Mid Continent Aircraft Corp. v. Curry County Spraying Service, Inc.

• Decision Date: 12 July 1978
• Docket Number: No. B-7030,B-7030
• Parties: 24 UCC Rep.Serv. 574 MID CONTINENT AIRCRAFT CORPORATION, Petitioner, v. CURRY COUNTY SPRAYING SERVICE, INC., et al., Respondents.
• Court: Texas Supreme Court

Page 308

572 S.W.2d 308

24 UCC Rep.Serv. 574

MID CONTINENT AIRCRAFT CORPORATION, Petitioner, v. CURRY COUNTY SPRAYING SERVICE, INC., et al., Respondents.

No. B-7030.

Supreme Court of Texas.

July 12, 1978.

Underwood, Wilson, Sutton, Berry, Stein & Johnson, H. C. Pipkin, Jr., Amarillo, for petitioner.

Aldridge, Harding, Aycock & Actkinson, Johnny W. Actkinson, Farwell, for respondents.

DANIEL, Justice.

This is a products liability case which presents the question of whether, in an "as is" sale to a commercial buyer, the seller's disclaimer of liability for physical damage caused to the product itself is effective under the Uniform Commercial Code.

Defendant Mid Continent Aircraft Corp. is a Missouri corporation engaged in the business of buying and selling small aircraft. It sold a reconditioned and overhauled single engine spray plane to the plaintiff, Curry County Spraying Service, Inc., a New Mexico corporation, to be used in Curry County's business of spraying crops. The plane was acquired by Mid Continent from co-defendant, Bobby Shivers, d/b/a Shivers Flying Service in Vernon, Texas, who had purchased the plane in a wrecked condition. Shivers repaired the airframe of the plane and had the engine overhauled by co-defendant, Robert Hawkins, a Federal Aviation Administration licensed engine mechanic, who maintained the independent Hawkins Aircraft shop in Quanah, Texas. In the transaction between Mid Continent and Curry County, the contract of sale stated that the purchase of the airplane was "subject to the terms and conditions of an 'as is' sale."

Curry sued Shivers, Hawkins, and Mid Continent. The trial court, without aid of a jury, held that all three of the defendants were liable in tort in spite of the "as is" provision in Curry County's purchase contract. Only Mid Continent appealed and the Court of Civil Appeals affirmed. 553 Curry County had operated the rebuilt plane for approximately 30 hours when the engine failed and the plane crashed while spraying insecticide on crops in Parmer County, Texas. The crash stemmed from Hawkins' failure to attach a small crankshaft gear bolt lock plate when the engine was overhauled. Because of the missing lock plate, the gear bolt failed to remain tight and permitted the crankshaft gear to become loose, separating approximately 5/16 of an inch from the rear of the crankshaft. The timing dowel pin that anchors the gear on the crankshaft was sheared off, causing the gear to stop rotating. The ignition magnetos, which are turned by the crankshaft gear, stopped; thus killing the engine. Without power, the pilot made a forced landing on a rough country road. This resulted in substantial damage to the fuselage and wings of the plane. However, the pilot suffered no personal injury and no property other than the aircraft itself was damaged.

S.W.2d 935. The judgment against Shivers and Hawkins has become final. The cause of action against Mid Continent is severed and the judgments of the courts below as to Mid Continent are reversed. Judgment is here rendered that plaintiffs take nothing against Mid Continent.

In this action against the three defendants, Curry County alleged negligence, breach of warranty, and strict liability. Curry County's insurer, who had paid a substantial portion of the cost of repairing the airplane and thus was subrogated to part of Curry County's cause of action, was joined as a party plaintiff. Mid Continent filed a cross-action against Shivers and Hawkins for contribution or full indemnity. However, on joint motion of Mid Continent and Shivers, the cross-action was severed from this suit for a separate trial.

In rendering judgment for Curry County and its insurer, the trial court held the defendants jointly and severally liable for the amount of $4,658.49 for damage to the airplane and $3,690.00 for its loss of use. Hawkins was found to have been negligent in failing to install the crankshaft gear bolt lock plate. Shivers and Mid Continent were held liable under strict liability in tort as sellers of the airplane in the business of selling such a product with a defect that rendered it unreasonably dangerous.

As indicated, only Mid Continent appealed. The Court of Civil Appeals, with one justice dissenting, held that Curry County was entitled to recover from Mid Continent for physical damage to the product itself under strict liability in tort as defined in Section 402A, Restatement, Second, Torts (1965). It was also held that the "as is" disclaimer of warranties was not effective to absolve Mid Continent of strict liability in tort. The Chief Justice dissented, stating that she would not have extended strict liability to cover the loss in this case. Mid Continent's application for writ of error was granted on the single issue of liability. The correctness of the measure of damages is not contested by the parties.

Heretofore, Texas courts have not been presented with the issue of whether a seller can contract against liability for harm caused by a defective product to itself. The question is whether injury to the product itself is a type of loss that requires contract language explicitly allocating the loss to the buyer before the seller can avoid liability, or should a general contract of purchase "as is" be sufficient to place the loss on the buyer?

TYPE OF LOSS

Pivotal to the question of disclaimer applicability is the determination of whether the product loss is recoverable under a contract theory of breach of warranty or whether it is a tort loss. Generally, disclaimers are enforced less readily in strict liability cases than in those of contract warranty. McMillen Feeds, Inc. v. Harlow, 405 S.W.2d 123 (Tex.Civ.App. Austin 1966, writ ref'd n. r. e.); Keystone Aeronautics Corp. v. R. J. Enstrom Corp., 499 F.2d 146 (3d Cir. 1974); Sterner Aero AB v. Page Airmotive, Inc., 499 F.2d 709 (10th Cir. 1974); Vandermark v. Ford Motor Company, 61 Cal.2d 256, 37 Cal.Rptr. 896, 391 P.2d 168 (1964). See Restatement, Second, Torts § 402A, comment m (1965). Therefore, the type of loss is relevant to the determination of a disclaimer's validity. ¹ Moreover, a decision on a disclaimer's validity without clearly identifying the type of loss and liability involved would be contrary to the recent writing which separates contract warranties from strict liability in products cases. Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77 (Tex.1977).

Strict liability in tort and contract have had an entangled relationship in the area of products liability. The entanglement is to be expected since strict liability resulted from the combination of tort and contract theories. See Shamrock Fuel & Oil Sales Company v. Tunks, 416 S.W.2d 779 (Tex.1967); Jacob E. Decker & Sons, Inc. v. Capps, 139 Tex. 609, 164 S.W.2d 828 (1942). With the codification of the Uniform Commercial Code, Tex.Bus. & Comm.Code Ann. §§ 1.101-9.507, and the adoption of Section 402A, McKisson v. Sales Affiliates, Inc., 416 S.W.2d 787 (Tex.1967), the theoretical bases of contract and strict liability have been separated and firmly established. Nobility Homes of Texas, Inc. v. Shivers, supra.

The applicability of strict liability has been defined in Texas for personal injuries resulting from unreasonably dangerous products. Bristol-Myers Company v. Gonzales, 561 S.W.2d 801 (Tex.1978); General Motors Corp. v. Hopkins, 548 S.W.2d 344 (Tex.1977); Rourke v. Garza, 530 S.W.2d 794 (Tex.1975); Crocker v. Winthrop Laboratories, Inc., 514 S.W.2d 429 (Tex.1974); Pittsburg Coca-Cola Bottling Works v. Ponder, 443 S.W.2d 546 (Tex.1969); Darryl v. Ford Motor Company, 440 S.W.2d 630 (Tex.1969); McKisson v. Sales Affiliates, Inc., supra. Physical injuries to a consumer's other property caused by a defective product has also been held to be included under strict liability. O. M. Franklin Serum Company v. C. A. Hoover & Son, 418 S.W.2d 482 (Tex.1967).

The present case involves an unreasonably dangerous product whose defect has caused harm to itself. No personal injury or injury to other property was involved. The critical question is whether, in a commercial sale, strict liability should be extended to cover loss resulting from damage to the product itself. ²

Texas has recently adopted the rule that economic loss resulting from a product with defective workmanship and materials is not recoverable in strict liability. Nobility Homes of Texas, Inc. v. Shivers, supra. That loss is merely loss of value resulting from a failure of the product to perform according to the contractual bargain and therefore is governed by the Uniform Commercial Code.

Mid Continent contends that the damage to the airplane in the present case is also an economic loss under the reasoning of Nobility Homes. It argues that there is no difference between a product that is unusable because of defects and one that causes physical harm to itself because of a defect that is unreasonably dangerous. While Texas courts have not before considered this question, it has arisen in other jurisdictions. There is no concensus in the decisions. Some courts have concluded that the loss is recoverable under strict liability. Cloud v. Kit Manufacturing Company, 563 P.2d 248 (Alaska 1977); Delta Air Lines, Inc. v. McDonnell Douglas Corp., 503 F.2d 239 (5th Cir. 1974); Sterner Aero AB v. Page Airmotive, Inc., supra; Keystone Aeronautics Corp. v. R. J. Enstrom Corp., supra; Air Products & Chemicals, Inc. v. Fairbanks Morse, Inc., 58 Wis.2d 193, 206 N.W.2d 414 (1973); Arrow Transportation Company v. Fruehauf Corp., 289 F.Supp. 170 (D.Or.1968). Others adopt the position that the loss is of a contractual nature and therefore covered by the Uniform Commercial Code. Long Manufacturing, Inc. v. Grady Tractor Company, 140 Ga.App. 320, 231 S.E.2d 105 (1976); Long v. Jim Letts Oldsmobile, Inc., 135 Ga.App. 293, 217 S.E.2d 602 (1975); Cf. Mike Bajalia, Inc. v. Amos Construction Company, Inc., 142 Ga.App. 225, 235 S.E.2d 664 (1977); Salmon Rivers Sportsman...