Casa Ford, Inc. v. Ford Motor Co.

Decision Date07 October 1997
Docket NumberNo. 06-96-00094-CV,06-96-00094-CV
Citation951 S.W.2d 865
PartiesCASA FORD, INC. and North River Insurance Company, and Casa Ford, Inc. and Western Alliance Insurance Company, Appellants, v. FORD MOTOR COMPANY, Appellee.
CourtTexas Court of Appeals

Jimmy Williamson, Houston, for Appellants, North River & Casa Ford.

Nicholas E. Zito, Livingston, Markle, Miller, Ramos, Houston, Randall D. Wilkins, Hennessy, Gardner, Barth, Houston, for Appellants, Western Alliance & Casa Ford.

Michael S. Goldberg, Jacalyn A. Hollabaugh, Michael L. Calhoon, Claudia Wilson Frost, Baker & Botts, Houston, for Appellee.

Before CORNELIUS, C.J., and GRANT and ROSS, JJ.

OPINION

ROSS, Justice.

Casa Ford, Inc. ("Casa"), North River Insurance Company ("North River"), and Western Alliance Insurance Company ("Western Alliance") appeal a judgment in favor of the defendant-appellee, Ford Motor Company. The appellants brought several claims against the appellee, seeking indemnity or contribution for a judgment against Casa. The trial court denied one of the claims after a bench trial and denied the other claims on summary judgment. The appellants bring several points of error, and the appellee brings several cross-points. We reverse and remand the trial court's judgment denying the appellants' claim for indemnity under the common law, but affirm the judgment in all other respects.

On the morning of July 16, 1988, Juan Sandigo was a passenger in a 1984 Ford Mustang owned and driven by Francisco Sodari. Sodari fell asleep at the wheel, causing the car to run off the road, collide with an abutment, and roll over. Because his shoulder harness failed, Sandigo incurred grievous injuries, including paraplegia and the loss of an eye.

Sodari's Mustang had seen many owners. In late 1983, Ford sold the Mustang to Richardson Ford in New Mexico. It passed through several owners before Casa, an El Paso dealership that sold new Ford vehicles and used vehicles, purchased it at a wholesale auction on November 16, 1986. Casa sold the vehicle wholesale to another dealer on February 12, 1987. The car then passed through several more owners before Alexander Ford in Arizona sold it to Sodari in June 1988. On July 5, 1990, Sandigo sued Casa, Alexander Ford, and Tate Motor Company, which purchased the Sodari vehicle from Casa. Sandigo's petition, which was filed in the El Paso District Court, alleged that the defendants misrepresented the condition of the car, breached warranties, and negligently marketed the car. The petition also invoked strict liability, alleging that "[t]he Ford Mustang was defective and unsafe for its intended purposes at the time it was sold. In particular, the Ford Mustang was defectively manufactured, designed and marketed." Casa eventually became the only defendant in the El Paso suit, while Sandigo maintained a separate action in Arizona against other dealerships. Sandigo did not sue Ford, and the statute of limitations ran on any claims by Sandigo against Ford.

The parties in Sandigo v. Casa Ford proceeded under the assumption that the failed seat belt was not original Ford equipment-in other words, that someone other than Ford had modified the seat belt. However, in May or June 1992, Casa discovered that the seat belt was original Ford equipment. Sodari's Mustang had been subject to a recall shortly after it was manufactured in 1983. It was one of 600,000 cars that Ford had manufactured with defective seat belts. A test collision showed that a defective bolt caused these seat belts to fail in a thirty-five-mile-per-hour collision. Ford sent many notices to its dealers and customers, with the hope that the subject vehicles would be brought in for seat belt repairs.

When a Ford vehicle came through a Ford dealership, the dealership had the opportunity to check whether all recalls had been performed on the vehicle. The dealership could make such a determination by inputting the vehicle identification number into one of Ford's automated vehicle tracking services. The first system-CARES-was operated by toll-free long-distance telephone, and the second system-OASIS-was operated by computer. Because of these systems, since 1978 every Ford dealership has had the ability to check any vehicle identification number for open recalls. Because Ford paid the dealerships for recall work, the dealerships had a financial incentive to use the CARES and OASIS systems. Despite these protections, the seat belt on Sodari's Mustang was never repaired.

On July 6, 1992, Casa first notified Ford of the El Paso lawsuit and requested that Ford indemnify Casa. At that point, virtually all discovery was complete, and the case was set for trial on August 31, 1992. On August 28, 1992, Victor Poulos, Casa's attorney, first met with Ford attorneys and gave them background information on the case. Meanwhile, the case was reset to November 4, 1992, then to February 9, 1993. Ford did not enter the case and eventually was barred from intervening. Additionally, Ford refused to indemnify Casa.

In October 1992, Casa and Sandigo made a deal that narrowed the focus of the El Paso suit. Casa admitted that the shoulder harness was defective and unreasonably dangerous and proximately caused Sandigo's injuries. Casa also stipulated that the issue of Sandigo's and Sodari's comparative responsibility would not be submitted. In return, Sandigo agreed to proceed only on the product liability claim, not his claim that Casa was independently negligent, and to waive any claim for punitive damages. As a result, the Sandigo trial concerned only damages. After a bench trial, the El Paso court rendered a judgment that Sandigo recover $8,762,313.00 from Casa.

On November 23, 1993, Casa and North River (Casa's excess liability insurer) filed this suit against Western Alliance (Casa's primary liability insurer) and Ford. North River and Casa sought indemnity and contribution from Ford and asserted DTPA, fraud, negligent misrepresentation, breach of contract, negligence, bad faith, and statutory violation claims against Western Alliance. The appellants eventually pleaded five bases for indemnity or contribution from Ford. First, they argued that Ford had a duty to indemnify under TEX. CIV. PRAC. & REM.CODE ANN. § 82.002 (Vernon 1997), which requires a manufacturer to indemnify a seller in certain product liability situations. Second, they argued that they were entitled to reimbursement under TEX.REV.CIV. STAT. ANN. art. 4413(36), § 5.02(11) (recodified unchanged at TEX.REV.CIV. STAT. ANN. art. 4413(36), § 5.02(b)(11) (Vernon Supp.1997)), which provides that an automobile manufacturer must reimburse an automobile dealer for certain losses incurred as a result of a product liability action. Next, the appellants sought common-law indemnity or common-law contribution. Finally, they argued that they were entitled to contribution under Chapter 33 of the Texas Civil Practice and Remedies Code.

On October 17, 1994, the trial court severed the claims against Ford from the claims against Western Alliance. On June 16, 1995, Western Alliance filed a cross-action against Ford, seeking indemnity and contribution and seeking recovery "based upon FORD MOTOR COMPANY'S breach of statutory duties, breach of common law duties, FORD MOTOR COMPANY'S liability under strict liability in tort, and based upon FORD MOTOR COMPANY'S negligence and breaches of warranty...." 1 On July 24, 1995, Casa and North River filed a motion for summary judgment on the grounds that they had conclusively established a right to indemnity under Section 82.002, Article 4413(36), and the common law. Western Alliance subsequently filed a motion for summary judgment adopting and incorporating for all purposes the summary judgment motion filed by Casa and North River.

On October 2, 1995, the trial court granted Casa and North River a partial summary judgment. The court determined that Section 82.002 was applicable to Casa and North River's cause of action and that Casa was not negligent for failing to discover the seat belt defect. However, the court declined to grant summary judgment on any claim that Casa was not negligent for failing to comply with the recall.

On October 27, 1995, Ford filed a motion for summary judgment, asserting that Casa and North River were not entitled to indemnity or contribution for the following reasons:

The appellants waived their contribution claims by failing to bring Ford into the El Paso suit. In other words, Chapter 33 requires that a contribution claim be brought in the original lawsuit.

The appellants waived their Chapter 33 contribution claim by failing to submit the percentages of responsibility of Sandigo and Sodari in the El Paso case.

The appellants could not obtain contribution under Chapter 33 from Ford because Ford had settled with Sandigo.

There is no common-law right to contribution.

The appellants were not entitled to indemnity because Casa was negligent as a matter of law.

The appellants could not rely on Section 82.002 because the Sandigo suit was filed before the effective date of Section 82.002.

The appellants could not rely on Article 4413(36) because it only applies to new vehicles.

On November 20, 1995, the trial court denied Ford's motion for summary judgment.

On December 5-6, 1995, the court held a nonjury trial on the Section 82.002 claims. On December 29, 1995, the trial court issued findings of fact and conclusions of law. The court noted that "[t]here are several reasons for construing [Section 82.002] to apply only to product liability actions filed after September 1, 1993." However, the court opted to apply Section 82.002 for reasons of "judicial economy." The court concluded that Section 82.002 permitted a court to award indemnity even to a negligent retailer. The court determined that "the comparative fault, negligence, and causation between Ford and Casa Ford under § 82.002 is 80% for...

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