Cosgriff Neon Co. v. Mattheus

• Decision Date: 21 May 1962
• Docket Number: No. 4453,4453
• Citation: 78 Nev. 281,371 P.2d 819
• Parties: COSGRIFF NEON COMPANY, Inc., Appellant, v. H. E. MATTHEUS, A. E. Bernard, E. J. Mangini and Jack Maddalena, dba Mangini and Maddalena, Respondents.
• Court: Nevada Supreme Court

Page 819

371 P.2d 819

78 Nev. 281

COSGRIFF NEON COMPANY, Inc., Appellant, v. H. E. MATTHEUS, A. E. Bernard, E. J. Mangini and Jack Maddalena, dba Mangini and Maddalena, Respondents.

No. 4453.

Supreme Court of Nevada.

May 21, 1962.

John S. Halley, Reno, for appellant.

Stewart, Horton & McCune and Donald Stuart Bab, Reno, for respondent Jack Maddalena.

John Sanchez, Reno, for respondent Ernest J. Mangini.

William J. Crowell, Carson City, for respondents H. E. Mattheus and A. E. Bernard.

THOMPSON, Justice.

Pursuant to a conditional sales contract with the Carson Shopping Center, the appellant Cosgriff Neon Company, Inc., installed and erected an electric neon sign on a brick pylon. On the day after such installation, the brick pylon collapsed. The sign was totally destroyed. In the lower court, Cosgriff Neon Company, Inc., by complaint in intervention, sought to recover the sum of $1,421.88 alleged to be the value of the sign. ¹ It was denied relief, the court stating, 'That the Intervenor, Cosgriff Neon Company, Inc., has no privity with the Plaintiffs, or the Defendants, and its action, if any, lies against Carson Shopping Center and Douglas Bryant ², who were not made parties to this action, nor appeared therein.' Appeal is taken from the judgment denying relief to Cosgriff Neon Company, Inc., as intervenor.

1. The parties' contentions: (a) Cosgriff Neon. In seeking a reversal of the judgment denying it relief, Cosgriff Neon urges upon us that it had a property interest in the destroyed sign, having retained title thereto by reason of the conditional sales contract with Carson Shopping Center; that the cause of the sign's destruction was the negligence of Mangini and Maddalena in their construction of the brick pylon on which the sign was subsequently erected; that it should be permitted to recover its loss directly from either the persons who caused it, Mangini and Maddalena, or from the owners of the brick pylon, Mattheus and Bernard, who had accepted the negligently constructed pylon from the contractors, and had thereafter maintained it; that it is not necessary to seek recovery from Carson Shopping Center to whom it had sold the sign and who remained obligated upon the contract; finally, that the requirement of contractual privity, as a prerequisite to a valid claim for relief, is no longer the law.

(b) Mangini and Maddalena. In seeking to uphold the judgment denying relief to Cosgriff Neon, the contractors contend that the lack of contractual privity between themselves and Cosgriff Neon is a complete defense; that the acceptance of the pylon by Mattheus and Bernard, for whom it was built, relieved them of liability for damage thereafter sustained by third persons; that there would be no end to litigation with third persons if liability did not cease when the work contracted for was accepted; that the proximate cause of the damage to Cosgriff Neon was broken by an intervening agency, the act of the owners Mattheus and Bernard in accepting the pylon and thereafter maintaining it; that Carson Shopping Center remained obligated on the conditional sales contract to Cosgriff Neon, with the result that Cosgriff Neon sustained no damage; and finally, under the circumstances of this case, Cosgriff Neon should not recover because it was contributorily negligent in erecting a heavy sign upon the pylon when it should have known that it would probably not sustain its weight. ³

(c) Mattheus and Bernard. The owners agree with all of the arguments advanced by the contractors, except that they do not subscribe to the contention that the proximate cause of the pylon's failure shifted to them upon their acceptance of the contractors' work and subsequent maintenance of the pylon. They make it clear that, in their view, Cosgriff Neon does not have a claim for relief against anyone except on the contract against Carson Shopping Center should it default in its payment obligation thereunder. However, they go further and argue that if the court believes that contractual privity is not a prerequisite to Cosgriff Neon's claim for relief, in any even they are not liable. They take this position because the trial court found the proximate cause of the pylon's failure to rest with the contractors. Additionally, they indicate that the defect in the construction of the pylon was latent in nature, not observable by them, with the result that it would be unfair to impose a liability upon them under such circumstances.

In resolving these contentions, we must first determine whether Cosgriff Neon, a conditional seller, has a claim for relief at all, in the absence of contractual privity. If we decide that it does, we must then decide whether the liability, under the circumstances here present, rests with the contractors, the owners, or both.

2. Absence of contractual privity, of itself, does not bar relief. In denying relief to Cosgriff Neon, the trial court gave as its reason the absence of contractual privity between Cosgriff Neon and the contractors and owners from whom it sought recovery. We do not agree.

It should first be noted that a conditional seller, under proper circumstances, has a claim for relief against a third person who tortiously damages or destroys the property which is the subject of the sale. Annot. 67 A.L.R.2d 582. What constitutes the 'proper circumstances' is a matter concerning which case authority is not in harmony. Some courts permit the conditional seller, or his assignee, to recover only if the buyer is in possession of the subject of the sale and in default in his payments under the conditional sales contract. Universal Credit Co. v. Collier, 108 Ind.App. 685, 31 N.E.2d 646; Harris v. Seaboard Airline Ry. Co., 190 N.C. 480, 130 S.E. 319, 49 A.L.R. 1452; Commercial Credit Corp. v. Satterthwaite, 107 N.J.L. 17, 150 A. 235. Some will not permit recovery against a third person if the buyer is in possession and not in default in his payments at the time the loss or damage occurs. Louisville & N. R. Co. v. Miller, 209 Ala. 378, 96 So. 322; Gas City Transfer Co. v. Miller, 107 Ind.App. 210, 21 N.E.2d 428. Other courts, in permitting recovery, have held that it is immaterial whether or not the buyer is in default in his payments at the time of loss or damage. Bell Finance Co. v. Gefter, 337 Mass. 69, 147 N.E.2d 815, 67 A.L.R.2d 578; First National Acceptance Corp. v. Annett, 121 N.J.L. 356, 2 A.2d 650.

In the case at bar the record reveals that the buyer was in possession of the sign and in default in its payment obligation when the loss occurred. The purchase price for the sign was $1,421.88, $277.88 to be paid upon execution of the contract on November 13, 1957, and the balance in twelve equal monthly installments of $101.05 commencing January 1, 1958. The pylon crumbled and the electric sign was destroyed on January 14, 1958. The parties stipulated that the buyer had paid only $250 when the loss occurred; apparently the installment payment due January 1, 1958 had not been made. Under such circumstances, all authorities appear to agree that the conditional seller has a claim for relief against the third person causing destruction of, or damage to, the property which is the subject of the sale.

However, the authorities collected in the annotation mentioned above do not deal with the liability of a third person to the conditional seller when such third person is an independent contractor who has negligently erected a structure that subsequently causes damage. Because of this, the contractors Mangini and Maddalena insist that the general rule set forth in said annotation has no application to the facts of this case. The validity of their position depends essentially upon whether or not we choose to extend the doctrine exemplified by the landmark decision of MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050, L.R.A.1916F, 696, to govern the liability of a contractor for damage to a third person (Cosgriff Neon) after completion of the contractors' work and the acceptance thereof by the owners. MacPherson imposed liability for negligence upon the manufacturer of a car, who had sold it to a retail dealer, who had resold it to the plaintiff. While the plaintiff was in the car, it suddenly collapsed, causing him to be thrown out and injured. Justice Cardozo said: 'The question to be determined is whether the defendant owed a duty of care and vigilance to anyone but the immediate purchaser.' He concluded that...