Laurens Elec. Co-op., Inc. v. Altec Industries, Inc., 88-1733
| Decision Date | 22 November 1989 |
| Docket Number | No. 88-1733,88-1733 |
| Citation | 889 F.2d 1323 |
| Parties | , Prod.Liab.Rep.(CCH)P 12,313 LAURENS ELECTRIC COOPERATIVE, INC., Plaintiff-Appellant, v. ALTEC INDUSTRIES, INC., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Ronald W. McKinney (Duggan, Reese & McKinney, P.A., on brief), Greer, S.C., for plaintiff-appellant.
Thomas W. Traxler (Jefferson V. Smith, Jr., Carter, Smith, Merriam, Rogers & Traxler, Greer, S.C., on brief), for defendant-appellee.
Before SPROUSE and WILKINSON, Circuit Judges, and HAYNSWORTH, Senior Circuit Judge.
In this action the plaintiff sought to recover the value of a utility truck that had been destroyed by fire and consequential damages for the loss of its use. The truck had been rebuilt by the defendant under a contract negotiated by the parties, and the complaint alleged counts in negligence and strict liability in tort as bases for the recovery it sought.
There was a limited warranty obligating the defendant to repair or replace any part found to be defective, but otherwise disclaiming all other warranties and all liability for consequential damages.
At the conclusion of the testimony, the judge granted the defendant's motion for a directed verdict and the plaintiff has appealed from the resulting judgment in the defendant's favor.
We affirm.
The plaintiff, Laurens Electric, is a cooperative providing electrical service to its customers in several counties in South Carolina. For the setting up of utility poles, it uses specially designed trucks, each of which is equipped with a hydraulic derrick and associated augers for the drilling of postholes.
The defendant, Altec, is in the business of repairing and rebuilding such utility trucks. The two parties had an established relationship, for Altec had rebuilt several utility trucks for Laurens Electric.
In late 1984, one such utility truck, owned by Laurens Electric, was in need of repairing and rebuilding. As the result of negotiations, the parties entered into a contract pursuant to which Altec was to do extensive, but specified, work on the derrick and remount it upon a new Chevrolet truck chassis.
The new or rebuilt truck was delivered to Laurens Electric, and in the spring of 1985, while being used in the boring of a utility posthole, the vehicle caught fire and was substantially destroyed. The plaintiff theorized that a clamp securing a flexible hose in the vehicle's hydraulic system had been improperly crimped and that the hose became loose, spraying inflammable hydraulic fluid upon the truck's exhaust system. There was ignition and the truck was destroyed.
On earlier occasions there had been a limited warranty obligating Altec to replace defective parts, but imposing no other obligation upon it. On this occasion, the parties dealt with each other on a rather informal basis. No new copy of the warranty was furnished by Altec, but there were references to the practice established between the parties, and an official of Laurens Electric testified that, while he had not memorized the exact terms of the warranty, he knew and understood that the applicable warranty was the limited one provided by Altec on the earlier occasions.
South Carolina, whose law governs our decision in this case in our diversity jurisdiction, has embraced the doctrine of strict liability in tort in products liability cases. It did so by legislative enactment of Sec. 402A of the Restatement of Torts Second, South Carolina Code (1976) Sec. 15-73-10. It provides that, regardless of fault, when one sells a product in a defective condition unreasonably dangerous to the user or consumer or to his property, he is subject to liability for physical harm suffered by the ultimate user or consumer or by his personal property, provided the seller is engaged in the business of selling such products. The statute does not attempt to define dangerousness or to limit application of the statute to non-commercial transactions. Nevertheless, the reason for the flowering of the doctrine strongly suggests the need for avoidance of such expansive interpretations of the statute that it loses touch with its reason.
The doctrine, of course, was born out of concern for the individual consumer in this modern world who purchases or uses appliances and other products capable of inflicting grievous bodily injury when the product is defective or misused. When the user of a defective riding lawn mower suffers a mangled leg, he is unlikely to be prepared to shoulder the economic losses flowing from his misfortune. It was thought much better that the burden of such economic losses be placed upon the business enterprises that manufactured and sold the lawn mower, and who could treat such losses as part of the cost of doing their business. Moreover, placing such liabilities upon manufacturers and sellers, regardless of fault, would create additional incentives for the exercise of extraordinary care to assure that their products would not cause injuries to consumers.
The reason for the rule, however, has no universal application in a commercial world. Thus, the reason for the rule does not suggest the answer when the problem is one of allocation of economic loss between commercial entities, neither of which is in any special need of protection from the other. There is room in the statutory expression of the rule for carefully fashioned judicial exceptions and limitations.
Such a problem came before us in a case in which the conflicting interests were commercial rather than personal.
In Purvis v. Consolidated Energy Products Co., 674 F.2d 217 (4th Cir.1982), we were concerned with the malfunction of six tobacco curing barns. The plaintiff hoped to reduce his labor costs by purchasing the new barns, with a different loading and stacking method. In operation, however, the barns proved ineffective in properly curing the tobacco. The plaintiff sought recovery for his economic losses from the manufacturer of the barns. We held that no such cause of action was available to him.
In Purvis, we might have found that the quality of dangerousness was not present, but concluded that the commercial setting made inapplicable South Carolina's strict products liability statute. The plaintiff's tobacco had been damaged, and he was saddled with six barns that could not be made to function in the manner he had expected. No one had been hurt, however. The plaintiff was a commercial farmer who had made a capital investment with the hope of effecting a reduction of his costs of operation. The question was one created by the failure of the barns to function in the manner in which the parties intended.
In this case, the district judge granted a directed verdict for the defendant after careful consideration of our opinion in Purvis. The analogy, of course, is not perfect, for in Purvis the only fault with the barns was the fact that they could not be made to function as intended, while in this case the truck was destroyed.
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