Sisson v. Hatteras Yachts, Inc., 87 C 0652.

• Decision Date: 29 October 1991
• Docket Number: No. 87 C 0652.,87 C 0652.
• Citation: 778 F. Supp. 959
• Parties: Everett SISSON, as subrogor, and American Home Assurance Company, as subrogee of Everett Sisson, Plaintiffs, v. HATTERAS YACHTS, INC., and Frigidaire Corporation, Defendants.
• Court: U.S. District Court — Northern District of Illinois

778 F. Supp. 959

Everett SISSON, as subrogor, and American Home Assurance Company, as subrogee of Everett Sisson, Plaintiffs, v. HATTERAS YACHTS, INC., and Frigidaire Corporation, Defendants.

No. 87 C 0652.

United States District Court, N.D. Illinois, E.D.

October 29, 1991.

Dennis Minichello, Warren J. Marwedel, Keck, Mahin & Cate, Chicago, Ill., for plaintiffs.

R. Bruce Duffield, Lord, Bissell & Brook, Douglas Palandech, Clausen, Miller, Gorman, Caffrey & Witous, P.C., Chicago, Ill., for defendants.

FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER

HART, District Judge.

I. HISTORY OF THE CASE

This case is before the court after a bench trial for entry of findings of fact, conclusions of law and disposition of certain pending motions. Admiralty jurisdiction is invoked pursuant to 28 U.S.C. § 1333 and Fed.R.Civ.P. 9(h).

In January 1985, plaintiff Everett Sisson ("Sisson") purchased the M/V ULTORIAN (the "Ultorian"), manufactured by defendant Hatteras Yachts, Inc. ("Hatteras"). On board was a washer/dryer unit manufactured by Frigidaire, a division of defendant White Consolidated Industries, a corporation ("Frigidaire"). On September 23, 1985, a fire in the dryer unit resulted in the destruction and sinking of the Ultorian. Sisson's insurance company, plaintiff American Home Assurance Company ("American Home") paid for the loss of the Ultorian and damage to adjacent vessels and docking. American Home presses this action as a subrogee of Sisson and an assignee of the rights of fire claimants against him.

Prior to the institution of this action, Sisson filed a related action in this court (86 C 1991) for limitation of liability to the amount of the salvage value of the Ultorian ($800) pursuant to 46 U.S.C. § 183, et seq. In that action, it was ruled (Bua, J.) that admiralty jurisdiction did not exist with respect to the destruction of a docked pleasure vessel. Matter of Sisson, 663 F.Supp. 858 (N.D.Ill.1987). Alternatively, it was held that if subject matter jurisdiction existed, the limitation of liability act did not apply to a pleasure craft. Matter of Sisson, 668 F.Supp. 1196 (N.D.Ill.1987). On appeal the Seventh Circuit affirmed the dismissal for want of admiralty jurisdiction. Complaint of Sisson, 867 F.2d 341 (7th Cir.1989). Thereafter, the Supreme Court reversed the judgment of the Seventh Circuit. Sisson v. Ruby, ___ U.S. ___, 110 S.Ct. 2892, 111 L.Ed.2d 292 (1990). Neither the Supreme Court nor the Seventh Circuit passed on the alternative grounds stated for dismissal of Sisson's action. Accordingly, American Home properly settled the claims against Sisson and obtained valid assignments of the claimants' actions against defendants.

Because of the existence of factual issues as to the cause and origin of the yacht fire and possible product liability on the part of defendants, summary judgment was denied in this case by an opinion and order dated September 11, 1989. Sisson v. Hatteras Yachts, Inc., No. 87 C 0652, 1989 WL 106584 (N.D.Ill. Sept. 14, 1989).

Based on East River Steamship Corp. v. Transamerica Deleval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986), which bars recovery in tort in admiralty proceedings for economic losses when a commercial party claims injury to a product, it was ruled on March 27, 1991 that plaintiffs were precluded from recovery in tort from defendants for the loss of the Ultorian but not for damage to other property consisting of vessels and docks. Sisson, 1991 WL 47543. Plaintiffs' claims for contribution were reinstated. Id. Thereafter, American Home sought to amend the pleadings to state direct actions as assignee against defendants. Defendants opposed the late amendment and the motions were continued for consideration at the trial with leave given to American Home to prove the claims which it did. Based on the facts herein stated, American Home was and is entitled to press the assigned claims against defendants.

American Home contends that the fire on the Ultorian and damage to adjacent vessels and property resulted from one of several product defects and that it was not due to any conduct of the Sissons in the operation of the dryer. Defendants contend that the fire resulted from spontaneous combustion of oily rags placed in the dryer by the Sissons and not from any product defect. The parties agree that if the fire was caused by something other than a product defect, defendants are not liable.

II. FINDINGS OF FACT

Based upon the Uncontested Facts stated in the final pretrial order (which are adopted as findings of fact), the testimony, exhibits and depositions received in evidence, the court finds the facts to be as follows:

A.

Uncontested Facts

1. American Home is an insurance company doing business in the State of Illinois and is subrogated to all of the rights of its insured, Everett Sisson, by virtue of having paid a claim made by Everett Sisson for the loss of his yacht, the Ultorian, under a policy of insurance issued to him. American Home is also the assignee of all of the rights of the claims pursuant to settlement agreements with those assignees.

2. Sisson is a citizen of the State of Illinois.

3. Defendant Hatteras is a division of Genmar Industries, Inc., a Delaware corporation with its principal place of business in Minnesota. Hatteras has been designing and building boats at its plants in High Point and New Bern, North Carolina for many years and finished construction of the subject 37 ton 56-foot motor yacht in 1981. The boat was sold by Hatteras to Dry Land Marina, Inc., a marine dealer in Grand Haven, Michigan.

4. Defendant Frigidaire is an operating division of White Consolidated Industries. The manufacturing of the Frigidaire product line is conducted in Webster City, Iowa. White Consolidated Industries is incorporated in Ohio and has its principal place of business in Ohio.

5. Frigidaire built and sold the washer/dryer product line Model LC 240 H.

6. The original purchaser of the subject boat was Robert Fryling of Grand Rapids, Michigan, who sold the boat to Grand Isle Marina in 1984. Sisson purchased the boat in early 1985 for his personal use and named it the Ultorian.

7. The subject boat was equipped when first built by Hatteras with a Model LC 240 H washer/dryer manufactured by Frigidaire.

8. On September 23, 1985, Sisson's wife, Betty, used the LC 240 H to wash and dry some towels which had been used to wipe unabsorbed Watco Teak Oil from wood surfaces in and on the boat.

9. Late in the evening of September 23rd, 1985, or in the early hours of the 24th, a fire broke out on board causing extensive fire damage as a result of which the boat capsized, rendering it a total loss.

10. Frigidaire sold the model LC 240 H unit laundry centers to Hatteras and knew that those units would be installed on boats manufactured by Hatteras.

11. The washer/dryer unit on board the Ultorian on the night of the occurrence was the same unit installed by Hatteras at the time the yacht was constructed.

12. The washer/dryer unit Model LC 240 H on board the Ultorian on the night of the occurrence had not been altered, modified or repaired in any way by the Sissons or the original owner of the Ultorian.

13. The manner in which the washer/dryer unit had been installed in the boat and vented to the outside of the boat had not been altered between the time the boat left the Hatteras factory and the day of the fire.

14. The Ultorian was a total loss and Sisson was paid $600,000 by American Home pursuant to his policy of insurance.

B.

Facts Determined at Trial

Additional facts are found to be as follows:

15. American Home is the assignee of all of the rights of the claimants John P. Walther; Continental Insurance Company as subrogee of John P. Walther; Cincinnati Insurance Company as subrogee of John P. Walther; Fireman's Fund Insurance Company as subrogee of Burton Ruby; the Port Authority of Michigan City; Moac/Continental Insurance Company as subrogee of Roger Dillon; and Moac/National Ben Franklin Insurance Company as subrogee of Joseph T. Charles, pursuant to settlement agreements with those claimants. The total amount of the claims assigned to American Home is $279,792.56. The total amount of settlements paid by American was $174,516.92.

16. Defendants were given notice of the claims of the claimants against Sisson and of America Home's intent to seek recovery of amounts paid to the claimants when American Home filed its original complaint in this action (Count IX). Defendants were tendered the defense of the claims in accordance with Fed.R.Civ.P. 14(c). Defendants did not accept the defense. Defendants were also advised of the settlements made with the claimants and tendered the opportunity to pay the settlements but refused. Moreover, there was no prejudice to defendants by the presentation of the claims in this action. All parties were fully informed, discovery was extensive and all factual issues were fully developed.

17. The towels placed in the LC 240 H washer/dryer on September 23, 1985 had been used by Sisson and his wife to wipe unabsorbed Watco Teak Oil from approximately 365 square feet of teak wood paneling in the Ultorian's pilothouse. Oil was applied to the wood with other towels and rags which were discarded after use. Subsequently, the soiled towels were placed in the washer with other rags and washed with detergent and bleach before being placed in the dryer. The Sissons used three or four towels for wiping the trim. The rags and other material resulted in a one-half wash and dry load consisting of some 12 rags.

18. The rags and towels were placed in the dryer at approximately 9:00 p.m. The drying cycle lasted about 45 minutes. A buzzer sound was heard signaling the completion of the drying cycle and shut-off of the dryer. The rags and towels were left in the dryer. Around midnight of September 23-24, 1985, the Sissons smelled smoke and investigated. The Sissons saw smoke coming from the area where the...