Hill v. Joseph T. Ryerson & Son, Inc.

• Decision Date: 06 May 1980
• Docket Number: No. 14111,14111
• Citation: 268 S.E.2d 296,165 W.Va. 22
• Court: West Virginia Supreme Court
• Parties: , 29 UCC Rep.Serv. 1208 Robert G. HILL v. JOSEPH T. RYERSON & SON, INC., Defendant, v. UNITED STATES STEEL CORPORATION, Third-Party Defendant.

Page 296

268 S.E.2d 296

165 W.Va. 22, 29 UCC Rep.Serv. 1208

Robert G. HILL v. JOSEPH T. RYERSON & SON, INC., Defendant, v. UNITED STATES STEEL CORPORATION, Third-Party Defendant.

No. 14111.

Supreme Court of Appeals of West Virginia.

May 6, 1980.

Dissenting Opinion June 11, 1980.

Syllabus by the Court

1. A seller who does not contribute to the defect in a product may have an implied indemnity remedy against the manufacturer of the product, when the seller is sued by the user.

2. The general principle of implied indemnity arises from equitable considerations. At the heart of the doctrine is the premise that the person seeking to assert implied indemnity the indemnitee has been required to pay damages caused by a third party the indemnitor. In the typical case, the indemnitee is made liable to the injured party because of some positive duty created by statute or the common law, but the actual cause of the injury was the act of the indemnitor.

3. In the field of product liability, the right of implied indemnity is generally accorded to a seller against the manufacturer of a defective product, regardless of whether the seller is found liable to the injured party under the theory of strict liability in tort or that of breach of implied warranty of fitness.

4. Lack of notice by the indemnitee to the indemnitor concerning the injured plaintiff's claim will not defeat an implied indemnity action that is timely filed. If, however, the indemnitor has received no notice and has not been impleaded by the indemnitee into the original suit brought against the indemnitee by the plaintiff, then the indemnitor is not bound by the judgment rendered against the indemnitee in the plaintiff's action.

5. W.Va. Code 46-2-607(3)(a), relating to the requirement of notice where the goods breach the contract of sale, is not available as a defense in a product liability action for personal injuries or in a related suit for implied indemnity.

6. When a claim for implied indemnity is brought in a product liability case involving intermediate parties in the product distribution chain, exculpatory contractual provisions may be considered, depending upon the commercial bargaining position of the parties and other factors governed by concepts of unconscionability.

7. Where, in the course of a business enterprise, systematic recordkeeping and product labelling are routinely conducted as a part of the business methods of the enterprise, the records and product identification fall within the business record exception to the hearsay rule.

8. An employee who is knowledgeable as to the recordkeeping and product identification process can testify to that process and thus lay the foundation for the admission into evidence of a properly marked or labelled product. The fact that the product has passed into the hands of a consumer or user will not defeat its admissibility as a business record.

Charles M. Love, Jr., David Faber, Love, Wise, Robinson & Woodroe, Charleston, for appellant U.S. Steel Corp.

Herbert G. Underwood, Steptoe & Johnson, Clarksburg, for Ryerson.

Timothy J. Padden, Fairmont, for Babcock & Wilcox.

Richard E. Rowe, Goodwin & Goodwin, Charleston, for Robert G. Hill.

MILLER, Justice:

United States Steel Corporation (U.S. Steel) appeals an adverse judgment in the amount of $125,000 in favor of Joseph T. Ryerson & Son, Inc. (Ryerson). The judgment was the result of a product liability action filed by Mr. Robert Hill against Ryerson in the Circuit Court of Monongalia County, in which U.S. Steel was found to have the ultimate liability for manufacturing the defective product a steel pipe.

Hill received injuries to his left eye when a hydraulic cylinder on which he was working split under pressure. The steel cylinder was part of a large tube or pipe that Hill's employer had purchased from Ryerson, which acted as a warehouse supplier of pipe products. Ryerson was sued by Hill on the basis that it supplied defective tubing and that there was a breach of the implied warranty of fitness. Hill recovered $125,000 from Ryerson, and Ryerson obtained a judgment in this amount from U.S. Steel, which it had sued as a third-party defendant.

U.S. Steel asserts that the trial court committed three principal errors: that the disclaimer and limitation of remedy provision contained in U.S. Steel's acknowledgement of order form sent to Ryerson limits Ryerson's recovery; that Ryerson did not give reasonably prompt notice to U.S. Steel of the claim for injuries arising out of the defective product; and that the admission into evidence of the piece of steel tubing which bore the paint mark "RT 1419" violated the hearsay rule.

I

Both the plaintiff's complaint against Ryerson and Ryerson's third-party complaint against U.S. Steel were framed to encompass both strict liability in tort and breach of implied warranty of fitness, and the jury was instructed as to both theories. While the case was tried prior to our decision in Morningstar v. Black & Decker Manufacturing Co., W.Va., 253 S.E.2d 666 (1979), the trial court's instructions on strict liability in tort perceptively followed Syllabus Point 4 of Morningstar :

"In this jurisdiction the general test for establishing strict liability in tort is whether the involved product is defective in the sense that it is not reasonably safe for its intended use. The standard of reasonable safeness is determined not by the particular manufacturer, but by what a reasonably prudent manufacturer's standards should have been at the time the product was made."

The issues in the present case do not relate to the correctness of the underlying product liability law, but rather involve the question of available defenses in a third-party action where the seller of a defective product seeks indemnity from the manufacturer.

In Note 22 of Morningstar v. Black & Decker Manufacturing Co., supra, we acknowledged the right of implied indemnity, stating:

"Most courts recognize that a seller who does not contribute to the defect may have an implied indemnity remedy against the manufacturer, when the seller is sued by the user. Good v. A.B. Chance Co., 565 P.2d 217, 227 (Colo.App.1977); Peterson v. Lou Bachrodt Chevrolet Co., 61 Ill.2d 17, 20-21, 329 N.E.2d 785, 786-87 (1975); Kroger Co. v. Bowman, 411 S.W.2d 339, 342-43 (Ky.1967); Newmark v. Gimbel's, Inc., 54 N.J. 585, 600, 258 A.2d 697, 705 (1969); Smith Radio Communications, Inc. v. Challenger Equipment, Ltd., 270 Or. 322, 527 P.2d 711 (1974); Annot., 28 A.L.R.3d 943, 975 (1969) (Supp.)."

We have not had occasion in a product liability case to discuss the nature of the right to implied indemnity. This indemnity concept is not unique to product liability cases. The general principle of implied indemnity arises from equitable considerations. At the heart of the doctrine is the premise that the person seeking to assert implied indemnity the indemnitee has been required to pay damages caused by a third party the indemnitor. In the typical case, the indemnitee is made liable to the injured party because of some positive duty created by statute or the common law, but the actual cause of the injury was the act of the indemnitor. United States Fidelity & Guaranty Co. v. Virginia Engineering Co., 213 F.2d 109 (4th Cir. 1954); Kaplan v. Merberg Wrecking Corp., 152 Conn. 405, 207 A.2d 732 (1965); Russell v. Community Hospital Ass'n, 199 Kan. 251, 428 P.2d 783 (1967); Mayer v. Fairlawn Jewish Center, 38 N.J. 549, 186 A.2d 274 (1962); Builders Supply Co. v. McCabe, 366 Pa. 322, 77 A.2d 368 (1951); 41 Am.Jur.2d Indemnity § 20 (1968); 42 C.J.S. Indemnity § 20 (1944).

While Morningstar dealt with the principles of strict liability in tort, in the field of product liability the right of implied indemnity is generally accorded to a seller against the manufacturer of a defective product regardless of whether the seller is found liable to the injured party under the theory of strict liability in tort or that of breach of implied warranty of fitness. In Herman v. General Irrigation Co., 247 N.W.2d 472, 479 (N.D.1976), the seller was found liable for breach of implied warranty. The court sanctioned his implied indemnity suit against the manufacturer, stating:

"It is the general rule that a retailer or other seller suffering and paying a judgment against him by an injured person in a warranty action is entitled to indemnity from a manufacturer who sold the product to him with a similar warranty. 3 Frumer & Friedman Products Liability § 44.03(1). And in the field of products liability, the concept underlying allowance of indemnity is that the indemnitee has been rendered liable because of a nondelegable duty arising out of common or statutory law, but the actual cause of the injury has been the act of another person. 3 Frumer & Friedman, supra, § 44.02(2). See Burbage v. Boiler Engineering and Supply Co., 433 Pa. 319, 249 A.2d 563 (1969)."

See also Agricultural Services Ass'n v. Ferry-Morse Seed Co., 551 F.2d 1057 (6th Cir. 1977); Hales v. Monroe, 544 F.2d 331 (8th Cir. 1976); Liberty Mutual Ins. Co. v. Williams Machine & Tool Co., 62 Ill.2d 77, 338 N.E.2d 857 (1975); Smith Radio Communications, Inc. v. Challenger Equipment, Ltd., 270 Or. 322, 527 P.2d 711 (1974); Drier v. Perfection, Inc., 259 N.W.2d 496 (S.D.1977); Houseboating Corp. of America v. Marshall, 553 S.W.2d 588 (Tenn.1977). While most courts acknowledge the availability of the remedy of implied indemnity in product liability cases, an extended analysis of its scope has not been undertaken.

The remedy of implied indemnity is an independent cause of action based primarily on principles of restitution:

"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). ¹

This is not to say that in an action for...