Nelson v. Nelson Hardware, Inc. , 160 Wis. 2d 689 ( 1991 )

HEFFERNAN, CHIEF JUSTICE.

This is a review of a published court of appeals decision¹ reversing the summary judgment of the circuit court for Barron county, James C. Eaton, circuit judge, dismissing the complaint of the plaintiff Bryan D. Nelson against the defendant Nelson Hardware, Inc.,² sounding in products liability and negligence. The court of appeals remanded for further proceedings.

The plaintiff injured his hand when a used shotgun purchased from the defendant store accidently discharged when the gun fell to the ground. The trial court granted summary judgment to the defendant, ruling that the defendant hardware store, as a seller of used merchandise, as a matter of law, was not subject to strict liability under sec. 402A, Restatement (Second) of Torts (1965), and that there were no genuine issues of material fact on the negligence issue. The court of appeals reversed on both issues, holding that sellers of used products can be held strictly liable and that a genuine factual dispute existed as to the store's negligence. We affirm the court of appeals, which remanded for further proceedings.

The facts in respect to the injury are, for the most part, not in dispute and are as follows:

Nelson, age fourteen, injured his hand while hunting pigeons and sparrows with a Stevens twenty-gauge model 940E single-shot shotgun. After Nelson observed a pigeon fly into a barn, he placed a shell in the chamber, entered the barn, and began climbing a ladder with the gun in his hand to reach the loft. The shotgun was uncocked. When Nelson approached the loft, he reached up and placed the shotgun in a leaning position on a board against the ladder. As he continued climbing, the gun slipped and fell butt-first to the barn floor and discharged into his hand.

The shotgun was manufactured by Savage Industries, Inc., sometime during the 1970's. According to Mark Nelson, the owner of Nelson's True Value Hardware Store, he took this weapon in trade from a third party on September 5, 1982, and had visually inspected it at that time but found no apparent defects. The gun appeared to be in good condition. It remained in the possession of the hardware store until it was sold to the plaintiffs father on October 13, 1983. No alterations, changes, or modifications of any type were made to the gun while in the possession of Nelson True Value Hardware. At no time was Mark Nelson ever informed by Savage Industries through a notice of recall, alert, or warning, or by the previous owner that there was a defect in the Stevens Model 940E 20-gauge shotgun. In fact, the latent defect had gone undiscovered.

Nelson's True Value Hardware store was engaged in the business of selling a wide variety of retail merchandise. From 1977 to January 1986, it sold new guns and took used guns in trade when selling new guns and, as the facts in the instant case reveal, later sold used guns that had been taken in trade. The store was never a dealer or distributor of products manufactured by Savage Industries.

Initially, Bryan brought an action in strict liability and negligence against Savage Industries, Inc., the manufacturer of the allegedly defective Stevens shotgun. Savage brought a third-party complaint against Bryan's father, alleging causal negligence. Sometime thereafter, Savage filed for Chapter 11 reorganization under the Federal Bankruptcy Act. The plaintiff then amended his complaint by bringing an action against the Nelson Hardware store and its insurer. Plaintiff alleged:

Nelson Hardware, Inc. was negligent in the marketing and distribution of said shotgun. Further, said shotgun, at the time it was sold, was in a defective condition so as to be unreasonably dangerous when it left the possession and control of defendant Nelson Hardware, Inc. and said shotgun remained in this defective and unreasonably dangerous condition at the time of the above accident.

The defendant hardware store moved for summary judgment based on its manager's affidavit that it sold guns and took used guns in trade, that it had taken the Savage shotgun in trade and had later sold it in 1983 to Bryan's father.³ The manager's affidavit stated that an inspection had been made when the shotgun was taken in trade in 1982 and no defects were apparent. He also stated that he made no assertions or representations concerning the safety of the gun when he made the sale to the father and, in respect to the allegations of negligence, stated that there were no factual averments of any negligent conduct whatsoever, only the statement that the store "was negligent in the marketing and distribution of said shotgun." Moreover, defendant denied any knowledge of any defect in the shotgun and asserted that no alteration was made to the shotgun while it was in the possession of the hardware store.

The counter-affidavit on behalf of plaintiff Bryan acknowledged that no alteration had been made in the weapon while it was in possession of the store, but, due to a design defect, that it was defective and unreasonably dangerous when manufactured and was in that condition when the hardware store sold it to Bryan's father. The plaintiff's father stated that he asked Mark Nelson "whether or not [the gun] would be a good beginning gun for his boy . . . meaning whether or not it was in good working order since it was a used shotgun," to which question, he averred, he received an affirmative answer. The plaintiffs father believes he paid between $65 and $80 for the gun.

Referring to a deposition of a firearms expert, the plaintiffs affidavit stated that the examination of the weapon revealed that the shotgun would fire every time it was dropped on its butt from a distance of as little as ten inches, despite the fact the weapon was not cocked and was set in a safety mode. The affidavit incorporated the statement of the expert that the weapon as sold was "unreasonably dangerous," was design defective, and was in the same condition as originally manufactured.

The plaintiff, in response to defendant's motion to dismiss, asserted that the seller, Nelson Hardware, Inc., came within the provisions of sec. 402A, Restatement (Second) of Torts, which this court adopted in Dippel v. Sciano, 37 Wis. 2d 443, 155 N.W.2d 55 (1967).

Defendant hardware store countered by arguing that the Wisconsin Supreme Court had never found sec. 402A to be applicable to a seller of used goods, and in Burrows v. Follett & Leach, Inc., 115 Wis. 2d 272, 340 N.W.2d 485 (1983), affirmed a trial court's refusal to instruct a jury on strict liability in a case involving the sale of a used chattel.

The trial court in this case found Burrows, supra, to be dispositive and flatly held, without exception or condition, that strict liability does not lie against the seller of a used product.

In respect to the claim that the hardware store was negligent, the trial court noted that the movant store, in its affidavit, stated that an inspection had been made and that there were no apparent defects. Because the plaintiff offered no counter-affidavits in respect to the nature of the inspection, the trial court concluded that the quality of the inspection was not put in issue. The court also noted that no facts were alleged in the complaint or referred to in the plaintiffs counter-affidavits that would furnish an evidentiary basis for the complaint's assertion that the hardware store was negligent in the marketing and distribution of the shotgun.

Accordingly, the trial court granted summary judgment to the defendant dismissing the plaintiffs complaint. On appeal from that judgment, the court of appeals reversed, stating:

We note the plain language of sec. 402A does not limit itself to new products but applies to "any product." Also, policy reasons that justify strict liability are equally applicable here.

153 Wis. 2d at 224.

In respect to the allegation of negligence, the court of appeals also reversed. It reasoned that:

Whether the hardware store breached its duty to inspect is dependent on numerous factors not sufficiently developed by affidavit to conclude that no genuine dispute of material fact exists. These factors include whether the seller made representations concerning the product, whether the inspection was adequate for the purpose for which it was undertaken, and whether a reasonable inspection would have revealed the defect. [Citation omitted.] Also disputed is whether the hardware, store made representations in the course of marketing the gun.

153 Wis. 2d at 226.

As we view the last stated ground for reversal, the court of appeals addresses the question of whether or not any representations were made and, further, questions if the representation asserted by Bryan's father was indeed made, whether that representation by the store had the effect of impliedly asserting that an adequate inspection for safety had been made. The court of appeals in effect stated that the reasonable import or the meaning a reasonable person would ascribe to the representation, if made, must be resolved by the finder of fact, and, hence, there was a material issue of fact that remained to be tried.

The hardware store and its insurer have petitioned for, and have been granted, review in this court.

We first address the question whether a products liability claim, first sanctioned by this court in Dippel v. Sciano, 37 Wis. 2d 443, 155 N.W.2d 55 (1967), applies to a used product which otherwise meets the criteria for strict liability set forth in sec. 402A, Restatement (Second) of Torts. We hold that a claim for products liability may be brought under circumstances alleged in this case where the defective condition causing harm to the consumer of the used product arises out of the original manufacturing process and where other elements requisite for liability under sec. 402A are present.

The circuit court, in view of its understanding of this court's opinion in Burrows v. Follett & Leach, Inc., 115 Wis. 2d 272, 340 N.W.2d 485 (1983), held that this court had decided that the Dippel rule of products liability had no applicability to used products; hence, the trial court found it unnecessary to re-examine the underlying rationale of Dippel or of sec. 402A in respect to their applicability to used products that would be subject to the rule were they sold new.

The trial court assumed, erroneously we conclude, that the "precedent" established by this court in Burrows made a detailed analysis of the question unnecessary.

Judge Eaton in his opinion stated:

There are profound factual similarities to the Burrows case in this one. So profound, in fact, that the Court cannot see under these facts, any possibility of a verdict submission under Section 402A.

The factual similarities relied upon by the trial court were that the shotgun in this case, like the machine in Burrows, was "old," that both were used, not new products, that neither in Burrows nor in the instant case was the seller to the consumer "in the business of buying used equipment nor [in the instant case] was it a regular purveyor of the Savage line."

Judge Eaton then went on to recognize that:

Admittedly, the dangerous aspect of the shotgun, namely its design, was not open and in plain view; and it was indisputably undetectable by the buyer.

He did not comment on the facts that made Burrows clearly distinguishable from the facts in this case — that the defect in the Burrows machine was in "plain view" and "[t]he dangers of a rapidly rotating drive shaft are obvious and well-known." Burrows, 115 Wis. 2d at 285.

The court of appeals in this case reversed for several reasons. One reason given, a reason in itself sufficient to remove the Burrows machine from sec. 402A coverage, was based on that distinction:

Because the dangers of the corn picker [in Burrows] . . . were readily apparent to the user, the corn picker would not have been unreasonably dangerous

153 Wis. 2d at 223.

Accordingly, the court of appeals made it clear that, even were the corn picker new, its condition did not come under the rubric of sec. 402A. As pointed out by this court, for a product to be in a defective and unreasonably dangerous condition under sec. 402A, it must be found to be a hidden, and not an obvious, defect. See Sumnicht v. Toyota Motor Sales, 121 Wis. 2d 338, 369, 360 N.W.2d 2 (1984).

The Burrows court specifically found the fact that the danger was in plain view and obvious to be reason enough for not applying sec. 402A. Thus, whether or not the corn picker was "used," the machine did not have an unreasonably dangerous defect cognizable under sec. 402A. Even were the Burrows machine new, sec. 402A would have been inapplicable.

While this court in Burrows obviously recognized that the machine was used, it never held, or even in dicta stated, that the purchaser of a used article was precluded from sec. 402A protection by that fact alone.⁴

The Burrows court, by stating, "We conclude that strict liability under sec. 402A is not appropriate in this case," made the outcome fact-specific without making the question of sec. 402A liability dependent upon whether the product was new or used. Whether or not sec. 402A applies to used goods, under any circumstances, otherwise subject to the rationale of Dippel v. Sciano, remains a question not heretofore decided by this court.

The conclusion of the court of appeals that sec. 402A is applicable is clearly correct. The wording of sec. 402A, the policy for the rule as set forth in the Restatement commentary, and the explication of the reason for sec. 402A and the policy explanation set forth at length in Dippel v. Sciano impel our conclusion that the buyers of used goods are not precluded from the protection of sec. 402A simply because the product is not purchased new.

Section 402A of the Restatement provides:

§ 402A. Special Liability of Seller of Product 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.

The court in Dippel restated the requirements of sec. 402A, which it adopted, in the following words:

From a reading of the plain language of the rule, the plaintiff must prove (1) that the product was in defective condition when it left the possession or control of the seller, (2) that it was unreasonably dangerous to the user or consumer, (3) that the defect was a cause (a substantial factor) of the plaintiffs injuries or damages, (4) that the seller engaged in the business of selling such product or, put negatively, that this is not an isolated or infrequent transaction not related to the principal business of the seller, and (5) that the product was one which the seller expected to and did reach the user or consumer without substantial change in the condition it was when he sold it.

37 Wis. 2d at 460.

Significantly, sec. 402A, which we adopted in Dip-pel, did not exclude used products from its embrace. The words employed are "(1) One who sells any product . . .." It is thus apparent that any seller "if. . .engaged in the business of selling such a product," — any product — is included. There are no exclusions based upon whether the product has previously been sold to a consumer. The potential liability attaches to one who sells any product if, in accordance with conditions of sec. 402A(l)(a), the seller "engaged in the business" of such selling.

It is argued, however, that Nelson Hardware store was not a seller within the definition of sec. 402A(l)(a), because the store had never been a dealer or a distributor of Savage firearms. We conclude this assertion misses the plain meaning of sec. 402A(l)(a), which refers not at all to particular brand selling, but only to "such" a product. The allegations and affidavits make it clear that firearms were sold by Nelson Hardware and . used firearms were purchased and then resold, as was the case here. Whether Savage brand firearms were sold on a regular basis by Nelson as a dealer in Savage firearms is irrelevant under the Restatement rule. Nelson sold firearms; the particular shotgun was "such a product."

Comment /, page 350, to sec. 402A, captioned Business of selling, makes clear that the rule applies to one in the business of selling, but does not apply to one "who is not engaged in that activity as a part of his business." Only the occasional nonbusiness seller is excluded — for example, the housewife who sells her neighbor a pound of sugar or an individual who sells his personal automobile to another. It is worthy of note that the Restatement does not exonerate the seller of a personal automobile from the strictures of sec. 402A because the product he sells is used, but because his sale is not in the course of the business of selling such products.

Here it is obvious beyond dispute that the acceptance of used firearms in trade and then subsequent resale is part and parcel of Nelson Hardware's business of trading in new and used firearms. Selling used firearms under any reasonable interpretation of the pleadings and affidavits was a part of its business.

The public policy for liability for one doing business in the sale of a product is set forth in Comment f, sec. 402A, page 351:

The basis for the rule is the ancient one of the special responsibility for the safety of the public undertaken by one who enters into the business of supplying human beings with products which may endanger the safety of their persons and property, and the forced reliance upon that undertaking on the part of those who purchase such goods. This basis is lacking in the case of the ordinary individual who makes the isolated sale, and he is not liable to a third person, or even to his buyer, in the absence of his negligence.

Because it is apparent that used goods sold by one in the "business of selling" are covered by sec. 402A, it is not necessary to restate the policy factors that justified sec. 402A as adopted by this court in Dippel v. Sciano. We need not reinvent or restate in detail the rationale for strict liability.⁵ The rationale is identical whether applied to new or used goods.

We do, however, for emphasis, restate the basic premises of Dippel relied upon by this court in Burrows v. Follett & Leach, Inc., 115 Wis. 2d 272, 273, 340 N.W.2d 485 (1983), and even more recently in Kemp v. Miller, 154 Wis. 2d 538, 550-51, 453 N.W.2d 872 (1990):

The reason, which has been reiterated most often, is that the seller is in the paramount position to distribute the costs of the risks created by the defective product he is selling. He may pass the cost on to the consumer via increased prices. He may protect himself either by purchasing insurance or by a form of self-insurance. In justification of making the seller pay for the risk, it is argued that the consumer or user has the right to rely on the apparent safety of the product and that it is the seller in the first instance who creates the risk by placing the defective product on the market. A correlative consideration, where the manufacturer is concerned, is that the manufacturer has the greatest ability to control the risk created by his product since he may initiate or adopt inspection and quality control measures thereby preventing defective products from reaching the consumer.

Dippel v. Sciano, 37 Wis. 2d at 450-51.⁶

The general policy reasons for the imposition of strict liability on a seller of goods — new or used — are as set forth in sec. 402A of the Restatement. These policy factors include the ability to compensate the injured party by the seller being able to spread the risk by insurance or indemnity which is inherent in selling products which may cause injury to a purchaser, who has a reasonable expectation that the product is safe for the intended use; and the risk reduction aspect is always present, since imposition of liability may impel a retail seller to purchase only from other sellers or manufacturers who, under threat of liability as a matter of law, will correct or prevent the manufacture of dangerously defective products.⁷

Thus, we conclude that this court's decision in Burrows v. Follett & Leach, 115 Wis. 2d 272, 340 N.W.2d 485 (1983), does not preclude the imposition of strict liability merely because the dangerously defective product is a "used" product. We also conclude that, from a policy standpoint, the route this court took in Dippel v. Sciano in 1964 is not only consistent with applying strict products liability to a used product but impels the application of sec. 4Q2A if other factors are present — the factors that would impose liability in the same circumstances were the product new. We do, however, limit our holding to the facts alleged in this case, where the seller of the used product is in the business of selling as defined in sec. 402A and where the defective condition causing harm to the consumer or user arises out of the original manufacturing process.

Accordingly, we agree with the court of appeals conclusion that it was error as a matter of law to grant summary judgment for the defendant seller on the sole ground that the product was used and that sec. 402A and the principles of Dippel v. Sciano did not apply.

Having concluded that the grant of summary judgment was the result of an error of law, it remains for the trial court to determine whether summary judgment should nevertheless be granted on factual grounds, i.e., that there has not been a proper allegation of the necessary elements for proof of strict liability or of negligence or whether, if the allegations are sufficient, in the absence of any disputed material facts, judgment should be granted to the plaintiff or the defendant.

The sufficiency of the allegations under a strict liability claim is not at issue — only the legal question of whether strict liability applied to an unreasonably dangerous defective used product under the facts of this case. It would appear, moreover, that the factual allegations of negligence are sufficient to satisfy the initial threshold which any complaint must surmount to state a claim. The complaint broadly alleged that Nelson Hardware was negligent in the marketing and distribution of the defective shotgun. Clearly, under the philosophy of our statutes (see sec. 802.02, Stats., and Morgan v. Pennsylvania General Ins. Co., 87 Wis. 2d 723, 731, 275 N.W.2d 660 (1979)) which allow and indeed encourage notice pleading, the allegations permit proof of specific acts of negligence which may be encompassed within the allegations of misconduct (i.e., negligent conduct) in the course of marketing and distributing of the weapon.

The court of appeals identified those possible acts of negligence that are in dispute: A negligent misrepresentation of the safety of the weapon, whether the "inspection" of the gun by the seller was done in the exercise of due care, and whether a due care reasonable examination in any event would have revealed the defect. Also, of course, and clearly disputed, is whether the seller made any representation whatsoever. We hasten to add, however, that these items of negligence become largely irrelevant if, in the course of further proceedings, it is determined that sec. 402A, as limited by our holding herein, applies in this particular instance, i.e., are the elements of strict liability alleged proved to a trier of fact.

There remains, however, one negligence issue that must be determined although all the elements of strict liability are proved. That issue is whether Bryan Nelson, the user of the arguably defective shotgun, was negligent in the use of the gun at the time the injury occurred. Under this court's formulation of products liability, the contributory negligence of the consumer or injured party may be used to reduce damages that might otherwise be awarded. Dippel v. Sciano, 37 Wis. 2d at 461.

Thus, numerous factual issues remain to be decided. Summary judgment is not appropriate for either party at this stage of the proceedings. We hold, under circumstances alleged in this case where the defective condition causing harm to the consumer of the used product arises out of the original manufacturing process and where other elements requisite for liability under sec. 402A are present, a claim for products liability may be brought. "New" or "used" is not a sole criterion for the application of products liability under the rationale of Dippel v. Sciano.

By the Court. — Decision of the court of appeals is affirmed.

1 Nelson v. Nelson Hardware, Inc., 153 Wis. 2d 218, 450 N.W.2d 491 (Ct. App. 1989).

2 The plaintiff is not related to the defendant hardware store although they have the same last name. See Nelson, 153 Wis. 2d at 220 n.l.

3 Savage Industries was dismissed as a party defendant on November 1,1988. Accordingly, the manufacturer is not a present party to this lawsuit.

4 Other reasons given by the Burrows court were that there was no express representation as to safety. While this may be a compelling reason to find no liability for a breach of warranty or representation, it is clear that the Burrows court did not intend to make the presence or absence of a representation relevant to a claim for products liability under sec. 402A. Section 402A was specifically devised to obviate the need for warranties or representation where the purchase is from a seller engaged in the business of selling such a product. See sec. 402A Comment m, par. 3, p. 355. See also Comment b to sec. 402B, p. 359.

Other reasons were given also to deny any liability, but none of them are expressly predicated on the simplistic premise that products liability cannot apply to used products.

5 We agree, however, with the policy rationale set forth by the court of appeals. Nelson v. Nelson Hardware, 153 Wis. 2d 218, 224-25, 450 N.W.2d 491. That court stated:

The three often cited justifications for the rule of strict liability for defective products are: "Compensation (ability to spread the risk), satisfaction of the reasonable expectations of the purchaser or user (implied representational aspect), and over-all risk reduction (the impetus to manufacture a better product)." Burrows, 116 Wis. 2d at 281,340 N.W.2d at 490 (quoting Fulbright v. Klamath Gas Co., 533 P.2d 316, 321 (Or. 1976)).

These three reasons justify applying sec. 402A to this case. It has been observed that "[djealers in used goods are, as a class, capable like other businesses of providing for the compensation of injured parties and the allocation of the cost of injuries caused by the products they sell. . Id. at 281,340 N.W.2d at 490 (quoting Tillman v. Vance Equip. Co., 596 P.2d 1299, 1303 (1979)). Also, there is evidence that the defective safety mechanism belied the reasonable expectations of the user in that the gun "will unexpectedly fire when dropped on the butt from a distance of only ten inches while uncocked and in the safety mode." And, although the chances of indemnity from a manufacturer may be diluted in the case of used goods due to the passage of time, a manufacturer would continue to be liable on an indemnification theory, which would create an impetus to manufacture a safer product.

6 It should be noted that the original justification of strict liability in Dippel made clear that one basis for strict liability on a manufacturer was separate and apart from the basis for holding a seller liable. Hence, it is fallacious to say that there should be no recourse in strict liability against the seller, Nelson Hardware, because holding Nelson liable does not impose the same pressures on the manufacturer as would be the case where the action was brought against, and continued directly against, the manufacturer. The reason for liability on Nelson Hardware is because it is the seller which is in the best position to distribute the costs of the risk created by the defective product it has sold. That there may be indemnity by a retailer against a manufacturer, which in turn imposes liability on a manufacturer and this, in turn, encourages the manufacturer to make a safer product is purely serendipitous when the retail seller is held liable. While there is an incremental benefit in terms of public policy by conceivably correcting manufacturers' errors, that additional point is almost irrelevant, when viewed from a plaintiffs point of view, to the imposition of strict liability on one who sells a dangerously defective product to a consumer.

Strict products liability is imposed upon manufacturers without regard to their care in producing goods. It is enough under sec. 402A that a product in a defective condition unreasonably dangerous to a user or consumer has been put into the stream of commerce. It is obviously satisfying to society's sense of rectitude to hold liable the manufacturer, the party responsible for the defect, but a seller is held responsible on an entirely different rationale. A seller is liable even though completely innocent or completely uninvolved in creating the defect. See sec. 402A Restatement, Comment c, page 349, which sets forth the policy reasons why a seller is appropriately held responsible in strict liability irrespective of any relation to a manufacturer and quite apart from any common law theories of indemnity.

7 It is argued that because Nelson Hardware never had a direct relationship with Savage, this latter policy factor is irrelevant. That it is not is demonstrated by the ability of Nelson in this case to seek indemnity against Savage even though it had never dealt with Savage. The argument made harks back to a now supplanted idea that there must be privity between the manufacturer and the seller. It is irrelevant from a legal policy standpoint that Savage is undergoing a reorganization under the bankruptcy laws. The liability of a seller who is otherwise responsible ought not, at the expense of an injured party, be determined by whether indemnity is in fact available.

Also, the mere holding of a retailer liable for the sale of a firearm that had its origin as being dangerously defective when it left the manufacturer is bound to motivate a weapons manufacturer to avoid producing a defective product. Whether or not Nelson had a course of dealing with Savage is immaterial to Nelson's liability. Moreover, all manufacturers of firearms will be induced to manufacture better products. A judgment in this case would constitute a signal to all weapons manufacturers.