Central Mut. Ins. Co. v. H. O., Inc.

• Decision Date: 02 April 1974
• Docket Number: Nos. 353 and 354,s. 353 and 354
• Citation: 63 Wis.2d 54,216 N.W.2d 239
• Parties: CENTRAL MUTUAL INSURANCE CO. et al., Appellants, v. H.O., INC. (formerly known as Pressed Steel Tank Co.) a Wis. corp., Respondent. William K. HUSSEY, Appellant, v. H.O., INC. (formerly known as Pressed Steel Tank Co.) a Wis. corp., Respondent.
• Court: Wisconsin Supreme Court

Page 239

216 N.W.2d 239

63 Wis.2d 54

CENTRAL MUTUAL INSURANCE CO. et al., Appellants, v. H.O., INC. (formerly known as Pressed Steel Tank Co.) a Wis.

corp., Respondent.

William K. HUSSEY, Appellant, v. H.O., INC. (formerly known as Pressed Steel Tank Co.) a Wis.

corp., Respondent.

Nos. 353 and 354.

Supreme Court of Wisconsin.

April 2, 1974.

Kluwin, Dunphy, Hankin & McNulty, Milwaukee, for appellants.

Gibbs, Roper & Fifield, Milwaukee, for respondent.

ROBERT W. HANSEN, Justice.

These appeals deal with two causes of action arising from a single explosion of a gas cylinder, manufactured in Wisconsin, sold to a company in Pennsylvania, forwarded to a distributor in North Carolina, and purchased in North Carolina. The explosion occurred in North Carolina. One action is for person injuries sustained by the repair mechanic injured in the explosion. The other is for property damage and is brought by insurers subrogated to the rights of the property owners involved. In each case the initial question presented is whether the North Carolina statute of limitations, as adopted by our own 'borrowing' statute, ¹ bars the cause of action. Each case will be considered separately.

CAROLINA STATUTES. Under the present North Carolina statute, appellant's cause of action for personal injuries sustained as a result of the cylinder's explosion would be deemed to accrue at the time 'the injury was discovered by the claimant, or ought reasonably to have been discovered by him.' ² The limitation upon the action being brought is ten years from the last act of the defendant giving rise to the claim for relief. However, this statute became effective July 21, 1971, and does not affect pending litigation. ³ The earlier North Carolina statute applicable to this case provides that an action for injury to the person must be brought within three years of the accrual of the action. ⁴ If the three-year statute of limitations runs from the date of sale of the allegedly defective cylinder, the appellant's claim is barred. If the three-year statute runs from the date of injury or discovery of the defect, it is not here barred. So we must review the judicial construction of the term, 'accrual of action,' in the North Carolina statute.

We do not begin or end with reviewing cases where the purchaser of an allegedly defective product sues the manufacturer from whom he bought the product. Despite an early case to the contrary, ⁵ it appears that the North Carolina Supreme Court has held that where a product is sold directly to the plaintiff the cause of action accrues and the statute of limitations runs from the date of sale or other initial act of negligence on the part of the defendant. ⁶ In the Thurston Case, the North Carolina high court carefully limited its holding to the factual situation present where the sale of the defective product was made directly to the plaintiff. ⁷ As to when a cause of action accrues, there is a distinction between a purchaser, with intervening full control and opportunity for inspection between date of purchase and date of injury, and a nonpurchaser whose contact with the defective equipment may well begin at the moment of injury. This is particularly true in states like North Carolina in which, unlike Wisconsin, ⁸ 'nominal damages' are sufficient to sustain recovery in a negligence action. ⁹

We do not find, nor do the briefs on appeal or the trial court opinion suggest, a North Carolina Supreme Court decision dealing with when the cause of action accrues where the injured party did not purchase the equipment and had no reason or basis for bringing a cause of action, even for nominal damages, against the manufacturer of the equipment involved until the time of injury. Our attention is directed to intermediate level appellate court decisions, but they appear to be in confoict, two supporting the position of appellant, ¹⁰ and two supporting the position of the respondent. ¹¹ With no definitive construction of the North Carolina statute of limitations by the North Carolina Supreme Court, dealing with the fact situation before us, we accept the construction given such statute by the United States District Court for the Western District of North Carolina. In an action by a truck driver against a tire manufacturer to recover for injuries the truck driver sustained in a collision which allegedly resulted from the failure of an inferior tire purchased by his employer, the federal court held that the North Carolina statute, the one applicable in the case before us, ran from the time the driver was injured, not form the time the tire was furnished the employer. ¹² Inconstruing the North Carolina statute, the court held:

'A great deal has been written on the subject of when a cause of action arises against a manufacturer or supplier based upon the production or furnishing of a defective or inadequate or dangerous piece of personal property or machinery. The question here is whether the statute (Note: the North Carolina statute of limitations applicable to the case before us.) begins to run from the time of the defendant's act or default or whether it begins to run from the time of injury to the plaintiff. This question is a theoretical one unless viewed in light of the language of the statute. The North Carolina statute by its terms begins to run after the action has 'accrued.' The suit does not involve an 'injury to the person or rights of another' until the plaintiff was hurt. There was no 'injury' and no basis for action until the wreck occurred in North Carolina on July 26, 1965. New Dixie might have had an action for breach of contract when the tire was delivered, but plaintiff, the driver had no cause of action until be was injured.

'This conclusion is believed to be consistent with Hocutt v. Wilmington & W. Railroad, 124 N.C. 214, 32 S.E. 681 (1899) and with all recent North Carolina decisions. . . .' ¹³

In Stell, the action was instituted more than three years after the sale of the allegedly defective tire, but less than three years after the accident and injuries to the plaintiff, and it was held not barred by the North Carolina statute of limitations applicable in 1968. In the case before us, the action was instituted more than three years after the sale of the allegedly defective cylinder, but less than three years after the accident and injuries to the plaintiff, and we follow the construction of statute and decision in Stell to hold that it was not barred by the North Carolina statute of limitations, the same statute involved in the Stell Case. We find additional support for our accepting the reasoning and result in Stell in the recent statement of the North Carolina Supreme Court in a breach of contract case, ¹⁴ the statement being: 'In no event can a statute of limitations begin to run until plaintiff is entitled to institute action.' ¹⁵

THE PROPERTY DAMAGE ACTION.

Wisconsin's borrowing statute does not block the path of the property damage action, that statute being limited to actions 'to recover damages for injuries to the person.' ¹⁶ However, such inapplicability of such statute does not entirely clear the way for the bringing of the insurers' actions arising from property damages sustained by their insureds in the explosion. With the property-damaging explosion occurring in the state of North Carolina, and the affirmative defense raised that the cause of action is barred by the North Carolina statute of limitations, we are back on the bus to North Carolina to determine if the action is there barred by the applicable statute of limitations and, if it is, we are back on the bus to Wisconsin to determine the choice-of-law question as to whether the law of the forum or the law of the place of injury is to be applied.

The plaintiff insurance companies seek reimbursement or indemnification for losses sustained by them in payment of property damage claims paid by them to their insureds arising out of the boiler explosion in North Carolina. Considered as an action for indemnity, the cause of action apparently was not barred in North Carolina by the fact that the action was instituted more than three years after the sale by the manufacturer of the cylinder alleged to be defective. Two North Carolina cases, both at the intermediate appellate court level, deal with accrual of the cause of action under the state's statute of limitations in an indemnity action. In the most recent case, ¹⁷ the plaintiff's insured was in an automobile accident and was sued by third parties. The insurer paid these parties and then brought action against defendants for negligent sale and manufacture of a brake cylinder. While holding the plaintiff's insured not to have been negligent on the running of the statute of limitations, the court held:

'. . . This Court, in Hager v. Equipment Co., 17 N.C.App. 489, 195 S.E.2d 54 (1973), held that the trial court erred in dismissing a third-party action for indemnity against the seller of an allegedly defective elevator sold more than three years earlier on the ground that the statute of limitations barred the indemnity action. We held that the claim for indemnity did not arise until the injured party had brought an action against the one seeking indemnity, and that the claim for indemnity was separate and distinct from any possible claim that may have arisen at the time the elevator was purchase. . . .' ¹⁸

The Hager Case ¹⁹ referred to, also an intermediate appellate court decision, involved a plaintiff who was injured in a falling elevator and who sued the elevator owner who then impleaded the seller in a third-party negligence and breach of warranty action seeking indemnification from the seller for any sums for which it might be found liable to the injured plaintiff. Holding that the North Carolina statute of limitations, the one applicable to the case before us, did not run from the time of sale, but did run from the time the elevator owner was legally obligated to pay the...