Durden v. Hydro Flame Corp.
| Decision Date | 03 August 1999 |
| Docket Number | No. 98-491.,98-491. |
| Citation | 1999 MT 186,983 P.2d 943 |
| Parties | Jesse DURDEN and Grace Ann Durden, individually and as Guardians for April Durden, a Minor, Plaintiffs, v. HYDRO FLAME CORPORATION, a Utah Corporation, Defendant, Cross-Defendant, and Respondent, and Chief Industries, Inc., |
| Court | Montana Supreme Court |
Gig A. Tollefson, Berg, Lilly, Andriolo & Tollefsen, P.C., Bozeman, Montana, for Appellant.
Barry G. O'Connell, Moore, O'Connell & Refling, P.C., Bozeman, Montana, Richard D. Burbidge, Burbidge & Mitchell, Salt Lake City, Utah, Monte D. Beck, Beck & Richardson, Bozeman, Montana, Joe Bottomly, Attorney at Law, Kalispell, Montana, for Respondent.
Stephen C. Pohl, Attorney at Law; Bozeman, Montana (MTLA), For Amicus.
¶ 1 The Durdens filed this action against Chief Industries, Incorporated and Hydro Flame Corporation in the Sixth Judicial District Court, Park County, to recover damages for injuries sustained while inhabiting a fifth-wheel trailer manufactured and sold by Chief Industries and heated by a furnace manufactured by Hydro Flame. Chief Industries and Hydro Flame filed cross-claims against each other seeking indemnification from the other in the instance either was found liable. Prior to trial the Durdens and Hydro Flame reached a court-approved settlement and the District Court dismissed both cross-claims with prejudice. Following a trial between the Durdens and Chief Industries, an appeal resulting in Durden v. Hydro Flame Corporation, 1998 MT 47, 955 P.2d 160, and remand, Chief Industries sought to have its indemnity cross-claim reinstated. The District Court refused and certified its order as a final judgment pursuant to Rule 54(b), M.R.Civ.P. Chief Industries appeals.
¶ 2 The sole issue raised on appeal is whether, in a product liability action in which the finished product manufacturer and a component part manufacturer are named defendants, the rights of the finished product manufacturer to indemnity against the component manufacturer are extinguished upon the latter's settlement with the injured party.
¶ 3 The Durdens filed this action against Chief Industries to recover damages for carbon monoxide poisoning they allegedly sustained while inhabiting a fifth-wheel trailer manufactured and sold by Chief Industries. The Durden's complaint was also filed against Hydro Flame Corporation, the manufacturer of the trailer furnace which is alleged to have been the source of the carbon monoxide. Chief Industries designed and installed the duct work and exhaust for the furnace which, according to the Durdens' expert, caused the trailer to be defective and unreasonably dangerous. The Durdens predicated each defendant's liability upon theories of breach of warranty and strict liability in tort.
¶ 4 As to Hydro Flame, the Durdens' complaint asserted that the furnace was defective as evidenced by the development of holes in the heat exchanger portion of the furnace. These holes were alleged to have allowed carbon monoxide to infiltrate the living space of the trailer. As to Chief Industries, the complaint alleged that the trailer was designed and manufactured in a defective and unreasonably dangerous condition because it incorporated a defective heating system, failed to have carbon monoxide detection devices, and failed to include adequate and complete warnings. It further alleged that Chief Industries failed to "properly inspect and test" the furnace.
¶ 5 Both defendants denied the allegations made in the complaint. Chief Industries filed a cross-claim against Hydro Flame by which it sought indemnity from Hydro Flame in the instance that it was found liable to the Durdens pursuant to a theory of strict liability. Hydro Flame likewise filed an indemnity cross-claim against Chief Industries. Shortly prior to trial the Durdens and Hydro Flame reached a court-approved settlement and the District Court dismissed the cross-claims of both Chief Industries and Hydro Flame with prejudice.
¶ 6 Following a jury trial between the Durdens and Chief Industries, the District Court granted the Durdens' motion for a directed verdict, finding that the trailer was defective, and granted a new trial on damages. The jury, nevertheless, found no causation between the defect and the Durdens' claimed injuries.
¶ 7 Following an appeal, we reversed the District Court's grant of judgment as a matter of law, but affirmed the grant of a new trial. Upon remand, Chief Industries sought to have its indemnity cross-claim reinstated by the District Court. The District Court refused and certified its order as final judgment pursuant to Rule 54(b), M.R.Civ.P. Chief Industries appeals.
¶ 8 This Court, when examining the trial court's conclusions of law, is required to "determine whether [the district court's] interpretation of the law is correct." Stratemeyer v. Lincoln County (1996), 276 Mont. 67, 71, 915 P.2d 175, 177. Thus, the standard of review is plenary. See Blackwell v. Lurie (1997), 284 Mont. 351, 943 P.2d 1318.
¶ 9 This appeal presents a practical dilemma between two competing public policies. One is the promotion of settlements, and the other is the placing of responsibility upon the "up stream" manufacturer of a defective product as opposed to the retailer or distributor of that product.
¶ 10 Chief Industries maintains that the latter policy, placing responsibility upon the "up stream" manufacturer of a defective product, is the more important public policy because in the context of a product liability action, a merchant should be able to claim indemnity from the "up stream" manufacturer who made a defective product sold by the merchant. Only this way, according to Chief Industries, is the party who is ultimately responsible for the defect, the party who pays for the resulting damages.
¶ 11 Hydro Flame, on the other hand, argues for the first policy because given the number of lawsuits filed, and the unavailability of resources and time, it is essential that lawsuits be encouraged to settle. It maintains that there would be little incentive for a manufacturer to settle with a plaintiff if it believed it still had to defend an indemnification cross-claim from a "downstream" retailer or distributor.
¶ 12 In State, ex rel., Deere & Co. v. District Court of the Fifth Judicial District (1986), 224 Mont. 384, 730 P.2d 396, we considered a settlement between a plaintiff and one of two defendants, and determined that when one defendant in a negligence action settles with the plaintiff it can "buy peace" from not only the plaintiff, but from the other defendants who seek damages in contribution or indemnity, or both, by way of cross-claim. Deere involved negligence, strict liability, contribution, and indemnity. In our decision in Deere, we relied upon the language of § 27-1-703, MCA, which concerns negligence, multiple defendants, joint and several liability, and contribution.
¶ 13 This action, on the other hand, is brought pursuant to § 27-1-719, MCA, as it existed in 1994. That statute indicates that principles of comparative negligence shall be applicable concerning named defendants; however, notably absent is any mention of multiple defendants or any reference to § 27-1-703, MCA. Section 27-1-703, MCA, is by it its terms limited to negligence actions and does not mention actions in strict liability.
¶ 14 Deere involved a negligence action against the operator of a bulldozer that backed into the plaintiff. The plaintiff also brought suit against the manufacturer of the bulldozer. The manufacturer settled with the plaintiff. The operator sought contribution and indemnity from the manufacturer. We held that a "joint tortfeasor who settles with the claimant before judgment on the claim is entered in a district court is not subject to claims for contribution or indemnity from the nonsettling joint tortfeasors," Deere, 224 Mont. at 392, 730 P.2d at 402. ¶ 15 Chief Industries is correct when it notes that because this case sounds in strict liability and not negligence, § 27-1-703, MCA, does not directly apply to this case. However, the policy statements made in Deere with regard to the promotion of settlements in cases in which indemnity is involved, do offer some guidance.
¶ 16 We recognize the importance of Chief Industries' public policy argument that a judicial system which places liability for injuries from defective products on the manufacturer of the defective product, provides protection for Montana's consuming public and also serves to prevent the inequity of requiring a retailer or distributor to bear the cost of injury created by a manufacturer. We also recognize that a judicial system which allows individual litigants to settle with one defendant in a multiple defendant case conflicts with the rationale for allowing strict liability against "downstream" parties (without proof of fault) in order to allow them to act as a conduit to pass liability "upstream" to the manufacturer of the defective product. It is clear that Montana adopted strict product liability in order to place responsibility upon the manufacturers of defective products. See Brandenburger v. Toyota Motor Sales U.S.A., Inc. (1973), 162 Mont. 506, 514, 513 P.2d 268, 273.
¶ 17 In order to allow "downstream" parties to "act as the conduit through which liability may flow to reach the manufacturer," a Montana federal court allowed cross-claims and third-party complaints for indemnification against a manufacturer. See Jones v. Aero-Chem Corp. (D.Mont.1987), 680 F.Supp. 338, 339. That court stated:
This "upstream" indemnification fosters the policy behind strict products liability by placing final responsibility for injuries caused by a defective product upon the entity initially responsible for placing that product into the stream of commerce.
Jones, 680 F.Supp. at 340. It further stated that "[t...
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