McDermott v. City of New York

• Decision Date: 01 May 1980
• Citation: 428 N.Y.S.2d 643,50 N.Y.2d 211,406 N.E.2d 460
• Parties: , 406 N.E.2d 460 Joseph McDERMOTT et al., Plaintiffs, v. CITY OF NEW YORK, Defendant and Third-Party Plaintiff-Appellant. Heil Company, Third-Party Defendant-Respondent; International Harvester Co., Third-Party Defendant.
• Court: New York Court of Appeals Court of Appeals

Page 643

428 N.Y.S.2d 643

50 N.Y.2d 211, 406 N.E.2d 460

Joseph McDERMOTT et al., Plaintiffs, v. CITY OF NEW YORK, Defendant and Third-Party Plaintiff-Appellant Heil Company, Third-Party Defendant-Respondent International Harvester Co., Third-Party Defendant.

Court of Appeals of New York.

May 1, 1980.

Allen G. Schwartz, Corp. Counsel, New York City, (Stephen J. McGrath and Bernard Burstein, New York City, of counsel), for defendant and third-party plaintiff-appellant

Anthony J. McNulty, Eugene Lieber and William F. McNulty, New York City, for third-party defendant-respondent.

OPINION OF THE COURT

COOKE, Chief Judge.

The cause of action for indemnification interposed against the manufacturer of an allegedly defective product is independent of the underlying wrong and for the purpose of the Statute of Limitations accrues when the loss is suffered by the party seeking indemnity. Hence, the dismissal of that part of the third-party complaint seeking indemnity, as barred by the four-year Statute of Limitations for breach of warranty measured from the date of tender of delivery (Uniform Commercial Code, § 2-725), was unwarranted.

Plaintiff Joseph McDermott, an employee in the New York City Sanitation Department, commenced this action against the city in 1969 after his arm was severed by the hopper mechanism of a sanitation truck. The city, in turn, brought a third-party action in June, 1975 against respondent Heil Company, the manufacturer of the body and hopper of the truck. The city alleged that any injury to the plaintiff was caused solely by Heil's breach of duty, and demanded full indemnification. Specifically, the city claimed that the product was not fit for its intended use and was dangerous to those who used it. In addition, the third-party complaint asserted a claim for negligence.

The trial evidence indicated that sanitation truck bearing serial number 252-386 was delivered to the city on February 5, 1969. On the evening of February 24, 1969, plaintiff and two fellow sanitation workers, Richard Mancuso and Joseph Cantelli, were assigned to that truck. When the accident occurred, Mancuso was driving, while McDermott and Cantelli were collecting refuse and loading it into the rear of the truck. Plaintiff testified that he was dumping the contents of a refuse can into the truck when the hopper activated. His arm got caught, he was raised up in the air, screaming, and his limb was severed. It is undisputed that the hopper mechanism was designed to activate only when a button at the rear of the truck was pressed. Both plaintiff and Cantelli related, however, that they did not activate the hopper, and it was impossible for Mancuso to have done so from the cab of the vehicle. Another city employee swore that, after the incident, he checked the hopper and it seemed to be functioning properly.

After all parties had rested, the trial court dismissed the third-party complaint on the ground that it was a products liability action barred by the Uniform Commercial Code four- Statute of Limitations for breach of warranty claims, calculated from the date of delivery of the sanitation truck. ¹ Before plaintiff's case was submitted to the jury, the city and the plaintiff arrived at a $150,000 settlement. On the city's appeal from the dismissal of the third-party complaint, the Appellate Division affirmed, 64 A.D.2d 1038, 407 N.Y.S.2d 769, without opinion. The city now urges, according to the accepted rule, that the cause for indemnification did not accrue until payment was made to the injured plaintiff. For its part, the Heil Company argues for a differing accrual rule for indemnification claims relating to defective products.

There must be a reversal. Indemnification claims generally do not accrue for the purpose of the Statute of Limitations until the party seeking indemnification has made payment to the injured person. This principle stems from the nature of indemnification claims and does not vary according to the breach of duty for which indemnification is sought. Since the city's third-party complaint was interposed before payment to plaintiff before the city sustained damage the indemnification cause of action was not time barred.

At the outset, it bears emphasis that no issue involving, Dole v. Dow Chem. Co., 30 N.Y.2d 143, 331 N.Y.S.2d 382, 282 N.E.2d 288, is implicated here. Dole dealt with apportionment of liability among joint tort-feasors, commonly referred to as contribution, and left undisturbed the established rules of indemnification (e. g., Riviello v. Waldron, 47 N.Y.2d 297, 306, 418 N.Y.S.2d 300, 391 N.E.2d 1278; Rock v. Reed-Prentice Div. of Package Mach. Co., 39 N.Y.2d 34, 38-40, 382 N.Y.S.2d 720, 346 N.E.2d 520; Rogers v. Dorchester Assoc., 32 N.Y.2d 553, 347 N.Y.S.2d 22, 300 N.E.2d 403). This court has often pointed to the "fundamental distinction between contribution and indemnity. The right to contribution is not founded on nor does it arise from contract and only ratable or proportional reimbursement is sought in an action for contribution. * * * The right to indemnity, as distinguished from contribution, is not dependent upon the legislative will. It springs from a contract, express or implied, and full, not partial, reimbursement is sought" (McFall v. Compagnie Maritime Belge (Lloyd Royal), S.A., 304 N.Y. 314, 327-328, 107 N.E.2d 463, 470; accord, e. g., Riviello v. Waldron, 47 N.Y.2d 297, 418 N.Y.S.2d 300, 391 N.E.2d 1278, supra; Rock v. Reed-Prentice Div. of Package Mach. Co., supra, 39 N.Y.2d at pp. 38-39, 382 N.Y.S.2d 720, 346 N.E.2d 520).

Conceptually, implied indemnification finds its roots in the principles of equity. It is nothing short of simple fairness to recognize 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" (Restatement, Restitution, § 76). To prevent unjust enrichment, courts have assumed the duty of placing the obligation where in equity it belongs (see, e. g., Dunn v. Uvalde Asphalt Paving Co., 175 N.Y. 214, 217-218, 67 N.E. 439; Oceanic S. N. Co. v. Compania Transatlantica Espanola, 134 N.Y. 461, 465-468, 31 N.E. 987; City of Brooklyn v. Brooklyn City R. R. Co., 47 N.Y. 475, 486-487; Leflar, Contribution and Indemnity Between Tortfeasors, 81 U. of Pa.L.Rev. 130, 147; Meriam & Thornton, Indemnity Between Tortfeasors: An Evolving Doctrine in the New York Court of Appeals, 25 N.Y.U.L.Rev. 845). As was true with many unjust enrichment cases, the vehicle through which the law operated was the quasi contract (see, e. g., Roberts v. Ely, 113 N.Y. 128, 131, 20 N.E. 606). ² Thus, the rule developed that "(w) here payment by one person is compelled, which another should have made * * * a contract to reimburse or indemnify is implied by law" (Brown v. Rosenbaum, 287 N.Y. 510, 518-519, 41 N.E.2d 77; Dunn v. Uvalde Asphalt Paving Co., supra, 175 N.Y. at pp. 217-218), 67 N.E. 439. This implied in law contract covers, "not mere liability", but loss or damage (Dunn v. Uvalde Asphalt Paving Co., supra, at p. 218, 67 N.E. 439; Occhialino, Contribution, Nineteenth Ann. Report of N.Y. Judicial Conference, 1974, pp. 217, 229).

Given the quasi contractual character of the indemnification action, it was obvious that the contract Statute of Limitations, now six years (CPLR 213, subd. 2), would be held controlling (Occhialino, Contribution, Nineteenth Ann. Report of N.Y. Judicial Conference, 1974, at pp. 229-230). And, since the cause of action is not complete until loss is suffered, familiar Statute of Limitations principles dictate that accrual occurs upon payment by the party seeking indemnity (see, e. g., Bay Ridge Air Rights v. State of New York, 44 N.Y.2d 49, 54, 404 N.Y.S.2d 73, 375 N.E.2d 29; Musco v. Conte, 22 A.D.2d 121, 125-126, 254 N.Y.S.2d 589, (Hopkins, J.); Occhialino, Contribution, Nineteenth Ann. Report of N.Y. Judicial Conference, 1974 at p. 229; see, also, Ann., 57 A.L.R.3d 867). ³ Because the indemnity claim is a separate substantive cause of action, independent of the underlying wrong, this accrual rule remains the same, whatever the underlying breach of duty for which indemnification is sought. ⁴

Contrary to respondent's position, then, that the city's indemnification cause of action stems from an allegedly defective product does not alter the general Statute of Limitations rules. It is true, as respondent maintains, that earlier lower court decisions refused to allow an indemnification action based upon a breach of warranty (e. g., Ibach v. Donaldson Serv., 38 A.D.2d 39, 326 N.Y.S.2d 720; C.K.S., Inc. v. Borgenicht Sportswear, 22 A.D.2d 650, 253 N.Y.S.2d 56). But those holdings, repeatedly criticized (see e. g., Note, An Appraisal of Judicial Reluctance to Imply an Indemnity Contract in Time-Barred Breach of Warranty Suits, 39 St. John's L.Rev. 361; Occhialino, Contribution, Nineteenth Ann. Report of N.Y. Judicial Conference, 1974, at pp. 234-236), were not premised on Statute of Limitations considerations. Rather, they reflected the then existing substantive limitations of the products liability concept. Recent developments in the products liability area have eroded the theoretical underpinning of such cases (see, e. g., Codling v. Paglia, 32 N.Y.2d 330, 345 N.Y.S.2d 461, 298 N.E.2d 622; see, also, Victorson v. Bock Laundry Mach. Co., 37 N.Y.2d 395, 373 N.Y.S.2d 39, 335 N.E.2d 275; Velez v. Craine & Clark Lbr. Corp., 33 N.Y.2d 117, 350 N.Y.S.2d 617, 305 N.E.2d 750). ⁵ Indeed, it would be illogical, in view of the breadth of the indemnification concept, to deny indemnity where a duty imposed by the law of products liability is breached, while allowing it in all other instances of breach of duty. No rationale supports that result.

Accordingly, the Statute of Limitations serves as no bar to the city's third-party action for indemnity. The action accrued upon payment to the injured party, and thus was not...