Jordan v. Sunnyslope Appliance Propane & Plumbing Supplies Co.

Citations: 660 P.2d 1236; 135 Ariz. 309Docket: 1 CA-CIV 5554

Court: Court of Appeals of Arizona; January 12, 1983; Arizona; State Appellate Court

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The Arizona Court of Appeals addressed whether dealers in used products can be held strictly liable for harm caused by defective goods. The case involved plaintiffs J.B. and Cathy Jordan, whose home was destroyed by an explosion from a used propane tank purchased from Canyon Gas Appliance Co. The tank, manufactured in 1947, had been sold without guarantees regarding its condition. After a year and a half of safe use, the tank exploded following a servicing incident by Sunnyslope Appliance, leading to allegations of strict liability against American Pipe (the tank's manufacturer) and Canyon Gas. Canyon Gas sought summary judgment, arguing that strict liability does not apply to sellers of used goods, which the trial court granted, dismissing them from the case. The plaintiffs appealed this decision, raising questions about the interpretation of the Restatement (Second) of Torts, Section 402A, which holds sellers liable for defective products that are unreasonably dangerous if they are engaged in the business of selling such products and they reach consumers without substantial change. The court ultimately concluded that a dealer in used goods can be held strictly liable under this provision.

Plaintiffs argue for the imposition of strict liability on dealers of used goods, interpreting Section 402A as inclusive of used products, as it states liability applies to the sale of "any" product, not limited to new products. Comment (f) provides an exception for occasional sellers, but does not exempt those in the business of selling used goods. Plaintiffs contend that the "unreasonably dangerous" standard allows for consideration of a product's age and condition, ensuring liability is confined to cases where a defect causes injury below expected safety levels. They assert strict liability serves to redistribute the costs of injuries to those who are better positioned to manage risks, arguing that used goods dealers can similarly incorporate liability costs into their pricing and insurance.

Conversely, Canyon Gas argues against applying strict liability to used goods dealers, highlighting differences from new goods sellers. It maintains that used goods dealers are not part of the initial production and marketing chain and lack ongoing relationships with manufacturers, which restricts their ability to manage liability costs or seek indemnity. Canyon Gas also claims that the financial burden of insurance would be excessive, potentially driving these dealers out of business.

The excerpt references case law, noting that courts have divided on the issue of whether used product dealers can be held strictly liable for defects linked to initial design or manufacturing. In Hovenden v. Tenbush, the court ruled that sellers of used products are not exempt from liability under Section 402A, emphasizing that the language does not limit its application to new products.

The court ruled that dealers in used goods should be subject to the same strict liability standards as dealers in new goods due to the principle of enterprise liability. Both types of dealers profit from sales and can distribute costs and liabilities associated with defective products. Under Section 402A, sellers of used products can be held liable for injuries caused by inherent defects, not merely by normal usage conditions. The precedent set in Turner v. International Harvester Company established that the same liability considerations apply to used goods. 

The court emphasized that sellers of used products can allocate costs of potential defects among their customers, similar to manufacturers of new products. While consumers may have lower expectations regarding the quality and durability of used goods, their expectations for safety remain significant. Public policy dictates that when a used vehicle is sold as serviceable, the seller must be accountable for any safety defects present at the time of sale, to prevent placing the burden of dangerous defects on buyers and the public.

The Turner court highlighted that the defect must be "unreasonably dangerous" for strict liability to apply, allowing courts to consider the product’s condition, age, and the relationship and sophistication of the parties involved. This standard ensures that recovery can be sought only when a product poses an unreasonable danger, providing a framework for assessing liability in cases involving used goods.

The 'unreasonably dangerous' standard allows courts to assess both the sophistication of the injured purchaser and the seller's reasonable expectations to determine the applicability of strict liability. Strict liability applies to both property damage and personal injury, as supported by Rocky Mountain Fire and Casualty Co. v. Biddulph Oldsmobile. The Oregon case Tillman v. Vance Equipment Co. established that sellers of used goods are not strictly liable for defects created by manufacturers. The court noted that buyers of used goods do not expect the same quality as buyers of new goods, and generally, sellers make no specific representations about the quality of used products. This reasoning, however, is criticized for lacking empirical evidence that buyers expect used products to be free of unreasonably dangerous defects. Additionally, it overlooks the potential harm to innocent bystanders who may be injured by such products. The Oregon court also argued that risk reduction through strict liability is not applicable to used goods since dealers are typically outside the original distribution chain. However, the argument is countered by asserting that sellers of used goods are part of the marketing system and that imposing strict liability could enhance the maintenance and inspection of these products prior to sale.

In *Tauber-Arons Auctioneers Co. v. Superior Court*, the court ruled against imposing strict liability on an auctioneer for a defective product sold at auction, determining that the relationship between the auctioneer and the product was "random and accidental." The court adopted the Oregon rule from *Tillman*, which limits the liability of secondhand dealers for defects created by the original manufacturer, noting that the expectation of safety is higher for new products than for used ones. It asserted that used goods dealers, being outside the original marketing chain, cannot effectively reduce risk or negotiate costs with manufacturers. Consequently, strict liability should not apply to used goods dealers unless there is an additional representation of quality or special circumstances.

In *La Rosa v. Superior Court*, the court reaffirmed its stance from *Tauber-Arons*, suggesting that strict liability could potentially be imposed on used goods dealers if California fully adopted section 402A of the Restatement of Torts, though it is not bound by it, as shown in *Cronin v. J.B.E. Olson Corp.*, where the "unreasonably dangerous" requirement was rejected. 

Arizona courts have addressed strict liability for used goods only in *Rix v. Reeves*, where the court denied strict liability for an auto salvage yard operator regarding a used wheel that caused injury, citing the unique circumstances of that case. The court emphasized the economic burden strict liability could impose on dealers of used parts, which are often visibly worn. However, it recognized that Arizona has adopted section 402A, allowing for strict liability in cases involving used goods, distinct from California's approach, which eliminates the "unreasonably dangerous" standard. Thus, unlike California, Arizona does not require dealers to act as insurers for used goods.

In Arizona, the plaintiff in a strict liability case must demonstrate that a product is unreasonably dangerous, which involves evaluating the product's nature, including whether it is new or used. The Turner court established that the unreasonably dangerous standard allows for examination of factors such as the age and condition of the product, the representations made about it, and the buyer's sophistication, thus protecting dealers of used goods. The definition of "unreasonably dangerous" is based on the ordinary consumer's expectations regarding safety. The Arizona Supreme Court, in Tucson Industries, Inc. v. Schwartz, articulated the public policy rationale for strict liability, emphasizing that the burden of loss should fall on those who market defective products rather than the injured public, as marketers can spread risk through insurance and indemnity arrangements.

Strict liability in Arizona is founded on the enterprise liability theory, asserting that any seller in the supply chain—regardless of being in the "initial" chain—can be held liable if the product reaches the consumer without substantial changes. Concerns about indemnification from manufacturers for used goods, due to potential changes in the product, apply equally to new and used products. Arizona law permits sellers to seek indemnity from manufacturers without distinction between the product's condition. Additionally, product liability claims must be initiated within twelve years of the product's initial sale. Consequently, the court reversed the summary judgment in favor of Canyon Gas, allowing further litigation on the factual issues at hand. Judge Eubank noted the evolving legal landscape regarding strict liability for used products, highlighting its relevance to various industries involved in selling secondhand items.

The Illinois Supreme Court in Peterson v. Lou Bachrodt Chevrolet Co. established that strict liability does not apply to sellers of used cars, reflecting concerns about the limitations of liability. Similarly, in Rix v. Reeves, the court excluded a seller of used truck parts from 402A liability. The opinion suggests narrowing the application of 402A liability to sellers of new and used propane tanks, aligning with the Oregon court's view in Tillman v. Vance Equipment Co. that buyers of used products expect less safety compared to new ones. Arizona's legislature has established a two-year statute of limitations for product liability actions under A.R.S. 12-682, with a twelve-year cap on actions unless based on negligence or breach of warranty. This statute aims to limit 402A liability, though it remains untested in appellate courts. The document clarifies that the terms "seller" and "dealer" are interchangeable under 402A and emphasizes that the theory of implied safety representation fails to consider third-party interests. It also notes that strict liability should not extend to random sales, such as garage sales. Furthermore, the Product Liability Risk Retention Act of 1981 has improved small businesses' access to product liability insurance, although it was not raised as a defense in this case due to its enactment after the injury.