Rosado v. Proctor & Schwartz, Inc. , 483 N.Y.S.2d 271 ( 1984 )

Kassal, J. (dissenting).

I disagree with the majority and would modify to deny the motion to dismiss the second cause of action in the third-party complaint for indemnity and remand the third-party action for trial on that cause. In my view, principles of equity and fairness warrant upholding a claim for indemnity under the facts of this case.

The issue is whether a manufacturer may obtain indemnification from the purchaser where, as here, the purchaser had agreed to be responsible for complying with local laws, did assemble and complete the product and, allegedly, the manner by which the completion was performed is said to be the proximate cause of the resulting injuries.

On December 3,1970, in Pennsylvania, defendant third-party plaintiff entered into a written contract to manufacture certain machinery for use by the third-party defendant purchaser at its factory in Brooklyn, New York. The agreement described the equipment, a garnett, provided for its delivery in an unfinished state and set forth the several responsibilities assumed by the purchaser. Among those listed under the category “work and

MATERIAL TO BE FURNISHED BY THE PURCHASER”, Were:

“4. All electrical wiring * * * plus disconnect switches as required * * *

“6. The necessary guards for the exposed moving parts of the machine in accordance with the laws of the district in which the machine is to be located.”

As a result, it was agreed that the required safety guards and disconnect switches were to be installed by the purchaser, not by the manufacturer. The machine was assembled and installed by the purchaser’s personnel, who also placed a mesh fence around the gear and pulley area. The fence contained a gate, consisting of several broad doors which, when opened, exposed the pulleys, chains and gears. It had a simple latch with no interlock on the gate and there was no machine cutoff. While it appears that the manufacturer had safety doors available and expert engineering services to install the guards, the purchaser did not avail itself of such opportunity. Although the record does not clearly reflect the extent of the discussions and negotiations between the parties respecting their relative responsibilities at the time the machine was purchased, it clearly appears that the purchaser did agree to complete the job and, expressly obligated itself to comply with all pertinent laws and regulations of this State.

More than 5½ years after the purchase, on September 9,1976, plaintiff, an employee of the purchaser who was hired to cleanup and assist with the machine, was severely injured when his right hand was caught in the exposed power chain. It is also alleged that, at the time of the accident, there was no warning posted on the fence. As far as appears, any instructions to plaintiff in connection with the operation of the machine were furnished by the employer.

Plaintiff’s action against the manufacturer was predicated upon claims of negligence and strict products liability based upon design defect, the manufacturer, in turn, impleading the purchaser to recover over for contribution and indemnity. When the case came on for trial, the court granted the third-party defendant’s oral application to dismiss the second cause of action in the third-party complaint for indemnity, whereupon the employer (third-party defendant) entered into a settlement with the injured employee. The employee’s case against the manufacturer proceeded and was settled during trial. This appeal is by the manufacturer from the dismissal of its second cause of action in the third-party complaint to obtain indemnification from the purchaser.

I agree that, under the circumstances, there is no claim for contribution which may be raised at this time, any such claim having been extinguished by the settlement (General Obligations Law, § 15-108, subds [b], [c]; McDermott v City of New York, 15 NY2d 211, 220). I also agree that, under the facts of this case, no claim for contractual indemnification exists since the contract does not contain an explicit agreement by which the purchaser agreed to indemnify or hold the manufacturer harmless (see Levine v Shell Oil Co., 28 NY2d 205; Margolin v New York Life Ins. Co., 32 NY2d 149; Vey v Port Auth., 54 NY2d 221).

However, in my view, the record is sufficient to raise in issue a claim for common-law indemnity by the manufacturer against the purchaser. The manufacturer concedes that, had it been held liable to the injured employee in negligence, no indemnity claim could be asserted since, in such case, a verdict on the negligence cause would amount to a finding of “fault” and, under the law of this State, indemnity may not be had by a primary or actual wrongdoer against another primary or actual wrongdoer. The remedy applies to permit a party secondarily responsible to proceed against the primary or actual tort-feasor (McDermott v City of New York, supra; Mauro v McCrindle, 70 AD2d 77, affd 52 NY2d 719; Smith v Hooker Chem. & Plastics Corp., 83 AD2d 199; Garrett v Holiday Inns, 86 AD2d 469; County of Westchester v Becket Assoc., 102 AD2d 34).

The manufacturer does contend, however, that to the extent it would have been held responsible to the plaintiff under strict products liability, which, according to appellant, is equivalent to absolute liability without fault, it may obtain indemnity against the purchaser, which installed the safety guards and is alleged to be primarily responsible for any improper installation. This argument is premised upon the assumption that strict tort liability results in the imposition of liability without “fault”, which may not be the case (see Cover v Cohen, 61 NY2d 261, 270). A manufacturer, held under strict tort liability, is held accountable as a wrongdoer. While the proof with respect to a claim for strict liability is less exacting than that in negligence, nevertheless, it must be established that there was a defect in the product when it left the hands of the manufacturer, whether the defect consisted of a mistake in manufacturing, a design defect or the absence or inadequacy of warnings with respect to the use of the product (Robinson v Reed-Prentice Div., 49 NY2d 471,478-479; Voss v Black & Decker Mfg. Co., 59 NY2d 102,107; Codling v Paglia, 32 NY2d 330; 1 American Law of Products Liability, §§ 4.7, 4.10 et seq., 4.32). Although plaintiff’s prima facie case does not require proof that the manufacturer acted unreasonably in the design or manufacture of the product, in any event, there must be proof that there was a defect at the time the product entered the stream of commerce and, to the extent such proof exists, the liability of the manufacturer, whether for a design or manufacturing defect, does impose liability for fault in a general sense. The situation with respect to the manufacturer in terms of strict liability is not analogous to that involving absolute liability without fault, as under the Labor Law, or the vicarious liability imposed upon an employer under the doctrine of respondeat superior, or that imposed by statute upon the owner of a vehicle for the actions of the operator, using the vehicle with the permission and consent of the owner.

However, the conclusion that strict tort liability is a “fault” concept is not dispositive here. The existence of a right to indemnity is generally based upon equitable considerations, to prevent unfairness or unjust enrichment. As was succinctly observed by Justice Simons in Garrett v Holiday Inns (86 AD2, at p 470): “In indemnity, a party held legally liable to plaintiff shifts the entire loss to another. His right to do so may be based upon an express contract * * * but more commonly the indemnity obligation is implied, based upon the laws’ notion of what is fair and proper as between the parties legally liable. Implied indemnity, which we are considering here, is a restitution concept which permits shifting the loss because to fail to do so would result in the unjust enrichment of one party (the indemnitor) at the expense of the other (the indemnitee)”.

Applying this standard, the Court of Appeals in McDermott v City of New York (supra) permitted the city to assert an indemnity claim against the third-party defendant manufacturer, in an action brought by an employee to recover for the loss of an arm sustained in the operation of a hopper mechanism of a sanitation truck. The court reinstated the third-party claim for indemnity, Chief Judge Cooke observing (50 NY2d, at pp 216-217, 220):

“Conceptually, implied indemnification finds its roots in the principles of equity. It is nothing short of simple fairness to recognize that ‘[a] person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity’ (Restatement, Restitution, §76). To prevent unjust enrichment, courts have assumed the duty of placing the obligation where in equity it belongs * * *

“where indemnity is at issue, one party is alleging that the other party should bear complete responsibility for the tort. Should the party seeking indemnity negotiate a settlement, this in itself would have no consequences upon the indemnity claim. Irrespective of the amount of the settlement, the indemnitor is either totally responsible or not.”

Applying the foregoing here, the manufacturer claims a failure on the part of the purchaser to discharge the duty it assumed to properly install the safety guards, an obligation under the express terms of the agreement. On that basis, it is claimed that, as between these parties, it is the purchaser who was primarily responsible for the installation of the guards and the disconnect switches and the failure to perform, under equitable principles, should impose complete responsibility upon the third-party defendant.

In Proctor & Schwartz v United States Equip. Co. (624 F2d 771), the United States Court of Appeals for the Sixth Circuit was confronted with the identical issue as that posed here. In that case, Proctor had manufactured machinery under an agreement which similarly provided that the necessary guards for the exposed moving parts were to be provided by United States Equipment Co., the employer of the injured plaintiff. As in our case, plaintiff’s action against Proctor had been settled and an action was thereafter brought by Proctor against the purchaser to recover on a theory of implied indemnity. The court upheld the indemnity claim as legally sufficient, finding that plaintiff’s pleadings raised factual issues as to the existence of an implied indemnity obligation. In denying summary judgment, the court there observed that the contract placed the burden of compliance with local law upon the purchaser, stating: “The logic of such a provision is apparent. Because the purchaser of the machinery would be in a better position to know local law and exactly how the machinery was to be used, the parties agreed that the purchaser should install the necessary safety devices.” (624 F2d, at p 775.) While the court in Proctor recognized that traditional common-law principles of indemnity required that a party seeking indemnification be free from personal fault, i.e., that he be passively and not actively responsible, it did recognize that, under Michigan law, a claim for indemnity could be based upon implied contract, under which liability might be imposed upon an undertaking, either oral or in writing, by the party from whom indemnity was sought “to perform a certain service or furnish a product to the other party” (Dale v Whiteman, 388 Mich 698, 705).

While no New York authority has been cited as upholding the sufficiency of an indemnity claim on law similar to that in Michigan, in my view, the same equitable principles do apply. Under the facts here and “based upon the laws’ notion of what is fair and proper as between the parties” (Garrett v Holiday Inns, 86 AD2d, at p 470), the sufficiency of the indemnity claim in the third-party pleading should be sustained. Arguably, there is a factual issue whether the third-party defendant discharged its duty owed to the manufacturer. If established, to avoid unjust enrichment, the court may act to place the obligation “where in equity it belongs”. (McDermott v City of New York, 50 NY2d, at p 217.)

There is an additional factual issue here as to whether there was a defect, either in the design or in the manufacture, by reason of the sale and delivery of a product in an unfinished state. It is for the jury to determine whether the manufacturer reasonably relied upon another to complete the product. In part, determination of this issue will be dependent upon the jury’s assessment of the relative obligations of the parties, bearing in mind that the absence of adequate safety guards is alleged to have caused the accident and, under the circumstances, could be found to have rendered the product inherently dangerous.

The holding in Robinson v Reed-Prentice Div. (49 NY2d 471) is instructive, albeit the factual situation there is distinguishable. In Robinson, plaintiff, a machine operator, employed by the third-party defendant, brought suit against the manufacturer to recover for serious injuries sustained approximately 6Y2 years after the plastic molding machine had been manufactured. It was established that the accident occurred when the employer modified the safety gate of the machine to accommodate its own needs and, as a result, nullified the safety features inherent in the manufacturer’s design. The Court of Appeals dismissed the complaint, finding no liability as against the manufacturer, either in negligence or in strict products liability, since the product had been substantially altered after it left the possession and control of the manufacturer. The court observed (49 NY2d, at pp 480-481):

“the manufacturer is in a superior position to anticipate the reasonable use to which his product may be put and is obliged to assure that no harm will befall those who use the product in such a manner. It is the manufacturer who must bear the responsibility if its purposeful design choice presents an unreasonable danger to users * * *

“The manufacturer’s duty, however, does not extend to designing a product that is impossible to abuse or one whose safety features may not be circumvented. A manufacturer need not incorporate safety features into its product so as to guarantee that no harm will come to every user no matter how careless or even reckless”.

Here, however, the responsibility for the installation of the safety devices by express agreement was delegated by the parties to the purchaser, to be accomplished pursuant to applicable local law. Whether the delegation of duty here was proper and whether the manufacturer could reasonably rely upon another to complete this product in terms of safety is not now before us. At this juncture, it is sufficient to find that, as between these parties, it may be established that the primary and ultimate responsibility was upon the purchaser, not the manufacturer.

In Cox v Cordice (90 AD2d 297), we reinstated a third-party claim for indemnity by a hospital against its staff pathologist and his professional corporation, where the hospital had been held liable for the negligent diagnosis by a pathologist who had acted as a substitute for the third-party defendant, based upon an agreement by which the staff pathologist assumed responsibility for substitute professional pathologists while he was absent from duty and guaranteed “the full and complete performance of the obligations hereunder by the Corporation” (supra, p 299). The observation by Presiding Justice Murphy in that case is equally applicable here (90 AD2d, at p 299): “This contract between the parties did not contain any express covenant of. indemnity. Nonetheless, even in the absence of an express covenant of indemnity, a primary or principal wrongdoer is responsible for his negligent act not only to the person injured, but to one indirectly harmed by being cast in damages by operation of law for the wrongful act * * * Thus, one party to a contract may be held as the indemnitor of the other if that other party is cast in damages as a result of the first party’s dereliction of duty. (Witz v Cadillac Hotel, 26 AD2d 763, affd 19 NY2d 824.)”

Accordingly, the order, Supreme Court, New York County (Orest V. Maresca, J.), entered July 27, 1983, granting the motion to dismiss the second cause of action for indemnity in the amended third-party complaint, should be reversed, on the law, the motion denied, the second cause of action of the amended third-party complaint reinstated and the matter remanded for further proceedings.

Sandler, J. P., concurs with Fein, J.; Silverman, J., concurs in an opinion; Kassal, J., dissents in a separate opinion.

Order, Supreme Court, New York County, entered on July 27, 1983, affirmed. Respondent shall recover of appellant $75 costs and disbursements of this appeal.