werchick, Arne Werchick and Jack H. Werchick, San Francisco, for plaintiff and respondent.

Bledsoe, Smith, Cathcart, Johnson & Rogers and Robert A. Seligson, San Francisco, for cross-defendant and respondent.

No appearance for intervener and respondent.

SULLIVAN, Justice.

We hold in this case that the doctrine of strict liability in tort which we have heretofore made applicable to sellers of personal property is also applicable to bailors and lessors of such property. As appears Infra, we find substantial evidence in the record that the lessor in the present matter falls within the reach of the doctrine. We therefore affirm the judgment entered on the verdicts in favor of plaintiff Merton Price and plaintiff in intervention Pacific Employers Insurance Company (Pacific) and against defendant Shell Oil Company (Shell). On a secondary issue, presented by Shell's cross-complaint against cross-defendant Flying Tiger Line, Inc. (Flying Tiger) we hold that Shell's aforementioned liability as lessor does not fall within the indemnity provisions of its lease so as to impose on Flying Tiger an obligation to indemnify. We therefore affirm the judgment of nonsuit in favor of Flying Tiger dismissing Shell's cross-complaint for indemnity. In sum, we uphold the judgments of the trial court.

Plaintiff is an aircraft mechanic employed by Flying Tiger. In 1958 Flying Tiger leased from defendant Shell a gasoline tank truck with a movable ladder mounted upon the tank for refueling certain types of aircraft. Under the terms of the lease Flying Tiger was obligated to maintain the equipment in safe operating condition and to make specified repairs not here relevant. All other repairs were to be made by Shell at the request of Flying Tiger.

In 1962 Shell, at Flying Tiger's request, removed the original ladder from the truck. A replacement, built by an undisclosed manufacturer, was furnished and installed under Shell's direction. Both Shell and Flying Tiger participated in the inspection of the new ladder. On March 12, 1964, about two years later, while plaintiff was climbing the ladder onto the wing of an aircraft, both of its legs split into segments. Plaintiff fell against the gasoline tank, hanging by his leg which was caught between the rungs of the upper segment of the ladder still attached to the aircraft wing. As a result he sustained serious personal injuries.

Plaintiff brought the instant action for damages against Shell. His complaint was in two counts: the first based on Shell's alleged negligence in manufacturing and maintaining a gasoline tank truck; the second based on an alleged breach of warranties that the tank truck and all its parts were free from defects, of merchantable quality and fit for the purpose for which they were intended to be used.

As we have already indicated, Shell cross-complained against Flying Tiger for indemnity but was nonsuited. On defendant's motion the trial court also nonsuited plaintiff on both of his pleaded causes of action but on its own motion submitted the case to the jury on the theory of strict liability in tort. The jury returned a verdict in favor of plaintiff and against Shell in the sum of $40,000, and in favor of plaintiff in intervention Pacific, the workman's compensation insurance carrier of Flying Tiger, and against Shell for $1,859.24 for medical and indemnity benefits paid by Pacific in connection with Price's injuries. Shell appeals both from the judgment entered on the above verdicts and the judgment of nonsuit dismissing its cross-complaint against Flying Tiger for indemnity. We turn first to defendant's attack on the verdicts.

Application of the Rule of Strict Liability

Shell contends that the trial court erred in submitting the case to the jury on the issue of strict liability. It argues that it is not a manufacturer, distributor or retailer of gasoline trucks. On the contrary, Shell asserts that in the present circumstances it was a bailor or lessor and that its liability as such was governed solely by Civil Code, section 1955 which imposed on Shell no greater duty than that of exercising ordinary care. ¹ In support of this contention Shell notes that section 408 of the Restatement Second of Torts ² 'continues to hold' Lessors of personal property liable only for negligence although section 402A ³ now imposes strict liability upon sellers of such property. From this premise Shell argues that the Restatement did not intend to apply strict liability to lessors.

The rule is now settled in California that 'A manufacturer is strictly liable in tort when an article he places on the market, knowing that it is to be used without inspection for defects, proves to have a defect that causes injury to a human being.' (Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57, 62, 27 Cal.Rptr. 697, 700, 377 P.2d 897, 900, 13 A.L.R.3d 1049.) A retail dealer, being an 'integral part of the overall producing and marketing enterprise' (Vandermark v. Ford Motor Co. (1964) 61 Cal.2d 256, 262, 37 Cal.Rptr. 896, 899, 391 P.2d 168, 171), is similarly liable. (See also Elmore v. American Motors Corp. (1969) 70 Cal.2d 578, 75 Cal.Rptr. 652, 451 P.2d 84; Prosser, Strict Liability to the Consumer in California (1966) 18 Hastings L.J. 9.) We have given this rule of strict liability a broad application. Recently in the Elmore case, Supra, we extended its protection to injured bystanders, a category not covered by the Restatement which limited its application to harm caused 'to the ultimate user or consumer.' ⁴ (Rest.2d Torts, § 402A; see fn. 3, Ante.) We there observed that the doctrine of strict liability may not be limited either 'on a theory of privity of contract' or 'on the theory that no representation of safety is made to the bystander.' (70 Cal.2d at p. 586, 75 Cal.Rptr. at p. 656--657, 451 P.2d at p. 88--89.) Emphasizing that our formulation was not restrictive, we pointed out that 'in both Greenman and Vandermark we did not limit the rules stated to consumers and users but instead used language applicable to human beings generally.' (Id.)

Such a broad philosophy evolves naturally from the purpose of imposing strict liability which 'is to insure that the costs of injuries resulting from defective products are borne by the manufacturers that put such products on the market rather than by the injured persons who are powerless to protect themselves.' (Greenman v. Yuba Power Products, Inc., Supra, 59 Cal.2d 57, 63, 27 Cal.Rptr. 697, 701, 377 P.2d 897, 901.) ⁵ Essentially the paramount policy to be promoted by the rule is the protection of otherwise defenseless victims of manufacturing defects and the spreading throughout society of the cost of compensating them. Thus the court in Kriegler v. Eichler Homes, Inc. (1969) 269 Cal.App.2d 224, 74 Cal.Rptr. 749, while noting that the rule of strict liability had theretofore been applied in California only to manufacturers, retailers and suppliers of personal property, found no difficulty in extending its application to builders engaged in the mass production and sale of homes. ⁶

Similarly we can perceive no substantial difference between Sellers of personal property and Non-sellers, such as bailors and lessors. In each instance, the seller or non-seller 'places (an article) on the market, knowing that it is to be used without inspection for defects, * * *.' (Greenman, supra, 59 Cal.2d at p. 62, 27 Cal.Rptr. at p. 700, 377 P.2d at p. 900) In the light of the policy to be subserved, it should make no difference that the party distributing the article has retained title to it. Nor can we see how the risk of harm associated with the use of the chattel can vary with the legal form under which it is held. Having in mind the market realities and the widespread use of the lease of personalty in today's business world, we think it makes good sense to impose on the lessors of chattels the same liability for physical harm which has been imposed on the manufacturers and retailers. The former, like the latter, are able to bear the cost of compensating for injuries resulting from defects by spreading the loss through an adjustment of the rental.

Two recent decisions support this view. In Cintrone v. Hertz Truck Leasing, etc. (1965) 45 N.J. 434, 212 A.2d 769, the court held that a lessor of trucks is liable upon the basis of strict liability in tort because 'A bailor for hire, such as a person in the U-drive-it business, puts motor vehicles in the stream of commerce in a fashion not unlike a manufacturer or retailer,' subjects such a leased vehicle 'to more sustained use on the highways than most ordinary car purchasers,' and by the very nature of his business, exposes 'the bailee, his employees, passengers and the traveling public * * * to a greater Quantum of potential danger of harm from defective vehicles than usually arises out of sales by the manufacturer.' (222 A.2d at p. 777) ⁷

A similar result was reached in this state in McClaflin v. Bayshore Equipment Rental Co. (1969) 274 A.C.A. 487, 79 Cal.Rptr. 337. In that case a bailor of maintenance equipment was held strictly liable when a leased stepladder collapsed, resulting in the death of the bailee. The court reasoned: 'Lessors of personal property, like the manufacturers or retailers thereof, 'are engaged in the business of distributing goods to the public. They are an integral part of the overall * * * marketing enterprise that should bear the cost of injuries resulting from defective products.' (Vandermark v. Ford...