Purvis v. Consolidated Energy Products Co.

• Citation: 674 F.2d 217
• Decision Date: 15 April 1982
• Docket Number: No. 81-1107,81-1107
• Parties: Preston B. PURVIS, Appellee, v. CONSOLIDATED ENERGY PRODUCTS COMPANY, a division of Condec Corporation, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 217

674 F.2d 217

Preston B. PURVIS, Appellee, v. CONSOLIDATED ENERGY PRODUCTS COMPANY, a division of Condec Corporation, Appellant.

No. 81-1107.

United States Court of Appeals Fourth Circuit.

Argued Oct. 8, 1981.

Decided March 8, 1982.

Rehearing and Rehearing En Banc Denied April 15, 1982.

William L. Rikard, Jr., Sydnor Thompson, Charlotte, N.C. (M. Craig Garner, Jr., Columbia, S.C., on brief), for appellant.

James T. McBratney, Jr., Florence, S.C. (Thomas E. Rogers, Jr., Florence, S.C., on brief), for appellee.

Before HARRISON L. WINTER, Chief Judge, ALBERT V. BRYAN, Senior Circuit Judge, and K. K. HALL, Circuit Judge.

HARRISON L. WINTER, Chief Judge:

Lacking a controlling state authority, we are called upon in this diversity case to decide whether, under the law of South Carolina, a plaintiff engaged in the business of raising and curing tobacco can recover under South Carolina's strict liability statute, S.C.Code § 15-73-10 (1976), for losses to his crops allegedly caused by a defective curing barn purchased from the defendant. The district court denied defendant's motion for summary judgment and submitted the case to the jury, ruling that recovery under the statute was permissible. From the judgment entered upon the jury's verdict for plaintiff, defendant appeals. Because we think that South Carolina would not permit recovery under the statute in the circumstances of this case, we reverse.

I.

Plaintiff, Preston B. Purvis, owns and operates a farm of approximately 600 acres in three counties of South Carolina. His principal crop is tobacco. He has been engaged in this occupation for at least nineteen years, sometimes sharing the responsibility for raising tobacco with sharecroppers, but at all times having sole responsibility for curing tobacco.

Prior to 1977, plaintiff used conventional stick barns to cure his tobacco. ¹ In 1977, plaintiff switched to a specially-built barn with metal construction that used the stick method of placing the tobacco leaves in the barn. He then decided to purchase other bulk curing barns of metal construction, which used loading methods different from sticks and offered the possibility of substantial gains in efficiency, particularly through labor saving. To that end he investigated the bulk curing barns of several manufacturers. In January 1978, plaintiff met with a representative of defendant, Consolidated Energy Products Company, which manufactured the "Conto" barn, and after several hours of discussion, he purchased six Conto barns. Under the sales contract, defendant warranted that the barns would be free from defects in parts and workmanship and confined plaintiff's remedies to the repair or replacement of defective parts.

Plaintiff first put the new Conto barns to use in the summer of 1978 together with a tobacco harvester of a type he had not previously employed. His first experience with the barns was not satisfactory and he sought defendant's help in improving subsequent cures. Although defendant's representatives sought to give aid, plaintiff's experience with the barns through the remainder of the season remained unsatisfactory. ² Finally, in 1979, plaintiff brought this suit. He alleged causes of action for fraud, breach of express and implied warranties, and strict products liability. Defendant moved for summary judgment as to all causes of action. Ruling on the motion was deferred and the jury was permitted to hear evidence. The district court later directed verdicts for defendant on the fraud and breach of warranty counts but submitted the case to the jury on the strict products liability claim. No appeal is taken with respect to the verdicts which were directed. This appeal is limited to the judgment entered upon the jury's verdict of $57,722.94 for plaintiff on his strict products liability cause of action.

II.

South Carolina's strict products liability statute, S.C.Code § 15-73-10 (1976), is an enactment of section 402A of the Restatement (Second) of Torts (1965). ³ Under the statute, one who sells a dangerously defective product is liable without fault to a user or consumer thereof who suffers physical injury to his person or property as a result of the defect. ⁴ Plaintiff invoked this doctrine on the theory that a design defect in the airflow system of defendant's curing barns caused physical harm to tobacco which plaintiff attempted to cure.

At the outset we are faced with a dearth of South Carolina authority as to whether the South Carolina statute would permit recovery by a buyer where the product was purchased from the seller in the ordinary course of their respective businesses. South Carolina has no certification statute. It becomes our duty, therefore, to determine how the Supreme Court of South Carolina would decide the issue if and when that issue were to come before it. We make that prediction on the basis of the rationale of the doctrine of strict products liability and its application in other jurisdictions.

The doctrine of strict products liability in tort was created "to insure that the costs of injuries resulting from defective products are borne by the manufacturers that put such products on the market rather than by the injured persons who are powerless to protect themselves." Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 377 P.2d 897, 901, 27 Cal.Rptr. 697 (1963). See Brown v. General Motors Corp., 355 F.2d 814, 821 (4 Cir. 1966), cert. denied, 386 U.S. 1036, 87 S.Ct. 1474, 18 L.Ed.2d 600 (1967); Restatement (Second) § 402A, Comment c ("public policy demands that the burden of accidental injuries caused by products intended for consumption be placed upon those who market them, and be treated as a cost of production against which liability insurance can be obtained"). By shifting certain product-related losses from consumers and users to manufacturers, the doctrine both promotes fairness and provides manufacturers with a disincentive to market unreasonably dangerous products. See Escola v. Coca Cola Bottling Co., 24 Cal.2d 453, 150 P.2d 436, 440-41 (1944) (Traynor, J., concurring in the judgment).

One of the purposes of strict products liability is to restrict the degree to which manufacturers may define their own legal responsibilities by means of the commercial law of warranties. ⁵ Strict products liability, however, has not completely displaced warranty theory. The Supreme Court of California, which pioneered the development of strict products liability, acknowledged this in Seely v. White Motor Co., 63 Cal.2d 9, 403 P.2d 145, 45 Cal.Rptr. 17 (1965). The Seely court held that a plaintiff claiming lost profits resulting from a product defect must rely on warranty theory rather than strict products liability. The court observed:

In (Greenman v. Yuba Power Products, Inc.) we recognized only that "rules defining and governing warranties that were developed to meet the needs of commercial transactions cannot properly be invoked to govern the manufacturer's liability to those injured by its defective products unless those rules also serve the purposes for which such liability is imposed." ... Although the rules governing warranties complicated resolution of the problems of personal injuries, there is no reason to conclude that they do not meet "the needs of commercial transactions." The law of warranty "grew as a branch of the law of commercial transactions and was primarily aimed at controlling the commercial aspects of these transactions." ...

Although the rules of warranty frustrate rational compensation for physical injury, they function well in a commercial setting.... These rules determine the quality of the product the manufacturer promises and thereby determine the quality he must deliver....

....

... A consumer should not be charged at the will of the manufacturer with bearing the risk of physical injury when he buys a product on the market. He can, however, be fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will.

403 P.2d at 149-51, 45 Cal.Rptr. at 21-23 (citations omitted).

Although Seely dealt specifically with a claim of intangible injuries, it has led to the recognition that the policies of strict products liability are generally inapplicable to purely commercial matters. The leading case in point is Kaiser Steel Corp. v. Westinghouse Electric Corp., 55 Cal.App.3d 737, 127 Cal.Rptr. 838 (1976). Kaiser sought to impose on Westinghouse strict liability for the sale of a defective generator intended for use in a steel mill. Westinghouse defended on the ground that it sold the generator under an agreement limiting its liability for defects to repair or replacement and relieving it of responsibility for consequential damages. The trial court refused to render summary judgment for Westinghouse, but the California Court of Appeal reversed. The court held: "(T)he doctrine of products liability does not apply as between parties who: (1) deal in a commercial setting; (2) from positions of relatively equal economic strength; (3) bargain the specifications of the product; and (4) negotiate concerning the risk of loss from defects in it." 55 Cal.App.3d at 748, 127 Cal.Rptr. 838 (citing Southwest Forest Industries, Inc. v. Westinghouse Electric Corp., 422 F.2d 1013 (9 Cir.), cert. denied, 400 U.S. 902, 91 S.Ct. 138, 27 L.Ed.2d 138 (1970)); accord, Scandanavian Airlines System v. United Aircraft Corp., 601 F.2d 425, 428-29 (9 Cir. 1979); Ebasco Services, Inc. v. Pennsylvania Power & Light Co., 460 F.Supp. 163, 226 (E.D.Pa.1978).

Kaiser Steel Corp. and its progeny recognize that the considerations of fairness and deterrence underlying strict products liability are anomalous when extended to commercial parties who have allocated the risk of product defects between themselves. Kaiser Steel Corp., 55 Cal.App.3d at 748, 127 Cal.Rptr. 838; see Scandanavian Airlines System, 601 F.2d at 428. The consumer who purchases a product on the...