Menendez v. Paddock Pool Construction Co.

OPINION

FACTS

Appellant Luis Menendez was an employee and kitchen training supervisor for TGI Friday’s, Inc. (TGIF). On the evening of June 29, 1985, TGIF hosted a private party at the La Casita recreational common area of the Dobson Ranch subdivision in Mesa, Arizona. This facility, which included a large in-ground swimming pool and other amenities, was rented that evening by TGIF from 8:00 p.m. to midnight so that about two hundred of its new employees could celebrate their completion of a two-week company training program.

TGIF furnished beer and wine to the partygoers that night. Further, trainees had been told they could “get crazy” at the party and even throw their training supervisors into the swimming pool. By 9:00 p.m., the effects of alcohol consumption became noticeable. At about 9:30 p.m., after at least four supervisors had been pushed or thrown into the La Casita pool, Luis Menendez was seized by several trainees as he was leaving the party. He was then forcibly carried to the pool and thrown headlong into its shallow end where he sustained spinal injuries resulting in quadriplegia.

Luis Menendez and members of his family (hereinafter individually and collectively referred to as Menendez) subsequently sued the appellees and others on multiple theories of liability, alleging in part that the design and construction of the La Casita pool proximately caused his injury. This appeal arises only from the dismissal of the strict liability in tort and negligence counts of the complaint.

In May 1987, the trial court granted various joint and individual motions by appellees American Continental Corporation and Continental Homes (hereinafter jointly designated as Continental), 1 Larry C. Fischer (Fischer), and Paddock Pool Construction Co. and Paddock Pool Engineering Corporation (hereinafter jointly designated as Paddock) to dismiss the strict liability in tort counts of the complaint against them. In January 1988, the court granted motions for summary judgment in favor of Continental, Fischer, and Paddock. This resulted in the dismissal of the negligence counts of the complaint against them. Menendez timely appeals both decisions. We consider each in turn.

DISCUSSION

Strict Liability in Tort

The La Casita pool had its origin in 1978 when Continental solicited bids for the design and construction of a custom, non-diving lap pool of specified dimensions. This pool was to be built at its residential development known as Dobson Ranch. Paddock was awarded the contract, which provided that the pool would be custom designed and have a maximum water depth of three feet to four-and-one-half feet. Construction of the pool was completed in 1979. In January 1980, Continental deeded the La Casita recreational property, including the pool, to the Dobson Homeowners’ Association. The homeowners’ association thereafter managed the facility, renting it regularly to homeowners’ groups.

*261 In the complaint, Menendez alleged several counts of strict liability in tort against (1) Continental as developer and general contractor for the pool, (2) Fischer as a corporate employee thereof, and (3) Paddock as the pool designer and building subcontractor. In its minute entry granting the motions to dismiss these counts, the trial court ruled that Menendez failed to state a claim upon which relief could be granted. The trial court found that the in-ground pool was not, as a matter of law, a “product” for purposes of strict liability in tort. Noting that such a pool is not manufactured and then introduced into the stream of commerce for sale, the trial court characterized it as a structural improvement to real property rather than as a product incorporated into an improvement to a structure.

Standard of review.

The standard of review for a grant of a motion to dismiss is to assume the truth of the allegations in the complaint and to uphold the dismissal only if plaintiffs would not be entitled to relief under any facts susceptible of proof in the stated claim. Mattison v. Johnston, 152 Ariz. 109, 114, 730 P.2d 286, 291 (App.1986). However, the record comes before us in an unusual posture for such review. The minute entry ruling, which grants the motions to dismiss, hinges on the in-ground character of the pool, a fact not alleged in the complaint but nevertheless presented by appellees to the trial court and relied upon in its ruling.

In his reply brief on appeal, Menendez argues that the standard of review for dismissal precludes our consideration of any such fact not alleged in the complaint. Since Menendez devoted a substantial portion of his opening brief to the issue of whether an in-ground pool is a product, we deem such conduct a waiver of any objection to our consideration of this fact. Moreover, the trial court’s reliance on evidence extrinsic to the complaint requires us to treat the granted motions to dismiss as motions for summary judgment. Pritchard v. State, 163 Ariz. 427, 433, 788 P.2d 1178, 1184 (1990); Ariz.R.Civ.P. 12(b). 2 On review, therefore, we view the evidence in the light most favorable to the party opposing summary judgment, Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 388, 710 P.2d 1025, 1043 (1985), and will uphold the ruling of the trial court only if there is no genuine issue of material fact, the undisputed material facts support but one inference, and the moving party is entitled to judgment under the substantive law. Taft v. Ball, 818 P.2d 158, 161 (App.1991); Ariz.R.Civ.P. 56(c). However, we only consider evidence that was in the record before the trial court during its summary judgment deliberations. GM Dev. Corp. v. Community Am. Mortgage Corp., 165 Ariz. 1, 4, 795 P.2d 827, 830 (App.1990).

Applicable substantive law.

A seller engaged in the business of selling a product in a defective condition unreasonably dangerous to the user or consumer is subject to strict liability in tort for physical harm or property damage caused thereby. O.S. Stapley Co. v. Miller, 103 Ariz. 556, 559, 447 P.2d 248, 251 (1968) (citing Restatement (Second) of Torts § 402A (1965)). To invoke such liability, a plaintiff must make a prima facie showing that a product is defective and unreasonably dangerous, the defect existed at the time it left defendant’s control, and the defect is a proximate cause of plaintiff’s injury or property loss. Rocky Mountain *262 Fire & Casualty Co. v. Biddulph Oldsmobile, 131 Ariz. 289, 292, 640 P.2d 851, 854 (1982). Moreover, an implicit condition precedent also requires the plaintiff to show that the object or instrumentality claimed to be defective is a "product” as defined either by section 402A of the Restatement (Second) of Torts, legislation, or caselaw. Brooks v. Eugene Burger Management Corp., 215 Cal.App.3d 1611, 1626, 264 Cal.Rptr. 756, 764 (1989); accord Kaneko v. Hilo Coast Processing, 65 Haw. 447, 654 P.2d 343, 347 (1982); Radcliff Homes v. Jackson, 766 S.W.2d 63, 68 (Ky.Ct.App.1989); Papp v. Rocky Mountain Oil & Minerals, 236 Mont. 330, 769 P.2d 1249, 1252 (1989); Charlton v. Day Island Marina, 46 Wash.App. 784, 732 P.2d 1008, 1012-13 (1987); James P. Maloney, Comment, What Is or Is Not a Product Within the Meaning of Section 402A, 57 Marq. L.Rev. 625, 648 (1974). Whether an object or instrumentality is a “product” is a question of law. Brooks, 215 Cal.App.3d at 1626, 264 Cal.Rptr. at 764.

Here, the in-ground nature of the pool is undisputed. Since strict liability in tort can be invoked only if the pool is a product as defined either by the Restatement, legislation, or caselaw, we first review whether the trial court applied the correct substantive law to product characterization. Although strict liability in tort under the Restatement has long been recognized in Arizona, e.g., O.S. Stapley Co., 103 Ariz. at 559, 447 P.2d at 251, the question of whether an in-ground swimming pool falls within the definition of a product is an issue of first impression in this state.

Neither the Restatement, Arizona Revised Statutes Annotated (“A.R.S.”), nor our caselaw provide a comprehensive definition of product for characterization purposes. 3 The trial court resolved the issue against Menendez by applying a principle of strict liability recited in Craft v. Wet ’N Wild, Inc., 489 So.2d 1221 (Fla.Dist.Ct.App.1986). This principle states that a structural improvement to realty is not itself subject to strict liability, although manufactured components incorporated into it could be. Id. at 1222. The trial court, citing O.S. Stapley Co., 103 Ariz. 556, 447 P.2d 248, and Wetzel v. Commercial Chair Co., 18 Ariz.App. 54, 500 P.2d 314 (1972), reinforced this determination by concluding that an in-ground pool is not manufactured and then introduced into the stream of commerce for sale.

Menendez argues on appeal that the principle announced in Craft and adopted by the trial court is unreasonably restrictive. This principle, Menendez contends, conflicts with the broad application of strict liability in tort which is inherent in the Restatement and which is reflected in the caselaw of Arizona 4 and other jurisdictions. Menendez also contends that an in- *263 ground pool is manufactured and introduced into the stream of commerce, thus denying any basis for distinguishing otherwise in this case. 5

Continental, Fischer, and Paddock defend the dismissal, arguing that the policy reasons underlying strict liability limit its application so as to clearly exclude the in-ground La Casita pool. Paddock also argues that since realty was not mentioned under section 402A but was addressed elsewhere in the Restatement, it was not the intent of the Restatement to bring realty within strict liability in tort.

A per se rule excluding structural improvements to realty has found support in cases from various jurisdictions. See Brooks v. Eugene Burger Management Corp., 215 Cal.App.3d at 1627, 264 Cal.Rptr. at 765 (apartment complex, playground equipment, and grounds); Pennington v. Cecil N. Brown Co., 187 Ga. App. 621, 371 S.E.2d 106, 107 (Ga.App.1988) (church parking lot); Moore v. Jesco, Inc., 531 So.2d 815, 817 (Miss.1988) (steel poultry houses); Scott v. Missouri Inv. Trust, 753 S.W.2d 73, 74 (Mo.Ct.App.1988) (common stairway of apartment building); Begay v. Livingston, 658 P.2d 434, 442 (N.M.1981) (building, parking ramp, and parking space); Cox v. Shaffer, 302 A.2d 456, 457 (Pa.Super.1973) (per curiam) (silo). Some courts have reasoned, however, that since the doctrine of strict liability is based upon a defect in a product, injuries arising either from an unsafe design or from a product manufactured by a defendant and incorporated into an improvement to realty may support a strict liability in tort action. See Philadelphia Nat’l Bank v. Dow Chemical Co., 605 F.Supp. 60, 62-63 (E.D.Pa.1985) (incorporation of manufacturer’s mortar additive in commercial bank building); Hyman v. Gordon, 35 Cal. App.3d 769, 773, 111 Cal.Rptr. 262, 264-65 (1973) (installation of water heater in dangerous location); Duggan v. Hallmark Pool Mfg. Co., 398 N.W.2d 175, 178 (Iowa 1986) (design and manufacture of prefabricated swimming pool); Patitucci v. Drelich, 153 N.J.Super. 177, 379 A.2d 297, 299 (1977) (installation of inadequate sewage disposal system); DeCrosta v. A. Reynolds Constr. & Supply Corp., 49 A.D.2d 476, 478, 375 N.Y.S.2d 655, 657 (1975) (defects in construction of in-ground swimming pool) (dictum); see generally Annotation, Recovery, Under Strict Liability in Tort, for Injury or Damage Caused by Defects in Building or Land, 25 A.L.R. 4th 351 (1983).

Moreover, numerous cases in other jurisdictions have excluded specific structures as well as improvements to realty after weighing the policy considerations for imposing strict liability in tort. See McClanahan v. American Gilsonite Co., 494 F.Supp. 1334, 1348 (D.Colo.1980) (applying Colorado law) (crude oil refinery); Wright v. Creative Corp., 30 Colo.App. 575, 498 P.2d 1179, 1182-83 (1972) (residential house); Easterday v. Masiello, 518 So.2d 260, 261 (Fla.1988) (jail); Messier v. Association of Apartment Owners, 6 Haw. App. 525, 735 P.2d 939, 946-47 (1987) (condominium apartment building); Lowrie v. City of Evanston, 50 Ill.App.3d 376, 8 Ill.Dec. 537, 542-43, 365 N.E.2d 923, 928-29 (1977), (multi-level open air parking garage and parking spaces therein); Chubb Group of Ins. Cos. v. C.F. Murphy & Assocs., 656 S.W.2d 766, 779-80 (Mo.Ct.App.1983) (enclosed public arena); Papp v. Rocky Mountain Oil & Minerals, 236 Mont. 330, 769 P.2d 1249, 1255-56 (1989) (petroleum separator facility); Jackson v. Franklin, 51 Ohio App.3d 51, 554 N.E.2d 932 (1988) (custom-designed public swimming pool). Some courts have found strict liability in tort applicable to specific realty improvements after taking into account the policy considerations underlying the doctrine. See Bednarski v. Hideout Homes & Realty, 711 F.Supp. 823, 825-27 (M.D.Pa.1989) *264 (applying Pennsylvania law) (defective electrical outlet in residential house); Bastian v. Wausau Homes, 620 F.Supp. 947, 949-50 (N.D.Ill.1985) (applying Illinois law) (defective electric baseboard heater in prefabricated factory-built home); Kaneko v. Hilo Coast Processing, 65 Haw. 447, 654 P.2d 343, 350 (1982) (prefabricated steel mill building); see generally Edie Lindsay, Strict Liability and the Building Industry, 33 Emory L.J. 175, 191-210 (1984).

For the reasons explained below, we do not deem it necessary to assess the validity of the per se rule adopted by the trial court in which it characterized an in-ground pool as a structural improvement and therefore not a product. Rather, we examine the policy reasons underlying the strict liability doctrine to see if it should be applied to this case. By this approach, we do not base our decision upon the intent of the drafters of the Restatement, as indicated by the absence of buildings and land from section 402A and from the fact that real property is expressly addressed elsewhere in the Restatement. 6 S ee Lowrie, 8 Ill.Dec. at 544, 365 N.E.2d at 929 (drafters’ intent considered with policy analysis); Chubb, 656 S.W.2d at 779 (drafters’ intent not dispositive). But see Cox, 302 A.2d at 457 (drafters’ intent dispositive).

Since strict liability in tort is imposed by law for reasons of public policy, Caruth v. Mariani, 11 Ariz.App. 188, 190, 463 P.2d 83, 85 (1970), public policy reasons are appropriate factors for case-by-case determination whether a structure is a product within this doctrine. Kaneko, 654 P.2d at 349; Trent v. Brasch Mfg. Co., 132 Ill.App.3d 586, 87 Ill.Dec. 784, 786-89, 477 N.E.2d 1312, 1314-17 (1985); Papp, 236 Mont. at 335-39, 769 P.2d at 1253-55; Maloney, supra; cf. Lechuga, Inc. v. Montgomery, 12 Ariz.App. 32, 37-38, 467 P.2d 256, 261-62 (1970) (Jacobson, J., concurring) (public policy reasons should determine if strict liability in tort applies to chattel lessors).

Strict liability in tort was not adopted by the courts simply because something was a product or resulted from production. Lowrie, 8 Ill.Dec. at 542, 365 N.E.2d at 928. Rather, public policy reasons brought it into being and continue to expand it. It is those reasons, therefore, that should determine what is a product. Id. Under that analysis, we characterize an object or instrumentality as a product only if such classification serves the policy considerations of the strict liability in tort doctrine. One authority has identified three main policy reasons driving the development of strict liability in tort:

(1) the costs to the victims of accidents attributable to defectively dangerous products can and should be distributed through the market mechanism by first charging those costs to sellers and manufacturers of the product who, in turn, will pass those costs on to purchasers; [ 7 ]

(2) the imposition of strict liability will serve the cause of accident prevention by *265 inducing improvements in products and in the information provided about those products; [ 8 ]and (3) the burden of proving fault or negligence, which is often present in defective product situations, is too difficult and expensive where the manufacturing process is not open to public view and, in many cases, not readily understandable without expert testimony.

Roger C. Henderson, Strict Products Liabilty and Design Defects in Arizona, 26 Ariz.L.Rev. 261, 261-62 (1984) (footnotes omitted); 9 see also W. Page Keeton et al., Prosser and Keeton on the Law of Torts, § 98, at 692-93 (5th ed. 1984). These three reasons can be summarized respectively as cost-shifting, public safety, and recovery policies.

This court focused on the burden of recovery as a policy justification when we declared that the strict liability in tort doctrine was adopted to correct the respective deficiencies of warranty and ordinary negligence—the privity requirement and the difficulty in proving lack of due care. Brady v. Melody Homes Mfr., 121 Ariz. 253, 258, 589 P.2d 896, 901 (App.1978), disapproved in part on other grounds, Dart v. Wiebe Mfg., 147 Ariz. 242, 709 P.2d 876 (1985). Given the inherent character of product defects rooted in the manufacturing process, the judicial response was to redress “the unavailability of an adequate remedy on behalf of the injured plaintiff.” Lechuga, 12 Ariz.App. at 38, 467 P.2d at 262 (Jacobson, J., concurring); see also McClanahan, 494 F.Supp. at 1348 (“ ‘[T]he predominant problem with effectuating recovery for injuries caused by a chattel is the difficulty of finding the negligent party and effecting a recovery from that party.’ ”) (citing Wright v. Creative Corp., 30 Colo.App. 575, 498 P.2d 1179, 1182 (1972); Harrington v. LaBelle’s of Colorado, 235 Mont. 80, 765 P.2d 732, 735 (1988) (“A major goal of [strict liability is] to afford the plaintiff a remedy____”); Jackson, 554 N.E.2d at 940 (“The first justification [for applying strict liability to manufacturers] is the difficult burden of proof that a consumer of mass-produced items would bear in a negligence action.”).

With these views of the policy reasons for imposing strict liability in tort, we examine their applicability to the in-ground pool at issue, with special emphasis on the adequacy of a remedy. Citing the reasoning in Lowrie, 8 Ill.Dec. 537, 365 N.E.2d 923, and Heller v. Cadral Corp., 84 Ill.App.3d 677, 40 Ill.Dec. 387, 406 N.E.2d 88 (1980), appellees argue that strict liability is not justified. Menendez, appellees contend, had an adequate remedy through the negligence counts brought against them and others in this action with no difficulty of access to a remote manufacturer. Indeed, Continental and Fischer note in this regard, and Menendez admits, that prior to this appeal, Dobson Homeowners’ Association, originally named as a co-defendant and identified as the pool landowner, had settled Menendez’s negligence and gross negligence claims.

The remedy analysis found in both Lowrie and Heller has also swayed courts in other jurisdictions against the imposition of strict liability. See Harrington, 765 P.2d at 735; Jackson, 554 N.E.2d at 940; Wright, 498 P.2d at 1182-83. Although we decline to make recovery alone dispositive of strict liability, we are persuaded at least that the nature of the La Casita pool as a realty improvement did not inherently foreclose Menendez from a negligence remedy by virtue of an insuperable burden of proof.

*266 Claiming that the La Casita pool was custom-built, appellees also argue against shifting the injury cost to them because unique projects limit a builder’s ability to absorb and spread the cost of risk through mass-production volume. If risk is to be shifted, appellees contend that the landowners are in the best position to control the use of a realty improvement, to discover defects and assess risks arising from its use, and to procure appropriate insurance for protection. In reply, Menendez responds that cost-shifting against the corporate appellees is warranted because they are “large companies which produce large numbers of similiar products.”

The cost-shifting arguments advanced by appellees find support from several commentators. See Lindsay, supra, at 197-201; Maloney, supra, at 635. Such arguments are grounded on the uniqueness of a constructed structure. These arguments, however, lose their force when the structure at issue is created in a mass-production context. See Lindsay, supra, at 199-200, 209; see also Jackson, 554 N.E.2d at 940.

In the landmark case of Schipper v. Levitt & Sons, Inc., 44 N.J. 70, 207 A.2d 314 (1965), the New Jersey Supreme Court held that a builder-vendor of mass-produced tract homes could be found strictly liable for injuries resulting from a defect in a water distribution system design which allowed excessively hot water into a bathroom faucet. The builder was a mass developer of planned communities and marketed residential homes through advertised models constructed with standardized specifications. Id. 207 A.2d at 316. The court found “that there [were] no meaningful distinctions, between Levitt’s mass production and sale of homes and the mass production and sale of automobiles and that the pertinent overriding policy considerations [were] the same.” Id. at 325.

If there is improper construction such as a defective heating system or a defective ceiling, stairway and the like, the well-being of the vendee and others is seriously endangered and serious injury is foreseeable. The public interest dictates that if such injury does result from the defective construction, its cost should be borne by the responsible developer who created the danger and who is in the better economic position to bear the loss rather than by the injured party who justifiably relied on the developer’s skill and implied representation.

Id. at 326. This same reasoning was adopted by a California appellate court. In Kriegler v. Eichler Homes, 269 Cal.App.2d 224, 74 Cal.Rptr. 749 (1969), the court extended strict liability in tort to a builder of mass-produced tract homes for economic damages resulting from a defectively installed radiant heating system. 10 See also Oliver v. Superior Court, 211 Cal.App.3d 86, 259 Cal.Rptr. 160, 162 (1989); Model Uniform Product Liability Act, § 102(A)(1), (F), 44 Fed.Reg. 62,714, 62,717-19 (1979) (builder-vendor strictly liable only if it is a mass producer and seller of standardized dwellings, including modular homes). Therefore, even if we were to adopt the reasoning of Schipper, cost-shifting can be justified in this case only if the pool at issue was a mass-produced rather than a unique structure. Finally, appellees argue against the public safety justification. Appellees assert that the construction process for structures such as this pool limits the ability of the builder to eliminate or minimize design defects by means of the test *267 ing, refinement, and quality-control procedures compatible with mass production. Because we find the evidence supports the contention of appellees that this pool was individually designed and custom built, this argument is persuasive. Appellee Paddock further contends that public safety is already protected by governmental regulation of the construction process through builder licensing, mandatory building codes, and project permit requirements, including plan review and site inspection approvals. We also find merit in this latter argument.

We conclude from this review that policy reasons do not justify characterizing the La Casita pool as a product for purposes of strict liability in tort. The La Casita pool has not been shown to be a standardized model constructed, assembled, or manufactured by a mass-production process analogous to the tract homes in Schipper and Kriegler. In addition, it has not been shown to be analogous to the prefabricated fiberglass pool designed, manufactured, and distributed for installation by the defendant in Duggan,