Rawlings v. D. M. Oliver, Inc.

• Decision Date: 19 October 1979
• Citation: 97 Cal.App.3d 890,159 Cal.Rptr. 119
• Parties: Kathryn RAWLINGS, Plaintiff and Appellant, v. D. M. OLIVER, INC., etc., Defendant and Respondent. Civ. 18318.
• Court: California Court of Appeals Court of Appeals

Page 119

159 Cal.Rptr. 119

97 Cal.App.3d 890

Kathryn RAWLINGS, Plaintiff and Appellant, v. D. M. OLIVER, INC., etc., Defendant and Respondent.

Civ. 18318.

Court of Appeal, Fourth District, Division 1, California.

Oct. 19, 1979.

Hearing Denied Dec. 13, 1979.

Reed, Sullivan, Reed & Finch and T. Michael Reed, San Diego, for plaintiff and appellant.

Wingert, Grebing, Anello & Chapin, Michael M. Anello and Charles R. Grebing, San Diego, for defendant and respondent.

WIENER, Associate Justice.

A manufacturer is strictly liable in tort for injuries proximately caused by a defect in design or manufacture of the product provided the product is used in a manner reasonably foreseeable by the manufacturer. (Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57, 62-63, 27 Cal.Rptr. 697, 377 P.2d 897; Cronin v. J.B.E. Olson Corp. (1972) 8 Cal.3d 121, 126, 104 Cal.Rptr. 433, 501 P.2d 1153.) In Ray v. Alad Corp. (1977) 19 Cal.3d 22, 136 Cal.Rptr. 574, 560 P.2d 3, our Supreme Court, after examining the underlying policy considerations, extended strict products liability to a successor corporation as a special exception to the general rule against imposition upon a successor corporation of its predecessor's liabilities where (1) the plaintiff was deprived of an adequate remedy against the predecessor, (2) the successor possessed the knowledge necessary for gauging the risk of injury from potential defects in the product and was able to spread the cost of the risk among current purchasers of its product line, and (3) the good will of the predecessor was transferred to the successor. (Id., at p. 31, 136 Cal.Rptr. 574, 560 P.2d 3.)

In this appeal, we face a variation of the foregoing whether a successor corporation, having purchased the business and certain of the assets of a manufacturer, has strict tort or negligence liability for defective products where the product was not mass-produced, but manufactured in accordance with the plans and specifications of the owner. For reasons which we will discuss, we reach the following conclusions: (1) A manufacturer may be liable for product defects based on negligence or strict products liability even where the product is manufactured in accordance with the owner's plans, (2) a successor corporation may be liable for its predecessor's tort liability depending on the terms of the written agreement between the parties, and (3) where the predecessor's obligation is based on strict liability, the successor corporation may be liable for a product defect under the principles expressed in Alad even where the product was not mass-produced and the successor did not continue the identical product line.

Factual and Procedural Background

In February 1969, Warren D. and Dorothy A. Stubbendieck, doing business as Warren Industrial Sheet Metal (Warren Industrial), began manufacturing nine identical kelp dryers for Kelco Company, in accordance with plans and specifications furnished by Kelco. The equipment was installed in October 1969. On October 6, 1976, plaintiff Kathryn Rawlings (Rawlings), an employee of Kelco, injured her hand when a co-employee turned on one of the dryers while plaintiff was cleaning it. In her personal injury complaint, plaintiff alleges the dryer was defective because it contained unguarded gears, it had no shut-off mechanism to protect a worker behind the machine from a co-worker activating the machine from the front, and there were no warnings to advise users of the machine's inherent dangers.

In January 1977, David M. Oliver purchased certain of the assets of Warren Industrial. Mr. and Mrs. Stubbendieck retained the land and building where the business was located, cash on hand, and accounts receivable. Mr. Stubbendieck died at an unspecified date after the sale. No information concerning his estate is in the record. In July 1977, the business was incorporated as D. M. Oliver, Inc. (Oliver), doing business as Warren Industrial Sheet Metal.

Plaintiff's action based on strict liability in tort and negligence was filed September 22, 1977. Oliver moved for summary judgment on the grounds that strict products liability did not apply because (1) the manufacturer complied with the plans and specifications prepared by the owner, and (2) as successor to the business of the manufacturer, it was not liable for its predecessor's defective products. The motion was supported by two declarations including the declaration of David M. Oliver, president of Warren Industrial. Attached to his declaration was the agreement between the Olivers and Stubbendiecks for the purchase of the business of Warren Industrial. There were no declarations filed by plaintiff in opposition to the motion. Summary judgment was granted; Rawlings appeals.

Rules Governing Motions for Summary Judgment

A motion for summary judgment is granted if all the papers show "there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Code Civ.Proc., 437c.)

The summary judgment procedure is a drastic measure depriving the losing party of a trial on the merits and may not be granted unless it is clear from the affidavits or the declarations filed in connection with the motion that there are no triable issues of fact. (People ex rel. Riles v. Windsor University (1977) 71 Cal.App.3d 326, 331, 139 Cal.Rptr. 378.) The affidavits or declarations of the moving party are to be strictly construed and those of the opponent liberally construed. (Chern v. Bank of America (1976) 15 Cal.3d 866, 873, 127 Cal.Rptr. 110, 544 P.2d 1310.) The court need not look to any counter-affidavits or counter-declarations unless the moving party's declaration standing alone, but considered in light of the pleadings, would support the summary judgment motion. (Residents of Beverly Glen, Inc. v. City of Los Angeles (1973) 34 Cal.App.3d 117, 127, 109 Cal.Rptr. 724.) In all cases, any doubts as to whether summary judgment is proper should be resolved against the moving party. (Buehler v. Oregon-Washington Plywood Corp. (1976) 17 Cal.3d 520, 526, 131 Cal.Rptr. 394, 551 P.2d 1226.) Thus, regardless of the absence of plaintiff's opposing declarations, we are still required to decide whether defendant has satisfied its burden.

A Manufacturer Is Not Immune From Products Liability Because It Complied With P lans Furnished By The Owner

A supplier of a product, whether as manufacturer or seller, may have liability based on negligence where he knows or has reason to know the product is dangerous for the use supplied and fails to exercise reasonable care to give warning of its dangerous condition. (4 Witkin, Summary of Cal. Law (8th ed.) Torts, §§ 607-608, pp. 2888-2889; Rest., 2d Torts, § 394; Crane v. Sears, Roebuck & Co. (1963) 218 Cal.App.2d 855, 859, 32 Cal.Rptr. 754.) A manufacturer may also be strictly liable for its failure to warn of the potential hazards in using the product. (Midgley v. S. S. Kresge Co. (1976) 55 Cal.App.3d 67, 74, 127 Cal.Rptr. 217.)

Plaintiff's complaint contains all the necessary averments including the allegations that the product was dangerous and warnings were necessary. Neither defendant's general statement that a manufacturer is not liable for injuries caused by a defective product where the product is manufactured in accordance with plans furnished by the owner ¹ nor its declarations resolve the questions raised by the pleadings. The dangerousness of the product and the duty to warn, if any, remain triable issues of material fact.

A Manufacturer May Be Held Strictly Liable For Defects In A Product Even Though It Is Not Mass-Produced

Oliver contends strict tort liability does not apply because the product alleged to be defective was not mass-produced and sold to the general public. (See, e. g., Greenman v. Yuba Power Products, Inc., supra, 59 Cal.2d 57, 27 Cal.Rptr. 697, 377 P.2d 897 (a mass-produced power tool sold to the public through a retailer); Vandermark v. Ford Motor Co. (1964) 61 Cal.2d 256, 37 Cal.Rptr. 896, 391 P.2d 168 (a mass-produced automobile advertised by the manufacturer and sold to the public through a retailer).) The machine is claimed to be a special piece of equipment fabricated in 1969 by Oliver's predecessor for Kelco in accordance with Kelco's plans.

Oliver, however, has not factually supported this argument. Its declarations contain no information relating to products manufactured by Warren Industrial after 1969. Whether similar machines or different models of the same machine were produced for other purchasers is unknown. Triable issues of fact remain on these questions.

Assuming, however, the particular piece of machinery alleged to be defective was not the typical product manufactured by defendant's predecessor, the same conclusion is reached.

Concern for victims is stated to be the "paramount policy" to be promoted by strict products liability. (Price v. Shell Oil Co. (1970) 2 Cal.3d 245, 251, 85 Cal.Rptr. 178, 466 P.2d 722.) Its purpose is also to transfer the cost of injuries caused by defective products from the injured person, powerless to protect himself, to the manufacturer (Greenman v. Yuba Power Products, Inc., supra, 59 Cal.2d 57, 63, 27 Cal.Rptr. 697, 377 P.2d 897), thus spreading the cost of compensating victims throughout society as a cost of doing business by the manufacturer. (Seely v. White Motor Co. (1965) 63 Cal.2d 9, pp. 18-19, 45 Cal.Rptr. 17, 403 P.2d 145.)

Defendant's predecessor does not appear to have been an occasional seller. (Rest., 2d Torts, § 402A, Comm. f.) It appears to have been engaged in manufacturing and selling products as part of its full time commercial activity. The uniqueness of Kelco's order may not alter its responsibilities. (See Douglas v. E. & J. Gallo Winery (1977) 69 Cal.App.3d 103, 113, 137 Cal.Rptr. 797.)

A Successor Manufacturer May Be Liable For Its Predecessor's Debts Pursuant to an Assumption Agreement Or Where The Obligation Is Based on Strict Tort Liability...