Stewart & Foulke, Inc. v. Robertshaw Controls Company

• Decision Date: 12 July 1968
• Docket Number: No. 24976.,24976.
• Citation: 397 F.2d 971
• Parties: STEWART & FOULKE, INC., et al., Appellants, v. ROBERTSHAW CONTROLS COMPANY and Dearborn Stove Company (Now Chancellor Corporation), Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

397 F.2d 971 (1968)

STEWART & FOULKE, INC., et al., Appellants, v. ROBERTSHAW CONTROLS COMPANY and Dearborn Stove Company (Now Chancellor Corporation), Appellees.

No. 24976.

United States Court of Appeals Fifth Circuit.

July 12, 1968.

Robert A. Gwinn, Dallas, Tex., Gus Sacopulos, Terre Haute, Ind., for appellants.

William N. Hamilton, John W. Copeland, Dallas, Tex., for appellees.

Before RIVES, BELL, and GOLDBERG, Circuit Judges.

GRIFFIN B. BELL, Circuit Judge.

This is an appeal from an action for indemnity based on breach of implied warranty by a retailer, Stewart & Foulke, Inc., appellant herein, against a stove manufacturer, Chancellor Corporation, and the manufacturer of a component part thereof, Robertshaw Controls Company. The action is to satisfy two Indiana judgments obtained against Stewart & Foulke through settlement agreements by the purchaser of a gas stove who was injured when the stove exploded and by the owners of the building which was demolished in the explosion.

Having denied motions for directed verdict filed by all parties, special issues were submitted by the court to a jury. The jury determined that the Indiana judgments did not result from a "full-dress, arm's length, good faith adversary proceeding" as that phrase was defined by the court. The jury also determined that the negligence of Stewart & Foulke was the proximate cause of the explosion, and that the stove was subjected to an abnormal and unintended use. Judgment was entered for the defendants. We affirm on the jury's first finding — the non-adversary proceeding issue. In this view of the case we do not reach the other assignments of error.

Chancellor manufactured the stove in question; Robertshaw manufactured its magnetic control valve. Chancellor sold the stove to Skelly Oil Company, not a party to this suit, who sold it to Stewart & Foulke and it was then sold, in turn, to Claude Bender. Bender had the stove installed in a building where he worked. The building was owned by Mr. and Mrs. Dome. The stove exploded some two years after it was purchased when Bender attempted to light it. The Domes and Bender filed separate suits against Stewart & Foulke in Indiana based on a breach of implied warranty. The basis of the alleged breach was that the magnetic control valve did not operate properly and therefore the stove was not reasonably fit for its intended use.

Stewart & Foulke gave written notice to Chancellor and Robertshaw of the litigation and tendered the defense of the suits to them. The tender was refused. There is no issue as to notice. Under Indiana law Stewart & Foulke could not join Chancellor, Robertshaw or Skelly Oil as third party defendants. The notice was given under the Indiana Uniform Commercial Code, § 19-2-607(5), which provides as follows:

"Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over

(a) he may give his seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two (2) litigations, then unless the seller after seasonable receipt of the notice does come in and defend he is so bound."

After a good deal of pre-trial activity, counsel for the Indiana litigants agreed to settle with $3,000 to be paid the Domes and $8,000 to be paid Bender. Judgments were subsequently entered in these amounts. Stewart & Foulke satisfied the Indiana judgments and brought the instant action in Texas for full indemnity including the attorney's fees and expenses entailed in the Indiana litigation.

The facts surrounding the entry of the Indiana judgments are of some importance. The settlement agreements were reached two weeks prior to the entry of the judgments. The attorney representing Bender and the Domes considered the matter settled when the settlement agreements were made. The Indiana trial judge agreed to have the cases presented for judgment but considered this unusual since they had already been settled. Evidence was introduced to demonstrate that the explosion was caused by the defective valve. Findings of fact and conclusions of law, prepared by counsel for Stewart & Foulke, were also entered in the Indiana court.

Stewart & Foulke brought this action for indemnity based on the judgments. The action was not premised on establishing the actionable facts on which liability for breach of warranty depended or the reasonableness of the settlements. Cf. Mitchell's, Inc. v. Friedman, 157 Tex. 424, 303 S.W.2d 775, 1957; Gulf, Colorado & Santa Fe Railway Co. v. McBride, 159 Tex. 442, 322 S.W.2d 492, 1959. Rather the premise is that the Indiana judgments were res judicata as to the liability of the defendants on matters of fact there presented inasmuch as the defense of the original actions was tendered to them by way of vouching them into the cases under the Indiana Commercial Code, supra.

The District Court posed Special Issue No. 1 to jury as follows:

"Do you find from a preponderance of the evidence that the judgment upon

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