Reed v. Central Soya Co., Inc.

• Court: Indiana Supreme Court
• Writing for the Court: KRAHULIK; SHEPARD, C.J., and GIVAN; DICKSON, J., concurs and dissents with separate opinion with which DeBRULER; DICKSON; DeBRULER
• Citation: Reed v. Central Soya Co., Inc., 621 N.E.2d 1069 (Ind. 1993)
• Decision Date: 22 September 1993
• Docket Number: No. 27S05-9309-CV-1020,27S05-9309-CV-1020
• Parties: Prod.Liab.Rep. (CCH) P 13,716 Michael E. REED and Beth E. Reed, Appellants, v. CENTRAL SOYA COMPANY, INC., National By-Products, Inc., and Boyce Turner d/b/a Turner & Sons AG Service, Appellees.

Page 1069

621 N.E.2d 1069

Prod.Liab.Rep. (CCH) P 13,716

Michael E. REED and Beth E. Reed, Appellants, v. CENTRAL SOYA COMPANY, INC., National By-Products, Inc., and Boyce Turner d/b/a Turner & Sons AG Service, Appellees.

No. 27S05-9309-CV-1020.

Supreme Court of Indiana.

Sept. 22, 1993.

Mary A. Findling, Price & Barker, Indianapolis, Frank E. Gilkison, Marianne L. Vorhees, Beasley Gilkison Retherford Buckles & Clark, Muncie, for Michael E. Reed and Beth E. Reed.

Randall D. Smith, Jeffrey A. Townsend, Baker & Daniels, Fort Wayne, for Central Soya Co., Inc.

John F. Prescott, Ice Miller Donadio & Ryan, Indianapolis, Brent B. Green, S.P. DeVolder, Gamble & Davis, P.C., Des Moines, IA, for National By-Products, Inc.

ON PETITION TO TRANSFER

KRAHULIK, Justice.

We grant transfer to address the parameters of recovery for property damage under Indiana's Strict Product Liability Act. ¹ Ind.Code Ann. Secs. 33-1-1.5-1 through 33-1-1.5-8 (West 1983 and Supp.1992). Michael E. Reed and Beth E. Reed (Plaintiffs-Appellants below) seek transfer after the Court of Appeals, in a memorandum decision, granted summary judgment in favor of Central Soya, Inc., and National By-Products, Inc. (Defendants-Appellees below) on the Reeds' strict liability claim and affirmed the trial court's entry of summary judgment in defendants' favor on the Reeds' punitive damage claim. Reed v. Central Soya (1991), Ind.App., 581 N.E.2d 467.

Facts

The Reeds operate a dairy farm under the name of Pinehurst Farm, which is devoted to the breeding of pure-bred dairy cows and to the production of milk. The Reeds claim their dairy cattle were damaged after eating contaminated feed.

National is a rendering company that produces meat and bone meal as a by-product of rendered animals. National sold meat and bone meal, allegedly contaminated with the pesticide Aldrin, ² to Central Soya. Central Soya is a manufacturer of animal feed which purchases raw ingredients from various sources for use in the animal feed. Among the ingredients incorporated into the feed used by the Reeds was the allegedly contaminated meat and bone meal from National. Central Soya sold the manufactured feed to the Reeds through its distributor, Boyce Turner d/b/a Turner & Sons Ag Service. ³

In January 1986, the Reeds purchased the contaminated feed. The cows ate it daily from January 8 through January 14, 1986, and from time to time between January 14 and February 20, 1986. The Reeds first observed side effects on January 9. Some cows were sick, nervous and restless; some had upset stomachs, bloody noses, and poor appetites. Milk production was down. The Reeds claim that the tainted feed had a long term effect on the cows: some aborted calves or gave birth to stillborn calves, some would not breed, some could no longer be used to harvest embryos for sale, and some died.

The Reeds sued National and Central Soya for negligence, breach of implied warranty, and strict liability in tort. The Reeds also sought punitive damages. Defendants moved for summary judgment. The trial court entered summary judgment for National on the breach of warranty and negligence claims because there was no privity between the Reeds and National. The trial court denied summary judgment to Central Soya on the negligence and strict liability in tort claims. The trial court entered summary judgment for both National and Central Soya on the punitive damage claim because there was no evidence to support that claim. The Reeds' request for reconsideration of the ruling on punitive damages was denied; the judgment was made final pursuant to Indiana Trial Rule 56(C). The Reeds appealed.

The Court of Appeals concluded that the Reeds could not recover compensatory damages under Indiana's Strict Product Liability Act because the damage was not "sudden, major damage to property" as defined in Ind.Code Sec. 33-1-1.5-2, and directed the trial court to enter summary judgment in favor of National and Central Soya on the strict liability in tort claim. The court affirmed summary judgment in favor of National on the issue of punitive damages because no claim for compensatory damages remained pending against National. With respect to Central Soya, the Court of Appeals affirmed the denial of summary judgment on the negligence claim. In addition, the court could not determine as a matter of law that there was not clear and convincing evidence to support punitive damages, so summary judgment in favor of Central Soya on the punitive damage claim was reversed.

The Reeds seek transfer and raise the following issues in their petition:

(1) Whether the damage to the dairy cows was recoverable on a theory of strict liability in tort; and

(2) Whether there is a genuine issue of material fact concerning Reeds' entitlement to punitive damages.

I. Standard of Review

This case was resolved in the court below by summary judgment. Summary judgment is appropriate only if the pleadings and evidence sanctioned by Indiana Trial Rule 56(C) show "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." T.R. 56(C). Once the movant shows entitlement to summary judgment, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." T.R. 56(E). On appeal, summary judgments, like all trial court judgments, are clothed with the presumption of validity, but the reviewing court faces the same issues that were before the court which granted summary judgment and follows the same process. Sullivan v. American Casualty Co. (1992), Ind., 605 N.E.2d 134, 140. The party appealing from the grant of summary judgment has the burden of persuading the appellate tribunal that the grant of summary judgment was erroneous, but the determination below is "carefully scrutinized to assure that the non-prevailing party is not improperly prevented from having his day in court." Id.

II. "Property Damage" Under Indiana's Strict Product Liability Act

The Reeds assert that the damages they sustained are recoverable under the Act. Defendants maintain that the Reeds do not have a valid claim because (1) the feed presented no risk of personal injury; (2) the Reeds suffered only economic damage; or, (3) the damage suffered by the Reeds was gradually-evolving damage to property rather than sudden, major damage.

The Reeds' claim is governed by Indiana's Strict Product Liability Act, which imposes strict liability in tort on one who places into the stream of commerce any product in a defective condition unreasonably dangerous to the property of a user or consumer. Ind.Code Sec. 33-1-1.5-3. Prior to passage of the Act, Indiana recognized strict liability in tort as embodied in Sec. 402A of the Restatement (Second) of Torts (1965) which imposes liability on manufacturers and sellers for injuries caused by unreasonably dangerous products. ⁴ Ayr-Way Stores, Inc. v. Chitwood (1973), 261 Ind. 86, 93, 300 N.E.2d 335, 340; Cornette v. Searjeant Metal Prod., Inc. (1970), 147 Ind.App. 46, 52, 258 N.E.2d 652, 656. Indiana courts justified imposing strict liability in tort on the same basis as the Restatement, viz.: the seller has undertaken a special responsibility toward the consuming public; the public has the right to expect sellers to stand behind their products; and public policy demands that the burden of accidents be placed upon those who market products and who can treat that burden as a cost of doing business. Cornette v. Searjeant, 147 Ind.App. at 52-3, 258 N.E.2d at 656; Restatement (Second) of Torts Sec. 402A cmt. c.

The liability imposed by Sec. 402A is founded on tort, not on contract. As such, strict liability in tort eliminated the need for privity in cases involving defective goods that cause physical harm. See, e.g., Ayr-Way Stores, 261 Ind. at 93, 300 N.E.2d at 340; Cornette, 147 Ind.App. at 52, 258 N.E.2d at 656. Liability is "strict" because it is imposed on sellers even if they exercise all reasonable care in the manufacture of the product. Montgomery Ward & Co. v. Gregg (1990), Ind.App., 554 N.E.2d 1145, 1162. Liability will be attributed to a seller only if the product contains a defective condition rendering it unreasonably dangerous for its intended use. Conder v. Hull Lift Truck, Inc. (1982), Ind., 435 N.E.2d 10, 17.

In 1978, the Indiana legislature passed the Strict Product Liability Act, Ind.Code Ann. Secs. 33-1-1.5-1 through 33-1-1.5-8, and incorporated Sec. 402A nearly verbatim. Ind.Code Ann. Sec. 33-1-1.5-3 (West 1983) (amended 1983); Hoffman v. E.W. Bliss Co. (1983), Ind., 448 N.E.2d 277, 281. The 1978 Act placed no restriction upon the type of property damage recoverable; the Act allowed recovery for "physical harm" which was defined as "bodily injury, death, loss of services, and rights arising therefrom, as well as damage to property." Ind.Code Ann. Sec. 33-1-1.5-2 (West 1983) (amended 1983) (emphasis added). Thus, in the same way that negligent tortfeasors are subject to liability for property damage caused by their negligence, sellers became subject to strict liability in tort for property damage caused by a defective product. The rule in Sec. 402A applied "to products which, if they are defective, may be expected to and do cause only 'physical harm' in the form of damage to the user's land or chattels, as in the case of animal food or a herbicide." Restatement, Sec. 402A, cmt. d (emphasis added).

In 1983, the legislature made significant changes to the Act. General Electric Co. v. Drake (1989), Ind.App., 535 N.E.2d 156, 158. The 1983 Act changed the definition of "physical harm" to read: "bodily injury, death, loss of services, and rights arising from such injuries, as well as sudden, major damage to property. The term does not include gradually-evolving damage to property or economic losses from such damage." Ind.Code Ann. Sec. 33-1-1.5-2 (West Supp.1992) (emphasis added).

A. Risk of personal injury is not necessary.

Defendants rely on Sanco,...