Industrial Uniform Rental Co. v. International Harvester Co.

HESTER, Judge,

dissenting:

I dissent. The issue for review is whether a cause of action arising from a defective product causing damage only to the product itself is properly grounded in tort under § 402A of the Restatement of Torts (2d). Although this issue has not been finally adjudicated by our appellate courts, the United States Court of Appeals for the Third Circuit, in Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co., 652 F.2d 1165 (3d Cir.1981), decided this precise issue according to its informed and cautious belief of how the Pennsylvania Supreme Court would rule. I will consider Pennsylvania Glass Sand, supra, and both forum and non-forum decisions in reviewing this issue of near first impression.

Section 402A of the Restatement of Torts (2d) was adopted by the Pennsylvania Supreme Court in Webb v. *81 Zern, 422 Pa. 424 , 220 A.2d. 853 (1966). Liability under § 402A is restricted as follows: 1) the defendant must be engaged in the business of selling the product alleged to be defective; 2) the defective condition must render the product unreasonably dangerous; 3) the product must be unreasonably dangerous to the consumer or his property; 4) the product must cause physical harm to the ultimate user or consumer, or his property; and, 5) “the product is expected and does reach the user or consumer without substantial change in the condition in which it was sold.” 1

It is not in dispute that the damage here was to the defective products themselves, namely, the delivery trucks. Appellants aver that physical damage to the defective product lies within the purview of § 40.2A; conversely, appellee maintains that such damage is solely an economic loss for which' retribution is traditionally sought in commercial law.

Ascertaining the correct theories of liability for physical injury to the consumer’s or ultimate user’s person, or to the non-defective property of the consumer or user is not an abstruse assignment. Section 402A has been upheld frequently and consistently as the mode of recourse for these injuries. See Berkebile v. Brantly Helicopter Corp., 462 Pa. 83 , 337 A.2d 893 (1975); Speyer, Inc. v. Humble Oil & Refining Co., 275 F.Supp. 861 (W.D.Pa.1967), affirmed 403 F.2d 766 (3d Cir.1968), certiorari denied 394 U.S. 1015 , 89 S.Ct. 1634 , 23 L.Ed.2d 41 (1969). Ambiguity abounds, how *82 ever, where the effects of the defect reach no further than the defective product itself.

Damage incurred by the defective product only is often considered solely economic loss where the plaintiff suffers out of pocket expenses, loss of bargain, or cost of replacement or repair. Seely v. White Motor Co., 63 Cal.2d 9 , 45 Cal.Rptr. 17 , 403 P.2d 145 (1965). Some courts presume economic loss simply because the defective product alone is damaged; the nature of the defect and the manner in which damage was inflicted is immaterial. For example, in Mid Continent Aircraft Corp. v. Curry County Spraying Service, Inc., 572 S.W.2d 308 (Tex., 1978), an aircraft was forced to an emergency crash landing because the defendant/manufacturer failed to install a crankshaft gear bolt lock plate. The aircraft received extensive damage upon landing. The Mid Continent court categorically labelled damages to the defective product itself as economic losses governed solely by the Uniform Commercial Code. All damages to the defective product itself, regardless of degree or manner inflicted, were deemed losses to the purchaser of the benefit of the bargain with the seller—a classic measure of contract damages.

This general rule projected by Seely, supra, and Mid Continent, supra, has been qualified in .diverse fashion. The applicability of § 402A and warranty law has been considered by some courts to weigh heavily upon the nature of the defect and the manner in which the damage developed. For example, in Pennsylvania Glass Sand Corp. (PGS) v. Caterpillar Tractor Co., supra, the court distinguished both theories on that basis. PGS filed its diversity action in negligence and strict liability under § 402A; it did not allege breach of warranty. The cause of action arose from a defective design in a front-end loader that PGS purchased from the defendant/manufacturer. Following four years of operation by PGS, the front portion of the loader caught fire. Due to the defendant’s omission of a fire extinguishing system from the design, the fire spread undeterred. PGS expended $170,000 in repairs, rental of a *83 temporary replacement and installation of fire suppressant equipment. Similarly, the defendant’s motion for summary judgment was granted by the trial court on grounds that PGS had suffered a purely economic loss not recoverable in tort.

Although impressed by the premise espoused by our Supreme Court in Kassab v. Central Soya, 432 Pa. 217 , 246 A.2d 848 (1968), i.e., that § 402A and implied warranty are •nearly coextensive in application, the Pennsylvania Glass Sand court opined that the theories were not equally applicable in all product-oriented disputes. It held that warranty causes of action are more suitable for redress from qualitative defects, whereas § 402A is more appropriately addressed to hazardous defects causing calamitous damage. In other words, according to Pennsylvania Glass Sand, supra, damage to the defective product itself resulting gradually from internal deterioration or breakdown is economic loss; § 402A physical injury to the defective product must arise as the result of violent accidents.

The defect in Pennsylvania Glass Sand, supra, was the failure to design a loader equipped with a fire extinguishing system. As a result, the risk of conflagration was particularly acute and the operation of the loader especially hazardous. The Pennsylvania Glass Sand court concluded, therefore, that the cause of action was properly brought in. tort under § 402A.

I acknowledge that Pennsylvania Glass Sand, supra, does not apply here. The inspections of the twelve damaged trucks disclosed broken welds for front spring brackets, fractured frame rails, broken spring cross-members, fractured mounting plates for gasoline tank support straps, broken shock absorber mounts and twisted support posts. These damages were detected by appellants two or three years following execution of the lease agreement and initial operation of the trucks; therefore, it cannot be gainsaid *84 that damages here were incurred more gradually than abruptly. 2

Certain jurisdictions have expanded the exception to the pure economic loss theory beyond the sudden, calamitous infliction of harm to the defective product itself. Where the defect causes the defective product alone to incur damages in a gradual manner, yet the deterioration is not commensurate with ordinary and expected wear and tear to the product, the common law tort theory of negligence is a permissible recourse. Spence v. Three Rivers Builders and Masonry Supply, Inc., 353 Mich. 120 , 90 N.W.2d 873 (1958); Oliver B. Cannon & Sons, Inc. v. Dorr-Oliver, Inc., 312 A.2d 322 (Del.Super., 1973).

The “consumer expectation” test adopted by Spence, supra, and Oliver B. Cannon & Sons, Inc., supra, was applied to a strict liability cause of action by the 5th Circuit Court of Appeals in Two Rivers Co. v. Curtiss Breeding Service, 624 F.2d 1242 (5th Cir.1980), rehearing denied 629 F.2d 1350 (5th Cir.1980), certiorari denied, 450 U.S. 920 , 101 S.Ct. 1368 , 67 L.Ed.2d 348 (1981). The plaintiff purchased bull semen processed by the defendant for the purpose of artificially inseminating its cows. Impregnation resulted; however, a genetic abnormality, syndactylism, developed in some offspring. The plaintiff attributed the birth defects to the semen; consequently, it sought damages for the reduced value of its entire herd. Initially, the Two Rivers court discussed the four common types of loss: 1) personal injury to the user or physical injury to the user’s property, other than the defective property itself; 2) economic loss of value resulting from a product rendered defective by poor workmanship or materials; 3) economic loss to the defective product itself; and, 4) physical harm to the user’s other property as well as the defective product itself. These categories were discussed for informational purposes only; the Two Rivers court did not consider the object of injury or *85 type of loss to be dispositive. Instead, it was first led by the simple categorical distinction between sales and strict liability proposed in Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77 (Tex.1977), i.e., that sales law governs the economic relationship between sellers and consumers of goods, whereas strict liability addresses the distinct nature of physical injuries. This distinction, according to Two Rivers, supra, determines the extent of responsibility carried by a manufacturer in marketing his product. For instance, he will be strictly liable only for those products that are “unreasonably dangerous” and thereby become unsafe for their intended use. Whether a product is “unreasonably dangerous” and, therefore, subjects the manufacturer to strict liability, depends on the expectations of the consumer. Insofar as most cattle breeds are afflicted with some type of genetic defects, the Two Rivers court concluded that the plaintiff was chargeable with expecting or accepting the risk of the bull semen containing defective spermatozoa; consequently, strict liability was an unavailable cause of action.

Still other jurisdictions care little whether the damages are imposed only upon the defective product itself, whether the damages accrued violently or gradually, or whether the particular damages were expected by the consumer. For example, strict liability for injuries or damages shall be borne by the manufacturer who places defective products in the mainstream of commerce; the cost of such injuries or damages shall not rest with the consumer who is powerless to protect himself, Cova v. Harley Davidson Motor Co., 26 Mich.App. 602 , 182 N.W.2d 800 (1970); Santor v. A & M Karagheusian, Inc., 44 N.J. 52 , 207 A.2d 305 (1965); where there are unequal bargaining positions, tort principles are permitted to protect consumers, Midland Forge, Inc. v. Letts Industries Inc., 395 F.Supp. 506 (N.D.Iowa, 1975); Southwest Forest Industries Inc. v. Westinghouse Electric Corp., 422 F.2d 1013 (9th Cir.1970), certiorari denied 400 U.S. 902 , 91 S.Ct. 138 , 27 L.Ed.2d 138 (1970); the law of products liability was inculcated at the time of the promul *86 gation of the Uniform Commercial Code, and with no Uniform Commercial Code provision usurping the role of negligence or intentional tort, strict liability applies without deference to commercial law, Jig the Third Corp. v. Puritan Marine Ins. Underwriters Corp., 519 F.2d 171 (5th Cir.1975), rehearing denied 522 F.2d 1280 (5th Cir.1975); finally, where the damage is limited to the defective product alone, there is a proposal for the applicability of § 402A to be determined by the degree of loss to the consumer and not the manner in which harm occurred. Rubin, “Products Liability: Expanding the Property Damage Exception in Pure Economic Loss Cases,” 54 Chicago-Kent L.Rev. 963 (1978).

Some jurisdictions cite policy grounds for determining the applicability of § 402A, In Jones & Laughlin Steel Corp. v. Johns-Manville Sale Corp., 626 F.2d 280 (3d Cir.1980), the original purchaser of a smooth-surface asbestos roof sustained damage to its roof and water damage to steel products inside its mill, and experienced electrical outages. It was not essential that the defective design of the roof caused damage beyond the product itself or whether the damage was expected or abruptly inflicted; the consumer’s ability to protect itself was the controlling interest. The plaintiff’s injury was considered an economic loss because it was capable of protecting itself through bargaining for a warranty or foregoing warranties in lieu of a lower purchase price. Furthermore, the Jones & Laughlin court opined, the extension of strict liability to cover economic losses would effectively circumvent § 2-316 of the Uniform Commercial Code; it would preclude the manufacturer from limiting his liability through disclaimers or limited warranties. Finally, in recognition of Clark v. International Harvester Co., 99 Idaho 326 , 581 P.2d 784 (1978), the court reasoned that the judiciary must recognize legislative acts in commercial law and coordinate the development of tort law with deference to statutory sales law.

Obviously, as the foregoing discussion intimates, whether § 402A is applicable to injuries sustained by the defective *87 product alone is a mercurial, unsettling legal issue. I view the distinctions between damages sustained to other property and damages sustained to the defective product itself, along with distinctions between sudden, violent damage and gradually-developing damage, as perfunctory rules having little correlation to the definitions and policies of warranty and strict liability law. It is indeed incredulous that the application of § 402A depends on whether the frame defects here caused appellants to incur further physical damage to their persons, their other property or the persons or property of third parties. Moreover, it is equally devoid of reason, to employ § 402A here only where the cracks and fractures to the frames occurred suddenly and in calamitous fashion.

I prefer to peruse the language of the Uniform Commercial Code and § 402A of the Restatement of Torts (2d) to dispose of the issue. No provision of statutory commercial law supplants, to any extent, the application of products liability. Additionally, it would have demanded little effort of the authors of the Restatement to specifically restrict the kinds of property to which damage must be imposed before § 402A is actuated. Instead, reference is made only to “property” and I perceive no reason why such a term should exclude the defective product itself, regardless of how harm is inflicted.

Section 402A was drafted and adopted by this Commonwealth for the purpose of placing the risk of injury and expense upon the party most able to minimize loss. It matters not whether the injured party is a commercial or individual consumer or whether the injured person is in privity with the manufacturer. Similarly, it should not matter whether the damaged property is the defective product itself or other property contacting the defective product. Whether § 402A applies should depend solely on the statutory limitations of whether the defective product is unreasonably dangerous, whether the seller is engaged in the business of selling such a product, whether the product is expected to and does in fact reach the consumer without substantial change and whether the defect is the proximate *88 cause of injury. Its applicability should not depend on the traditional distinctions between tort and contract law or the categorical rules discussed above.

I believe that appellants’ cause of action was properly filed under products liability law; therefore, I would hold that it was error to summarily dismiss their complaint due to its timely filing within the applicable six year limitations period.

Accordingly, I would reverse.

. Special Liability of Sellers of Products for Physical Harm to User or Consumer.

(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property, is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if

(a) the seller is engaged in the business of selling such a product, and

(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.

(2) The rule stated in subsection (1) applies although

(a) the seller has exercised all possible care in the preparation and sale of his product, and

(b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.

. For a further example of the application of § 402A liability to damages precipitously imposed on the defective product itself, see Cloud v. Kit Manufacturing Co., 563 P.2d 248 (Alaska 1977).