Schultz v. Tecumseh Products, 14649

• Decision Date: 27 November 1962
• Docket Number: No. 14649,14650.,14649
• Citation: 310 F.2d 426
• Parties: William B. SCHULTZ, Plaintiff-Appellee and Cross-Appellant, v. TECUMSEH PRODUCTS, a Corporation, Defendant-Appellant and Cross-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

310 F.2d 426 (1962)

William B. SCHULTZ, Plaintiff-Appellee and Cross-Appellant, v. TECUMSEH PRODUCTS, a Corporation, Defendant-Appellant and Cross-Appellee.

Nos. 14649, 14650.

United States Court of Appeals Sixth Circuit.

November 27, 1962.

G. Cameron Buchanan, Detroit, Mich., Robert P. Hobson, Louisville, Ky., on brief, for Tecumseh Products Co.

William J. Weinstein, Detroit, Mich., Carl Gussin, Detroit, Mich., on brief, for William B. Schultz.

Before CECIL, WEICK and O'SULLIVAN, Circuit Judges.

O'SULLIVAN, Circuit Judge.

Plaintiff-appellee, a citizen of Kentucky, brought suit to recover damages for personal injuries sustained by him when a refrigerator compressor unit which he had installed in a food market exploded. The accident happened in Kentucky. Defendant-appellant, a Michigan corporation, manufactured the unit which caused the injuries. The suit was tried to a jury in the United States District Court for the Eastern District of Michigan, Southern Division, and resulted in a verdict of $74,349.64 for the plaintiff. Of that amount, $21,994.00 was ordered remitted by the District Judge. This is a diversity case.

Defendant raises only one question in its appeal: Did the District Judge err in submitting to the jury the right of the plaintiff to recover on a finding of breach of implied warranty, in the absence of privity of contract between plaintiff and defendant? Plaintiff cross-appeals from the order of remittitur, contending that such order violates the Seventh Amendment to the United States Constitution. Because of our disposition of defendant's appeal, we need not discuss the cross-appeal.

The case was submitted to the jury on two theories: negligence in manufacture and breach of implied warranty. No error is claimed in the submission of the negligence count. It is clear, however, that if the warranty count was erroneously submitted to the jury, the verdict returned in plaintiff's favor must be set aside and a new trial ordered.¹

Defendant contends, and plaintiff agrees, that the law of Kentucky controls the disposition of the question it raises. Under the law of that state, it is argued, a plaintiff may not recover damages for a breach of implied warranty in the absence of privity of contract between him and defendant. No privity of contract existed between the parties.

Plaintiff's proofs showed that the explosion was caused by the presence of a defective casting in the compressor unit. Defendant purchased the casting from the Lakey Foundry, Muskegon, Michigan, and sent the casting to its plant in Marion, Ohio, where it was used as a component in the refrigerator compressor unit here involved. The compressor unit was sold by defendant to a distributor, Williams & Company, Louisville, Kentucky. On July 24, 1957, plaintiff purchased the unit from Williams & Company and installed it that same day at the K & I Super-Market in Louisville. The next day, when plaintiff began to remove his test gauges from the unit, the explosion occurred with the consequent injuries. No direct contractual relation thus exists between plaintiff and defendant.

In diversity cases, a federal court applies the substantive law of the state where that tribunal sits. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188. This requirement directs that the federal court likewise follow the conflict of laws rules of the forum state. Klaxon Co. v. Stentor Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477; Griffin v. McCoach, 313 U.S. 498, 61 S.Ct. 1023, 85 L.Ed. 1481; Maki v. George R. Cooke Co., 124 F.2d 663 (C.A. 6, 1942); Victorson v. Albert M. Green Hosiery Mills, 202 F.2d 717 (C.A.3, 1953). Under the conflict of laws rule obtaining in Michigan, the forum state, in an action involving a sale, the law of the place of the sale determines the extent and effect of the warranties which attend the sale. Schantz v. Mott, 242 Mich. 642, 645, 646, 219 N.W. 634; Amos v. Walter N. Rilley Co., 240 Mich. 257, 260, 215 N.W. 397. See also: Sullivan v. Sullivan, 70 Mich. 583, 585, 38 N.W. 472; Alropa Corp. v. King's Estate, 279 Mich. 418, 420, 272 N.W. 728. Where an action is predicated upon a statute of a state other than the forum state, such statute will be construed in accordance with the decisions of that state unless those courts have not placed a definite construction on the statute. In the latter event, the courts of the forum state, Michigan in this case, will construe the statute as they would a like statute of their own state. Edison v. Keene, 262 Mich. 611, 613, 247 N.W. 757; Perkins v. Great Central Transport Corp., 262 Mich. 616, 623, 247 N.W. 759. If the courts of the state of the situs of a sale have not adopted any rule on the point of law involved in the case — in this case the question of whether privity of contract is essential to an action on an implied warranty — the forum state may follow its own views and decisions in resolving the question. Bostrom v. Jennings, 326 Mich. 146, 154, 40 N.W.2d 97.

Our first inquiry, then, is whether there is now clear Kentucky law on the question before us. If not, the rule presently in force in Michigan would sustain the district court's submission of breach of implied warranty. In Michigan, privity of contract is no longer essential to the maintenance of an action for breach of implied warranty. Spence v. Three Rivers Builders & Masonry Supply, Inc., 353 Mich. 120, 90 N.W.2d 873; Manzoni v. Detroit Coca-Cola Bottling Co., 363 Mich. 235, 109 N.W.2d 918. We are of the opinion, however, that the law of Kentucky is to the contrary.

Prior to 1928, when Kentucky adopted the Uniform Sales Act (K.R.S. § 361.010 et seq., repealed, 1958, c. 77, art. 10, § 10-102²), it was the law of Kentucky that no action could be predicated on a warranty, express or implied, without privity of contract between the parties to the suit. Prater v. Campbell, 110 Ky. 23, 60 S.W. 918 (1901); Hall Manufacturing Co. v. Purcell, 199 Ky. 375, 378, 251 S.W. 177 (1923); J. I. Case Threshing Machine Co. v. Dulworth, 216 Ky. 637, 641, 287 S.W. 994 (1926); Berger v. Standard Oil Co., 126 Ky. 155, 158, 103 S.W. 245, 11 L.R.A.,N.S., 238 (1907). In the last cited case, the Berger case, an employee of the purchaser of lubricating oil claimed to have been injured from its use, charging that such oil was not fit and suitable for its intended use as impliedly warranted by its manufacturer. He brought suit against the manufacturer in two counts, one in negligence and one in warranty. The trial court submitted plaintiff's claim of negligence to the jury, but, because there was no privity of contract between plaintiff and the manufacturer, refused to submit the warranty issue. In sustaining the action of the trial court, the Kentucky Court of Appeals said:

"There is lacking privity, mutuality, consideration, and every other element essential to constitute the contractual relation between the claimant and the person sued."

Appellee argues that because the above cases antedated Kentucky's adoption of the Uniform Sales Act, they have lost their validity as controlling precedents. In this connection, it should be noted that Section 73 of the Sales Act (K.R.S. 361.730) provides: "In any case not provided for in this chapter, the rules of law and equity * * * shall continue to apply to contracts to sell and to sales of goods." Nowhere in the Sales Act does it purport to deal with the question of privity of contract. Consequently, since that Act does not legislate on the question of privity of contract, it cannot be said to overrule prior court decisions on that point. Cf., Graves Ice Cream Co. v. Rudolph W. Wurlitzer Co., 267 Ky. 1, 6, 100 S.W.2d 819 (1937). Apart from this consideration, however, the Kentucky decisions rendered after the adoption of the Sales Act in 1928 treat of the point involved with sufficient clarity and finality as to provide controlling precedent for our decision of the case at bar. Since the Sales Act became a part of Kentucky law, the Court of Appeals has dealt with the privity question in four cases. Nehi Bottling Co. v. Thomas, 236 Ky. 684, 33 S.W.2d 701 (1930); Hieronymous Motor Co. v. Smith, 241 Ky. 209, 43 S.W.2d 668 (1931); North American Fertilizer Co. v. Combs, 307 Ky. 869, 212 S.W.2d 526 (1948); Caplinger v. Werner, 311 S.W. 2d 201 (Ky.1958). While the facts of these cases are not on all fours with those in the case before us, the decisions are sufficiently analogous for our purposes here. From those cases, we conclude that Kentucky adheres to the rule that privity of contract between plaintiff and defendant is essential to a cause of action for breach of implied warranty.

In Nehi Bottling, which involved an implied warranty, the plaintiff was poisoned by drinking pop which he had purchased from a seller who had, in turn, purchased it from the defendant manufacturer, or bottler. On appeal, it was held that plaintiff was entitled to go to the jury on negligence, but not on breach of implied warranty. After reviewing cases involving the liability of manufacturers of food and drink, the Court said:

"* * * There are two lines of cases upon which the right of action by the consumer is upheld against the manufacturer, and which are bottomed upon two distinct theories, the one ex contractu and the other upon tort. The opinions adopting the first theory permit the action to be maintained upon the theory, which those courts are pleased to designate, of a constructive warranty which is always a contractual obligation. The courts that permit the action to be maintained upon the ground that the manufacturer failed to exercise the requisite degree of care, and was therefore negligent, adopt the tort theory, since there can be no warranty in the absence of a contractual relationship, and there is no such relationship between the consumer and the manufacturer * * *. To keep our opinion in harmony with the fundamental and basic principles of the law, we have concluded to adopt the tort

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