Hanover Ltd. v. Cessna Aircraft Co.
| Decision Date | 28 June 1988 |
| Docket Number | No. 880042-CA,880042-CA |
| Citation | 758 P.2d 443 |
| Parties | Prod.Liab.Rep. (CCH) P 11,868 HANOVER LIMITED, a partnership, Western Maintenance and Management, Inc., a Utah corporation, and Brooke Grant, an individual, Plaintiffs, v. CESSNA AIRCRAFT COMPANY, a Kansas corporation; Cessna Finance Corporation, a Kansas corporation; Teledyne Industries, Inc., a California corporation; AAR Northwest, Inc., a Deleware corporation; and Trans West Aircraft Sales, Inc., a Utah corporation, Defendants. TRANS WEST AIRCRAFT SALES, INC., Cross-claimant and Appellant, v. CESSNA AIRCRAFT COMPANY, a Kansas corporation, Cross-defendant and Respondent. |
| Court | Utah Court of Appeals |
Paul N. Cotro-Manes, Salt Lake City, for defendant-appellant Trans West Aircraft Sale, Inc.
H. Wayne Wadsworth, R.L. Knuth, Watkiss & Campbell, Salt Lake City, for respondent Cessna Aircraft Co.
Before BILLINGS, GREENWOOD and DAVIDSON, JJ.
Trans West, a retail seller, appeals from a summary judgment which denied it indemnification for attorney fees, costs, and expenses from Cessna Aircraft Company, the manufacturer, and Cessna Finance Corporation, co-defendants in a product liability lawsuit based upon an allegedly defective airplane. Trans West seeks a reversal of the summary judgment arguing the trial court misapplied the law, or, alternatively, the trial court erred in not allowing Trans West the opportunity to establish that the airplane was defective and that Trans West was a passive tortfeasor. We reverse and remand.
In the underlying product liability action plaintiffs claimed the six-passenger airplane sold to them by Trans West and manufactured by Cessna was defective. Plaintiffs filed their lawsuit against Cessna Aircraft Company ("Cessna"), the manufacturer of the airplane; Teledyne Industries, Inc., the company that designed and manufactured the airplane powerplant; AAR Northwest, Inc. ("AAR"), the regional franchise distributor of Cessna airplanes; Trans West, the retail seller; and, Cessna Finance Corporation ("C.F.C."), Cessna's underwriting and financing subsidiary. Plaintiffs' complaint alleged against each defendant (1) deceit, (2) negligent misrepresentation, (3) breach of express warranties, (4) breach of implied warranties, (5) negligence, and (6) failure to comply with 15 U.S.C. § 2301 (1982). The complaint further stated that
TRANS WEST was, at all times material to this action, engaged on its own behalf and as an appointed dealer for CESSNA and C.F.C., in the business of marketing aviation products and services to the public at large in Utah and other jurisdictions.
Similar assertions were exacted against each named defendant. Trans West claims it made an oral tender of its defense in the principal action to a Cessna zone manager in the same month in which the product liability suit was commenced. Trans West made no formal written tender of its defense. However, Cessna and Cessna Finance were aware of Trans West's involvement in the suit and its request for indemnification because all were named defendants and Trans West filed a cross-claim for indemnification.
Trans West, in its cross-claim, sought indemnity for any judgment plaintiffs received against Trans West, plus interest, attorney fees, costs, and expenses. Trans West, at all times, insisted it made no independent representations or warranties regarding the subject airplane, but rather was merely a "passive" retail seller in the chain of commerce.
A compromised settlement was reached between plaintiffs and all named defendants including Trans West, prior to trial. An order dismissing the product liability action, with the exception of Trans West's cross-claims for indemnity, was entered. Trans West paid no part of the settlement to plaintiffs. Trans West asserts it is entitled to the attorney fees, costs, and expenses incurred in defense of plaintiffs' product liability action based on an implied indemnity theory. Cessna and Cessna Finance, however, argue that Trans West is not entitled to recover attorney fees, expenses, and costs because these expenses were incurred by Trans West in defending itself.
The matter came before the trial court on cross motions for summary judgment. The trial court granted Cessna's and Cessna Finance's motions and denied Trans West's. Trans West appeals from this determination.
On appeal, we review the facts and inferences reasonably drawn therefrom in the light most favorable to the party against whom summary judgment was granted. Payne ex. rel. v. Myers, 743 P.2d 186, 187-88 (Utah 1987); Atlas Corp. v. Clovis Nat'l Bank, 737 P.2d 225, 229 (1987); K.O. v. Denison, 748 P.2d 588, 590 (Utah Ct.App.1988). If we conclude there is a dispute as to a material issue of fact, we must reverse the trial court's determination and remand to the trial court on that issue. Atlas, 737 P.2d at 229; Denison, 748 P.2d at 590.
We must determine when, if at all, a retail seller can recover its attorney fees, costs, and expenses from a manufacturer in a products liability action. This is an issue of first impression in Utah.
There is no express indemnity contract between Trans West and Cessna wherein Cessna was obligated to defend actions brought against Trans West for injury caused by defective airplanes manufactured by Cessna and sold by Trans West. Consequently, Trans West is entitled to be indemnified, if at all, under the equitable concept of implied indemnity.
The general rule of indemnity provides that
A person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity from the other, unless the payor is barred by the wrongful nature of his conduct.
Restatement of the Law of Restitution § 76 (1937). Implied indemnity arises from equitable considerations. Hill v. Joseph T. Ryerson & Son, Inc., 165 W.Va. 22, 268 S.E.2d 296, 300 (1980). It is based upon principles of restitution which state:
A person who, without personal fault, has become subject to tort liability for the unauthorized and wrongful conduct of another, is entitled to indemnity from the other for expenditures properly made in discharge of such liability.
Restatement of Restitution § 96 (1937). Accord Hill, 268 S.E.2d at 301.
The law is well settled that, in certain circumstances, indemnification may be based upon a theory of a contract implied in law. See, e.g., Henderson Realty v. Mesa Paving Co., Inc., 27 Ariz.App. 299, 554 P.2d 895, 896 (1976); Aetna Life & Casualty Co. v. Ford Motor Co., 50 Cal.App.3d 49, 52, 122 Cal.Rptr. 852, 854 (1975); Sendroff v. Food Mart of Connecticut, 34 Conn.Sup. 624, 381 A.2d 565, 566-67 (1977); Safeway Stores, Inc. v. Chamberlain Protective Servs., Inc., 451 A.2d 66, 69-70 (D.C.Ct.App.1982); Pender v. Skillcraft Indus., Inc., 358 So.2d 45, 47 (Fla.Ct.App.1978). Utah has recognized this theory where, as between the parties, based upon their respective culpability, the obligation ought to be discharged by the more culpable party. Perry v. Pioneer Wholesale Supply Co., 681 P.2d 214, 218 (Utah 1984). Accord Salt Lake City School Dist. v. Galbraith & Green, Inc., 740 P.2d 284, 287 (Utah Ct.App.1987).
Although the Utah Supreme Court has not directly addressed the issue, courts from other jurisdictions have uniformly held that in products liability litigation passive suppliers, distributors, and retailers may be entitled to indemnification from the manufacturer of a defective product for any judgment they are required to pay a purchaser. See, e.g., Good v. A.B. Chance Co., 39 Colo.App. 70, 565 P.2d 217, 227 (1977); Peterson v. Lou Bachrodt Chevrolet Co., 61 Ill.2d 17, 329 N.E.2d 785, 786-87 (1975); Kroger Co. v. Bowman, 411 S.W.2d 339, 342-43 (Ky.1967); Smith Radio Communications, Inc. v. Challenger Equip., Ltd., 270 Or. 322, 527 P.2d 711, 713 (1974). "The major purpose of strict liability is to place the loss caused by a defective product on those who create the risk and reap the profit by placing a defective product in the stream of commerce...." Liberty Mut. Ins. Co. v. Williams Machine & Tool Co., 62 Ill.2d 77, 338 N.E.2d 857, 860 (1975). The courts have implemented this purpose by allowing wholesalers, retailers, sellers, and users of a product to seek indemnity. This right of implied indemnification is accorded to a retailer against the manufacturer of an alleged defective product regardless of whether the seller is found liable to the purchaser under a strict liability theory in tort or that of breach of warranty. Hill, 268 S.E.2d at 300.
We agree with the aforementioned authority. We are persuaded that the same policy which holds a manufacturer liable for a defective product under strict liability in tort or breach of warranty should apply in ascertaining whether indemnity will be permitted to a passive retailer. See Wagner v. Beech Aircraft Corp., 37 Wash.App. 203, 680 P.2d 425, 429 (1984).
The doctrine of strict liability is premised upon the sound public policy consideration that the manufacturer who places a product in the stream of commerce for use by the general public is best able to bear the risk of loss resulting from the defective product. The manufacturer has a nondelegable duty to produce a reasonably safe product.
Id. (citations omitted).
Through the equitable concept of implied indemnity, the retailer-indemnitee is prevented from being held derivatively or vicariously liable for the wrongful act of the manufacturer-indemnitor. Accordingly, even in the absence of an express indemnity agreement, retailers in products liability actions may recover any judgment they are required to pay from the manufacturer of the defective product provided certain conditions, developed infra, are satisfied.
The precise issue presented in this case is whether a retailer can recover attorney fees, costs,...
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