Plas-Tex, Inc. v. U.S. Steel Corp.

• Decision Date: 19 April 1989
• Docket Number: PLAS-TE,INC,No. C-7728,C-7728
• Citation: 772 S.W.2d 442
• Parties: 8 UCC Rep.Serv.2d 991 et al., Petitioners, v. U.S. STEEL CORPORATION, Respondent.
• Court: Texas Supreme Court

Page 442

772 S.W.2d 442

8 UCC Rep.Serv.2d 991

PLAS-TEX, INC. et al., Petitioners, v. U.S. STEEL CORPORATION, Respondent.

No. C-7728.

Supreme Court of Texas.

April 19, 1989.

Rehearing Denied May 17, 1989.

Roger D. Higgins and Robert A. Michael, Thompson, Coe, Cousins & Irons, Dallas, for petitioner.

Larry Hallman & Joann N. Wilkins, Burford & Ryburn, Judy Norris and Frank Finn, Thompson & Knight, Dallas, for respondent.

COOK, Justice.

This is a breach of implied warranty of merchantability case that was brought by Fiberex, Inc. against U.S. Steel Corporation and Plas-Tex, Inc. The court of appeals reversed the judgment of the trial court and remanded the cause for a new trial after concluding that the evidence was factually insufficient to support jury findings of a breach of warranty and causation against U.S. Steel. 751 S.W.2d 628 (Tex.App.1988). We modify the judgment of the court of appeals and remand the cause to the trial court for a new trial.

Fiberex is a manufacturer of fiberglass swimming pools. During 1980 and 1981 Fiberex purchased polyester resins used in the manufacture of these pools from Plas-Tex, a resin distributor. Most of the resins purchased by Fiberex in 1980 and 1981 were manufactured by U.S. Steel. Beginning in the latter part of 1980 some of the pools manufactured by Fiberex began delaminating. ¹ By the spring of 1981 approximately thirty-four pools had delaminated. Fiberex kept no records as to which types of resins were used in the manufacture of the pools that delaminated.

Fiberex then brought suit against U.S. Steel and Plas-Tex, claiming that the resins manufactured by U.S. Steel and sold by Plas-Tex caused the delamination in the swimming pools Fiberex built using these resins. Plas-Tex asserted a cross-claim against U.S. Steel for indemnity. The trial court rendered judgment in favor of Fiberex against U.S. Steel, holding it liable for breach of implied warranty of merchantability and for violations of the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA), Tex.Bus. & Com.Code Ann. §§ 17.41-.63 (Vernon 1987). With regard to Plas-Tex, the trial court rendered judgment that Fiberex take nothing. The trial court also rendered judgment that U.S. Steel indemnify Plas-Tex for its attorney's fees.

U.S. Steel appealed and the court of appeals reversed the judgment of the trial court and remanded the entire cause for a new trial. Fiberex and Plas-Tex each filed an application for writ of error. Fiberex contends that the court of appeals erred in requiring proof of a defect in the goods in an implied warranty of merchantability claim and also erred in its factual sufficiency analysis. Plas-Tex contends that the court of appeals erred in reversing its award of indemnity for attorney's fees and in remanding the entire cause for a new trial.

I.

Fiberex argues that the court of appeals erred in holding that goods must be defective before recovery will be allowed under an implied warranty of merchantability theory. Tex.Bus. & Com.Code Ann. § 2.314(b)(3) (Tex.U.C.C.) (Vernon 1968) ("Goods to be merchantable must be at least such as are fit for the ordinary purposes for which such goods are used."). Fiberex contends that it need not show a defect in the goods, but instead it need only show that the goods were not merchantable, i.e., not fit for the ordinary purposes for which the goods are used.

The majority of the courts of appeals that have considered this issue have concluded that proof of a defect is required. Fitzgerald v. Caterpillar Tractor Co., 683 S.W.2d 162, 163-64 (Tex.App.--Fort Worth 1985, writ ref'd n.r.e.); Ford Motor Co. v. Tidwell, 563 S.W.2d 831, 835 (Tex.Civ.App.--El Paso 1978, writ ref'd n.r.e.); see also Clark v. DeLaval Separator Corp., 639 F.2d 1320, 1326 (5th Cir. Unit A Mar.1981) (applying Texas law). But see Bernard v. Dresser Indus., 691 S.W.2d 734, 738 (Tex.App.--Beaumont 1985, writ ref'd n.r.e.) (no proof of defect required). ² The overwhelming majority of jurisdictions also requires proof of a defect. ³ We likewise hold that proof of a defect is required in an action for breach of implied warranty of merchantability under section 2.314(b)(3). ⁴

The defect in an implied warranty of merchantability case is not the same as the defect in a strict products liability case. In the context of an implied warranty of merchantability case the word "defect" means a condition of the goods that renders them unfit for the ordinary purposes for which they are used because of a lack of something necessary for adequacy. In the area of strict products liability, however, the word "defect" means a condition of the product that renders it unreasonably dangerous. See 3 State Bar of Texas, Texas Pattern Jury Charges PJC 71.01 (1982). Practitioners--as well as the courts--should exercise care to see that these terms are used precisely.

A plaintiff in an implied warranty of merchantability case has the burden of proving that the goods were defective at the time they left the manufacturer's or seller's possession. He must show that the goods were unfit for the ordinary purposes for which they are used because of a lack of something necessary for adequacy, i.e., because of a defect. A plaintiff does not, however, have to use direct or expert opinion evidence to show that the goods had a defect; he can instead meet his burden by using circumstantial evidence. See Ford Motor Co. v. Tidwell, 563 S.W.2d at 835. To make a prima facie showing of a defect based solely on circumstantial evidence, Fiberex must present evidence that it handled and applied the resin properly. ⁵ Evidence of proper use of the goods together with a malfunction may be sufficient evidence of a defect.

The only Texas case stating that it is not necessary to show a defect in the goods to recover under a breach of implied warranty of merchantability theory is Bernard v. Dresser Industries, 691 S.W.2d 734, 738 (Tex.App.--Beaumont 1985, writ ref'd n.r.e.). Even in Dresser, however, the court concluded that circumstantial evidence and reasonable inferences showed that the gauge in question was in fact defective, id. at 738, thereby making this statement dictum. The evidence in Dresser showed that the gauge was in the same condition as it was when it left the possession of the manufacturer and that the gauge had been properly handled and used. Id. at 735-38. There was no evidence that anything else caused the malfunction of the gauge. This made any explanation other than the existence of a defect unlikely. We disapprove Dresser to the extent it conflicts with the instant case. ⁶

II.

Further, Fiberex argues that the court of appeals erred in applying its factual sufficiency analysis in reviewing the jury findings regarding the presence of a defect in the goods and causation because it failed to detail the evidence and state why the evidence was factually insufficient, as required by this court in Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.1986). Fiberex contends that the court of appeals looked only to the evidence contrary to the verdict and substituted its judgment for that of the jury. We disagree.

The court of appeals correctly recognized that in its factual sufficiency review it was to consider all of the evidence in the record, including any evidence contrary to the judgment. ⁷ 751 S.W.2d at 631 (citing Burnett v. Motyka, 610 S.W.2d 735, 736 (Tex.1980)). The court of appeals then went on to do just that, consider both the evidence supporting and contrary to the judgment. After doing so, the court of appeals concluded that the evidence was factually insufficient to support jury findings regarding the presence of a defect in the goods and causation. 751 S.W.2d at 634, 637. The court of appeals adequately detailed the evidence and stated the reasons why the evidence was factually insufficient, thus satisfying the dictates of this court set forth in Pool, 715 S.W.2d at 635.

III.

In its application Plas-Tex complains that the court of appeals erred in reversing the judgment in its favor against U.S. Steel for indemnity for attorney's fees under the DTPA. Plas-Tex contends that it is entitled to indemnity for attorney's fees under section 17.55A of the Texas Business and Commerce Code even though the judgment rendering U.S. Steel liable under the DTPA was reversed by the court of appeals. ⁸ Deceptive Trade Practices-Consumer Protection Act--Definitions, Relief, Defenses, Legislative Intent, ch. 216, § 7, 1977 Tex.Gen.Laws 600, 604, repealed by Act of May 25, 1987, ch. 167, § 5.02(6), 1987 Tex.Gen.Laws 1338, 1361. We disagree.

Section 17.55A was added to the DTPA as part of the 1977 amendments. The section was added in response to Volkswagen of America, Inc. v. Licht, 544 S.W.2d 442, 447 (Tex.Civ.App.--El Paso 1976, no writ), in which the court of civil appeals held that the right of indemnity was not available under the DTPA. See Debate on Tex.S.B. 664 in Senate Hum. Res. Comm., 65th Leg. 2 (Mar. 14, 1977) (transcript available from Texas Senate Staff Services Office). The statute does not describe the nature of or set the standard for obtaining the statutory rights to contribution and indemnity. See W. Dorsaneo & C. Alder, Contribution and Indemnity, in 4 Texas Torts and Remedies § 102.06 (J. Edgar & J. Sales eds. 1989). Considering the circumstances under which the section was added and its lack of guidelines, it appears this section was intended to incorporate existing principles of contribution and indemnity law into DTPA cases. See id.

We considered an issue related to the one in the instant case in Swafford v. View-Caps Water Supply Corp., 617 S.W.2d 674 (Tex.1981). In that case the indemnitor, View-Caps, was found to be liable to the plaintiff, but the indemnitees, Swafford and Baker, were absolved of liability. Id. at 675. The indemnitees sought attorney's fees under section 17.55A. Id. We said:

The only question before this Court is whether Swafford and Baker are entitled to...