Clay v. Johns-Manville Sales Corp.

• Decision Date: 26 January 1984
• Docket Number: Nos. 80-5416,80-5417,JOHNS-MANVILLE,s. 80-5416
• Citation: 722 F.2d 1289
• Parties: Bankr. L. Rep. P 69,507, 14 Fed. R. Evid. Serv. 1205 John Ed CLAY and wife, Marie Clay, Plaintiffs-Appellants, v.SALES CORP., Raybestos-Manhattan, Inc., Defendants-Appellees. Curtis T. BAILEY and wife, Effie Bailey, Plaintiffs-Appellants, v.SALES CORP., Raybestos-Manhattan, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1289

722 F.2d 1289

Bankr. L. Rep. P 69,507, 14 Fed. R. Evid. Serv. 1205

John Ed CLAY and wife, Marie Clay, Plaintiffs-Appellants, v. JOHNS-MANVILLE SALES CORP., Raybestos-Manhattan, Inc.,

Defendants-Appellees.

Curtis T. BAILEY and wife, Effie Bailey, Plaintiffs-Appellants, v. JOHNS-MANVILLE SALES CORP., Raybestos-Manhattan, Inc.,

Defendants-Appellees.

Nos. 80-5416, 80-5417.

United States Court of Appeals Sixth Circuit.

Argued March 3, 1982.

Decided Dec. 7, 1983.

As Amended Dec. 22, 1983.

Rehearing and Rehearing En Banc Denied Jan. 26, 1984.

Michael Y. Rowland (argued), Gilreath, Pryor & Rowland, Knoxville, Tenn., for plaintiffs-appellants.

Fred H. Cagle, Jr. (argued), Frantz, McConnell & Seymour, W. Kyle Carpenter, Knoxville, Tenn., for Johns-Manville.

Donald F. Paine Egerton, McAfee, Armistead & Davis, Harry P. Ogden, Dwight E. Tarwater (argued), Knoxville, Tenn., for Raybestos.

Before EDWARDS, Circuit Judge, PECK, Senior Circuit Judge, and CHURCHILL, ^* District Judge.

GEORGE CLIFTON EDWARDS, Jr., Circuit Judge.

In these two cases plaintiffs John Ed Clay and Curtis Bailey, each joined by his wife, brought actions for damages against defendants Johns-Manville Sales Corporation and Raybestos-Manhattan, Inc., on the basis of products liability claims resulting from plaintiffs' exposure to asbestos containing products manufactured by the defendants. The cases were tried in the United States District Court for the Eastern District of Tennessee and ended in jury verdicts for the defendants.

Appellants urge that the District Judge committed reversible error in a variety of ways. In our judgment, three of these require our discussion.

Before turning to these issues, however, we must point out that Johns-Manville as previously recognized in a number of cases which we cite in the footnote below, ¹ has filed for reorganization under Chapter 11 of the Bankruptcy Act of 1979, 11 U.S.C. Sec. 1101, et seq. Supp. III 1979, in the Bankruptcy Court for the Southern District of New York. This action brought into play the automatic stay provision set out in Sec. 362(a)(1) of the Act, which reads:

Sec. 362. Automatic stay

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title operates as a stay, applicable to all entities, of--

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; ....

The language of Sec. 362(a)(1) quoted above states flatly that filing of a bankruptcy petition "operates as a stay." Although no motion to stay has been filed by Johns-Manville in this court, we hereby order the appeal as to Johns-Manville to be stayed, pending further action by the parties or the Bankruptcy Court in the Southern District of New York, and we further instruct the clerk to place the file as it pertains to Johns-Manville in inactive status, pending the actions just referred to.

I.

Turning now to the other issues remaining in relation to defendant Raybestos-Manhattan, the first issue pertains to the judge's instruction to the jury on the possible effect of a general 10-year statute of limitations, T.C.A. Sec. 29-28-103, which became effective in the State of Tennessee on July 1, 1978. This statute was amended approximately one year later by the Tennessee legislature by the adoption of T.C.A. Sec. 29-28-103(b) which provided that the 10-year statute of limitations was inapplicable "to any action resulting from exposure to asbestos." The District Judge in these cases instructed the jury in effect that if the jury found that plaintiffs during the year the 10-year statute of limitations was in effect for all cases discovered or should have discovered that they were suffering from asbestosis, then the jury should find for the defendants.

Although it seems obvious to us that the legislature of Tennessee, in adopting the 10-year statute of limitations without any exemption of asbestos disease in the first instance, simply made a serious error which it has now sought to correct, appellees argue that the Tennessee Constitution and the Tennessee Supreme Court have mandated the interpretation which the District Judge gave to this jury. See Article I, Section 20 of the Tennessee Constitution, which provides: "That no retrospective law, or law impairing the obligation of contracts, shall be made." See Ford Motors v. Moulton, 511 S.W.2d 690 (Tenn.1974), cert. denied, 419 U.S. 870, 95 S.Ct. 129, 42 L.Ed.2d 109 (1974), reaffirmed, 533 S.W.2d 295 (Tenn.1976).

This would obviously produce a harsh result from what appears clearly to have been a legislative mistake. Even so, the federal courts in the exercise of their diversity jurisdiction would be obligated to follow state law as that law has been construed by the state's highest court, absent reason to believe from subsequent state court developments that such would no longer be the ruling of the Supreme Court of Tennessee.

Such reason has now been found in a recent case in this court which raised this identical issue from a similar ruling by the same District Judge. In Murphree v. Raybestos-Manhattan, Inc., 696 F.2d 459 (6th Cir.1982), with one of this court's Tennessee judges writing for a unanimous panel, the court held on the principal legal issue presented in our instant case:

"The main question of law on appeal in this diversity case is whether Tennessee's ten year statute of limitations based on sale, adopted July 1, 1978, as T.C.A. Sec. 29-28-103 (action 'must be brought within ten years from the date ... product ... first purchased for use') created for defendant a vested right barring plaintiff's claim despite a July 1, 1979, statutory amendment excluding asbestos-related disease actions from this ten year ceiling. ¹ The Tennessee appellate courts have not spoken directly on this issue. We hold that Tennessee's vested rights doctrine based on Tennessee Constitution Article I Section 20 does not bar the claim and that the 1979 amendment is applicable as a matter of law.

"Interpretation of Tennessee's various statutes of limitations governing products liability actions has created troublesome problems for Tennessee courts in the past two decades. In 1969 the Tennessee Supreme Court in Jackson v. General Motors, 223 Tenn. 12, 441 S.W.2d 482 (1969), adopted a rule widely criticized by the bench and bar of the state. It held that Tennessee's limitations statute in products cases begins to run on the date of purchase of the product and not on the date of injury or discovery. Thus, in some cases of latent disease and injury the limitation period expired before discovery by the victim. The legislature acted promptly to overrule the holding in Jackson by amending the statute. In 1974 the Tennessee Supreme Court, with Justice William Fones dissenting, prevented the amendment from becoming effective. The Court held in Ford Motor Company v. Moulton, 511 S.W.2d 690 (Tenn.1974) that under Tennessee vested rights doctrine, based on Article I, Section 20 of the Tennessee Constitution, the statutory amendment running the limitation period from discovery could not be applied retroactively. Thus, the seller who sold his product outside the statutory period was held to have a vested right to defeat an action for injuries discovered and sued upon during the statutory period.

"In 1975, shortly after the decision in Moulton, a new Tennessee Supreme Court was elected. Of the members of the old Court, only Justice William Fones remained. He became the first Chief Justice of the new Court. The new Court, in an opinion by Justice Joe Henry (a beloved member of that Court until his recent untimely death), promptly overruled Jackson v. General Motors, supra, and held that the limitations statute runs from discovery, not sale. In McCroskey v. Bryant Air Conditioning Co., 524 S.W.2d 487 (Tenn.1975), Justice Henry held that 'reason, logic and fundamental fairness' demanded that the running of the statute begin upon discovery, for it is ludicrous to have a 'law which charges a litigant with sleeping upon any right which he does not have' just as one cannot 'harvest a crop never planted, or burn down a house never built.' 524 S.W.2d at 489. The McCroskey opinion announces very clearly that judicial policy in Tennessee does not favor doctrines that activate statutes of limitations before the plaintiff has knowledge of his injury.

"Although the Tennessee Supreme Court in McCroskey did not expressly overrule the vested rights doctrine as applied to statutes of limitations in Moulton, it is clear to us that the Moulton vested rights doctrine no longer has any vitality. Justice Henry's McCroskey opinion quotes from that part of Justice Fones' Moulton dissent that quotes in turn from an opinion of this Court by Judges Phillips, Edwards and Celebrezze. In McCroskey Justice Henry said:

Our own Chief Justice [Fones] dissented from the majority opinion in Ford Motor Company v. Moulton, supra. We quote from his dissent:

"The following principles are stated concisely in Hodge v. Service Machine Company, 438 F.2d 347 (6th Cir.1971).

'A cause of action accrues when a suit may be maintained upon it. Black's Law Dictionary 37 (4th ed. 1951). A suit may not be brought upon a cause of action until it exists, and a cause of action does not exist until all its elements coalesce. In civil actions for damages, two elements must coalesce before a cause of action can exist: (a) a breach of some legally recognized duty owed by the defendant to the plaintiff; (b) which causes the plaintiff some legally cognizable damage.'

To hold that a products liability action, which is a recognized legal right, is barred by a statute of limitations before any injury is...