Desert Golf Cars v. Yamaha Motor Co.

• Decision Date: 08 June 2000
• Docket Number: No. 1 CA-CV 99-0419.,1 CA-CV 99-0419.
• Citation: 7 P.3d 112,198 Ariz. 103
• Parties: DESERT GOLF CARS, Crossclaimant-Appellant, Cross Appellee, v. YAMAHA MOTOR CO., Crossdefendant-Appellee, Cross Appellant.
• Court: Arizona Court of Appeals

7 P.3d 112

198 Ariz. 103

DESERT GOLF CARS, Crossclaimant-Appellant, Cross Appellee, v. YAMAHA MOTOR CO., Crossdefendant-Appellee, Cross Appellant.

No. -0419.

Court of Appeals of Arizona, Division 1, Department D.

June 8, 2000.

As Amended June 13, 2000.

Carnahan & Perry, PLC By Michael W. Carnahan, Daniel W. McCarthy, Gary L. Hudson, Phoenix, Attorneys for Crossclaimant-Appellant, Cross Appellee.

Gallagher & Kennedy, P.A. By Michael L. Gallagher, Donald B. Petrie, Phoenix, Attorneys for Crossdefendant-Appellee, Cross Appellant.

OPINION

WEISBERG, Judge.

¶ 1 Desert Golf Cars ("Desert Golf") appeals the trial court's grant of a directed verdict to Yamaha Motor Company ("Yamaha"). Yamaha cross-appeals the trial court's award of costs. For the following reasons, we reverse both the directed verdict and the award of costs.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 In 1988, the Scottsdale Princess Resort ordered a room services cart from Desert Golf. To fill the resort's order, Desert Golf purchased a golf cart from Yamaha and modified it to better serve its intended function. The original Yamaha golf cart was changed by adding thirty-two inches of length and installing a food-service body. Although the seat was altered slightly, the occupants' compartment was largely unchanged.

¶ 3 On September 22, 1994, the plaintiff below, a bartender at the resort, was injured when she was riding in the cart with two other resort employees.¹ The driver made a sharp left turn, and plaintiff fell out of the cart.

¶ 4 Plaintiff filed her complaint against both Desert Golf and Yamaha, seeking damages for her injuries. In her complaint, plaintiff claimed that the two defendants manufactured and sold the defective cart to her employer. Essentially, plaintiff claimed that the cart had been designed and manufactured without an adequate passenger restraint system.

¶ 5 Desert Golf tendered its defense to Yamaha, which refused to defend because of Desert Golf's modifications. Desert Golf then filed a cross-claim against Yamaha, seeking indemnity and reimbursement of attorneys' fees pursuant to Arizona Revised Statutes Annotated ("A.R.S.") section 12-684 ("section 684"). Yamaha answered, maintaining that it did not design, manufacture, distribute or sell the cart.

¶ 6 Three days prior to trial, and over three years after filing suit, plaintiff, pursuant to a stipulation with Yamaha, announced that she intended to voluntarily dismiss her claims against it.² In her motion to dismiss, plaintiff stated that Yamaha did not design or manufacture the cart. At oral argument on the motion, plaintiff's counsel explained why he believed that Yamaha was not liable for plaintiff's injuries: "I think you should know that in our original complaint, we were really gunning for Desert Golf, but we ... were lead [sic] to believe that Yamaha produced the [cart]." Over Desert Golf's objection, the trial court dismissed Yamaha.

¶ 7 At trial, after both plaintiff and Desert Golf had presented their evidence, Yamaha moved for a directed verdict on Desert Golf's cross-claim, arguing that it neither designed nor manufactured the cart. The trial court granted Yamaha's motion, and the case went forward only as to plaintiff's claims against Desert Golf. At the close of trial, the jury returned a verdict in favor of Desert Golf.

¶ 8 After trial, Yamaha submitted a statement of costs to which Desert Golf objected. The trial court sustained in part Desert Golf's objection and awarded Yamaha $9659.97 of the $26,049.71 that it had requested. Desert Golf now appeals the directed verdict issued in favor of Yamaha, while Yamaha cross-appeals the trial court's refusal to award its full costs.³ We have jurisdiction pursuant to A.R.S. § 12-2101(B).

DISCUSSION

¶ 9 Desert Golf argues that the Arizona product liability statutes, A.R.S. §§ 12-681 through 12-687 in general, and section 684 in particular, compel Yamaha to reimburse its attorneys' fees and costs arising out of the underlying lawsuit. Yamaha, of course, rejects that conclusion. Furthermore, while both parties agree that the application of the Arizona product liability statutes ordinarily presents a question of fact for the jury, each argues that the facts here require a judgment in its favor as a matter of law. We agree that section 684 controls, but conclude that the question of whether Yamaha must reimburse Desert Golf remains an unresolved question of fact.

¶ 10 Section 684 states, in pertinent part:

A. In any product liability action where the manufacturer refuses to accept a tender of defense from the seller, the manufacturer shall indemnify the seller for any judgment rendered against the seller and shall also reimburse the seller for reasonable attorneys' fees and costs incurred by the seller in defending such action, unless either paragraph 1 or 2 applies:

....

2. The seller altered, modified or installed the product, and such alteration, modification or installation was a substantial cause of the incident giving rise to the action, was not authorized or requested by the manufacturer and was not performed in compliance with the directions or specifications of the manufacturer.

¶ 11 Section 684 is intended, in most circumstances, to place the burden and costs of defending products on their manufacturers. See McIntyre Refrigeration v. Mepco Electra, 165 Ariz. 560, 564, 799 P.2d 901, 905 (1990). This reflects the legislature's judgment that liability ought to begin with the manufacturer who is best situated to detect, control or prevent the putative defect. See 13 American Law of Products Liability § 52:98, at 52-137 (Timothy E. Travers ed., 3rd ed.1987). Of course, when a seller modifies the product and that modification substantially causes the incident in question, then it is the seller who steps into the shoes of the manufacturer as being the one best situated to detect, control or prevent the putative defect. See id.

¶ 12 McIntyre further established that "a manufacturer's product need not be proven to be defective to render the manufacturer liable for the seller's defense costs." Id.; see also Hellebrandt v. Kelley Co., Inc., 153 Ariz. 429, 430, 737 P.2d 405, 406 (1987) ("A faultless seller is as victimized by being required to defend a meritless claim against it as by one having merit because of a manufacturer's defective product."). Here, although no fault was ultimately placed on either Yamaha or Desert Golf, Yamaha argues that because Desert Golf modified the cart, Desert Golf was either the "manufacturer" responsible for the costs of defense or the seller whose modifications to the golf cart were "a substantial cause of the incident giving rise to the action," thereby disqualifying Desert Golf from reimbursement under the statute.

¶ 13 The Arizona product liability statutes define "manufacturer" as "a person or entity who designs, assembles, fabricates, produces, constructs or otherwise prepares a product or component part of a product prior to its sale to a user or consumer." A.R.S. § 12-681(1). The statutes define a "seller" as "a person or entity, including a wholesaler, distributor, retailer or lessor, engaged in the business of leasing any product or selling any product for resale, use or consumption." A.R.S. § 12-681(7). In this case, we focus on the intended operation of section 684 that entitles the downstream seller/modifier to compensation from the upstream manufacturer, unless otherwise precluded by subsection 684(A)(2). Because Desert Golf does not deny that it modified the cart, or contend that Yamaha authorized or requested the modifications or gave it any directions, the sole question is whether Desert Golf's modifications were "a substantial cause of the incident giving rise to the action."

¶ 14 Desert Golf argues that, because the jury found that it was not liable for plaintiff's injuries, its modifications could not have been a "substantial cause of the incident" pursuant to section 684. But that analysis fails for two reasons.

¶ 15 First, Desert Golf's argument would be compelling only if "substantial cause of the incident" were defined to mean "causing harm and a resulting judgment in the plaintiff's favor." But we cannot read section 684 so narrowly because a favorable defense verdict does not preclude indemnity. Moreover, a defense verdict does not compel the conclusion that the defendant's modifications were not a substantial cause of the underlying incident. That is, an incident can occur without creating liability. In fact, section 684 refers only to the "incident." It is entirely possible that the jury believed Desert Golf's modifications to be a substantial cause of the incident, but not the proximate cause because of someone's intervening negligence. Or perhaps the jury believed that Desert Golf was not negligent in modifying the cart. Thus, it is possible for Desert Golf to be denied indemnity even when the verdict is in its favor.

¶ 16 Second, even if the jury had specifically decided that Desert Golf did not substantially cause the incident pursuant to section 684, the verdict could not bind Yamaha. To illustrate, had Desert Golf first successfully defended its case against plaintiff without Yamaha's involvement, and then brought suit against Yamaha for defense cost indemnity, Yamaha would have been entitled to a trial on the merits of Desert Golf's subsequent indemnity claim. Yet here, because its motion for directed verdict was granted, Yamaha presented no evidence to the jury, and merely cross-examined the witnesses for plaintiff and Desert Golf. Its limited participation in the trial, however, did not waive its right to a full trial on the merits of Desert Golf's indemnity claim. Therefore, the indemnity issue cannot be decided by this jury's verdict without violating Yamaha's right to a trial by jury. See Ariz. Const. art. 6, § 17.

¶ 17 Although each party now argues that, given the underlying facts, the indemnity claim can only be resolved in...