Fireside Motors, Inc. v. Nissan Motor Corp. in U.S.A.

• Citation: 479 N.E.2d 1386,395 Mass. 366
• Parties: , Prod.Liab.Rep. (CCH) P 10,614 FIRESIDE MOTORS, INC. v. NISSAN MOTOR CORPORATION IN U.S.A. et al. 1
• Decision Date: 10 July 1985
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1386

479 N.E.2d 1386

395 Mass. 366, Prod.Liab.Rep. (CCH) P 10,614

FIRESIDE MOTORS, INC. v. NISSAN MOTOR CORPORATION IN U.S.A. et al. ¹

Supreme Judicial Court of Massachusetts Middlesex.

Argued March 4, 1985.

Decided July 10, 1985.

Herbert D. Lewis, Boston (Roberta L. Paris, Weston, with him), for plaintiff.

Scott A. Smith, Boston, for defendants.

Before HENNESSEY, C.J., and WILKINS, ABRAMS, NOLAN and LYNCH, JJ.

ABRAMS, Justice.

The plaintiff, Fireside Motors, Inc. (Fireside), an automobile dealer, sold a motor vehicle to a retail customer. The customer, Pauline Dusablon, was involved in an accident and brought an action against Fireside and Nissan Motor Corporation in U.S.A. (Nissan U.S.A.), the distributor. Fireside settled the claim with the customer, and then brought this action for indemnification against Nissan U.S.A., the distributor, and Nissan Motor Co., Ltd. (Nissan Ltd.), the manufacturer. The defendants filed a motion for summary judgment, which a Superior Court judge allowed. The plaintiff appeals. We transferred the case to this court on our own motion. We conclude that the judge properly determined that, as a matter of law, there was no express or implied contractual right or statutory right to indemnification. We reverse, however, on Fireside's claim that it is entitled to a trial on the theory of common law tort indemnification. On this record that issue presents significant factual questions on negligence of the parties, breach of warranty, and reasonableness of the plaintiff's settlement, which are not appropriately resolved by summary judgment. Mass.R.Civ.P. 56, 365 Mass. 824 (1974). See C.A. Wright, A.R. Miller & M.K. Kane, 10A Federal Practice and Procedure § 2734 (1983). We therefore reverse that portion of the summary judgment based on a claim of common law indemnity.

We summarize the facts. In 1973, Dusablon filed a declaration against Fireside and Nissan U.S.A., alleging that she had been injured when the seat belt system in her 1970 Datsun automobile, purchased from Fireside, failed during a collision in 1972. In the declaration, Counts I through IV against Fireside, and Counts V through VIII against Nissan U.S.A., alleged a breach of warranty of merchantability, a breach of express warranty, and negligent inspection (against Fireside) and negligent manufacture (against Nissan U.S.A.). Nissan Ltd. was not a party to the original suit. Fireside's attorney notified Nissan U.S.A. of the pending suit, claiming that Nissan U.S.A. was answerable to Fireside, and that if Nissan U.S.A. failed to come in and defend Fireside, Nissan U.S.A. would be bound by any determination of fact common to the two litigations.

Dusablon reached a settlement for $20,000 with Fireside during the course of the trial and the parties filed a stipulation of dismissal, with prejudice, as against Fireside. See Mass.R.Civ.P. 41(a)(1)(ii), 365 Mass. 803 (1974). The case continued against Nissan U.S.A. The judge then allowed Nissan U.S.A.'s motion for a directed verdict as to Counts V, VI, VII, and VIII pertaining to the warranty violations, and the claim of negligent manufacture. The judge allowed Dusablon to amend her declaration to add Count IX and go to the jury on a claim of negligent inspection and distribution. The jury found against Dusablon and for Nissan U.S.A. on Count IX and the judge entered judgment for Nissan U.S.A. in December, 1978.

In 1979, Fireside brought the present action against the defendants for $20,000, the amount of the settlement with Dusablon, plus interest, costs, and attorneys' fees. The complaint alleged breach of implied warranty of merchantability and implied warranty of fitness for intended purpose against both Nissan U.S.A. and Nissan Ltd., and alleged negligent manufacture and design against only Nissan Ltd. In November, 1983, the judge granted the defendants' motion for summary judgment.

Fireside challenges the following rulings by the judge: (1) Fireside's settlement precludes it from asserting a claim for indemnification on a common law basis; (2) there was no evidence of an implied contractual right to indemnification or any special circumstances giving rise to a right to indemnification; and (3) Fireside's settlement precludes an indemnification claim because, under G.L. c. 93B, § 5B (1984 ed.), there was no court determination of the liability of the defendants. ² We turn to the first ruling.

1. Common law tort indemnification.

Fireside requests indemnification on a theory of common law tort indemnification. At common law a person may seek indemnification if that person "does not join in the negligent act but is exposed to derivative or vicarious liability for the wrongful act of another." Stewart v. Roy Bros., 358 Mass. 446, 459, 265 N.E.2d 357 (1970); Rathbun v. Western Mass. Elec. Co., 395 Mass. 361, 479 N.E.2d 1383 (1985); Decker v. Black & Decker Mfg. Co., 389 Mass. 35, 40-41, 449 N.E.2d 641 (1983); Ford v. Flaherty, 364 Mass. 382, 385-386, 305 N.E.2d 112 (1973); Gray v. Boston Gas Light Co., 114 Mass. 149, 154 (1873). See Araujo v. Woods Hole, Martha's Vineyard, Nantucket S.S. Auth., 693 F.2d 1, 3 (1st Cir.1982). ³ The cause of action exists independently of statute, and whether or not contractual relations exist between the parties. W. Prosser & W. Keeton, Torts § 51, at 341 (5th ed. 1984). "The general rule is that a person who negligently causes injury to a third person is not entitled to indemnification from another person who also negligently caused that injury." Rathbun v. Western Mass. Elec. Co., supra at ----, 479 N.E.2d 1383. Further, "[i]f a manufacturer supplies a defective product to a retailer, who sells it to a customer, who recovers from the retailer for an injury incurred, the retailer may recover in indemnity against the manufacturer or [she or] he may maintain an action in negligence ...." Restatement (Second) of Torts § 886B, comment c (1979). Keeping these principles in mind, we consider the judge's ruling that Fireside's settlement precludes recovery on a theory of common law indemnification.

a. Effect of settlement. In granting summary judgment to the defendants, the judge ruled that Fireside's settlement of the claim against it precluded Fireside from recovering in a common law indemnity action. ⁴ Normally, our rule is that a person seeking common law indemnification may pursue the indemnification claim even if the claim is settled. Swansey v. Chace, 16 Gray 303, 304 (1860); Gray v. Boston Gas Light Co., supra at 155. See Monadnock Display Fireworks, Inc. v. Andover, 388 Mass. 153, 158, 445 N.E.2d 1053 (1983) (implied warranty); Great Atl. & Pac. Tea Co. v. Yanofsky, 380 Mass. 326, 331- 332, 403 N.E.2d 370 (1980); Trustees of N.Y., N.H. & H.R.R. v. Tileston & Hollingsworth Co., 345 Mass. 727, 732-733, 189 N.E.2d 522 (1963) (contractual indemnity); Royal Paper Box Co. v. Munro & Church Co., 284 Mass. 446, 453, 188 N.E. 223 (1933) (indemnity arising from breach of warranty). "Indemnity may be had even though the indemnitee settled the claim against him without waiting for suit to be brought or judgment obtained." Hennessey, Torts: Indemnity and Contribution, 47 Mass.L.Q. 421, 424 (Dec., 1962). Other jurisdictions also follow this rule. See, e.g., Jennings v. United States, 374 F.2d 983, 987 (4th Cir.1967) (Maryland law); Forty-Eight Insulations, Inc. v. Johns-Manville Prods. Corp., 472 F.Supp. 385, 393 (N.D.Ill.1979) (Illinois law); Blockston v. United States, 278 F.Supp. 576, 586 (D.Md.1968) (Maryland law); St. Paul Fire & Marine Ins. Co. v. Michelin Tire Corp., 12 Ill.App.3d 165, 169, 298 N.E.2d 289 (1973); McDermott v. City of New York, 50 N.Y.2d 211, 220, 428 N.Y.S.2d 643, 406 N.E.2d 460 (1980). See generally W. Prosser & W. Keeton, Torts, supra; 1 S.M. Speiser, C.F. Krause & A.W. Gans, Torts § 3:26, at 483 & n. 6 (1983). The defendants do not suggest any reason why we should not apply the general rule to this case. Thus, the judge's ruling that the settlement was fatal to Fireside's assertion of a common law claim is erroneous.

b. Lack of notice as to Nissan Ltd. Nissan Ltd. contends that the plaintiff's tort action against it is barred because it did not receive timely notice of the pendency of the underlying action of Dusablon against the plaintiff. ⁵ The defendants' assertion that notice to a would-be indemnitor is a precondition to a subsequent indemnity action against the putative indemnitor is incorrect. The failure to give notice merely imposes on the person seeking indemnity the burden of litigating the facts supporting the indemnitor's primary liability to the original plaintiff and giving rise to the indemnity relationship itself. Monadnock Display Fireworks, Inc. v. Andover, 388 Mass. 153, 157-158 n. 1, 445 N.E.2d 1053 (1983); Trustees of N.Y., N.H. & H.R.R. v. Tileston & Hollingsworth Co., 345 Mass. 727, 732, 189 N.E.2d 522 (1963); Miller v. United States Fidelity & Guar. Co., 291 Mass. 445, 449, 197 N.E. 75 (1935). See Boston & Me. R.R. v. Bethlehem Steel Co., 311 F.2d 847, 849 (1st Cir.1963). See also Tillman v. Wheaton-Haven Recreation Ass'n, 580 F.2d 1222, 1230 (4th Cir.1978); Jennings v. United States, supra at 986.

The failure to give timely notice to the alleged indemnitor also imposes on the indemnitee the burden of proving that the original settlement was reasonable in all the circumstances. Keljikian v. Star Brewing Co., 303 Mass. 53, 54, 20 N.E.2d 465 (1939). The Massachusetts cases cited by the defendants state only that lack of notice precludes a binding effect to be given the earlier judgment or settlement on the subsequent action for indemnity; the cases do not hold that there is a requirement of notice to the putative indemnitor in order to pursue an indemnity claim. Thus, there is no merit to Nissan Ltd.'s claim that Fireside's failure to give it notice of the Dusablon claim precludes Fireside from seeking indemnification based on the common law.

c. Issue preclusion and collateral...