Hales v. Green Colonial, Inc.

• Citation: 402 F. Supp. 738
• Decision Date: 24 October 1975
• Docket Number: No. 1625.,1625.
• Parties: Dean HALES et al., Plaintiffs, v. GREEN COLONIAL, INC., et al., Defendants.
• Court: U.S. District Court — Western District of Missouri

402 F. Supp. 738

Dean HALES et al., Plaintiffs, v. GREEN COLONIAL, INC., et al., Defendants.

No. 1625.

United States District Court, W. D. Missouri, St. Joseph Division.

October 24, 1975.

Michael E. Waldeck, Kansas City, Mo., for plaintiffs.

Joseph K. Houts, St. Joseph, Mo., for Green Colonial.

James Borthwick, Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, Mo., for Iowa Plumbers.

Dan Hale, St. Joseph, Mo., for Dover Corp.

MEMORANDUM AND ORDER

JOHN W. OLIVER, District Judge.

This diversity case raises the question, not heretofore decided by Missouri courts, of whether and under what circumstances a supplier and distributor who have been held strictly liable in tort for selling a defective product may seek indemnity from the manufacturer of the product. For the reasons which we shall state, we find and conclude that the supplier and distributor in this case are entitled to indemnity from the manufacturer.

In June of 1970 plaintiff Dean Hales contacted a plumbing and heating specialist about installing a heating unit in his retail store. The plumber, Harold Munroe, ordered two Peerless LP gas (Propane) heating units from Green Colonial, Inc., which in turn placed an order for the units with its distributor, Iowa Plumbers Supply, Inc., (IPS). IPS supplied one Peerless 150,000 BTU propane heater and one Peerless 300,000 BTU natural gas heater, which were installed by Munroe. The Peerless heaters were designed and manufactured by Dover Corporation.

In October of 1970 Munroe modified the 300,000 BTU unit so that it could be used with LP gas by using a conversion kit provided by Dover. Thereafter, when the heating units were placed in operation, plaintiffs noticed popping and exploding noises coming from the larger heating unit. Finally, on December 18, 1970 the 300,000 BTU unit caused a fire which completely destroyed plaintiffs' store.

Plaintiffs instituted an action against Dover, IPS and Green Colonial on July 19, 1971. Dover asserted a third-party claim for indemnity against Munroe. In February of 1972, IPS and Green Colonial notified Dover that unless it took over the defense of the case, they would assert cross-claims for indemnity. Dover declined to take over the complete defense, whereupon IPS and Green Colonial asserted cross-claims. At the close of all the evidence, the late Judge Duncan granted a motion for directed verdict in favor of third party defendant Munroe, and dismissed the cross-claims of IPS and Green Colonial. The case was submitted to the jury solely on the issue of strict liability in tort for dangerously defective products. The jury returned a verdict against all defendants in the amount of $102,594.00. After trial, the Court set aside the dismissal of the cross-claims and reserved ruling thereon. On appeal, the Eighth Circuit Court of Appeals affirmed, but declined to rule on the cross-claims because the district court had not considered them. Hales v. Green Colonial, 490 F.2d 1015, 1017 n. 3 (8th Cir. 1974). IPS and Green Colonial have now filed motions for summary judgment on the cross-claims.

INDEMNITY IN MISSOURI

The cross-claims of IPS and Green Colonial are predicated on a theory of indemnity. Indemnity shifts the entire liability from one tortfeasor who has been compelled to pay damages to another joint tortfeasor who should bear it. W. Prosser, Handbook of the Law of Torts, § 51 at 310 (4th Ed. 1971). The right of indemnity may arise by means of a contractual agreement or by operation of law. Non-contractual indemnity is allowed in Missouri only if the joint tortfeasors are not in pari delicto. Barb v. Farmers Insurance Exchange, 281 S. W.2d 297, 304 (Mo.1955).

In negligence cases one who is secondarily liable will be entitled to indemnification from the party primarily liable. Secondary liability may arise out of a legal relation with the one primarily liable, some common law or statutory rule imposing liability, or the failure of the one secondarily liable to discover or correct a dangerous condition. See Crouch v. Tourtelot, 350 S.W.2d 799, 805 (Mo.1961); State ex rel. Siegel v. McLaughlin, 315 S.W.2d 499, 507 (Mo. App.1958); Comment, Procedure — Third Party Practice — Non-Contractual Indemnification, 28 Mo.L.Rev. 307, 309 (1963). In the latter situation, indemnity has been allowed against a manufacturer and in favor of an employer who negligently failed to discover a defect and became liable to an employee injured by the defective product. Busch & Latte Paint Co. v. Woermann Const. Co., 310 Mo. 419, 276 S.W. 614 (1925). Similarly, Missouri has upheld the right of a retailer and distributor to assert a cross-claim for indemnity against the manufacturer of an allegedly defective product where all three were joined as defendants in an action by a consumer based on negligence. Woods v. Juvenile Shoe Corp., 361 S.W.2d 694 (Mo.1962). See also Feinstein v. Edward Livingston & Sons, Inc., 457 S.W.2d 789 (Mo.1970).

This case, as we have stated, presents a question of indemnity not heretofore considered by Missouri courts. Here indemnity is sought where plaintiffs' right to recovery was based solely upon strict liability in tort. Although no Missouri case has considered the question of whether a distributor and supplier found strictly liable in tort for selling a defective product has a cause of action against the manufacturer for indemnity,¹ at least one Missouri court has sustained a cross-claim for indemnity in a products liability action involving a strict liability claim. In Sisco v. Nu Process Brake Engineers, Inc., 462 S.W.2d 658 (Mo.1971), the Supreme Court of Missouri reversed a trial court determination dismissing a cross-claim asserted by the installer of a power brake system against the manufacturer, both of whom were joined as defendants in an action alleging that the power brake was defective.

On these facts, it cannot be said that Nu Process can have no right of recovery over against Power Brakes for any recovery which plaintiffs might have against Nu Process. We deem it unnecessary to categorize the legal basis of plaintiffs' claims. Although they appear to be couched primarily in terms of implied warranty, the petition also alleges matters which might form the basis for recovery on strict liability in tort, or negligence.

The exact basis of recovery would have to await the outcome of the trial of plaintiffs' claims. However, the facts alleged do not show that, in no event, would Nu Process have a right of indemnity against Power Brakes in the event of a verdict against the defendants jointly. Id. at 660-61

Other courts that have faced the question of indemnity in products liability actions based on strict liability under Section 402A of the Restatement of Torts have recognized the right of persons down the distributive chain to shift the loss back to the manufacturer. See Farr v. Armstrong Rubber Co., 288 Minn. 83, 179 N.W.2d 64 (1970); Hawkeye-Security Insurance Co. v. Ford Motor Co., 174 N.W.2d 672 (Iowa 1970); Newark v. Gimbels, Inc., 54 N.J. 585 258 A.2d 697 (1969), and Texaco, Inc. v. McGrew Lumber Co., 117 Ill.App.2d 351, 254 N.E.2d 584 (1969). The proposed Restatement rule would also allow indemnification of a supplier and retailer who failed to discover the defect:

(1) If two persons are liable in tort to a third person for the same harm, and one of them discharges the liability of both, he is entitled to indemnity from the other if the other would be unjustly enriched at his expense by the discharge of the liability.

(2) Instances in which indemnity is granted under this principle include the following:

(d) The indemnitor supplied a defective chattel, or performed defective work upon land or buildings, as a result of which both were liable to the third person, and the indemnitee innocently or negligently failed to discover the defect; . . . .

Restatement of Torts (Second) § 886B

(Tentative Draft No. 18, April 26, 1972)²

We find and conclude that the weight of authority generally supports a cause of action for indemnity against the manufacturer of a defective product which has been found to be unreasonably dangerous where the seller seeking indemnity has no actual knowledge of the defect.³

INDEMNITY APPLIED

Once it is established that a cause of action for indemnity will lie against a manufacturer of a defective product, the Court must then determine whether the distributor and supplier are entitled to indemnification on the facts of the case. Accordingly, we must determine whether IPS and Green Colonial had actual knowledge of the defect in the Peerless heater prior to the sale to plaintiff Hales. Mere negligence in failing to discover this defect will not prevent them from recovering in indemnity against Dover. Dover states that all the relevant facts have been adduced at trial and the question of recovery for indemnity is one for the Court on the undisputed record. We agree and proceed to an examination of the trial testimony.

Plaintiffs' expert testified that the 300,000 BTU heating unit was defective for two reasons. First, the unit lacked a flame tube which would ignite all the burners at the same time. Second, the air shutter bar was defectively designed in that it made an even distribution of the gas and air mixture impossible. The Eighth Circuit Court of Appeals discounted the testimony of plaintiffs' expert on the second reason as insufficient to sustain the verdict, but it concluded that the absence of a flame tube was sufficient evidence for the jury to infer that the unit was defective. 490 F.2d at 1018-19.

The evidence at trial failed to establish any actual knowledge of either defect on the part of IPS or Green Colonial.⁴ Dover contends that IPS and Green Colonial were actively at fault because they participated in "making the danger effective as to the plaintiffs," and therefore they are not entitled to indemnity. Dover emphasizes the role played by IPS and Green Colonial in furnishing a natural gas heater...