Siebrand v. Eyerly Aircraft Company

• Decision Date: 16 August 1961
• Docket Number: Civ. No. 60-27.
• Citation: 196 F. Supp. 936
• Parties: P. W. SIEBRAND and Hiko Siebrand, a Co-Partnership, Doing Business Under the Name of Siebrand Bros., Plaintiffs, v. EYERLY AIRCRAFT COMPANY, a corporation, Defendant.
• Court: U.S. District Court — District of Oregon

196 F. Supp. 936

P. W. SIEBRAND and Hiko Siebrand, a Co-Partnership, Doing Business Under the Name of Siebrand Bros., Plaintiffs, v. EYERLY AIRCRAFT COMPANY, a corporation, Defendant.

Civ. No. 60-27.

United States District Court D. Oregon.

August 16, 1961.

Dusenbery, Martin, Beatty & Parks, John C. Beatty, Jr., Portland, Or., for plaintiffs.

Maguire, Shields, Morrison, Bailey & Kester, W. H. Morrison, Howard K. Beebe, Winfrid K. Liepe, Portland, Or., Robert W. DeArmond, DeArmond & Sherman, Salem, Or., for defendant.

KILKENNY, District Judge.

This is an action in which plaintiffs claim the right to be indemnified by defendant against the effect of certain judgments entered in the United States District Court for the District of Montana.

I have heretofore made and filed preliminary findings of fact.

Plaintiffs are engaged in the business of operating a circus and carnival which includes furnishing for compensation rides on various machines and devices used for amusement purposes. Defendant is engaged in the business of manufacturing, overhauling, renovating and repairing amusement rides and devices for sale to or on behalf of those engaged in the circus and carnival business. Among such rides and devices manufactured by defendant is one commonly known as the "Octopus." In 1937 plaintiffs purchased from defendant an Octopus of a type designed and manufactured by defendant. In January 1951 plaintiffs returned the Octopus to defendant's factory for certain repairs, overhauling and the installation of new sweep arms and extension bars. Said repairs, overhauling and installation were completed in February 1951. Defendant knew that plaintiffs intended to use the Octopus in providing rides for the public. In August 1954 one of the extension arms which had been installed by defendant in February 1951 failed and caused three of plaintiffs' patrons who were riding in the bucket supported by said arm to fall to the ground, resulting in personal injuries to each. Each of said persons instituted an action in the United States District Court for the District of Montana and each obtained judgment against the plaintiffs for a substantial sum. Plaintiffs advised defendant of the accident and in October 1954, defendant instigated an investigation. On January 20, 1956, plaintiffs tendered the defense of the above actions to defendant and shortly thereafter the defendant rejected the tender of said defenses. In the Montana action the Court submitted to the jury the following interrogatory, to which the jury answered "Yes":

"Do you find from the evidence in this case that the accident was caused by a defect in the construction of said Octopus by the manufacturer?"

Plaintiffs contend, and the Court has found, that the Octopus is an inherently dangerous amusement device and requires extremely careful design and manufacture and extreme care in rebuilding. Defendant held itself out to be a competent and careful designer, manufacturer and rebuilder of such machines and the plaintiffs held themselves out to be careful and competent operators of amusement devices, such as the Octopus. The Court further found that plaintiffs relied on the skill and judgment of the defendant in the purchase and rebuilding of said amusement device and that defendant impliedly warranted and represented that said device was properly designed and properly constructed for the use and purpose intended and at the same time expressly warranted that the rebuilt and reconstructed Octopus would be as good as a new 1951 model and would carry the same guarantee and that the new sweep arms and extension arms would carry four times the stress and have four times the life of a pre-war model and that such sweep arms and extension arms were designed to compensate for any difference in operators. Plaintiffs relied on the warranties and representations in the first instance. The Court further found that the defendant breached both the implied and express warranties in the particulars mentioned in the findings.

Defendant contained, and the Court found, that plaintiffs were negligent in a manner which proximately contributed to the accident and the injuries sustained by the judgment creditors in the particulars set forth in the preliminary findings and had notice of defendant's breach of warranties long prior to the occurrence in question and had negligently repaired and rewelded, on numerous occasions, fractured and loosened bonds in the stub arm involved in the accident. The negligence of the plaintiffs and the breaches of warranty by the defendant proximately caused the accident and resulting injuries to the judgment creditors and plaintiffs' negligence was active and a substantial and contributing factor in such cause.

No notice of any kind was given by plaintiffs to defendant of the defective construction which was discovered by plaintiffs a considerable period of time in advance of the accident.

Plaintiffs instituted this action against defendant in this Court on the theory that defendant, having breached its express and implied warranties in connection with such reconstruction, should indemnify the plaintiffs for the amount of the judgments recovered against plaintiffs, together with certain costs and expenses incurred in such actions.

Plaintiffs contend, and properly so, that defendant, having received notice of the pendency of the original action and an opportunity to defend and having refused to participate in such defense, is bound by the determination of all facts in the Montana action which were material to a recovery against the defendant in that action, including liability. There are cases which hold that, on certain issues, a determination of the issues against the indemnitee will establish a right to recovery, as a matter of law, against the indemnitor. For instance, where the indemnitor leaves the defense of a case to the indemnitee, after proper notice and a request to defend, and where the facts in the case would demonstrate liability on the indemnitor, then in subsequent litigation between the parties the findings necessary to the judgment in the original action are binding on all concerned. Washington Gas Light Co. v. District of Columbia, 161 U.S. 316, 16 S.Ct. 564, 40 L.Ed. 712. This rule is followed in the Ninth Circuit. Booth-Kelly Lumber Company v. Southern Pacific Co., 9 Cir., 1950, 183 F.2d 902, 20 A.L.R.2d 695; Farmland Irrigation Co. v. Dopplmaier, 9 Cir., 1955, 220 F.2d 247. Oregon follows the same rule. City of Astoria v. Astoria & C. R. R. Co., 67 Or. 538, 550, 136 P. 645, 49 L.R.A.,N.S., 404. The scope of the estoppel created by the judgment in the primary cases embraces all issues necessarily determined in the original case. Booth-Kelly Lumber Co. v. Southern Pacific Co., supra. However, it is only those facts necessarily litigated and determined against the indemnitor in the former action which would be binding on it in subsequent litigation. Security Insurance Co. of New Haven v. Johnson, 10 Cir., 1960, 276 F.2d 182, 188, 189; Crawford v. Pope & Talbot Co., Inc., 3 Cir., 1953, 206 F.2d 784, 795. In making the determination as to what facts were necessarily determined by the verdict of the jury in the original case the Court, on litigation between the indemnitor and the indemnitee, should look to the entire record, including the pleadings, the evidence, the instructions, the verdict, and the judgment. Washington Gas Light Co. v. District of Columbia, supra.

The consolidated complaint in the Montana action charges that defendants (here plaintiffs) negligently "constructed, maintained, operated, managed, conducted, and * * * controlled said amusement device." Of course, the defendant in this case would not necessarily be liable for the negligent maintenance and operation of the device by the plaintiffs. The plaintiffs recognize this hurdle and attempt to avoid it by arguing that the Court in the Montana case did not submit to the jury the question of negligent maintenance and operation. The Court instructed the jury that it was sworn to try the issues of fact as presented by the allegations of the complaint and the answer of the defendant. The Court defined ordinary care and told the jury that the operator was required to use due care and diligence to put and keep the device in a reasonably safe condition for its patrons. After a thorough reading of the instructions, I am of the opinion that the Montana court submitted the question of negligent maintenance and operation to the jury. Plaintiffs urge that the affirmative answer by the Montana jury to the special interrogatory precludes an inquiry into other issues of negligence which may have been submitted. First of all, the special interrogatory did not require the jury to find that defects in design or manufacture were the sole cause. I do not believe it is necessary for me to pass on the propriety of submitting a special interrogatory on one specification where the Court submits to the jury other specifications of negligence. The practice may be questionable. Under the circumstances, the interrogatory and the answer thereto are not conclusive against defendant in this case.

Assuming, arguendo, that the verdict and the special interrogatory in the original case were conclusive against defendant on the issues involved,...