Mulhern v. Outboard Marine Corp.

• Decision Date: 27 September 1988
• Docket Number: No. 87-2320,87-2320
• Citation: 146 Wis.2d 604,432 N.W.2d 130
• Parties: , Prod.Liab.Rep. (CCH) P 11,962 James H. MULHERN and Nancy Mulhern, Plaintiffs-Respondents, v. OUTBOARD MARINE CORPORATION, Defendant-Third-Party Plaintiff-Appellant and Cross-Respondent, * Edward Kroggel, Third-Party Defendant and Cross-Appellant.
• Court: Wisconsin Court of Appeals

Page 130

432 N.W.2d 130

146 Wis.2d 604, Prod.Liab.Rep. (CCH) P 11,962

James H. MULHERN and Nancy Mulhern, Plaintiffs-Respondents, v. OUTBOARD MARINE CORPORATION, Defendant-Third-Party Plaintiff-Appellant and Cross-Respondent,^* Edward Kroggel, Third-Party Defendant and Cross-Appellant.

No. 87-2320.

Court of Appeals of Wisconsin.

Submitted on Briefs Aug. 9, 1988.

Opinion Released Sept. 27, 1988.

Opinion Filed Sept. 27, 1988.

Shneidman, Myers, Dowling & Blumenfield by Robert G. Dowling, on briefs, Milwaukee, for plaintiffs-respondents.

Peterson, Johnson & Murray, S.C. by Donald R. Peterson and Craig A. Christenson, on briefs, Milwaukee, for defendant-third-party plaintiff-appellant.

Brennan & Brennan by Joseph K. Brennan, on briefs, Milwaukee, for third-party defendant-cross-appellant.

Before MOSER, P.J., and SULLIVAN and FINE, JJ.

SULLIVAN, Judge.

Outboard Marine Corporation (OMC) appeals a judgment granting compensatory and punitive damages to James H. Mulhern In 1971 or 1972, Mulhern purchased a used 1957 thirty-five horsepower Johnson outboard motor from his brother-in-law, Kroggel. Kroggel was employed as a mechanic in OMC's Evinrude service department. In approximately 1973, Kroggel offered to service Mulhern's motor at the Evinrude service department. After inspecting the motor, Kroggel discovered that it was necessary to replace several parts. He used parts from different motors, with varying make and year, which had been salvaged from motors brought into the department under warranty. Kroggel reinstalled a limited throttle start-in-gear mechanism that had been designed and manufactured by OMC, the same type of mechanism had been in the motor before he began to rebuild it. Before returning the motor to Mulhern, Kroggel gave the motor to the motor tester at OMC to determine if the motor was operating according to OMC's standards. The motor tester approved the work and the motor was returned to Mulhern with no charge for labor or parts.

                (Mulhern) and Nancy Mulhern. 1  Edwin Kroggel (Kroggel) cross appeals the judgment dismissing OMC's third-party action against him and denying his postverdict motion for reasonable costs and attorney's fees under sec. 814.025, Stats
                

Mulhern had no complaints about the motor until 1976. At that time, Mulhern inadvertently started the motor while it was in gear but he was not injured. Since he believed that the motor was designed to start in neutral only, he contacted Kroggel. Kroggel, who also believed that the motor could only start while in neutral, replaced a spring in the interlock mechanism and returned the motor to Mulhern. On August 6, 1977, while boating at his lake cottage, Mulhern accidently started the outboard motor in gear causing the boat to suddenly lunge forward, pulling him partially out of the boat. Mulhern's right leg was severely injured when it came in contact with the motor propeller. As a result of the accident, Mulhern's right leg was surgically amputated.

In his second amended complaint, Mulhern alleged that the limited throttle interlock system, incorporated in the motor, had been defectively designed because it allowed the motor to start while in gear and with varying amounts of power. Mulhern contended that OMC was liable for his injuries under the theories of strict liability and negligence.

OMC brought a third-party action against Kroggel alleging that he had been negligent in rebuilding Mulhern's motor and that his actions were the cause of Mulhern's injuries. The jury found OMC liable for Mulhern's injuries under the theories of strict liability and negligence. The jury also found that Kroggel had not been negligent. The trial court granted judgment on the verdict and denied OMC's postverdict motion for a new trial. It also denied Kroggel's motion for reasonable costs and attorneys fees under the frivolous claims statute, sec. 814.025, Stats.

On appeal, OMC raises five issues: (1) Whether the doctrine of strict liability can be applied in a nonsale context; (2) whether the Federal Boat Safety Act preempts state tort law; (3) whether the trial court abused its discretion when it submitted instructions and verdict questions to the jury which were limited to the design and manufacture of the interlock device, rather than the motor as a whole; (4) whether the trial court abused its discretion when it admitted tests which had been performed after the motor had been reassembled; and (5) whether there is any credible evidence to uphold the jury award of punitive damages. Kroggel raises one issue in his cross appeal: Whether OMC's third-party claim against Kroggel was frivolous.

STRICT LIABILITY IN NONSALE TRANSACTIONS

Kroggel rebuilt Mulhern's motor at OMC's Evinrude service department using salvaged parts, including a limited throttle start-in-gear interlock mechanism. However, OMC did not charge Mulhern for parts or labor on the motor. OMC alleges The application of strict liability to the facts of this case is a question of law. This court decides questions of law independently and without deference to the trial court's decision. Ball v. District No. 4, Area Bd., 117 Wis.2d 529, 537, 345 N.W.2d 389, 394 (1984).

that it was unaware of the service performed on Mulhern's motor and did not approve of it. OMC argues that the [146 Wis.2d 611] doctrine of strict liability is inapplicable because it requires an actual sales transaction. Since Mulhern did not purchase the motor or its parts from OMC, OMC contends that the trial court erred when it applied the doctrine to this case. We disagree.

The Wisconsin Supreme Court, in Dippel v. Sciano, 37 Wis.2d 443, 155 N.W.2d 55 (1967), adopted the rule of strict liability in tort as set forth in the Restatement (Second) of Torts sec. 402A (1965). ² To recover under strict liability, a plaintiff must prove:

(1) that the product was in defective condition when it left the possession or control of the seller, (2) that it was unreasonably dangerous to the user or consumer, (3) that the defect was a cause (a substantial factor) of the plaintiff's injuries or damages, (4) that the seller engaged in the business of selling such product or, put negatively, that this is not an isolated or infrequent transaction not related to the principal business of the seller, and (5) that the product was one which the seller expected to and did reach the user or consumer without substantial change in the condition it was when he sold it.

Dippel, 37 Wis.2d at 460, 155 N.W.2d at 63.

OMC alleges that because sec. 402A(1) of the Restatement states that "[o]ne who sells any product in a defective condition unreasonably dangerous to the user or consumer ... is subject to liability," an actual sales transaction must occur before it can be held liable under the theory of strict liability.

Comment 1 of sec. 402A provides:

User or consumer. In order for the rule stated in this Section to apply, it is not necessary that the ultimate user or consumer have acquired the product directly from the seller.... It is not even necessary that the consumer have purchased the product at all.... The liability stated is one in tort, and does not require any contractual relation, or privity of contract, between the plaintiff and the defendant.

The issue of whether a technical sale must occur before the doctrine of strict liability can apply has not been addressed before in Wisconsin. However, the doctrine has been applied in the nonsale context in other jurisdictions.

In Delaney v. Towmotor Corp., 339 F.2d 4 (2d Cir.1964), the manufacturer of a forklift truck gave a demonstrator to the plaintiff's employer. The plaintiff was subsequently injured by the vehicle. The Second Circuit concluded that although no technical sale had occurred, the manufacturer was liable under the doctrine of strict liability because it was responsible for placing the defective product in the "stream of commerce." Id. at 6. Accord First Nat'l Bank of Mobile v. Cessna Aircraft Co., 365 So.2d 966, 968 (Ala.1978). The terms "sell" and "seller" as stated in sec. 402A are merely descriptive and "the product need not be actually sold if it is injected The "stream of commerce" requirement is consistent with the application of sec. 402A in Wisconsin. In Barter v. General Motors Corp., 70 Wis.2d 796, 235 N.W.2d 523 (1975), the supreme court applied the doctrine to a third-party sale and rental. Krager manufactured a motor home which it sold to Allen Industries. Allen Industries sold the home to Dawson who rented it to Otis. Otis and other passengers were injured when a wheel came off the vehicle. The court found Krager strictly liable for Otis' injuries, although he had not purchased the motor home from Krager.

into the 'stream of commerce' by other means." Link v. Sun Oil Co., 160 Ind.App. 310, 312 N.E.2d 126, 130 (1974); Henderson v. Gould, Inc., 288 S.C. 261, 341 S.E.2d 806, 810 (Ct.App.1986).

The Barter court concluded that:

While the factor of sale is important in establishing the underlying predicate that the seller, by marketing his product, undertook and assumed the special responsibility toward the consuming public, the sale is relevant only to the extent that it is probative of the "business" of the manufacturer or seller. It is the "business of selling" that is significant.

Id. at 803, 235 N.W.2d at 526. See also Howes v. Hansen, 56 Wis.2d 247, 255, 201 N.W.2d 825, 829 (1972) (seller found liable for bystander's injuries, although there was no sale between the defendant and the plaintiff). Therefore, the sale of the product is not important as long as the defendant is in the business of selling such a product and it placed the product in the "stream of commerce."

In this case, the start-in-gear interlock device had been salvaged by Kroggel from a motor that was returned on warranty. OMC sold the original motor with the interlock system and by so doing placed the interlock system in the "stream of commerce." Also, after Kroggel had installed...