Russell v. Ford Motor Co.

• Decision Date: 21 March 1978
• Parties: Stanley Marvin RUSSELL, Respondent, v. FORD MOTOR COMPANY, a Delaware Corporation, Appellant.
• Court: Oregon Supreme Court

Page 1383

575 P.2d 1383

281 Or. 587

Stanley Marvin RUSSELL, Respondent, v. FORD MOTOR COMPANY, a Delaware Corporation, Appellant.

Supreme Court of Oregon.

Argued and Submitted Nov. 3, 1977.

Decided March 21, 1978.

Ridgway K. Foley, Jr., Portland, argued the cause for appellant. With him on the briefs were Henry C. Willener and Souther, Spaulding, Kinsey, Williamson & Schwabe, Portland.

Robert S. Lovlien, Bend, argued the cause for respondent. With him on the brief were Gray, Fancher, Holmes & Hurley, Bend.

Before DENECKE, C. J., and HOLMAN, HOWELL, BRYSON, LENT and LINDE, JJ.

LINDE, Justice.

Plaintiff recovered a judgment for damages to his pickup truck, which allegedly resulted from the fracture of a defective weld in an axle housing. The damage occurred when plaintiff lost control of the truck after it went over a bump on a gravel road, left the road, struck a rock pile, upended, and finally came to rest on its wheels. Plaintiff's initial complaint alleged negligence, strict liability, and breach of warranty, but the case went to trial on an amended complaint based solely on the strict liability of the truck manufacturer for the allegedly defective axle. The jury awarded plaintiff $2,666.97 for damages to the truck. Defendant manufacturer appeals, assigning as error the trial court's denial of its motions for an involuntary nonsuit and for a directed verdict, each based on three grounds: Failure by plaintiff to state a cause of action, ¹ to demonstrate that the truck was defective when it left defendant's possession, and to establish causation.

The first of these issues requires us to fit into place another piece in the puzzle of products liability: Whether the manufacturer's strict liability for a dangerously defective product may be invoked when the only injury caused by the defect is to the product itself. Defendant contends that it may not. It characterizes damage to or destruction of the purchased product as an "economic loss" with respect to which the relations of the parties, from the manufacturer to the disappointed user, are governed by the law of sales transactions, specifically the Uniform Commercial Code. Plaintiff contends, to the contrary, that when a defective product is dangerous to persons or property, the manufacturer's strict liability extends also to the loss of the product itself. The trial court concluded in a memorandum opinion that the precise issue is left open by the prior decisions of this court, but that strict liability does reach the damage to the product under the circumstances of this case. We agree.

The evolution of the prior decisions was recently reviewed in Brown v. Western Farmers Association, 268 Or. 470, 521 P.2d 537 (1974). Strict liability for products that are not "ultrahazardous," as in Wights v. Staff Jennings, Inc., 241 Or. 301, 405 P.2d 624 (1965), but are "dangerously defective" dates from Heaton v. Ford Motor Co., 248 Or. 467, 435 P.2d 806 (1967), a case factually very similar to the present one. "Dangerously defective" has been held to mean "unreasonably dangerous to the user or consumer or to his property." See cases cited in Brown, 268 Or. at 477, 521 P.2d 537. The liability is independent of contractual privity and extends to remote buyers, users, or others foreseeably within the range of the danger created by the defective condition. This line of development addressed the standards of the manufacturer's or seller's responsibility for his product and the class of injured parties to whom he would be liable, but it did not settle the type of losses included within that liability.

The evolution of tort liability for defective products did not proceed without second thoughts that it threatened to swallow up the law enacted by the legislature to govern relationships in the commercial marketplace, specifically the sales provisions of the Uniform Commercial Code, ORS 72.1010-72.7250, as critics had charged. See e. g., Markle v. Mulholland's, Inc., 265 Or. 259, 273, 509 P.2d 529 (1973) (O'Connell, C. J., concurring), and articles cited id. at 275 n. 4, 509 P.2d 529; Brown, supra, 268 Or. at 483, 521 P.2d 537 (O'Connell, C. J., dissenting). The Code, as enacted in 1961, contains provisions for a buyer's recovery of damages from the seller for breaches of warranty, including consequential damages in the form of predictable business losses as well as injuries to persons or property, ORS 72.7140-72.7150, and it specifies how express and implied warranties are created, modified, or excluded, and who may rely upon them. ORS 72.3130-72.3180. Moreover, the legislative assembly in 1973 enacted a further statute addressed specifically to the sale of consumer goods (defined to include "a new motor vehicle . . . used or bought for use primarily for personal family or household purposes"), which makes detailed provisions for the liability of manufacturers, distributors, and retailers under express or implied warranties and for the disclaimer of such warranties. ORS 72.8010-72.8200. ² The accommodation between these enactments and the tort liability for damages caused by defective products follows no easy lines of demarcation. It is clear, of course, that the common law cannot override the statutes or deprive persons of statutory rights or remedies when these are invoked. On the other hand, the court has assumed that the statutes were not intended to be exclusive and to displace entirely the common-law principles of liability insofar as these focus on premises other than the mutual bargains or expectations of sellers and buyers in the marketplace. Indeed, the 1973 statute so provides. ORS 72.8190. The problem has been seen as one of finding some limits to the producer's strict liability for losses caused by his products. Phillips v. Kimwood Machine Co., 269 Or. 485, 491-492, 525 P.2d 1033 (1974).

The effort to stake out a line between the tort law and the commercial law has taken various forms. A "disappointed buyer" seeking a remedy only for "economic loss" resulting from the defective performance of a product purchased for business use was left to find it in the law of sales, first as against an "innocent" seller, Price v. Gatlin, 241 Or. 315, 405 P.2d 502 (1965), and later also against a nonnegligent producer, State ex rel. Western Seed v. Campbell, 250 Or. 262, 442 P.2d 215 (1968), cert. denied, 393 U.S. 1093, 89 S.Ct. 862, 21 L.Ed.2d 784 (1969), though such a loss would be recoverable for negligence, id. at 269-270, 442 P.2d 215. Three members of the court suggested that the distinction between an "economic loss" from defective performance and "property damage" recoverable upon strict liability could be whether the defect caused an "accident," Price v. Gatlin, 241 Or. at 320, 405 P.2d 502 (O'Connell, J., dissenting with Sloan and Denecke, JJ.) and then withdrew that suggestion in Western Seed, 250 Or. at 285 n. 8, 442 P.2d 215 (same justices concurring and dissenting).

Meanwhile, any buyer invoking commercial law to recover for losses from a product's defective performance in the buyer's business was met by decisions retaining the requirement of privity in that context. Id. at 268, 442 P.2d 215; Hupp Corp. v. Metered Washer Service, 256 Or. 245, 472 P.2d 816 (1970); Davis v. Homasote Co., 281 Or. 383, 574 P.2d 1116 (1978). ³ On the other hand, in cases where strict liability for a dangerously defective product was otherwise held to apply, plaintiffs were allowed to recover property damage both when the property was used in business, Brownell v. White Motor Corp., 260 Or. 251, 490 P.2d 184 (1971), ⁴ and in the home, Wulff v. Sprouse-Reitz Co., 262 Or. 293, 498 P.2d 766 (1972). Finally, Brown v. Western Farmers Association, supra, rejected a claim for "economic loss" by a purchaser of defective chicken feed because the defect did not render the feed "unreasonably dangerous," although it threatened and caused an impairment of plaintiff's property, the chickens. A concurring opinion in Brown would have relegated the purchaser to the UCC because the economic injury was loss of profits and its cause was not "accidental," reviving a criterion raised in Price v. Gatlin and dropped in Western Seed above. 268 Or. at 481, 521 P.2d 537 (Denecke, J., concurring). A dissent suggested that if we were writing on a clean slate, we might confine strict liability for dangerously defective products to injuries to the person, also reviving an earlier suggestion in Price v. Gatlin, 268 Or. at 485, 521 P.2d 537 (Holman, J., dissenting).

Starting with a clean slate, an argument can also be made that recovery for repair or replacement of the defective product itself must be pursued under the commercial law and not under a tort theory of strict liability. If the defective product has done no other damage, what plaintiff has lost is part or all of what he bought, and his rights toward his immediate or remote seller are normally governed by contractual and statutory provisions. But when the defective product has damaged or destroyed other property besides the product itself, as in Wulff v. Sprouse-Reitz Co., supra, segregation of the claims seems artificial. And the slate is not clean, since the court in fact allowed a strict liability claim for loss of the defective product itself in Brownell v. White Motor Corp., supra. So the Brown court, having found no "unreasonable danger" to "property" in the mere impairment of the commercial value of the property in that case, only acknowledged that perhaps strict liability should require the danger to be one endangering human life or safety, a different question from whether tort recovery should be limited to such an injury. ⁵

That difference determines the decision in the present case. The focus in the foregoing evolution of products liability has been on the premise for the seller's responsibility beyond warranty or negligence, though the motivating concern was with injuries to personal health. This premise of responsibility has...