682 N.E.2d 1052 | Ohio Ct. App. | 1996
Lead Opinion
The flocking machine had been selected by Green before the lease was signed, and Tokai did not participate in the selection or negotiation of terms between Green and Nissho. Tokai also never had possession, custody, or control over the machine, nor did Tokai ever participate in its possession, maintenance, or operation. *118
The original lease term was from May 17, 1988 through May 17, 1995, and during that time, Green was to pay rental fees for the flocking machine. Under Section 16 of the agreement, Green was allowed to purchase the flocking machine at the end of the original lease term or at the end of any renewal term, for the machine's fair market value. Moreover, Section 9 stated as follows:
"Lessee agrees that the equipment will be used solely in the conduct of the business of Lessee and will at all times be and remain in the possession and control of Lessee at the place of installation set forth in the relevant Lease Supplement. Lessee warrants that each item of equipment will at all times be used and operated under and in compliance with the laws of the jurisdiction in which such item may be operated, and in compliance with all lawful acts, rules, regulations, and orders of any commissions, boards or other legislative, executive or judicial bodies of officers having power to regulate or supervise the use of such property and, in any event, in compliance with the manufacturer's schedule of preventive maintenance."
Finally, in Section 17, Tokai also disclaimed any express and implied warranties and assigned right to the warranties to Green.
On September 23, 1991, during the original lease term, the flocking machine exploded and injured Ralph Long, who was an employee of Green. Long then filed the present action on September 22, 1993 against Tokai, Nissho (the seller), and Sankyo-Kasei (the manufacturer of the machine), based on negligence and products liability claims. Another entity, Tokai Bank, Ltd., was sued, but was voluntarily dismissed by appellants. On November 27, 1995, the trial court filed a decision granting summary judgment to Tokai on the negligence and products liability claims, based on three findings: (1) Tokai was not subject to products liability claims because it was neither a manufacturer nor a supplier as defined by R.C.
On appeal, the Longs assert the following assignments of error:
"I. The trial court erred in finding, as a matter of law, that reasonable jurors could not find that appellee satisfied the definition of "supplier" under R.C. §
"II. The trial court erred in failing to consider the evidence presented by appellant concerning the application of R.C. §
"III. The trial court erred in finding as a matter of law that the appellee owed no duty to plaintiff where the product at issue could not have been placed into the stream of commerce but for the involvement of appellee." *119
With the above facts in mind, we now turn to consideration of appellants' assignments of error.
As a starting point for analysis, we note that the pertinent standards for assessing the propriety of summary judgment are well established. As this court previously observed in Doner v.Snapp (1994),
"The Ohio Supreme Court has interpreted [Civ.R. 56] to say:
"`The appositeness of rendering a summary judgment hinges upon the tripartite demonstration: (1) that there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in his favor.'" Id. at 600,
In Doner, this court also commented:
"In a summary judgment motion, the nonmoving party shoulders the burden to `produce evidence on any issue for which that party bears the burden of production at trial.' Wing v. AnchorMedia, Ltd. of Texas (1991),
Applying these standards to the present case, we find that the facts are not in dispute, and reveal that Tokai was not a supplier as defined by R.C.
"`Product liability claim' means a claim that is asserted in a civil action and that seeks to recover compensatory damages from a manufacturer or supplier for death, physical injury to person, emotional distress, or physical damage to property other than the product in question, that allegedly arose from any of the following:
"(1) The design, formulation, production, construction, creation, assembly, rebuilding, testing, or marketing of that product;
"(2) Any warning or instruction, or lack of warning or instruction, associated with that product;
"(3) Any failure of that product to conform to any relevant representation or warranty."
R.C.
"`Supplier' does not include any of the following:
"* * *
"(d) Any person who acts only in a financial capacity with respect to the sale of a product, or who leases a product under a lease arrangement in which the selection, possession, maintenance, and operation of the product are controlled by a person other than the lessor."
As noted above, appellants claim that Tokai fit within the definition of "supplier" because of certain lease provisions through which Tokai allegedly exercised control over the machine. We disagree.
Applying the plain meaning of the terms in the statute, Tokai was not a supplier for purposes of the Product Liability Act because the selection, possession, maintenance, and operation of the product were controlled by Green — a person other than the lessor. Although Tokai specified in the lease that the lessee should maintain the equipment according to the manufacturer's maintenance schedule, this provision merely safeguarded Tokai's interest in the equipment as collateral for the money expended. Certainly, a prudent lessor would include such a provision in a lease to ensure that the value of the leased equipment would not be excessively diminished during the term of the lease and that, upon default by a lessee, something of value would remain. *121
More important, we believe the interpretation urged by appellants would unduly burden commerce by imposing liability on banks and other lending institutions who enter into lease transactions not as commercial lessors, but as financial lessors. In this context, courts in a number of jurisdictions have distinguished between financial and commercial lessors for purposes of applying strict liability. See, e.g., Rivera v.Mahogony Corp. (1986),
Before we elaborate on this point, however, a few comments are in order. In their brief, appellants contend that 2 Restatement of the Law 2d, Torts (1965) 347-348, Section 402A, should be applied to decide if Tokai is strictly liable as a lessor. On the other hand, Tokai claims that the legislature, by codifying products liability law, has removed common-law causes of action and concepts such as Section 402A from Ohio law. The Ohio Supreme Court has not ruled precisely on this point. For example, in McAuliffe v. W. States Import Co., Inc. (1995),
In its syllabus, the Supreme Court did not rule on whether the products liability law abrogated the common law, but its comments in rejecting the appellate opinion indicate disapproval of a number of the lower court's conclusions about the law. In particular, the Supreme Court rejected the notion that the products liability law had eliminated a cause of action for express warranty. Id. at 539-540, 650 N.E.2d at 961. Moreover, the three justices who dissented in McAuliffe later commented as follows:
"Given the majority opinion in McAuliffe, it should now be understood that all common-law products liability causes of action survive the enactment of R.C.
In addition, in Anderson v. Olmsted Utility Equip. Co.
(1991),
However, this area is unsettled. For example, in Carrel v.Allied Products Corp. (July 11, 1995), Marion App. No. 9-94-24, unreported, 1995 WL 423388, the court of appeals held that any tort action arising after the effective date of the Ohio Product Liability Act must conform to the requirements of the Act, and that the Act had also eliminated negligent design claims against manufacturers. This case was recently accepted for review by the Supreme Court. See Carrel v. Allied Products Corp. (1996),
"The definition is intended to be very broad and to embrace claims challenging virtually any aspect of commercial product design, manufacture, marketing, or warning. The definition does not distinguish one legal theory of recovery (e.g., negligence or strict liability) from another. Whether a civil action includes a `products liability claim' depends on what is sought and from whom it is sought. If compensatory damages for death, physical injury to person, emotional distress, or physical damage to property other than the product in question are sought based on any of the factual premises enumerated in RC
Darling observed that the original proposed legislation would have codified the Ohio law of products liability, but that the bill as enacted had some differences. Id. at 51. However, Darling also made these statements: *123
"RC
"`Product liability claim' is defined in RC
The above comments indicate that the legislature's intent in passing the Ohio Product Liability Act was to codify, to the extent possible, the common law of products liability. At the same time, inconsistent common law should be disregarded, and the provisions of the new law control, with the exception of common law relating to claims based on breach of express warranty or misrepresentation.
It is appellant's position, of course, that Section 402A is inconsistent with the requirements of R.C.
"When determining if a lessor is a `commercial lessor' so that the theory of strict liability is applicable, the inquiry should be whether the lessor is in the business of leasing the product in the same sense as a seller of a product is in the business of manufacturing, selling or retailing the product."Id. at 187, 10 OBR at 258,
Application of this doctrine was appropriate in Miles,
because the lessor in question was undisputably a commercial lessor, being in the specific business of leasing the product in question, much like a seller of mobile homes would be in the business of selling such homes. Subsequently, following the enactment of the Ohio Product Liability Act, the Supreme Court of Ohio cited Miles and the commercial-lessor doctrine in a case extending strict liability to certain nonsale situations. SeeAnderson, supra,
The approach in Miles is consistent with that of other jurisdictions that have considered this issue. Importantly, these cases have distinguished between "commercial" and "financial" lessors, finding no action for strict liability where the lessor is a financial as opposed to a commercial lessor. For example, in Rivera, supra,
"A commercial lessor rents the product for a short period of time, generally less than its expected useful life, with the expectation that the product will be returned at the end of the lease period. On the other hand, a financial lessor purchases the product for his customer whose goal is to own the product, leases it to the customer, and does not expect that the product will be returned, but rather expects that the product will be purchased at the end of the period by his customer or that its useful life will have been exhausted." Id. at 216, 98 Ill. Dec. at 540,
Typically, in these kinds of transactions, the lessee selects the equipment and negotiates for the purchase, while the lessor does not participate. Id. at 214, 98 Ill. Dec. at 539,
In Rivera, the court commented on the reasons that financial lessors should not be held strictly liable, noting that since the lessee has already selected the equipment, the lessor could not be said to be in a position to exert pressure on the manufacturer to enhance the safety of the machine.
"It would be novel indeed to suggest that financing agencies should be responsible for detecting defects in the products financed. Such a result would have catastrophic impact upon commerce. Financing institutions are not equipped to pass upon the quality of the myriad of products they are called upon to finance nor do they have direct impact upon the manufacturing process of the product to exercise quality control. Finally, their relationship with a particular manufacturer does not, in the normal course, possess the continuity of transactions that would provide a basis for indirect influence over the condition and the safety of the product." Id.,
The court also noted that while the financier made the purchase possible and to a limited extent, therefore, participated in the delivery of the product, such a "tangential participation" did not warrant imposing strict liability. As the court observed, "the financier is not supplying the chattel but is rather offering the use of money." Id.
Similarly, in the present case, Tokai did not participate in the selection of the product or in negotiations about the product. Like the financiers in the cited cases, its role was one of offering the use of money, not of supplying the chattel. Tokai's retention of title and requirement in the lease that the lessee follow the manufacturer's schedule of maintenance were means of preserving the value of the collateral for the money that had been lent. As in Nath, this tangential participation does not justify the imposition of strict liability.
Ohio's Product Liability Act follows the commercial/financial lessor distinction, by exempting from the definition of supplier those parties who lease products under a lease arrangement where the possession, maintenance, and operation of the product are controlled by someone other than the lessor. The comments by the primary author of the bill support this distinction, by stating as follows: *126
"A person who leases a product under a lease arrangement in which the selection, possession, maintenance, and operation of the product are controlled by a person other than the lessor is not a `supplier.' Though the language of exclusion can be read to refer either to a lessor or a lessee of a product, it is intended to refer to a `finance lessor' who is technically a commercial lessor of a product, who might therefore otherwise qualify as a `supplier,' but whose relationship to the product leased is so tenuous as to justify exclusion from imposition of the products liability standards of H.1." Darling, Ohio Civil Justice Reform Act (1987) 47.
Again, there is no inconsistency between this doctrine and the concepts outlined in the above common-law decisions, which have rejected liability on the part of financial lessors. Because we find, under the undisputed facts, that Tokai was a financial lessor, we also conclude that Tokai was not a "supplier" as defined by R.C.
In this context, appellants have cited our own decision on reconsideration in Monnin v. Fifth Third Bank of Miami Valley,N.A. (1995),
In the first place, our examination of the Monnin decision reveals its inapplicability, as that case involved negligence claims based on the duty of an owner or occupier of real property to protect persons from dangerous conditions existing on the property. Id. at 231,
By the same token, the trial court correctly granted summary judgment on the breach of warranty and negligent leasing claims. Implied warranty claims are governed by the Product Liability Act, which does not give rise to liability in this case. Express warranty claims are not covered in the Act, but as the trial court noted, Tokai's disclaimer of express warranties in Section 17 of the lease agreement precludes a finding of potential liability on that ground. See Konicki v. Salvaco, Inc. (1984),
As a final matter, we also believe the trial court correctly rejected claims of negligent leasing. In Mussivand v. David
(1989),
The preceding analysis has demonstrated that under the undisputed facts, Tokai is not liable for appellants' injuries under theories of products liability or negligence. Accordingly, the first assignment of error is overruled. *128
"The court does not believe that [the lessee] could seriously argue that if it had borrowed money from a bank to pay for the [product], the bank would be liable for any defects." Id. at 133.
Adopting the position urged by appellants would lead to just such a result in the present case, as the undisputed facts indicate that Tokai is a banking corporation providing a range of banking services, including, on occasion, the purchase and lease of items of machinery and equipment. As we observed previously, we reject this concept in view of the potentially severe impact on commerce. Accordingly, the third assignment of error is overruled.
Based on the foregoing discussion, the first and third assignments of error are overruled, and the second assignment of error is moot. The judgment of the trial court is affirmed.
Judgment affirmed.
FAIN, J., concurs.
GRADY, J., dissents.
Dissenting Opinion
I respectfully dissent from the decision of the majority. While Judge Brogan is quite correct that Ohio follows the commercial/financial lessor distinction in these matters, and has done an excellent review of it, I am not persuaded that the record before the trial court was sufficient for a summary judgment.
The affidavit statement on which it relies simply states that "Tokai Bank of California had no involvement with the selection, maintenance, price, or operation" of the flocking machine. That statement is conclusory. Also, with respect to the matter of control, it fails to trump the requirement in the lease that Green Tokai Co., Ltd. comply with the manufacturer's schedule of preventive maintenance. That provision does not contemplate that Tokai Bank will maintain the machine, but it is some evidence that Tokai Bank controlled its maintenance by requiring the lessee to follow the manufacturer's maintenance protocol, if there was one.
Control is the point of concern for purposes of R.C.