PRICE v. Pacific Employers Insurance Company, a Corporation, Intervenor and Respondent.

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Court of Appeal, First District, Division 1, California.

Merton PRICE, Plaintiff and Respondent, v. SHELL OIL COMPANY, a Corporation, Defendant, Cross-Complainant and Appellant. Flying Tiger Line, Inc., a Corporation, Cross-Defendant and Respondent. Pacific Employers Insurance Company, a Corporation, Intervenor and Respondent.

Civ. 24279.

Decided: April 29, 1969

O'Connor, Moran, Cohn & Lynch, San Francisco, for appellant; Cyril Viadro, San Francisco, of counsel. Bledsoe, Smith, Cathcart, Johnson & Rogers, San Francisco, for cross-defendant and respondent Flying Tiger Line, Inc.; Robert A. Seligson, San Francisco, of counsel. Werchick & Werchick, Jack H. Werchick, San Francisco, for respondent Merton H. Price. Mullen & Filippi, San Francisco, for respondent and intervenor Pacific Employers Ins. Co.

Plaintiff, an employee of Flying Tiger Line, Inc. (hereinafter referred to as ‘Flying Tiger’), filed this action for injuries he sustained as a result of falling from a ladder attached to a fuel truck leased by defendant Shell Oil Company (hereinafter referred to as ‘Shell’) to Flying Tiger. Shell cross-complained against Flying Tiger for indemnity. Shell appeals from the judgment in favor of plaintiff for his injuries, from a judgment in favor of intervenor Pacific Employers Insurance Company (hereinafter referred to as ‘Pacific Employers'), the workmen's compensation carrier for Flying Tiger, and from the judgment of nonsuit in favor of Flying Tiger on the cross-complaint.

The complaint set out two causes of action, one based on the alleged negligence of Shell in maintaining the truck and its equipment, and the second, alleging breach of the warranty that the truck and ladder were merchantable and fit for the purpose intended. The trial court nonsuited plaintiff on the pleaded causes of action based on negligence and breach of warranty and submitted the case to the jury only on the theory of strict liability.1

The questions presented on this appeal are: (1) was the trial court in error in submitting the case to the jury on the theory of strict liability; (2) was the trial court in error in concluding that Shell had no right to be indemnified by Flying Tiger.

Facts

Plaintiff was employed by Flying Tiger as a licensed mechanic at the San Francisco International Airport on March 12, 1964. At some time after midnight on that date, the ladder connected to the fuel truck was placed up against the wing of a Flying Tiger airplane at the airport. Plaintiff went up the ladder to discharge his duty to check the hydraulic oil. When he was about half way up the ladder it broke and he fell, hitting the truck and sustaining injuries.

Shell had leased the gasoline tank truck to Flying Tiger beginning approximately January 1, 1958. The truck had a ladder anchored to its top for purposes of access to the wing of an airplane for fueling operations. Under the terms of the lease agreement, Flying Tiger was required to maintain the equipment in ‘good, safe and efficient’ operating condition and to make certain specified repairs and all repairs necessitated by neglect, abuse or accident, while all other repairs and replacements were the responsibility of Shell. Some time in 1961 or 1962,2 Flying Tiger notified Shell that the roller assembly on the truck ladder was worn and after inspection by Shell personnel, the ladder was replaced. This replacement ladder was made of aluminum rather than steel, but the record does not indicate who manufactured it.3 However, it is clear that the ladder was installed for Shell by Oliver's Auto Parts of San Francisco. Additionally, there was testimony that Oliver's Auto Parts might not have been the only party involved in the installation, and that it was possible that Shell employees might have had something to do with the project. Representatives of Shell and Flying Tiger inspected the new ladder for purposes of ascertaining that it was the right size for the purposes for which it was needed. There was expert testimony to the effect that the quality of welding was poor and that this poor welding predisposed the ladder to failure because of concentrated stress. The poor design of the ladder, when combined with the aforementioned welds, also predisposed it to fracture. For purposes of the appeal, Shell concedes that the ladder had been improperly welded ‘by whoever had welded it.’

The facts particular to the issue of indemnity will later appear in the discussion of that issue.

Strict Liability

Shell contends that the trial court erred in submitting the case to the jury on the theory of strict liability in tort because that theory has no application to a lessor of personal property.4 In considering this contention we first note that the doctrine of strict liability in tort applies when the plaintiff proves that he was injured while using a product or instrumentality in a manner it was intended to be used and the injury resulted from a defect in design and manufacture which made it unsafe for the intended use and that he was unaware of the defect. (Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 27 Cal.Rptr. 697, 377 P.2d 897, 13 A.L.R.3d 1049; Vandermark v. Ford Motor Co., 61 Cal.2d 256, 37 Cal.Rptr. 896, 391 P.2d 168; Alvarez v. Felker Mfg. Co., supra, 230 Cal.App.2d 987, 994, 41 Cal.Rptr. 514.) In this state the doctrine has been applied to the manufacturers of unwholesome food products and to a variety of other products that create as great or greater hazards if defective. (See Greenman v. Yuba Power Products, Inc., supra, at pp. 62–63, 27 Cal.Rptr. 697, 377 P.2d 897, and cases there cited.) Recently, the doctrine was applied to builders engaged in the mass production and sale of homes. (Kriegler v. Eichler Homes, Inc., 269 A.C.A. 224, 227–228, 74 Cal.Rptr. 749; but see Conolley v. Bull, 258 Cal.App.2d 183, 195–196, 65 Cal.Rptr. 689 where this court held that the doctrine did not apply to the sale of a single parcel of real estate.)5 However, in this state the rule of strict liability in tort has never been applied to a lessor of personal property.

In California the duty of a lessor is clearly based on statutory definitions of negligence and turns upon the obligations of a letter of personal property as set out in Civil Code section 1955.6 (Holmes Packaging Mach. Corp. v. Bingham, 252 Cal.App.2d 862, 868–869, 60 Cal.Rptr. 769; Tierstein v. Licht, 174 Cal.App.2d 835, 841, 345 P.2d 341.) In Holmes we reiterated this duty as follows: ‘This section [Civil Code section 1955] contains a statutory declaration of the obligations of a lessor of personalty [citation] and is an expression of the duty of a bailor in terms of an implied warranty of the fitness of the chattel for the use intended. [Citation.] It is not, however, an absolute warranty, making the bailor an insurer or guarantor. [Citation.] In actions for damages for personal injuries resulting from the use of the lease chattel, section 1955 has been held to provide for an implied warranty by the bailor that he has exercised reasonable care to ascertain that the chattel is safe and suitable for the purposes for which it is hired, the essential inquiry being whether the hirer complied with the standard of reasonable care in ascertaining the fitness of the chattel for the use for which he knew it was hired. [Citation.]

‘The duty imposed under section 1955 that one who hires a chattel for the use of others ordinarily assumes a duty to furnish a proper and reasonably safe chattel, and that he is liable for injuries which may result from his negligence to one using the chattel, finds its basis in the duty to exercise ordinary care which is due to everybody under the principles declared in [Civil Code] sections 1708, 1714, and 3281, * * *. [Citations.] Accordingly, section 1714, defining negligence, and section 1955, defining the obligations of a letter of personal property, must be read together. [Citation.]’ (Pp. 868–869, 60 Cal.Rptr. p. 773.)

The California rule that the liability of a lessor for personal injuries resulting from the leased property is based upon the duty to exercise ordinary care is also the rule of the Restatement. Under the rule set out in section 408, liability is imposed in cases of physical harm caused by a chattel only if the lessor fails to exercise ‘reasonable care’ in relation to the leased property.7 (Rest.2d Torts.) It should be noted here that this rule is in contradistinction to that stated in section 402A of the same Restatement which calls for the imposition of strict liability on the ‘seller’ of a defective product which causes physical harm.

Plaintiff points to the increasing use of lease agreements to accomplish commercial ends and particularly relies on the New Jersey case of Cintrone v. Hertz Truck Leasing, etc. Service, 45 N.J. 434, 212 A.2d 769, in support of his position that the trial court did not err in applying the doctrine of strict liability. In Cintrone a lessor of trucks was held liable under the doctrine of strict liability upon the rationale that the nature of the ‘U-Drive-It’ type rental business is such that the lessor who ‘puts motor vehicles in the stream of commerce in a fashion not unlike a manufacturer or retailer’ exposes the bailee, his employees, passengers and the traveling public ‘to a greater quantum of potential danger of harm from defective vehicles than usually arises out of sales by the manufacturer.’ (P. 450, 212 A.2d p. 777.)

In Martinez v. Nichols Conveyor etc. Co., 243 Cal.App.2d 795, 799, 52 Cal.Rptr. 842, 844, the appellate court cited the Cintrone case when it stated. ‘We shall assume for the purpose of this opinion that the rule of strict liability in tort applies also to lessors * * *.’ The decision in Martinez turns, however, upon the finding of the jury that plaintiff's injury was not proximately caused by the negligence of the lessor of the equipment.8

In Cintrone the court was not faced with a well-developed statutory expression of the liability of lessors such as that which confronts us in the instant case. Cintrone is distinguishable, moreover, from the present case in that there the defendant was very similar to a manufacturer engaged in putting products on the market for sale, while here there is nothing in the record that indicates that Shell was in the business of leasing its trucks on a mass scale or that it had leased any trucks other than the one involved in the instant case.9 Moreover, in Cintrone the defendant was responsible for inspection of the vehicle every 14 days and for daily fueling. (Pp. 440–441, 212 A.2d 769.) Such circumstances are not present here.

The conclusive consideration in the present case, is, as we have pointed out, the rule which has consistently held lessors of personal property to the duty of reasonable care. In the absence of any legislative action on the applicable statutes we see no reason to disturb this longstanding California interpretation.10

Indemnity

The agreement by which the truck was leased to Flying Tiger included the following paragraph: ‘Lessee shall indemnify Shell against any and all claims and liability for injury or death of persons or damage to property caused by or happening in connection with the equipment or the condition, maintenance, possession, operation or use thereof.’

On the basis of this indemnity agreement, Shell cross-complained against Flying Tiger, avering that Shell should be indemnified from all liability, costs and charges in case plaintiff recovered damages. Flying Tiger answered that Shell was not entitled to indemnity because of active negligence in supplying a defective ladder. The trial court essentially agreed with Flying Tiger and granted a nonsuit to Shell on the cross-complaint. The trial court reached this conclusion on the ground that the agreement set out above was not sufficiently specific to allow for indemnity in either a situation where Shell was actively negligent or where Shell was liable on the theory of strict liability in tort.

Shell contends that the trial court erred in granting the nonsuit because the agreement was intended by its clear terms to cover precisely the type of claim established in this case, regardless of any active negligence on the part of Shell.11 Flying Tiger claims that it has no obligation to indemnify Shell essentially because Shell was the wrongdoer in providing defective equipment and because the lease did not specifically mention the original ladder or the replacement ladder which was involved in the accident.12

Before considering these arguments in more detail we will first discuss the general rules applicable to indemnity agreements of the type utilized in the instant case. Also, we initially note that in a case of this sort where there is no conflicting extrinsic evidence relating to the contract, the interpretation of the terms of the agreement is a question for this court. (Parsons v. Bristol Development Co., 62 Cal.2d 861, 865, 44 Cal.Rptr. 767, 402 P.2d 839; Markley v. Beagle, 66 Cal.2d 951, 962, 59 Cal.Rptr. 809, 429 P.2d 129.) Next, we note that since the parties to this agreement expressly contracted on the subject of indemnity, the extent of the duty to indemnify must be ascertained from the agreement itself and not from the application of the doctrine of equitable indemnity. (Markley v. Beagle, supra, at p. 961, 59 Cal.Rptr. 809, 429 P.2d 129 and cases cited there.)

The basic rule on general indemnity clauses is succinctly set forth in Markley v. Beagle, supra, 66 Cal.2d 951, 59 Cal.Rptr. 809, 429 P.2d 129: ‘An indemnity clause phrased in general terms will not be interpreted, however, to provide indemnity for consequences resulting from the indemnitee's own actively negligent acts. [Citations.] Mere nonfeasance, however, such as a negligent failure to discover a dangerous condition arising from the work will not preclude indemnity under a general clause such as the one in this case. [Citations.]’ (P. 962, 59 Cal.Rptr. p. 816, 429 P.2d p. 136; see also Cahill Bros., Inc. v. Clementina Co., 208 Cal.App.2d 367, 382, 25 Cal.Rptr. 301; King v. Timber Structures, Inc., 240 Cal.App.2d 178, 181–182, 49 Cal.Rptr. 414.)

Flying Tiger contends that Shell was actively negligent because Shell was responsible for the design of the ladder. In this regard it appears that the applicable rule in determining what is active negligence is, by analogy, the same rule applied in cases of implied indemnity. That rule is that a person cannot seek indemnification if he personally participates in an affirmative act of negligence, or is physically connected with an act or omission by knowledge or acquiescence in it on his part, or fails to perform some duty in connection with the omission which he may have undertaken by virtue of his agreement. (Cahill Bros., Inc. v. Clementina Co., supra, 208 Cal.App.2d 367, 382, 25 Cal.Rptr. 301; Goldman v. Ecco-Phoenix Elec. Corp., 62 Cal.2d 40, 44, 41 Cal.Rptr. 73, 396 P.2d 377; Harvey Mach. Co. v. Hatzel & Buehler, Inc., 54 Cal.2d 445, 449, 6 Cal.Rptr. 284, 353 P.2d 924; see 8 Santa Clara Lawyer, pp. 167–168.) In the instant case the evidence was uncontradicted that the manufacturer of the ladder was told to make the ladder of aluminum and that it was to be patterned and copied from the old ladder. In the light of this evidence the trial court was entitled to conclude as a matter of law that Shell participated in the conduct or omission which caused the injury beyond the mere failure to perform a duty imposed upon it by law and that, therefore, there was active fault on Shell's part. (See Cahill Bros., Inc. v. Clementina Co., supra, at p. 381, 25 Cal.Rptr. 301.)

However, the foregoing rules concerning general indemnity clauses are not applicable where the parties have contracted with the intention and contemplation of indemnifying from the precise risk from which the injury arose, and the agreement providing for such indemnification is clear and explicit. (Goldman v. Ecco-Phoenix Elec. Corp., supra, 62 Cal.2d 40, 44, 41 Cal.Rptr. 73, 396 P.2d 377; Harvey Mach. Co. v. Hatzel & Buehler, Inc., supra, 54 Cal.2d 445, 449, 6 Cal.Rptr. 284, 353 P.2d 924; John E. Branagh & Sons v. Witcosky, 242 Cal.App.2d 835, 839, 51 Cal.Rptr. 844.) Accordingly, in the instant case if by a clear and explicit agreement the parties intended that Shell be indemnified by Flying Tiger for an accident resulting from supplying a defective ladder, then it matters not if Shell was actively negligent, passively negligent, or liable under the theory of strict liability. (See Harvey Mach. Co. v. Hatzel & Buehler, Inc., supra, at pp. 448–449, 6 Cal.Rptr. 284, 353 P.2d 924; Schackman v. Universal Pictures Co., 255 Cal.App.2d 857, 862–863, 63 Cal.Rptr. 607; Atchison, T. & S. F. Ry. Co. v. James Stewart Co., 246 Cal.App.2d 821, 830, 55 Cal.Rptr. 316.) As the court said in Atchison, ‘The clearly expressed intention of the parties will be enforced.’ (At p. 830, 55 Cal.Rptr. at p. 321.) Or as the court stated in Harvey Mach. Co., supra, ‘The question is one of interpretation of contracts' and ‘it is the intent of the parties which the court seeks to ascertain and make effective.’ (Pp. 447, 449, 6 Cal.Rptr. pp. 286, 287, 353 P.2d pp. 926, 927.)

In the instant case the trial court simply equated Shell's strict liability for the defective ladder with negligence and concluded that Shell could not be indemnified for such liability. In doing so the court basically assumed that the indemnity agreement was general in terms. A careful reading of the clause makes it clear, however, that the parties intended and contemplated that Shell be indemnified from any injury caused in connection with the condition or use of the leased equipment. Since the equipment was contemplated to be used in fueling operations, it seems apparent to us that the risk which resulted in the accident was contemplated by the parties and was covered in the clause in question. Although the agreement does not specifically mention a ladder, a ladder is surely an item of equipment. In the absence of any extrinsic evidence to the contrary, it is clear that the express agreement was designed to cover the precise type of accident which occurred. Consequently, we conclude that the indemnification agreement was clear and explicit and, therefore, that it is inconsequential whether Shell was actively or passively negligent in supplying the defective ladder. If Shell is found to be liable to plaintiff, it should as a matter of law succeed on its cross-complaint against Flying Tiger.

The judgments against Shell in favor of plaintiff Merton Price, and Pacific Employers and Flying Tiger are reversed.

FOOTNOTES

1.  It is settled that in cases involving manufacturers, strict liability may be pleaded in a cause of action sounding in breach of warranty as long as all the facts necessary to establish strict liability in tort are pleaded. (Alvarez v. Felker Mfg. Co., 230 Cal.App.2d 987, 1005, 41 Cal.Rptr. 514.)

2.  The exact date is difficult to ascertain. Raymond Brendemuhl, the plant superintendent for Shell, testified the ladder was replaced in 1961 at the expense of Shell. But the invoice of installation is dated July 1962.

3.  Merit Tank & Body was originally sued as manufacturer but was dismissed by stipulation.

4.  The trial court instructed the jury as follows: ‘In this action, the plaintiff has the burden of proving the following: That Shell Oil Company, as lessor, leased the ladder as part of the equipment on the truck to which said ladder was attached to the Flying Tiger Line, plaintiff's employer, knowing it was to be used without inspection; that plaintiff was injured on March 11, 1964, as a proximate result of a defect in the design or manufacture of said ladder, and that plaintiff's injury happened while the ladder was being used in the way it was intended to be used, and that plaintiff was unaware of the defect, making the ladder unsafe for its intended use; the elements of his damage; the amount thereof; and the nature and extent of his injuries.’

5.  A hearing by the Supreme Court was denied in both the Kriegler and the Conolley cases.

6.  Civil Code section 1955, in pertinent part, reads as follows: ‘One who lets personal property must * * * put it into a condition fit for the purpose for which he lets it, * * *.’

7.  Section 408 of the Restatement Second of Torts reads in its entirety: ‘One who leases a chattel as safe for immediate use is subject to liability to those whom he should expect to use the chattel, or to be endangered by its probable use, for physical harm caused by its use in a manner for which, and by a person for whose use, it is leased, if the lessor fails to exercise reasonable care to make it safe for such use or to disclose its actual condition to those who may be expected to use it.’

8.  The ‘assumption’ made by the Martinez case is recognized in Barth v. B. F. Goodrich Tire Co., 265 A.C.A. 253, 278, 71 Cal.Rptr. 306, a case involving the application of the doctrine of strict liability to a tire manufacturer.

9.  A New Jersey court has already limited the application of Cintrone. In Conroy v. 10 Brewster Ave. Corp., 97 N.J.Super. 75, 234 A.2d 415, the doctrine was rejected in the case of a lessor of a residence. The court pointed out that there was no indication that the rule of Cintrone was intended to be applied to cases involving isolated sales or leases.

10.  It has been suggested by an eminent authority that California might soon adopt the Cintrone rule. (See Prosser, Strict Liability to the Consumer in California, 18 Hastings L.J.(1966) 9–29.)

11.  Alternatively, Shell argues that strict liability in tort is analogous to ‘passive’ negligence against which Shell could be indemnified. In light of our conclusion on the inapplicability of the doctrine of strict liability, it is unnecessary for us to consider this contention.

12.  Flying Tiger also argues that Shell breached its contract and that this is equivalent to active negligence, but the argument is insufficiently developed.

MOLINARI, Presiding Justice.

SIMS and ELKINGTON, JJ., concur.