Spartanburg County School Dist. Seven v. National Gypsum Co.

• Decision Date: 25 November 1986
• Docket Number: No. 85-2273,85-2273
• Citation: 805 F.2d 1148
• Parties: , 36 Ed. Law Rep. 52, 2 UCC Rep.Serv.2d 850, Prod.Liab.Rep.(CCH)P 11,193 SPARTANBURG COUNTY SCHOOL DISTRICT SEVEN, Appellant, v. NATIONAL GYPSUM COMPANY; United States Gypsum Company, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1148

805 F.2d 1148

55 USLW 2328, 36 Ed. Law Rep. 52, 2

UCC Rep.Serv.2d 850,

Prod.Liab.Rep.(CCH)P 11,193

SPARTANBURG COUNTY SCHOOL DISTRICT SEVEN, Appellant, v. NATIONAL GYPSUM COMPANY; United States Gypsum Company, Appellees.

No. 85-2273.

United States Court of Appeals, Fourth Circuit.

Argued July 15, 1986.

Decided Nov. 25, 1986.

Edward J. Westbrook, Jr., Barnwell, S.C. (Terry E. Richardson, Jr., Blatt & Fales, Barnwell, S.C., Daniel A. Speights, Hampton, S.C., on brief), for appellant.

Lawrence T. Hoyle, Jr., Philadelphia, Pa. (Hoyle, Morris & Kerr, Philadelphia, Pa., on brief), and Richard P. Brown, Jr., Philadelphia, Pa. (Frank L. Corrado, Jr., Morgan, Lewis & Bockius, Philadelphia, Pa., Patrick Michael Duffy, Michael A. Scardato, Morris, Duffy & Boone, Charleston, S.C., Edwin P. Martin, Steven W. Outzs, Turner, Padget, Graham & Laney, P.A., Columbia, S.C., Lively M. Wilson, Stites & Harbison, Louisville, Ky., on brief), for appellees.

Before HALL and ERVIN, Circuit Judges, and BUTZNER, Senior Circuit Judge.

BUTZNER, Senior Circuit Judge:

Spartanburg County School District Seven appeals the judgment of the district court in its products liability action against National Gypsum Company and United States Gypsum Company in which a jury found no liability on the part of either company. Because of error in the charge to the jury, we vacate the judgment and remand the case for a new trial.

The school district sued to recover the cost of removing and replacing ceilings containing asbestos in five of its buildings constructed between 1955 and 1971. First alerted to a potential problem by the state in 1979, the school district contacted a United States Gypsum official. He responded that the company's product, Audicote, contained a "minor amount" of asbestos but that there would be no hazardous exposure problem from a properly installed and maintained ceiling. Again in 1982 the school district became concerned and requested an inspection of its buildings by the South Carolina Department of Health and Environmental Control. Inspections revealed asbestos in five buildings, and, upon abatement recommendations, the school district replaced the ceilings.

Although it originally alleged numerous causes of action, the school district ultimately went to trial on only negligence and implied warranty of merchantability. The jury found for the companies in a general verdict on which the court entered judgment.

I

The school district contends that the trial court erred by instructing the jury that the asbestos companies would not be liable for breach of implied warranty if, because of the state of the art, the companies could not have known of the defect in their product. ¹ The asbestos companies assert that South Carolina law admits evidence concerning state of the art to defeat an action brought for breach of an implied warranty because of a design defect. They seek to support their position by drawing an analogy to an action based on strict liability in tort.

No South Carolina case, however, has allowed state of the art evidence to defeat a claim of breach of implied warranty. South Carolina has long adhered to the rule that a sale for a fair and full price raises an implied warranty that the thing sold is free from defects, known or unknown to the seller. The Supreme Court of South Carolina, drawing on consistent precedent, explained the reason for holding a vendor liable on its implied warranties in Lane v. Trenholm Building Co., 267 S.C. 497, 502-03, 229 S.E.2d 728, 730-31 (1976), as follows:

When a product is sold, the parties contemplate an expected use of the product. One of the primary objectives of the law of contracts and sales is to carry out the reasonable expectations of the parties. To this end, the court in this State has consistently rejected caveat emptor and adopted the civil law rule of caveat venditor as part of the common law of South Carolina.

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Under the rule of caveat venditor, a sale "raises an implied warranty (against latent defects) from the fairness and fullness of the price paid, upon this clear and reasonable ground, that in the contract of sale, the purchaser is not supposed to part with his money, but in expectation of an adequate advantage, or recompense." ... "Selling for a sound price raises an implied warranty that the thing sold is free from defects, known and unknown (to the seller)."

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[The vendor's] liability is not founded upon fault, but because it has profited by receiving a fair price and, as between it and an innocent purchaser, the innocent purchaser should be protected from latent defects. ²

Contrary to the asbestos companies' contention, Claytor v. General Motors Corp. 277 S.C. 259, 286 S.E.2d 129 (1982), Reed v. Tiffin Motor Homes, Inc., 697 F.2d 1192 (4th Cir.1982), and Madden v. Cox, 284 S.C. 574, 328 S.E.2d 108 (S.C.App.), appeal dismissed, 286 S.C. 127, 332 S.E.2d 102 (1985), do not sustain the trial court's charge. In Claytor, the proof established that a product was not defective, and, consequently, there could be no recovery under strict liability, warranty, or negligence theories of recovery. See 277 S.C. at 264-65, 286 S.E.2d at 132. Claytor does not stand for the proposition that state of the art evidence can absolve a vendor of liability for a defective product.

Reed allowed the state of the art defense in an action brought under South Carolina law solely upon the theory of strict liability in tort. See 697 F.2d at 1194, 1197. The case does not hold that the state of the art is relevant in actions brought for breach of warranty under South Carolina law.

Madden allowed recovery for a defectively designed mechanism in an action that alleged negligence, breach of warranty, and strict liability in tort. See 284 S.C. at 577-80, 328 S.E.2d at 111-13. A state of the art defense apparently was not tendered, for the court does not discuss it in connection with any of the theories of recovery.

Claytor, Reed, and Madden do not expressly or by implication hold that South Carolina law equates strict liability in tort and breach of warranty with respect to the relevance of state of the art evidence. Any notion to the contrary is dispelled by Schall v. Sturm, Ruger Co., Inc., 278 S.C. 646, 300 S.E.2d 735 (1983). In that case the Supreme Court of South Carolina held that a statute creating a cause of action for strict liability in tort could not be applied retroactively. Explaining the rationale of its decision, the Court emphasized that strict liability in tort was different from breach of warranty, which deals with rights and duties framed by a transaction between the parties. 278 S.C. at 648, 300 S.E.2d at 736.

We conclude that the South Carolina Supreme Court would rule that a manufacturer who sells a defectively designed, dangerous product cannot escape liability for breach of implied warranty of merchantability by showing it could not have known of the defect because of the state of the art. The seller, whether he was ignorant of the defect or conscious of it, is bound to take back the thing or to abate the price, and to make good the damages which the buyer suffered. Stevenson v. B.B. Kirkland Seed Co., 176 S.C. 345, 356, 180 S.E. 197, 201 (1935). By instructing the jury that evidence of the state of the art could exonerate the asbestos companies from liability for selling defectively designed products, the trial court erroneously introduced an element into an action for breach of an implied warranty that South Carolina has never accepted.

II

In denying the school district's motion for a new trial, the district court reasoned that the error, if any, was harmless because the state of the...