Peterson v. Idaho First National Bank

BISTLINE, Justice,

dissenting.

Chief Justice Bakes is to be commended for an excellent opinion. He correctly observes that “[s]ince Shields and Rindlisbaker were decided, no subsequent case in Idaho has raised the issue of whether strict liability extends to the sellers of used products____ Not having addressed this issue ... we turn to the rulings of our sister states for guidance.” 117 Idaho at 725, 791 P.2d at 1304 (1990). This is as it should be.²

He first observes in this regard that there is a split of authority on the question, citing to the authority where strict liability has been imposed, and citing to converse authority. Included in the latter, of course, is Oregon’s Tillman v. Vance Equipment Co., 596 P.2d 1299 (Or.1979), and California’s Wilkinson v. Hicks, 126 Cal.App.3d 515, 179 Cal.Rptr. 5 (1981). Other prominent California cases entitled to mention are LaRosa v. Superior Court, 122 Cal.App.3d 741, 176 Cal.Rptr. 224 (1981), and Tauber-Arons Auctioneers Co. v. Superior Court, 101 Cal.App.3d 268, 161 Cal.Rptr. 789 (1980). When we heard oral argument and also had the benefit of the clerk’s record and the briefs of the parties, it was my expectation that the Court would lean toward the Oregon authority, if it proved sound, and toward California’s Wilkinson case, which had made the choice to align with Tillman. The casual reader of Chief Justice Bakes’ opinion should be convinced that it is soundly based, and two members of the Court were readily brought to join it.

A careful review of the Tillman case, however, and the California cases which followed it, disclose that Tillman, if understood and properly applied to the facts of this case, require that the summary judgment be vacated and the issue at the least be submitted to a jury, although judgment' of liability as a matter of law might be proper.

Judge Carey is to be commended for the succinct and forthright eloquence of his opinion. He lets his reader know at once that the defendant bank is, and he so holds, “a commercial dealer in mobile homes, based on the substantial number of sales transactions it had consummated.” R. 102. To my mind that holding necessarily should bear heavily on the decision which this Court reaches. A commercial dealer which deals only in slightly used mobile homes, but on an extensive basis, is far better positioned to profit from its venture than is the entrepreneur who — without the assets and available finances within the easy reach of the defendant bank — opts to enter the business of selling new mobile homes.

Judge Carey, as it turns out, was 100 percent correct in writing: “I believe that Idaho would follow the decisions of jurisdictions such as California and Oregon that the relevant policy considerations do not justify imposition of strict liability for dangerously defective products, on dealers in used goods, in the absence of circumstances making the dealer tantamount to a manufacturer.” R. 103. The Idaho Supreme Court quickly did go with Oregon, and did not pause to consider the cautioning phrase which I have italicized.

On the other hand, had the case come up before the Court of Appeals, it is not unlikely that the case would have been decided differently. And correctly. There is simply no sound rationale for handing to the bank such a windfall as it receives here, and certainly not on the flimsy basis upon which this decision is being made. Positioned as it was, the bank was able to make substantial sums on the financing interest which it charges, whereas normal dealers in the business of retailing mobile homes make only their mark-up. Here the bank finances, then obtains the financed property itself at foreclosure, and then comes in for yet another bite of the same golden apple when a new purchaser is found — here the luckless Petersons.

That may be said to be attributable to the good and bad luck of the business world. But, where is the justification for a holding that when, as here, a bit of bad luck surfaces in that the golden apple comes up spoiled with the contamination of formaldehyde — up to that point undetected — the bank is granted judicial immunity from the liability which would without question attach to any other comparably sized or smaller vendor of new mobile homes? The bank’s immunity is based simply on the slender premise that the mobile home when sold by the bank was not 100 pereent'new merchandise, but slightly used (but yet of such value that it commanded a $40,000.00 purchase price, and finance charges of 15 percent).

Judge Carey, as did Chief Justice Bakes, observed that there was no guiding authority to be found in Idaho and naturally looked to neighboring or nearby states— still finding very little. The two cases which he reviewed, Wilkinson v. Hicks, 126 Cal.App.3d 515, 179 Cal.Rptr. 5 (1981), and Tillman v. Vance Equipment Co., 596 P.2d 1299 (Or.1979), are instructive, but far from compelling, and definitely not of much persuasion. The Wilkinson case, the most recent, also applied “two very recent cases,” one of which was Oregon’s Tillman case,³ and it also largely relied upon yet two other California cases, LaRosa v. Superior Court, 122 Cal.App.3d 741, 176 Cal.Rptr. 224 (1981), and Tauber-Arons Auctioneers Co. v. Superior Court, 101 Cal.App.3d 268, 161 Cal.Rptr. 789 (1980). In LaRosa, a petition for rehearing was denied, and hearing by the California Supreme Court was denied — with three justices dissenting.⁴ In Tauber-Arons, the California Supreme Court also denied a hearing. All of the California cases fell in line with Oregon’s Tillman case. In reality, then, there is scant new thought in what has been written since Tillman. In short, there is, as Judge Carey so viewed, no sound body of law to turn to for guidance.

But, be that as it may, there is good reason for not weighting very heavily Tillman and the California cases which utilized it. First of all, none of those cases concerned a bank heavily involved in financing mobile home transactions and thereafter acquiring the mobile homes for itself in foreclosure proceedings, and thereafter gaining the judicial beneficence of immunity from liability which a majority of the Court is all too willing to bestow— which it does without any display of having delved into a novel issue not heretofore reached by this Court. Second, and equally important, exactly what was involved in the California cases and the Oregon case? It is sincerely believed that if Judge Carey had been as much concerned here as he was in predicting which way this Court would go, the opinion which he would write, if not subjected to higher review, would have achieved a result favorable to the Petersons.

FACTUALLY IT IS ILLOGICAL TO ANALOGIZE THIS CASE TO TILLMAN.

Tillman did not involve anything so mundane as a slightly used mobile home. And we have not, until today, ever thought of mobile homes as being inherently dangerous products. The same may not be said, however, of a twenty-four-year-old crane, the defective condition of which caused the injuries suffered by Buddy Tillman, the plaintiff in the Oregon case. It may be noted that the Oregon court was not quick to take the opportunity of releasing the seller of the used crane from liability; and, it is very likely indeed that had Justice Lent participated in the opinion, ’twould have gone otherwise.

A bank financing mobile homes on such a scale that it has repossessed, obtained title thereto and resold over one thousand such units has seemingly brought itself into a “special position ... in the chain of original distribution.” Also, is it not equally true that when the bank in turn sells its thusly acquired mobile home for $40,000, such amounts to a “representation of quality.” Especially where, as in the Petersons’ case, the plaintiffs’ deposition testimony was directly on point, corroborative, and unrefuted:

Q. Would you tell the court the circumstances leading up to the purchase of the mobile home that is involved in this case.

A. Yes. I called Gerry George and asked him if he had a repo mobile home, and he said, ‘Yes, as a matter of fact, I do.’

He said, T got a beautiful one over on the lot, and you will buy it if you look at it,’ and so—

R. 57.

These circumstances, plus the unidentified quotations set forth above, fit neatly into the holding of the Oregon court, the main part of which has heretofore eluded the attention of the majority, namely “representation of quality” and “special position”:

For the reasons we have discussed, we have concluded that the relevant policy considerations do not justify imposing strict liability for defective products on dealers in used goods, at least in the absence of some representation of quality beyond the sale itself or of a special position vis-a-vis the original manufacturer or others in the chain of original distribution. Accord: Rix v. Reeves, 23 Ariz.App. 243, 532 P.2d 185 (1975).

Tillman, 596 P.2d at 1304 (emphasis added). Earlier on, the Oregon court had written in that opinion:

The flexibility of this kind of market appears to serve legitimate interests of buyers as well as sellers.

We are of the opinion that the sale of a used product, without more, may not be found to generate the kind of expectations of safety that the courts have held are justifiably created by the introduction of a new product into the stream of commerce.

Id. at 1303-04 (emphasis added) (footnote omitted). Even earlier the Oregon court wrote at length, quoting Justice Traynor in Vandermark v. Ford Motor Co., 61 Cal.2d 256, 37 Cal.Rptr. 896, 391 P.2d 168 (1964), and Justice Schaefer in Dunham v. Vaughan & Bushnell Mfg. Co., 42 Ill.2d 339, 247 N.E.2d 401 (1969), for the proposition that:

‘The strict liability of a retailer arises from his integral role in the overall producing and marketing enterprise and affords an additional incentive to safety.’

Moreover, if a jurisdiction has adopted the principle of strict liability on the basis of enterprise liability, the liability of the seller of either a new or used product would logically follow.

Tillman, 596 P.2d at 1302 (emphasis added), quoting with approval to Dunham v. Vaughan & Bushnell Mfg. Co., 42 Ill.2d 339, 247 N.E.2d 401 (1969). No one can with any sincerity assert that the bank did not play an integral role in the marketing of mobile homes, in general, and particularly in regard to the Petersons’ acquisition of the Marlette. Without financing, very few mobile homes would find buyers. Moreover, the financing in and of itself is a lucrative business, with almost ho exposure of loss for banks, which make it matter-of-course to repossess and outright own the security.

The product in LaRosa, 122 Cal.App.3d 741, 176 Cal.Rptr. 224, was a sixteen year old forty-five ton punch press capable of crushing both hands of an operator because of its defective condition. The product in Tauber-Arons, 101 Cal.App.3d 268, 161 Cal.Rptr. 789, was a planer. But the California court succumbed to its reading of Tillman, 596 P.2d 1299, although it acknowledged the holdings of Vandermark, 61 Cal.2d 256, 37 Cal.Rptr. 896, 391 P.2d 168, and distinguished it successfully. The product in Wilkinson, 126 Cal.App.3d 515, 179 Cal.Rptr. 5, another punch press, “was more than 50 years old,” and had been purchased for a paltry $750 in March of 1972, which price the defendant Hicks doubled on resale, part Of the increase being for labor in a change from a foot treadle to a dual palms control. All of the example cases were isolated sales of ancient heavy machinery, much of which was retired, but not yet discarded, and also having inherent market value as scrap iron. Really, now, need much more be said as to those antique iron monuments to which stare decisis effect is today accorded to a first-class, albeit slightly used, mobile home? The answer is easy. Practically new but slightly occupied, and hence “used” mobile homes cannot be equated against huge heavy equipment, most of which is ancient and its history as to maintenance unavailable or inadequate.

Tillman understood and appreciated that the doctrine of strict liability of a retailer (any retailer, here a bank) arises from the retailer’s integral role in the overall producing and marketing enterprise, but insisted that such be supplemented by “some representation of quality,” 596 P.2d at 1304, or some “special position vis-a-vis the original manufacturer or others in. the chain of original distribution.” Id. (citations omitted). There should be little doubt in anyone’s mind that the Oregon Supreme Court would have been quick to agree that it was the bank who financed the mobile home that made it possible for the retailer to obtain the money to pay the manufacturer, and thus keep the stream of commerce rolling merrily along. For a better understanding of the important part played by a financing company, albeit in the context of travel trailers rather than mobile homes, see Airstream, Inc. v. CIT Financial Services, 111 Idaho 307, 723 P.2d 851 (1986), and Airstream, Inc. v. CIT Financial Services, 115 Idaho 569, 768 P.2d 1302 (1988).

The problem in today’s majority opinion was most likely caused by relying on headnote 5 of Tillman, the first phrase of which states that a used goods dealer is normally entirely outside the original chain of distribution, which is not to say that West Publishing is at fault, because the opinion itself states somewhat the same:

As to the risk-reduction aspect of strict products liability, the position of the used goods dealer is normally entirely outside the original chain of distribution of the product. As a consequence, we conclude any risk reduction which would be accomplished by imposing strict liability on the dealer in used goods would not be significant enough to justify taking that step.

Tillman, 596 P.2d at 1304 (emphasis added). Of course, in Tillman it does not appear that a bank had financed the transaction on the twenty-four year old crane, or that a bank was heavily involved in financing any ancient used heavy equipment, or that a bank generally ended up as owner/retail dealer after foreclosure proceedings. The reported Oregon and California cases recite sales prices hardly needful of or entitled to financing — not when as is generally known, scrap iron sells for cash.

The facts and circumstances of the two scenarios, Tillman and this case, are poles apart. Tillman does contain some help, even inspiration, in being careful to observe that a used-goods dealer is normally out of the original chain. For certain it has no application in the Petersons’ loss, and the bank’s great gain. Those who comprise the majority are far too careless in considering the bank’s involvement as being one normally out of the chain of distribution.⁵ The bank was in the original chain as financier, and in short time it wds the retailer of that merchandise which it formerly financed, and then in short order it was the seller.

All of which makes one appreciate the care with which Tillman confined its holding of no strict liability to cases where there was no' representation of quality; and there was no entity occupying a special position in the chain of original distribution. The care taken by the Tillman opinion is a respectable example of judicial far-sightedness, which makes it all the more a pity that its display of caution is not contagious on exposure to all of its Idaho readers. In California, at least the LaRosa court was itself careful to repeat in full what the Tillman court had stated in qualifying its holding:

[W]e have concluded that the relevant policy considerations do not justify imposing strict liability for defective products on dealers in used goods, at least in the absence of some representation of quality ... or of a special position vis-avis the original manufacturer or others in the chain of original distribution.

LaRosa, 176 Cal.Rptr. at 230, quoting with approval to Tillman. Were this Court to now appreciate Tillman for the narrowness of its non-liability holding, it would be hard put to deny the Petersons their constitutional right to take the case to a jury.

It is not considered necessary to engage Chief Justice Bakes in a discussion of Restatement § 402A. A conclusion in that regard need not be made at this time. Primarily, this office is concerned now that the Petersons not be turned out of court, as so far has been their lot on their other theories of liability. Suffice it to say that since this litigation commenced, and while finding its way to this Court, yet another neighboring state has been heard from. In Thompson v. Rockford Mach. Tool Co., 744 P.2d 357 (Wash.App.1987), J. Ben McInturff, Chief Judge of the Third Division, Spokane, Washington, in writing for a unanimous court, first quoted approvingly from New Jersey’s now time-tested opinion in Turner v. International Harvester Co., 133 N.J.Super. 277, 336 A.2d 62 (1975), and specifically rejected Oregon’s Tillman opinion. He does so in Restatement § 402A context, which, as mentioned earlier, is deserving of far more time and thought than is now available to us. Suffice it to say that in Farmer v. International Harvester Company, decided about the same time as the New Jersey Turner case, this court in an opinion authored by Justice Shepard, unanimous other than for one dissent without opinion, adopted the Restatement definition of defective condition in relationship to “unreasonably dangerous.” 97 Idaho 742, 747, 553 P.2d 1306, 1312 (1976). See also Shields v. Morton Chemical Co., 95 Idaho 674, 518 P.2d 857 (1974).

Midships in 1983 Arizona produced Jordan v. Sunnyslope App. Prop. & Plumbing, 660 P.2d 1236 (App.1983), which also expressed approval of Turner, and rejected Tillman:

Admittedly, the relationship between a dealer in used products and the manufacturer is more attenuated than the relationship between the dealer in new products and the manufacturer. But we reject the view that the seller of used goods is outside the chain of distribution. He offers the goods for sale and profits therefrom. Thus, he is an integral part of the marketing system.

Jordan, 660 P.2d at 1240 (emphasis added).

My oh my, how sweet it would be to have that Arizona court assess the situation which this Court reviews. The banker lends the necessary financing so that a retailer can buy wholesale and sell at retail, and then finances the sale at retail. The bank has foreclosed on over 1000 of its financed mobile homes, and has acquired them. The one mobile home involved here was only in Petersons possession for a short time before being repossessed and foreclosed, the bank being the new owner and the vendor. In Arizona, so I would surmise, the bank has at all times been an “integral part” in the chain of distribution, one way or another, or both. There is no doubting that the Oregon Supreme Court would likewise agree that the facts of this case clearly fall within the ambit of that Court’s rule — stringent as it may be in comparison to New Jersey, Arizona, and Washington.

2 . That issue was not involved in Shields or in Rindlisbaker. In both of those cases the involved goods were not used, but new.

3 . The Wilkinson court did not directly rely upon or cite to Tillman. As a matter of curiosity, the name ‘Tillman” does not appear anywhere in the Wilkinson opinion. Tillman crept surreptitiously into Wilkinson in connection with the latter’s discussion of the California Tauber-Arons case:

Quoting from a decision by the Oregon Supreme Court, the [Tauber-Arons] court stated: ‘“We conclude that holding every dealer in used goods responsible regardless of fault for injuries caused by defects in his goods would not only affect the prices of used goods; it would work a significant change in the very nature of used goods markets. Those markets, generally speaking, operate on the apparent understanding that the seller, even though he is in the business of selling such goods, makes no particular representation about their quality simply by offering them for sale. If a buyer wants some assurance of quality, he typically either bargains for it in the specific transaction or seeks out a dealer who routinely offers it (by, for example, providing a guarantee, limiting his stock of goods to those of a particular quality, advertising that his used goods are specially selected, or in some other fashion). The flexibility of this kind of market appears to serve legitimate interests of buyers as well as sellers.

We are of the opinion that the sale of a used product, without more, may not be found to generate the kind of expectations of safety that the courts have held are justifiably created by the introduction of a new product into the stream of commerce.”’ (Id., 101 Cal.App.3d at p. 281, 161 Cal.Rptr. 789).

Wilkinson, 179 Cal.Rptr. at 8, 126 Cal.App.3d at 515. One can only wonder at Wilkinson’s failure to identify Tillman by name.

4 . There are seven justices on the California Supreme Court, as is also true of the Oregon court.

5 . The majority, somewhat blind-sidedly, simply strikes the word "normally” from the Tillman quotation. Likewise it strikes from mind “absence of some representation of quality ...- or of a special position.”