Berkeley Pump Co. v. Reed-Joseph Land Co., REED-JOSEPH

• Decision Date: 06 June 1983
• Docket Number: REED-JOSEPH,No. 82-197,82-197
• Citation: 279 Ark. 384,653 S.W.2d 128
• Parties: , 37 UCC Rep.Serv. 1107 BERKELEY PUMP COMPANY, Appellant, v.LAND COMPANY et al., Appellees.
• Court: Arkansas Supreme Court

Page 128

653 S.W.2d 128

279 Ark. 384, 37 UCC Rep.Serv. 1107

BERKELEY PUMP COMPANY, Appellant, v. REED-JOSEPH LAND COMPANY et al., Appellees.

No. 82-197.

Supreme Court of Arkansas.

June 6, 1983.

Supplemental Opinion on Denial

of Rehearing July 18, 1983.

Atchley, Russell, Waldrop & Hlavinka by Victor Hlavinka, Texarkana, Tex., for appellant.

Smith, Stroud, McClerkin, Dunn & Nutter by Winford L. Dunn, Jr. and Charles A. Morgan, Texarkana, for Reed-Joseph Land Co.

Hubbard, Patton, Peek, Haltom & Roberts by Phillip N. Cockrell and James R. Hubbard, Texarkana, Tex., for S & W Well Drilling and Irr. Corp. and Riceland Mach. and Supply Corp.

HAYS, Justice.

This products liability case involves three irrigation pumps consisting of components manufactured by Berkeley Pump Company, appellant, and assembled and installed by Riceland Machine and Supply Corporation and S & W Well Drilling and Irrigation Corporation, appellees. The pumps were purchased in 1978 from Riceland by J.B. Joseph and Clark Reed, appellees, to supply irrigation to Reed-Joseph's rice and soy bean crops on lands along the Red River in Miller County. In addition to relying on the pumps for their own irrigation needs, Reed-Joseph contracted with Agri-Vestors Corporation, appellees, to supply water for Agri-Vestors' rice crop.

A few years earlier, Reed-Joseph had purchased a pumping system from Riceland with components supplied by Berkeley consisting of three slant-mounted pumping units having a combined capacity of 30,000 gallons per minute. Wanting an increase in capacity, and relying on performance curves published by Berkeley, Reed-Joseph elected to purchase three new Berkeley impellers which were expected to produce 36,000 gallons per minute. The system, installed in April, 1978, performed inadequately, resulting in drought damage to the crops of Reed-Joseph and Agri-Vestors, and springing this litigation.

Riceland initiated this action by suing Reed-Joseph for the value of the pumps and equipment. Reed-Joseph counterclaimed for damages for its crop losses on counts of strict liability, breach of express and implied warranties, negligence and fraud. Riceland brought Berkeley in by third-party complaint seeking contribution and indemnity and tendering to Berkeley the defense of the Reed-Joseph claims. Agri-Vestors intervened seeking recovery for its losses.

The case was submitted to the jury on all theories and a verdict of $684,753.42 ¹ was awarded Reed-Joseph. Riceland was awarded judgment of $134,039.15 and indemnified against Berkeley as to any money recovered by Reed-Joseph and Agri-Vestors with responsibility for the total fault apportioned by the jury at 90% to Berkeley, 10% to Riceland. Riceland was granted full indemnification from Berkeley and awarded $134,039.15 as expenses incurred in defending the litigation. Reed-Joseph was also awarded $15,698.15 and prejudgment interest of $126,081.20. Riceland was given judgment against Reed-Joseph for $32,407.22 plus prejudgment interest of $5,833.30.

On appeal, Berkeley alleges numerous errors, some of which must be sustained. It is urged that there was no breach of warranty for a particular purpose as there was no evidence that any particular purpose was communicated to Berkeley; that it was error to submit the case to the jury on the issue of strict liability and on the issue of fraud; that the court should not have awarded Reed-Joseph $15,698.18 and prejudgment interest, nor should it have indemnified Riceland and allowed it to recover the costs of defense.

Riceland argues on cross-appeal that prejudgment interest should not have been awarded to Reed-Joseph and, in the event of reversal, that the jury should not have been instructed with respect to breach of an express warranty because any such warranties were negated by Reed-Joseph's failure to comply with certain conditions of warranty; that there was no evidence that Riceland knew of any particular purpose intended for the pumps and the jury should not have been instructed on the issue of a breach of warranty of fitness for a particular purpose.

I

We consider first what we regard as the pivotal point, whether under the evidence it was appropriate to submit the issue of strict liability to the jury.

After the immunity of manufacturers to all but the original purchaser was destroyed by MacPherson v. Buick Motor Co., 111 N.E. 1050 (App.Div.1916) the progress of products liability was gradual but deliberate. Producers of food and beverages experienced the first exposure and other manufacturers followed. In 1960 the Supreme Court of New Jersey applied strict liability to the user of a defective automobile, though wholly on the basis of an implied warranty. See Henningsen v. Bloomfield Motor Company, 32 N.J. 358, 161 A.2d 69.

In 1965, decisions were reached in two significant cases: in February the New Jersey Supreme Court handed down Santor v. A. and M. Karagheusian, Inc., 44 N.J. 52, 207 A.2d 305, upholding a recovery of an economic loss by a consumer against the manufacturer of a defective rug, recognizing a cause of action in tort, independent of fault or warranty. Justice Francis described the cause as hybrid in character, "having its commencement in contract and its termination in tort." A few months later the Supreme Court of California, through Chief Justice Traynor, rejected the reasoning of Santor, saying "only if someone had been injured because the rug was unsafe for use would there have been any basis for imposing strict liability in tort," Seely v. White Motor Company, 63 Cal.2d 9, 45 Cal.Rptr 17, 403 P.2d 145 (1965). The opinion points out that the tentative draft of 402A, Restatement of Torts (Second) limits recovery in strict liability to physical harm to persons or property.

That same year 402A was formally adopted by the American Law Institute, providing that one who sells "any product in a defective condition unreasonably dangerous to the user or consumer or to his property" is strictly liable. With the approval of 402A, strict liability "swept the country," (Prosser, "The Law of Torts", § 98 at p. 567-8 (4th Edition 1971)) and within a decade all but a few jurisdictions had embraced the concept (Berman v. Watergate West, Inc., 391 A.2d 1351 (D.C.App.1978)).

In Arkansas the change from fault to strict liability was legislative rather than judicial, with the adoption of Act 111 of 1973, which provides for strict liability by suppliers of a product "in a defective condition which rendered it unreasonably dangerous." (Ark.Stat.Ann. § 85-2-318.2). While our act is "substantially verbatim" to 402A (See Woods, "Products Liability: Is Comparative Fault Winning the Day?" 36 Arkansas Law Review, No. 3, p. 360, at 364), Act 111 broadened the scope of strict liability in two important respects: by substituting "supplier" for "seller" and injury to "persons and property" for "users" or "consumers." More recently, the legislature enacted the "Arkansas Products Liability Act of 1979" (Act No. 511) (Ark.Stat.Ann. §§ 34-2801--34-2807 (Repl.1962), which makes no substantive changes, but simply codifies certain precepts and evidentiary rules affecting strict liability. (3 UALR Law Journal 316, Survey of Torts, by Powell).

With that background, we turn to Berkeley's arguments. It contends that strict liability is not applicable: one, where the product, in spite of any defective condition, does not constitute an unreasonable danger to persons or property; or two, in the absence of injury to persons, such defect causes purely economic loss.

We addressed the issue of economic loss only recently in Blagg v. Fred Hunt Co., Inc., 272 Ark. 185, 612 S.W.2d 321 (1981), where by dictum we opted in favor of the reasoning of Justice Francis in the Santor case. We see no need to review that choice. The other phase of the argument, i.e. that the product must be unreasonably dangerous, was not raised in Blagg and accordingly was not decided. Nor was it raised in another recent decision, Southern Company v. Graham, 271 Ark. 223, 607 S.W.2d 677 (1980). Thus, we have not yet considered to what extent a product in a defective condition must be "unreasonably dangerous" so as to render the supplier or manufacturer strictly liable.

We have little doubt that the language of 402A contemplates a type of defect which renders the product not merely inadequate, but one which poses an actual danger to persons or property. That is explicit in the language, "any product in a defective condition unreasonably dangerous", and is said at least as plainly in our statute, which requires that the defective condition render the product unreasonably dangerous. We construe the wording as requiring a defect that renders the product not simply deficient but dangerous.

In spite of the clear language of 402A, some disagreement has developed over the terms "unreasonably dangerous" and "defective condition". A few states have placed the emphasis on defectiveness. In Cronin v. J.B.E. Olson Corp., 8 Cal.3d 121, 104 Cal.Rptr. 433, 501 P.2d 1153 (1972), the California Supreme Court refused to set aside a verdict for a consumer whose injuries were incurred when a defective safety hasp on a bread truck broke, allowing heavy trays of bread to slide forward into the driver. The result is understandable enough, as a defective hasp behind the driver's seat of a bread truck readily suggests a danger within the scope of 402A. But the trial court had not instructed the jury that it must find the condition "unreasonably dangerous" as well as defective and the Supreme Court declined to reverse. Noting that strict liability was adopted in California, not in the aftermath of 402A, but in advance of it, in the form of Greenman v. Yuba Power Company, 59 Cal.2d 57, 27 Cal.Rptr 697, 377 P.2d 897 (1963), the Supreme Court reasoned that to require proof that a product is both defective and unreasonably dangerous imposes a greater burden on the plaintiff than was applied in...