SUPREME COURT OF ILLINOIS
527 N.E.2d 1248, 123 Ill. 2d 245, 123 Ill. Dec. 473 1988.IL.1121
Appeal from the Appellate Court for the Second District; heard in that court on appeal from the Circuit Court of Du Page County, the Hon. Bruce R. Fawell, Judge, presiding.
JUSTICE WARD delivered the opinion of the court. JUSTICE STAMOS took no part in the consideration or decision of this case. JUSTICE MILLER, specially Concurring. JUSTICE RYAN, Dissenting.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WARD
The question presented on this appeal is whether the distributor of a product found guilty of negligence in a personal injury action can maintain a third-party action for implied indemnity against the manufacturer and wholesaler of a product on the grounds of negligence, strict products liability or breach of an implied warranty of merchantability.
The plaintiff, Doris Frazer, brought an action in the circuit court of Du Page County for personal injuries sustained when a trailer, which was attached to the back of a pickup truck ahead of her, disengaged and collided with the car she was driving. The plaintiff sued Keith Allen, the operator of the pickup truck; A. F. Munsterman, Inc., d/b/a Wheaton Rental Center (Munsterman), the owner of the trailer and the trailer hitch; Robert Sosnowski, one of Munsterman's employees who allegedly helped Allen attach the trailer to his truck; the Beck Corporation (Beck), the manufacturer of the trailer; Iris Dougherty and the George Croft Trust, d/b/a Croft Trailer and Hitch Company (Croft), the seller to Munsterman of the trailer hitch; and Ring Brothers, Inc. (Ring Brothers), the company which sold the trailer hitch to Croft. Munsterman filed a third-party action against Allen, Croft, Ring Brothers, Beck, and Dico, Inc. (Dico), which manufactured the trailer's brake system, for contribution under "An Act in relation to contribution among joint tortfeasors" (Contribution Act) (Ill. Rev. Stat. 1979, ch. 70, par. 302) and for indemnity predicated on the common law doctrine of implied indemnity. The third-party complaint asserted three grounds for recovery: negligence, strict products liability and breach of the implied warranty of merchantability under section 2-314 of the Uniform Commercial Code (Ill. Rev. Stat. 1979, ch. 26, par. 2-314).
After the plaintiff had entered into a settlement with the defendants, Croft, Ring Brothers, Beck and Dico, the trial court dismissed the counts of Munsterman's complaint claiming contribution pursuant to sections 2(c) and (d) of the Contribution Act (Ill. Rev. Stat. 1979, ch. 70, pars. 302(c), (d)), and severed Munsterman's third-party action from the primary action, that is, the plaintiff's personal injury suit. On the plaintiff's action against Allen, Sosnowski and Munsterman, the court directed a verdict against Munsterman on the strict products liability count of the complaint, and the jury found in favor of Allen and Sosnowski, and against Munsterman, on the negligence count. The court then dismissed Munsterman's third-party complaint, stating that actions for implied indemnity were abolished upon the adoption of contribution among joint tortfeasors. (See Ill. Rev. Stat. 1979, ch. 70, par. 301 et seq.; Skinner v. Reed-Prentice Division Package Machinery Co. (1977), 70 Ill. 2d 1.) Munsterman appealed the dismissal of its claims against Croft, Beck, Ring Brothers and Dico for indemnification, and the appellate court affirmed (145 Ill. App. 3d 1092). We granted Munsterman's petition for leave to appeal under our Rule 315 (107 Ill. 2d R. 315).
On April 15, 1980, the defendant, Keith Allen, was given the use of a trailer by the Wheaton Rental Center, which is owned and operated by the defendant, A. F. Munsterman, Inc. (The terms of the use are not clear from the record.) Allen attached the trailer to the back of his pickup truck with a "pintle hook/trailer hitch" and two "safety chains," both of which he obtained from Munsterman. Allen also attached a third chain between the truck and the trailer which was designed to activate the brakes on the trailer in the event that it became detached from the towing vehicle. Shortly after leaving Munsterman's premises, the trailer broke free from Allen's pickup truck as a result of the trailer hitch and safety chains' disengaging from the truck as it was being pulled along the highway. The detached trailer veered into oncoming traffic, colliding with the plaintiff's auto and causing her injuries.
The plaintiff originally had filed an action in the circuit court of Du Page County against only Munsterman, Sosnowski and Allen, charging each with separate acts of negligence. Frazer alleged, inter alia, that Munsterman was negligent in providing Allen with a pintle hook/trailer hitch which it knew, or should have known, was in an unreasonably dangerous condition, and in providing Allen with a trailer with attached safety chains and "S" hooks which it knew, or should have known, were inadequate to secure the trailer to the rear of Allen's truck. The complaint also set out a strict products liability claim against Munsterman alleging that defects in both the trailer and trailer hitch, existing at the time they left Munsterman's control, rendered them unreasonably dangerous.
Munsterman brought a third-party action against Allen; the manufacturer of the trailer, Beck; the manufacturer of the trailer's brake system, Dico; the seller to Munsterman of the trailer hitch, Croft; and the seller of the trailer hitch to Croft, Ring Brothers. The complaint sought both contribution under the Contribution Act (Ill. Rev. Stat. 1979, ch. 70, par. 301 et seq.), and indemnity predicated on a common law theory of implied indemnity. Against Allen, Munsterman sought recovery under negligence principles and asserted three grounds for recovery against the other third-party defendants: negligence, strict products liability, and breach of an implied warranty of merchantability under section 2-314 of the Uniform Commercial Code (Ill. Rev. Stat. 1979, ch. 26, par. 2-314). The plaintiff subsequently amended her complaint to make all of the third-party defendants, except Dico, direct defendants. She asserted negligence and strict products liability as grounds for recovery.
When defendants Croft, Beck, Ring Brothers, and Dico entered into a settlement agreement with the plaintiff, under which she was paid $60,000 in return for a release of all claims against them arising out of the April 15 occurrence, they moved to dismiss Munsterman's third-party action. They asserted that Munsterman's claims for contribution should be dismissed pursuant to sections 2(c) and (d) of the Contribution Act (Ill. Rev. Stat. 1979, ch. 70, pars. 302(c), (d)). Section 2(c) of the Act provides:
"When a release or covenant not to sue or not to enforce judgment is given in good faith to one or more persons liable in tort arising out of the same injury or the same wrongful death, it does not discharge any of the other tortfeasors from liability for the injury or wrongful death unless its terms so provide but it reduces the recovery on any claim against the others to the extent of any amount stated in the release or the covenant, or in the amount of the consideration actually paid for it, whichever is greater." (Ill. Rev. Stat. 1979, ch. 70, par. 302(c).)
Under section 2(d) of the Act, a tortfeasor who settles with the plaintiff in "good faith" pursuant to section 2(c) of the Act is discharged from all liability for contribution to other tortfeasors. Ill. Rev. Stat. 1979, ch. 70, par. 302(d).
The third-party defendants also argued that Munsterman's complaint failed to state a cause of action for indemnity. They argued that after the adoption of contribution among tortfeasors in Skinner v. Reed-Prentice Division Package Machinery Co. (1977), 70 Ill. 2d 1, and the subsequent enactment of the Contribution Act, actions for implied indemnity are no longer recognized.
The trial court held that the settlement was in "good faith" and granted in part the third-party defendants' motions, striking the contribution counts of Munsterman's complaint. The court, however, reserved ruling on the motions to dismiss the indemnity counts and severed Munsterman's third-party action from the underlying action brought by Frazer.
In the plaintiff's action against Munsterman, Sosnowski and Allen, the trial court directed a verdict against Munsterman on the strict liability count of the complaint. The court found that the trailer hitch Munsterman provided Allen was in an unreasonably dangerous condition at the time it left Munsterman's control, and that the defect was a proximate cause of the plaintiff's injuries. The jury found in favor of Allen and against Munsterman on the negligence counts of the plaintiff's complaint, and awarded the plaintiff $365,338.03 in damages. Sosnowski was dismissed after he testified that he had nothing to do with the attaching of the trailer to Allen's truck. The trial court reduced the plaintiff's award to $305,338.03 pursuant to section 2(c) of the Contribution Act (Ill. Rev. Stat. 1979, ch. 70, par. 302(c)), which, as shown above, provides that any judgment paid by nonsettling defendants to the plaintiff is reduced by the amount of an earlier settlement between the plaintiff and the other defendants.
After trial, the court dismissed the remaining counts of Munsterman's third-party complaint on the ground that actions for implied indemnity, regardless of the theory presented for recovery, are no longer recognized following the adoption of contribution among joint tortfeasors in this State.
Munsterman appealed the dismissal of its indemnity claims, and the appellate court affirmed (145 Ill. App. 3d 1092). The court concluded, too broadly, as we shall see, that all actions for indemnity, except actions predicated on a contract for indemnity, were abolished upon the recognition of a right of contribution. The court also held that Munsterman's claims for indemnity based on breach of the implied warranty of merchantability under section 2 -- 314 of the Uniform Commercial Code were in essence "claim[s] for contribution which [were] correctly dismissed in light of plaintiff's settlement with Croft, Ring and Beck." (145 Ill. App. 3d at 1099.) As stated, we granted Munsterman's petition for leave to appeal under our Rule 302 (107 Ill. 2d R. 302(a)).
Indemnity and contribution are mutually exclusive remedies for allocating a plaintiff's damages among joint tortfeasors with liability to the plaintiff. Indemnity allows a defendant who satisfies a judgment for which he and another tortfeasor or tortfeasors are jointly and severally liable to recover from the other tortfeasor or tortfeasors the entire amount he was obligated to pay. (Heinrich v. Peabody International Corp. (1984), 99 Ill. 2d 344, 349; Gulf, Mobile & Ohio R.R. Co. v. Arthur Dixon Transfer Co. (1951), 343 Ill. App. 148, 152-54.) To have the right to indemnity there must have been a pretort relationship between the guilty parties and a qualitative difference in their conduct in the occurrence. Van Slambrouck v. Economy Baler Co. (1985), 105 Ill. 2d 462, 469; Heinrich v. Peabody International Corp. (1984), 99 Ill. 2d 344, 349.
The right to indemnification may arise from contract (see Westinghouse Electric Elevator Co. v. La Salle Monroe Building Corp. (1947), 395 Ill. 429), or from situations in which a promise to indemnify can be implied from the relationship among the tortfeasors. Appel & Michael, Contribution Among Joint Tortfeasors in Illinois: An Opportunity for Legislative & Judicial Cooperation, 10 Loy. U. Chi. L.J. 169, 171 & n.8 (1979); M. Polelle & B. Ottley, Illinois Tort Law 674-75 (1985).
"Implied indemnity" is based on principles of restitution: "a contract implied in law arising from the legal obligation of an indemnitee to satisfy liability caused by actions of his indemnitor." (Allison v. Shell Oil Co. (1986), 113 Ill. 2d 26, 28; F. Woodward, Quasi Contracts 259 (1913); Restatement (Second) of Torts § 886B, comment c, at 345 (1979).) The fundamental premise for the cause of action is that the indemnitee, although without fault in fact, has been subjected to liability solely because of the legal relationship with the plaintiff or a non-delegable duty arising out of common or statutory law. (See 1 J. Dooley, Modern Tort Law § 26.07, at 651 (1982).) For example, an employer held liable for the torts of his employee under the doctrine of respondeat superior is generally allowed indemnification from the employee, assuming the employer did not participate in the wrongful conduct. (Embree v. DeKalb Forge Co. (1964), 49 Ill. App. 2d 85.) Too, a landowner held responsible for failure to perform the duty imposed by law to maintain his premises in a reasonably safe condition is allowed indemnity from the negligent party who created the dangerous condition. See Rovecamp v. Central Construction Co. (1964), 45 Ill. App. 2d 441.
Different from indemnity, contribution distributes the loss among tortfeasors by requiring each to pay a proportionate share based on the relative fault of the parties. (Suvada v. White Motor Co. (1965), 32 Ill. 2d 612, 624.) Although the common law permitted indemnity in certain limited situations, it prohibited contribution among joint tortfeasors. (Merryweather v. Nixan (1799), 8 T.R. 186, 101 Eng. Rep. 1337.) The prohibition was based primarily on the notion that courts should not be used to assist wrongdoers. Reese v. Chicago, Burlington & Quincy R.R. Co. (1973), 55 Ill. 2d 356, 363-64.
As a reaction to the common law's prohibition of contribution, the right to implied indemnity expanded beyond the original notion of an indemnitee who himself was without personal fault. (Allison v. Shell Oil Co. (1986), 113 Ill. 2d 26, 30; Heinrich v. Peabody International Corp. (1985), 139 Ill. App. 3d 289, 292.) Under what became known as the doctrine of active/passive negligence, courts recognized a right of "'equitable' implied indemnity based upon the relative fault of the parties." (Allison v. Shell Oil Co. (1986), 113 Ill. 2d 26, 30.) Where the conduct of one tortfeasor was considered to be the primary cause of the damages of the plaintiff, that is, where there was "active" negligence, and the conduct of the other was considered to be a secondary cause of the injury, or where there was "passive" negligence, the passively negligent party was permitted to shift the entire burden of the plaintiff's loss to the actively negligent tortfeasor. See Sargent v. Interstate Bakeries, Inc. (1967), 86 Ill. App. 2d 187; Reynolds v. Illinois Bell Telephone Co. (1964), 51 Ill. App. 2d 334.
Typically, it was the "active" negligence of one party that created a dangerous condition which caused the plaintiff's injury, and the other party's negligence amounted to no more than the failure to discover and correct it. (See Chicago & Illinois Midland Ry. Co. v. Evans Construction Co. (1965), 32 Ill. 2d 600, 604; W. Prosser & W. Keeton, Torts § 51, at 343 (5th ed. 1984); Restatement of Restitution § 95 (1937); Restatement (Second) of Torts § 886B(1)(d) (1979).) Thus, where the distributor of a product was held liable to a vendee for injuries caused by defects in the product, it was generally allowed indemnity against the manufacturer of the product if the distributor had been held liable for not discovering and correcting the defective condition of the product. (See Restatement of Restitution § 93(1) (1937); Restatement (Second) of Torts § 886B, comment c (1979); V. Schwartz, Comparative Negligence § 16.9, at 287 (2d ed. 1986); Gulf, Mobile & Ohio R.R. Co. v. Arthur Dixon Transfer Co. (1951), 343 Ill. App. 148, 153.) The rationale for the cause of action was that the manufacturer was considered "actively" negligent in ...