Full opinion text
ORDER HEMPHILL, District Judge. This court has before it for decision the motions of defendant Celotex Corporation (“Celotex”) for judgment notwithstanding the verdict (n. o. v.) or, in the alternative, for an order for a new trial. The motions arise out of a “products liability” action brought by plaintiff which alleged, among other causes of action, fraud and gross negligence on the part of Celotex in marketing commercial roofing materials. After 12 days of testimony, a jury awarded Campus Sweater and Sportswear Company (“Campus”) $208,000.00 in actual damages and $500,000.00 in punitive damages on the claims against Celotex. The jury also awarded defendant Fort Roofing (“Fort”) $125,000.00 in punitive damages on Fort’s cross claim against Celotex for fraud and gross negligence. Celotex claims the evidence does not support the verdict, that punitive damages should not have been awarded, and that a mistrial should have been declared. For the reasons which will appear at length in this opinion, the motions for judgment n. o. v. and a new trial are denied and the jury awards of punitive damages against Celotex are affirmed in toto. However, the award of compensatory (actual) damages to Campus must be reduced as hereinafter explained. INTRODUCTION AND BACKGROUND Plaintiff instituted this action in the United States District Court for the District of South Carolina on February 17, 1976. The original complaint alleged and the answers admitted the complete diversity of the parties under 28 U.S.C. § 1332(a). Although the parties have raised some issues which arise under the Constitution of the United States, jurisdiction will not lie under 28 U.S.C. § 1331 since no federal question appears on the face of the well-pleaded complaint in this action. Louisville & N. R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908); Gold Washing & Water Co. v. Keyes, 96 U.S. 199, 24 L.Ed. 656 (1877). It appears that Campus is an Ohio corporation with its principal office located in Cleveland, Ohio. Defendant M. B. Kahn Construction Co. (“Kahn”) is a South Carolina corporation with its principal office in Columbia, South Carolina; defendant Fort is a South Carolina corporation, with its principal office in Sumter, South Carolina; while defendant Celotex is a Florida corporation doing business in the State of South Carolina. Due to the number and complexity of the issues raised in these motions, it will be necessary to postpone a full discussion of the facts until such time as each issue is treated separately. However, the testimony will confirm that this action revolves around the development and sale of a Bond Ply roofing system, and a brief history of the context in which this action arose may be helpful as an introduction. At some undisclosed point in time, but well before 1963, the Barrett Company, a long respected member of the roofing manufacturing community, in business since the 1850s, was purchased by Allied Chemical Company and thereafter became known as the Barrett Division of Allied Chemical Company. As such, it continued to manufacture roofing products. During 1963, Barrett began making certain tests to determine whether two plies of coated saturated felt material might be successfully employed as a built-up roof membrane instead of the then-traditional four-ply roof membrane. In 1963, coated felts had been used for many years as a “base sheet”, i. e., the very first sheet applied in the construction of certain types of commonly used roofing membranes. Hence, there was nothing new or unique about the use of a coated felt as a part of a roofing system. What was to be new or unique, however, was the use of two of these coated sheets instead of the traditional four unsaturated felt sheets in installing the new system, as it was envisioned in 1963. In 1963, three test roofs were built whose significance is disputed. Celotex admits the primary purpose was to determine how well the system “plied”, that is, how easily it could be applied to the roof. Campus and Fort contend these tests had nothing to do with the life expectancy of the roof, while Celotex contends that the roofs performed well insofar as the roofers were concerned. After approximately one year of such testing, the Barrett Division decided to market a roofing system to consist of two plies of coated sheets, which it would specify and offer to bond for a term of 20 years just as it had the four-ply system. The coated sheets employed in this new system, while essentially the same as the coated base sheets which had been marketed for years, were given the name “Bond Ply”. The two-ply membrane to be specified, which consisted of two Bond Ply sheets, was known as the “Bond Ply System”. Inasmuch as the two-ply roofing system constituted a major deviation from roofing tradition, opinions were not unanimous, even within Barrett, as to the merits of the system. Upon assurance from the Research Department that the system was workable, Barrett decided to market the Bond Ply system as a 20-year roof. Yet, the head of research, Mr. Donegan, cautioned, “We have no service basis on which to recommend a construction as simple as this for a 20-year period”. Barrett also knew at this time, that the tensile strength of the Bond Ply system was one-half as strong as a conventional roofing system. However, no standards as to felt strength existed at the time and the importance of felt strength was uncertain. In early 1963, when Barrett decided to market the system, one of Barrett’s largest competitors, JohnsManville, was rejecting a two-ply system as being unsound. After one year of testing the ease of application of the “Bond Ply System”, Barrett decided to place the system on the market without determining if the Bond Ply roof would last 20 years. There was in existence at that time a device known as a “weatherometer” whose function was to test the weatherability of a roof, and thus its longevity, by “weathering” it in an exaggerated fashion to simulate extended periods of time. It is possible this device could have been used to test the Bond Ply life expectancy, although some witnesses were not sure of its applicability to commercial roofs. Either this test was not made or its results were unreported. Once on the market, Bond Ply became the most profitable roofing system in Barrett’s line, and as a result, salesmen were awarded bonus points for selling this system in lieu of others. The two-ply system, which was included in the Barrett Roofing Manual of Specifications for 1964, was promoted as the functional equivalent of a four-ply uncoated saturated felt roof system. Barrett offered a 20-year bond upon such a roof built in accordance with its specifications. In advertisements and brochures, Barrett pointed out that such a roof would be more economical to install, that a roof constructed of coated felt sheets would be more weather-tight as the individual sheets were going on, that a coated sheet would withstand foot traffic better than a saturated felt sheet before the top flood coating was applied, and that a roofer would have a greater margin for error by using the two coated sheets. As sales began to climb, complaints of roof problems also started coming into Celotex, which had purchased the Barrett Division of Allied Chemical in 1967. Mr. Rissmiller, a researcher, was assigned full time to investigate Bond Ply complaints. As early as 1965, Mr. Franklin had predicted that unless the problems of Bond Ply were solved, sales would slowly diminish to insignificance. Celotex knew of these problems and plaintiff and Fort theorized that Celotex attempted to solve the problems without letting its customers know of them in order to maintain its sales, profit and market advantages. Whether this was a case of isolated complaints arising from the use of thousands of roofs, or whether there were sufficient complaints that warnings should have issued, was a matter in dispute. At the same time that Celotex [Barrett] issued a brochure, received by Fort, implying that the performance of a Bond Ply system was as good as that of a four-ply system, Franklin was asking research to make a comparison of the two systems. Meanwhile, Campus had been developing a manufacturing and distribution center in Chester, South Carolina, with the assistance of the Chester County Development Authority. In 1968, Campus decided to erect an addition to its warehouse facilities in Chester. Pursuant to an arrangement worked out for bookkeeping and tax reasons, the Chester County Development Authority was the actual signatory on the contract with the general contractor, Kahn. In actuality, it was the intention of Campus and the Development Authority that the building was to be built for Campus and in accordance with the specifications submitted by Campus. The contract was signed by Campus’ chief engineer, Bernard Zuckerman, on behalf of the Development Authority. However, under the contract, Campus had an option to buy the building after 10 years. The roof specified in the original contract was never built. The contract with Kahn called for “a four-ply coal tar pitch and gravel, 20-year roof over insulation.” However, Kahn’s Vice President, Mr. Strauss, was contacted about this time by a Celotex sales representative, Mr. McClellan, who brought “data” to him concerning a proposed change from a four-ply, tar-and-gravel roof to a two-ply, Bond Ply roof. This information was forwarded by letter to Mr. Zuckerman of Campus, who then instructed his assistant, Mr. Heppert, to investigate what the Celotex catalog said about the Bond Ply roof. Mr. Heppert was initially dubious of the existence of a two-ply 20-year roof, but his inspection of the Celotex catalog revealed that there was a 20-year bondable roof made of two plies. Heppert then made some calculations concerning the amount of asphalt or tar in the roof and came to the conclusion that the amount of asphalt or tar used was roughly comparable to that in a conventional four-ply roof. Based on the catalog, his investigations, and the good reputation of the Barrett Company, Mr. Heppert reported to Mr. Zuckerman that “sure enough, there is such a roof”. Having reached the conclusion that the Bond Ply roof apparently met Campus’ specifications, Mr. Zuckerman authorized the change from a four-ply to a Bond Ply roof. Kahn subcontracted with Fort who built the roof using the material sold to them by Celotex. Fort was an approved roofer for Barrett and Celotex, who were very selective about roofing contractors. However, there was no evidence that Fort as an “approved roofer” was ever told of the complaints or possible limitations of the Bond Ply system. In 1972, Celotex removed the Bond Ply product from most of its markets, and in 1973 Celotex did not list Bond Ply in the roofers’ manual. The roof in question began to leak in 1973, and the leaks became progressively more numerous and more serious. In 1974, Campus purchased the building in question from the Chester County Development Authority, and in February, 1976, filed the instant lawsuit, shortly before it replaced the roof in question. In its lawsuit, Campus charged negligence on Kahn’s part in not having properly supervised subcontractor Fort thereby permitting the latter to indulge in certain specified negligent practices which allegedly contributed to the roof failure. Kahn was further charged with breach of implied warranty and breach of express warranty. During the course of the trial, on motion properly made, this court dismissed Campus’ negligence and express warranty claims against Kahn and at the conclusion of all evidence, Campus voluntarily suffered a dismissal of its implied warranty claim against Kahn. Campus alleged that Fort was negligent in leaving roofing materials exposed to the elements, in failing to apply roofing materials in accordance with the Celotex specification, and in allowing insulation to become wet by exposure overnight. Upon conclusion of plaintiff’s evidence, this court dismissed Campus’ complaint against Fort, but left intact Fort’s cross-claim against Celotex. Campus charged that Celotex was guilty of negligence in placing its Bond Ply system on the market in 1964 without previously having conducted adequate tests. Campus further alleged that Celotex was on notice that problems, such as were experienced by Campus, should have been anticipated because Celotex had allegedly received similar prior complaints. Hence, it was charged that Celotex had a duty to warn Campus, which it failed to do. Campus also alleged fraud in that Celotex allegedly made representations which it knew or should have known were false, and that Campus was entitled to punitive damages as a result. Further contentions by Campus were that Celotex had breached its express warranty of longevity and implied warranties as to the suitability of the roof. The implied warranty action was dismissed at the close of the evidence. Kahn filed an indemnity cross-claim against Fort alleging that, if Kahn were held liable, its liability would have to be predicated upon Fort’s errors and omissions. The Kahn cross-claim became moot when Kahn and Fort were relieved of any liability to plaintiff. In its answer Fort also incorporated a cross-claim against Celotex, contending that Celotex was liable for fraud in that it had represented to Fort that the Bond Ply system was better than others used by Fort and that Fort had relied upon such representation. Fort claimed that Celotex had not properly tested the system, that those tests which were conducted had given poor results and that Celotex had maintained poor quality control. Celotex denied substantially all of the material allegations of Campus’ complaint and of Fort’s cross-claim. It additionally asserted affirmative defenses which included the statute of limitations and a motion to dismiss premised upon the contention that plaintiff was not the real party in interest. The trial was a mammoth and complex event. The transcript of 12 days of testimony runs 2500 pages, hundreds of exhibits were introduced or identified, and the number of objections raised were more than this court has ever experienced in over 40 years of law practice and service on the bench. Aware that the attorneys were trying to protect their clients and also aware of the effect which numerous objections may have on a jury, this court attempted to protect advocates and their clients by hearing most objections out of the presence of the jury. Furthermore, the parties were allowed to interject general objections, rather than to argue in front of the jury each time something they perceived as objectionable was sought to be introduced into evidence. This court feels this technique was especially effective in light of Celotex’s numerous objections to the introduction of documents relating to similar complaints. Instead of having to remove the jury every five minutes when evidence was sought to be introduced, this court took note of Celotex’s general objection and allowed Celotex’s attorneys to interject any specific objections which they might have at that time. As a result, this court perceives that any distractions and irritations to the jury were held to a minimum. The verdicts were returned by the jury after a day of deliberation. The jury found that Celotex had breached an express warranty to Campus, that it had perpetrated a fraud on defendant Fort, that Celotex was negligent in testing or failing to test its product before putting it on the market, that Celotex was guilty of a conscious disregard of a duty in testing or failing to test its product before putting it on the market, and that Celotex had perpetrated a fraud on Campus. The jury found the plaintiff damaged in the amount of $208,000.00 and proceeded in addition to award the plaintiff $500,000.00 in punitive damages. Fort Roofing and Celotex had previously stipulated that Fort need not prove actual damages. Therefore, the jury was instructed that it might find actual damages in any amount and that punitive damages could be assessed regardless of the amount of actual damages found. The jury proceeded to award no actual damages and $125,000.00 in punitive damages. This court entered judgment in accordance with the jury verdict and the motions which are the subject matter of this opinion followed. STANDARDS FOR CONSIDERATION OF MOTION(S) FOR A JUDGMENT NOTWITHSTANDING THE VERDICT (N.O.V.), OR, IN THE ALTERNATIVE, FOR A NEW TRIAL Defendant Celotex’s motion for judgment n. o. v. under Rule 50(b), Federal Rules of Civil Procedure, has the effect of renewing its motion for a directed verdict made during trial. The standards for granting the motions are identical, as Celotex is simply asking this court to reconsider its decision not to direct a verdict in favor of Celotex. See Wright & Miller, Federal Practice and Procedure, § 2537 (West Publishing Co., 1978). Since the question presented by a motion for judgment n. o. v. is whether there are any reasonable grounds to support the jury’s verdict, the evidence must be viewed in the light most favorable to the non-moving parties (Campus and Fort). Furthermore, those parties are entitled to the benefit of all inferences which the evidence reasonably supports, even though contrary inferences might reasonably be drawn. Scavens v. Mack Stores, Inc., 577 F.2d 870, 873 (4th Cir. 1978); Butler v. O/Y Finnlines, Ltd., 537 F.2d 1205, 1206-07 (4th Cir.), cert. denied, 429 U.S. 897, 97 S.Ct. 260, 50 L.Ed.2d 180 (1976); Howard v. McCrory, 601 F.2d 133 (4th Cir. 1979). The alternative motion for a new trial is apparently based upon Rule 59(a), which employs a less rigorous standard than Rule 50(b) since the finality intrinsic to a judgment is not found in Rule 59(a). Judge John J. Parker, speaking for the Fourth Circuit in 1932, drew the distinction between these two motions in an oft-quoted passage: There seems to be some confusion on the part of counsel as to the difference between the duty to direct a verdict and the duty to grant a new trial after verdict; and the contention is frequently made that the judge should direct a verdict whenever the evidence is such that he would be justified in setting the verdict aside. The distinction, however, is clear. Where there is substantial evidence in support of plaintiff’s case, the judge may not direct a verdict against him, even though he may not believe his evidence or may think that the weight of the evidence is on the other side; for, under the constitutional guaranty of trial by jury, it is for the jury to weigh the evidence and pass upon its credibility. He may, however, set aside a verdict supported by substantial evidence where in his opinion it is contrary to the clear weight of the evidence, or is based upon evidence which is false; for, even though the evidence be sufficient to preclude the direction of a verdict, it is still his duty to exercise his power over the proceedings before him to prevent a miscarriage of justice.... A verdict can be directed only where there is no substantial evidence to support recovery by the party against whom it is directed or where the evidence is all against him or so overwhelming so as to leave no room to doubt what the fact is.... Verdict may be set aside and new trial granted, when the verdict is contrary to the clear weight of the evidence, or whenever in the exercise of a sound discretion the trial judge thinks this action necessary to prevent a miscarriage of justice. Garrison v. United States, 62 F.2d 41, 42 (4th Cir. 1932). To emphasize, a new trial may be ordered if the trial court believes that the verdict “is contrary to the clear weight of the evidence,” or that a new trial is “necessary to prevent a miscarriage of justice.” Campus objects to this court entertaining those issues which were not asserted at trial or within the ten days allowed by Rules 59(b) and 50(b). Although the motions were filed in a timely manner, Celotex has raised additional issues which were not included in the original motion. The objection, as it relates to Rule 50(b) is well taken. Celotex is barred from raising new grounds not included in its motion for a directed verdict. Sulmeyer v. Coca Cola Co., 515 F.2d 835, 846 (5th Cir. 1975), cert. denied 424 U.S. 934, 96 S.Ct. 1148, 47 L.Ed.2d 341 (1975); Moran v. Raymond Corp., 484 F.2d 1008, 1014 (7th Cir.), cert. denied 415 U.S. 932, 94 S.Ct. 1445, 39 L.Ed.2d 490 (1973). The courts have been more liberal, however, in allowing additional grounds to a motion for a new trial under Rule 59, due to the language of Rule 59(d), which reads: The court may grant a motion for a new trial, timely served, for a reason not stated in the motion. This amendment has been interpreted by the courts to permit the movant to supplement the grounds for his motion for a new trial, so long as the opposing party has an adequate opportunity to respond to movant’s contentions. See Moore's Federal Practice, § 59.09(2). The Sixth Circuit advanced this very point in Pogue v. International Industries, Inc., 524 F.2d 342, 344 (6th Cir. 1975): We conclude that a district court may in its discretion consider the issues raised in the amended motion for a new trial even though it was not filed within the time provided for by the rule, where as here, the original motion for a new trial was filed within the ten (10) day rule time period. Indicative of the Fourth Circuit’s liberality as to the requirements of Rule 59 is the case of Witt v. Merrill, 208 F.2d 285 (4th Cir. 1953), which holds that the Federal Rules of Civil Procedure should not be transformed into technical traps for the unwary. Witt cited the decision in Fishbaugh v. Armour & Co., 185 F.2d 541, 542 (4th Cir. 1950) where it was stated that, “[t]he rule should be liberally construed and review should not be denied on mere technicalities where this can be avoided.” The Witt court went on to conclude that, To hold that the motion for a new trial was a nullity because the grounds were not stated, even though the trial judge entertained it ... would be to deny review on a technicality in contravention of the spirit of the rules. Fairness requires that the additional grounds posed by Celotex be considered. The lack of a transcript may delay a party who must take considerable time to review its trial notes to determine more specific grounds for its motions, especially in a long and complex case such as the present litigation. Alcaro v. Jean Jordeau, Inc., 3 F.R.D. 61 (D.N.J.1942), rev’d on other grounds, 138 F.2d 767 (3rd Cir. 1943); Williamson v. Williamson Pulp and Paper Co., 8 F.R.D. Serv. 7b 2, Case 1 (M.D.Pa.1944). Further, in a case as significant as this one, this court feels it should take every opportunity to study and pass on the questions raised by the motions. The issues are complex and the trial court should be given the opportunity to clear up the confusion of the issues and to insure that no party becomes the victim of a miscarriage of justice. Finally, since Campus has had sufficient notice and has addressed these issues in its brief, Campus will suffer no prejudice if the court considers these issues. STATUTE OF LIMITATIONS Celotex urges that the action be dismissed or in the alternative that judgment be entered in its favor on the grounds that the statute of limitations, set forth in South Carolina Code § 15-3-530, is a bar to the warranty and negligence claims asserted against it. These claims, Celotex contends, arose more than six years next preceding the dates upon which the complaint was filed in the federal forum. The facts upon which this defense is based are simple. In 1968, Celotex sold Bond Ply roofing materials to Fort, who erected a roof constructed therefrom for general contractor Kahn upon premises owned by Chester County Development Authority. In installing the roof upon the warehouse in question, Kahn acted as general contractor, and Fort as its subcontractor. The roof began to leak in 1973 and the leaks became progressively more numerous and more serious as time passed. In 1974, Campus bought the warehouse from the Chester Development Authority and, in February of 1976, more than seven years after the roof was installed and three years after the roof first began to leak, Campus filed suit. At trial, believing that the South Carolina Supreme Court would probably apply the “discovery” rule, this court allowed the negligence count to go to the jury. Celotex now makes a two-pronged attack upon this ruling, alleging first, that this ruling was contrary to the South Carolina cases which hold that the statute of limitations begins to run when the cause of action arises; and second, that by the doctrine of “inclusio unius est exclusio alterius” the legislature has indicated that the “discovery” rule applies only to medical malpractice actions. As to the negligence cause of action, Celotex notes that § 15-3-530 is the applicable six-year statute of limitations. Since the South Carolina courts have generally construed that the statute begins to run when the cause of action arises, Brown v. Finger, 240 S.C. 102, 124 S.E.2d 781 (1962), the crucial question is when does the cause of action arise in cases involving latent defects which cannot reasonably be discovered except with the passage of time. If any cause of action accrued on the date of sale, in 1968, it would be barred since the complaint was not filed until February 17, 1976. However, if any cause of action accrued on the date of the injury or on the date plaintiff discovered the injury, it would not be barred since the roof began to leak in December, 1973. In 1976, this court concluded that, if faced with the issue of medical malpractice, the South Carolina Supreme Court would apply the discovery rule. Gattis v. Chavez, 413 F.Supp. 33 (D.S.C.1976). Subsequently, in 1977, the South Carolina Legislature ventured into the area of the statute of limitations for the first time since 1870. In Act No. 182, the legislature provided that an action for damages due to personal injury arising from medical malpractice must be brought within either two or three years from the date of discovery, depending on the type of malpractice involved. However, the legislature did not limit its reforms to medical malpractice. In Section 5 of the same Act, now codified as § 15 — 3— 535, the legislature applied the “discovery” rule to personal injury actions commenced under § 15-3-530(5): Except as to actions initiated under § 15-3-545 of the 1976 Code, all actions initiated under Item 5 of § 15-3-530, as amended, shall be commenced within six years after the person knew or by the exercise of reasonable diligence should have known that he had a cause of action. Looking to § 15-3-530, we find that Item (5) reads: An action for criminal conversation or for any other injury to the person or rights of another, not arising on contract, not hereinafter enumerated, ... Since the “discovery” rule in § 15-3-535 applies only to Item (5), a preliminary issue is whether the present action comes within the scope of that section. Perhaps one might argue that the negligence charged in this case was a failure to warn or a failure to adequately test, and that the interest involved is the right of the plaintiff to know about the product or to be protected from unsafe products. It could also be argued that this constitutes a personal right under the definition of Item (5) of § 15-3-530. However, Item (5) seems to catch only the residue of actions not enumerated elsewhere. Section 15-3-530(3) provides for damages to real property, while § 15-3-530(4) provides for injuries to any goods or chattels including the specific recovery of personal property. The injury in this case was to property, enumerated elsewhere. Therefore the court must conclude that this cause of action is not covered under Item (5). Accordingly, the question arises as to the significance of the legislature’s failure to expand the “discovery” rule to Items (3) and (4), and whether the doctrine of “inclusio unius est exclusio alterius” bars the negligence action. Clearly the South Carolina Supreme Court has been aware of the problems arising from latent defects in property cases down through the years. As this court stated in Gattis v. Chavez, 413 F.Supp. 33 (D.S.C.1976): On several previous occasions the Supreme Court has endeavored to soften the harsh impact which the statute of limitations might otherwise have had on a plaintiff’s right to proceed. For example, in a case involving riparian water rights, the court utilized a ‘continuing nuisance’ theory to allow the plaintiff to recover the impairment of his water rights for the six years immediately preceding, notwithstanding the fact that the tort (polluting the water) actually had begun many years earlier. Conestee Mills v. City of Greenville, 160 S.C. 10, 158 S.E. 113 (1931). See also Sutton v. Catawba Power Co., 104 S.C. 405, 89 S.E. 353 (1916) where a dam backed up water onto a plantation but the full effect of rendering the land unfit for cultivation was not ascertained until three years later, the six-year limitation was held not to begin to run until the latter time. King v. United States, 59 F. 9 (C.C.S.C.1893), appeal dismissed, 164 U.S. 703, 17 S.Ct. 1001, 41 L.Ed. 1182. Moreover, where several bales of cotton were held for safekeeping and destroyed, it was held that the statute of limitations began to run from the time of the loss, or at the latest, from the time the owner had notice of the loss rather than from the time demand for the goods was made. Cohrs v. Fraser, 5 S.C. 351 (1873). These cases are by no means identical to the present action, but they do indicate that the Supreme Court has avoided mere mechanical application of the statute of limitations in the past and would probably not be reluctant to do so again. 413 F.Supp. at 40. Against this seeming willingness on the part of the courts to mitigate the harshness of the statute of limitations in this area must be balanced the traditional doctrine of “inclusio unius est exclusio alterious” — the inclusion of one is the exclusion of another. Since the legislature had not spoken on the issue of the statute of limitations since 1870, this court in Gattis refused to apply the doctrine in a mechanical manner. As this court pointed out at that time, there was no indication that the legislature in 1870 could have foreseen or considered the problems of latent injury due to medical malpractice. Pointing to the nationwide trend since 1870, this court then went on to adopt the “discovery” rule. However, this court faces a different situation today than it faced in 1976. Since the legislature considered this problem in 1977 and acted in reference to personal injury actions, the inference raised by the traditional doctrine to the effect that the legislature meant to exclude actions for injury to property, seems more reasonable at this time. Although there is no evidence before this court that the legislature actually did consider property suits, one could assume that the legislature was aware of the problem in this area due to the tremendous amount of “products liability” actions in this country in the last 15 years. Fortunately this court need not seek to read the South Carolina legislature’s intent since the South Carolina Supreme Court has implicitly done so in the recent decision of Mills v. Killian, S.C., 254 S.E.2d 556 (1979). Killian was an action to foreclose a mortgage with a cross claim for professional negligence by the lending institution against its attorney who failed to discover the existence of the assignment of a real estate mortgage in his title search. The trial court found that plaintiff had a valid second mortgage and ordered that the debt be recovered from the lending institution. However, the cross claim against the attorney was held to be barred by the statute of limitations, even though there was no notice of the defect until the Killian action was commenced. On appeal the Supreme Court reversed the decision on the cross claim, holding that the statute of limitations did not begin to run until discovery by the injured party. Although the ruling is based in part on a carved out exception where professional negligence is involved, the ruling derives its real support from the equitable notion that a statute of limitations should accrue with the discovery of the injury. Said the court: We conclude the accrual upon discovery rule represents the more equitable and rational view. It would be manifestly unfair to hold First Carolina liable on its general warranty deed but not permit it to prevail against Oxner when First Carolina had no knowledge of his negligence until institution of this foreclosure action. Id. at 558. The ruling in Killian clearly extends the “discovery” rule beyond the confines of § 15-3-530(5). While, the cross-claim in Killian was probably governed by § 15-3-530(1), the case must be interpreted to mean that the legislature did not intend to limit the discovery rule to personal injury cases under § 15-3-530(5). Thus the equitable factors cited in Killian, which freed that case from the doctrine of exclusion by implication, are operable in this case. Since no reason appears why property damage suits should not be treated on a par with other types of injuries, this court holds that the “discovery” rule applies to actions brought under §§ 15-3-530(3) and (4). On its breach of express warranty cause of action, Campus asserts, the applicable statute is § 36-2-725(2): A cause of action accrues for breach of warranty when the breach is or should have been discovered. Celotex contends that by its title, “Statutes of limitations in contracts of sale,” this section applies only to a breach of warranty by the seller to the buyer in a contract of sale. Celotex also refers to the South Carolina Reporters Comments relative to this section for the proposition that in South Carolina the cause of action accrues when the breach occurs, rather than upon discovery. Celotex’s first argument is merely a different approach to the defense of privity which Celotex has raised to the warranty cause of action. The UCC, as adopted by South Carolina, has abolished privity as a requirement to recovery for breach of warranty when the person injured is a natural person. S.C.Code Ann. § 36-2-318; Campus of course is not a natural person. However, Official Comment 3, to § 36-2-318 states: This section expressly includes as beneficiaries within its provisions the family, household, and guests of the purchaser. Beyond this, the section is neutral and is not intended to enlarge or restrict the developing case law on whether the seller’s warranties, given to his buyer who resells, extend to other persons in the distributive chain. By the incorporation of this language, the Legislature has given the courts a rule of construction to work with. The most reasonable interpretation to this court of Official Comment 3 is that the Legislature, by remaining neutral on the issues left unconfronted by the statute, and by disavowing any intent to influence the developing case law, has left to the courts the responsibility for determining the scope of the privity defense. The South Carolina courts have never determined whether a corporation may recover on express warranty absent privity. In fact, only one case has discussed the privity issue as it relates to warranties. In Odom v. Ford Motor Co., 230 S.C. 320, 95 S.E.2d 601 (1956), the Supreme Court discussed the possibility of recovery under express warranty without privity where the purchaser had relied upon representations made by the manufacturer in its brochure. Although the issue of express warranty was not before the court at that time, Odom seemed to imply that this state would go along with the majority line of reasoning. While holding that privity was necessary in implied warranty cases, the court distinguished the express warranty situation, implicitly raising the possibility that privity would not be necessary under an express warranty. The traditional approach holds that express warranty is a contract action, and that to recover on contract one must either be in privity or be the one for whose benefit the contract was made. See Lewis v. Terry, 111 Cal. 39, 43 P. 398 (1896); Collum v. Pope & Talbot, Inc., 135 Cal.App.2d 653, 288 P.2d 75 (1955); Altorfer Bros. Co. v. Green, 236 Ala. 427, 183 So. 415 (1938); Holland v. Good Bros., Inc., 318 Mass. 300, 61 N.E.2d 544 (1944); See also Anno., 75 A.L.R.2d 39. This prevalent but mistaken notion was challenged in Rogers v. Toni Home Permanent Co., 167 Ohio St. 244, 147 N.E.2d 612 (1958) which noted that the original basis for warranty recovery was an action for deceit or for a breach of duty assumed by the seller. Other writers and cases have since registered their agreement with this position. See citations in Frumer & Friedman, Products Liability, § 16.03[1], [3A-52]. But the courts have not been tied down to reaching an unjust result because of a legal technicality. The first case to allow recovery absent privity was Baxter v. Ford Motor Co., 168 Wash. 456, 12 P.2d 409 (1932), 15 P.2d 1118 (1932), which was an action to recover for a lost eye which resulted when a pebble shattered a windshield which had been represented as nonshatterable. Frumer & Friedman quote the court: Since the rule of caveat emptor was first formulated, vast changes have taken place in the economic structures of the English speaking peoples. Methods of doing business have undergone a great transition. Radio, billboards, and the products of the printing press have become the means of creating a large part of the demand that causes goods to depart from factories to the ultimate consumer. It would be unjust to recognize a rule that would permit manufacturers of goods to create a demand for their products, by representing that they possess qualities which they, in fact, do not possess, and then, because there is no privity of contract existing between the consumer and manufacturer, deny the consumer the right to recover damages resulting from the absence of those qualities, when such absence is not readily noticeable. Similar reasoning was employed in Bahlman v. Hudson Motor Car Co., 290 Mich. 683, 288 N.W. 309 (1939), where the court held liability can be imposed “on the maker of false statements and may be enforced by the ultimate consumer of the product to whom the statements are directed.” Id. at 313. See also Rogers v. Toni Home Permanent Co., supra. In considering the Odom holding on implied warranty, as a clue to South Carolina’s view on privity, one must recognize that an express warranty stems from a different footing than implied warranty. In an implied warranty there is no express representation as to the quality of a product, but the warranty is implied as a matter of law. Odom noted that expanded liability to third persons had been limited to recovery resting upon negligence, but that when proceeding on the contractual of implied warranty, the injured party must be able to establish privity with the manufacturer. On the other hand, express warranty arises from the representations which the manufacturer uses to induce purchase of his products, although not directly from the manufacturer. This court reads the Odom case as intimating that privity will be abolished as a requirement in express warranty. When one considers the liberality of the South Carolina Supreme Court in products liability matters, the opinion in Odom, and the greater weight of authority in this country, the factors are sufficient to convince this court that a plaintiff who relies on express representations by a manufacturer will be allowed to recover absent privity. That plaintiff is a corporation should not change this result. Just as it is unfair to allow a manufacturer of a defective product to escape from liability via privity when the plaintiff is an individual, so it is unfair to disallow recovery when a corporation brings suit. Nor is the greater sophistication of a corporation a guarantee against a corporation being misled by the manufacturer’s claims. The instant case is a perfect example. The two Campus employees who chose Bond Ply were much more knowledgeable about roofing than the average person, yet they too were unaware of the defects in Bond Ply. Why should they not be protected? Finally, is there any reason why an innocent corporate consumer should have to bear the loss when a manufacturer puts a defective article into commerce from which it hopes to profit? The same risk allocation policy should apply to corporate transactions as to consumer purchases. Why should an innocent party suffer rather than the one who introduced the product in commerce for profit? There is no reason, and in the opinion of this court, lack of privity cannot be asserted as a defense in an express warranty action against a corporation in South Carolina. Celotex further contends that the South Carolina Reporter’s Comments state that a cause of action for breach of warranty accrues at the time of the breach. This court is satisfied that the Reporter’s Comments, which directly contradict the text of § 36-2-725, were written before the legislature passed this state’s version of U.C.C. § 2-725. See 23 S.C.L.Rev. 308, 310, n. 15 (1971). The original U.C.C. § 2-725, in pertinent part, read, “a cause of action accrues when the breach occurs regardless of the aggrieved parties’ lack of knowledge of the breach.” The Comments are of no assistance in interpreting South Carolina’s version which reads as set out earlier in this opinion. Clearly the Comments refer to the original U.C.C. version of the U.C.C. and not to South Carolina’s version. REAL PARTY IN INTEREST Every suit in federal court must be prosecuted in the name of the real party in interest. The purpose of the rule mandating that the owner of the substantive right be the prosecutor of the suit is to protect defendants from the harassment of suits by persons who do not have the power to make final and binding decisions concerning prosecution, compromise and settlement. Virginia Elec. & Power Co. v. Westinghouse Elec. Corp., 485 F.2d 78 (4th Cir. 1973), cert. denied 415 U.S. 935, 94 S.Ct. 1450, 39 L.Ed.2d 493, Rackley v. Board of Trustees of Orangeburg Regional Hospital, 35 F.R.D. 516 (D.S.C.1964). In a diversity action such as this, the governing substantive law is the law of South Carolina. The issues of whether a cause of action exists, whether causes of action are assignable, and whether they have been successfully assigned, are matters of substance which require this court to canvass the law of South Carolina for guidance. Dixie Portland Flour Mills, Inc. v. Dixie Feed & Seed Co., 382 F.2d 830 (6th Cir. 1967); Dubuque Stone Prods. Co. v. Fred L. Gray Co., 356 F.2d 718 (8th Cir. 1966). The facts pertaining to this issue are undisputed. In 1964, Chester Development Association (“Chester Development”) leased a warehouse located on a site near Chester, South Carolina, to Campus. The lease provided that Campus should have the option to require the landlord to construct at landlord’s cost, additions to the building provided the aggregate area of such additions not exceed 500,000 square feet. In connection with such additions, the lease directed that the “tenant shall have the absolute right in its discretion to select the contractor .... and to negotiate such contract ...” Campus exercised this option first in 1966, then again in 1968. The lease also included an option to purchase the building for the amount of the unpaid aggregate rentals payable under the lease, including those payable with respect to any additions to said building, less any savings incurred as a result of the prepayment of the loan out of the purchase price. The contract for the second addition was let to Kahn who, in turn, subcontracted with Fort for the installation of the roof. The roof, which is the subject matter of the present litigation, was installed during the summer of 1968. Five years later, Campus gave the landlord, Chester Development, written notice of its intention to exercise the Tenant’s Purchase Option contained in Paragraph 19 of the 1964 Lease. Title was transferred by deed dated February 4, 1974. The deed, employing traditional language, included in the conveyance the described property “together with all and singular the Rights, Members, Hereditaments, Improvements and Appurtenances to the said Premises belonging, or in any wise incident or appertaining.” This transfer took place after the leaks had begun. In 1976, approximately eight years following the initial erection of the roof, suit was filed in the name of Campus. Celotex then filed a motion to dismiss predicated upon the argument that Campus was not the real party in interest at the time when suit was filed. No effort was made to substitute Chester Development for Campus as the party plaintiff in the case, nor to add Chester Development as an additional party plaintiff; rather Campus obtained an assignment of any cause of action which Chester Development might have had, and continued to pursue the claims as plaintiff. The parties have extensively briefed the issue of whether Campus acquired the cause of action in the 1974 deed from Chester Development. Celotex argues that a cause of action does not accompany a conveyance of real estate unless expressly included. The case of Hi Hat Elkhorn Coal Co. v. Kelly, 205 F.Supp. 764 (E.D.Ky.1962) is cited by Celotex for the rationale that Campus is presumed to have obtained the benefit of reduced value by the amount the prior owner could have recovered, since Campus acquired the building with knowledge of the existence of a leaking roof. Campus responded that it received no diminution of purchase price due to the leaks, hence the rule of Hi Hat Elkhorn is inapplicable to this deed. Cook v. Commercial Casualty Ins. Co., 160 F.2d 490 (4th Cir. 1947); Wise v. Picow, 232 S.C. 237, 101 S.E.2d 651 (1958). Alternatively, if one accepts the need for an express transfer of the cause of action, Campus asserts that the word “hereditament” in the deed is sufficiently broad in meaning to transfer the cause of action to Campus. Intriguing as these arguments are, they need not be resolved in this case: the subsequent assignment in 1977 is sufficient to make Campus the real party in interest for Rule 17(a) purposes. Celotex cites two South Carolina cases to support its argument that the 1977 assignment is invalid as a transfer of causes of action for a suit where the suit is already filed by the assignee at the time of the transfer. However, Celotex’s argument does not attack the validity of the assignment so much as its timeliness. Despite the fact that timeliness is a question of federal law governed by Rule 17(a), and not by South Carolina law, Celotex’s authority is inapposite. Celotex relies on The Bank of the State of S. C. v. The S. C. Mfg. Co., 34 S.C.L. (3 Strob.) 190 (1848) and Young Receiver v. Peoples Bank, et al., 163 S.C. 57, 161 S.E. 324 (1931), for the position that one who brings a suit prior to the time he has the right to bring it, will have judgment rendered against him, even though he subsequently acquires the right to bring the suit. Young and The Bank of S. C. dealt with suits filed before a cause of action was mature, and did not deal with the issue of whether a party can obtain real party in interest status by subsequent assignment of a cause of action which had accrued before suit was commenced. The Bank of S. C. case was an action for a writ of trespass commenced before plaintiffs had received title to the land by the Sheriff. The court held that plaintiffs could not: [Djemand the possession of the land until they were invested with the legal estate, which can be done only by a conveyance in writing, signed, sealed and delivered by the owner, or someone authorized by law to convey. 34 S.C.L. (3 Strob.) at 193. Thus the case turned on the fact that plaintiffs’ cause of action had not yet matured. In Young, suit was brought against the directors of a bank on their liability as endorsers of a note on which the bank was the principal obligee. By contract, an express condition precedent to the directors’ liability was that the holders of the note must first exhaust the bank’s assets. Although the bank’s resources were depleted subsequent to the filing of the suit, the court dismissed the suit because the cause of action had not matured at the time of filing. In its reasoning the court stated that the rule served to prevent premature suits which could result in confusion, uncertainties, and complications in business, and in harassment of defendants. The court dismissed the suit without prejudice to plaintiff’s refiling. Here, the cause of action was mature at the time Campus filed its complaint. Furthermore, neither Young nor The Bank of S. C. speak to the validity of an assignment after suit is commenced. There being no real dispute that the cause of action could be assigned in 1977, or that the instrument in question effected a valid assignment, the issue is whether one can acquire real party in interest status after suit is instituted. This raises a question of whether this court should look to federal or state law in deciding the issue of timeliness. The keystone case of Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), transformed the traditional analysis of choice of law in the federal courts which had developed after the seminal case of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Discarding the “outcome determinative” test of Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), as modified by Byrd v. Blue Ridge Electric Cooperative, Inc., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958), Hanna held that any federal rule which can reasonably be characterized as procedural should apply so long as it meets constitutional muster and comes within the terms of the enabling act under which the rules were promulgated. The constitutionality of Rule 17 has apparently been accepted and is not questioned here. Since Rule 17 clearly relates to the procedural issue of who should be allowed to prosecute a suit in federal court (once a cause of action is presumed to exist), the only inquiry for this court is whether the question of “timeliness” is within the scope of Rule 17(a). If so, federal law must govern whether Campus can pursue its claim. Rule 17(a) in part provides that no action shall be dismissed on the ground that it is not prosecuted by the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of the real party in interest. The rule further provides that such ratification, joinder or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest. Some courts have interpreted the word “ratification” to validate an arrangement by which the real party in interest authorizes the continuation of an action brought by another and agrees to be bound by its result, thereby eliminating any risk of multiple liability. See Wright & Miller, Federal Practice and Procedure, § 1555 at 709 (West Pub. Co. 1978). Here, Chester Development went so far as to explicitly assign its cause of action, thereby eliminating itself as a real party in interest. Although Rule 17(a) does not explicitly address the issue of the timeliness of an assignment, courts in construing the rule have held that even when the claim is not assigned until after the action has been instituted the assignee is the real party in interest and can maintain the action. The first case to deal with this issue was Kilbourn v. Western Surety Co., 187 F.2d 567 (10th Cir. 1951). Kilbourn, possessing an oral assignment of a claim, had collected $1,625.00 in cash and taken some forged checks in payment of the balance. He then filed suit to collect the balance represented by the forged checks. The trial court apparently dismissed the action on the basis that the assignee was not the real party in interest. The Tenth Circuit held that Kilbourn became the real party in interest in a written assignment of the claim to him after suit had been commenced. The court made the telling observation that the then-new rules of federal procedure were adopted to free the courts from the straitjacket of technical rules of pleading and procedure. The purpose of Rule 17(a), according to the court, was to facilitate a just and speedy adjudication between the interested parties without regard to the technicalities of the rules. The court noted that an adjudication by the present parties would be final, and that there was no danger of harassment by numerous actions by different claimants. Citing the liberal spirit of the new rules which allow substitution of parties to bring in the real party in interest even though an action has already been commenced, the court concluded that justice and the spirit of the new rules required that Kilbourn be allowed to bring the suit even though the assignment postdated the commencement of the action. Fifteen years later, the Eighth Circuit considered the same issue in Dubuque Stone Prods. Co. v. Fred L. Gray Co., 356 F.2d 718 (8th Cir. 1966). The Eighth Circuit also refused to accept the argument that the assignment was invalid because it was made after the suit had been filed. Stressing that the assignment had occurred before trial and that defendant had suffered no prejudice therefrom, the court saw no reason to prevent the assignee from prosecuting the suit. By assigning its cause of action to Gray, the assignor lost any right to bring a later suit and the assignment did not affect any defenses which Dubuque might be able to assert against the first plaintiff. The court remanded the case for prosecution under Rule 17(a). See also Petrikin v. Chicago R. I. & P. R. Co., 15 F.R.D. 346 (W.D.Mo.1954). To dismiss this judgment against Celotex on grounds that Campus was not the real party in interest would require such a technical approach to the problem that all common sense and justice would be left strewn in its path. First, from 1964 on, all actions concerning the construction and additions to this building had taken place at the direction and instigation of Campus. The Chester Development Authority has been a mere “straw man” throughout, while Campus has been the party directly benefited by the construction of the building. Second, this assignment took place a year before the trial, leaving Celotex with ample time to prepare a defense. Furthermore, Celotex was in no way prejudiced by the assignment since all defenses which were available to it against Chester Development were also available to it against Campus. Finally, Chester Development is effectively precluded from bringing any suit on the roof in question, thus insuring that the policies of Rule 17(a) have been protected in this case. For these reasons, Celotex’s motions for a new trial and for judgment n. o. v. on the grounds that Campus is not the real party in interest, are denied. NEGLIGENCE AND GROSS NEGLIGENCE Celotex makes several contentions which pertain to its view of the sufficiency of the evidence to support the jury’s verdict on the issues of negligence and gross negligence. It is asserted that the roof was not applied according to the 220-INS specifications; that nothing “bridges the gap” between possible inadequate testing in 1964 and the application of the roof in 1968; that the pre-marketing testing met the terms of the only standard which could reasonably be called an industry standard; that the problem with Bond Ply was an inadequacy in tensile strength which played no role in the failure of this roof; and that the proximate causes of the roof’s failure were loose insulation and bonding, which were not attributable to Celotex. It is true that the specifications were not followed precisely in constructing this roof. The 220-INS specification was a series of instructions for installing a two-ply Bond Ply roof on all types of decks with preformed roof insulation and a maximum incline of three inches per foot. It was proven at trial that the roof in question was applied by a method known as “phasing” or “one on one”, rather than by the written specified method of application known as “shingling”. In the “shingling” method both plies, one overlapping the other, would be applied in one operation, whereas in a “phasing” method of application, one ply would be applied throughout the area being roofed before the second ply was applied on top. The major advantage of shingling is that there is less danger of rainfall permeating the lower ply before the roofer has time to complete the entire roofing process. However, the phasing method, if applied the same day, also prevents the danger of water permeating the lower ply, prevents fishmouths which had been a serious problem with the application of the new bond-ply system, and had a greater margin of error in application for the roofer. Although there is testimony that rainfall may have reached the lower ply on at least one occasion, and that the roof may have been left unprotected overnight on at least one other occasion, there was evidence to show that the failure to follow the specification was immaterial insofar as the failure of the roof was concerned. There was also evidence that Celotex waived the assertion of this specification as a defense in that Celotex itself, permitted the application of the Bond Ply system in a manner contrary to its written specification. Mr. Dugger and Mr. Rissmiller both testified that Celotex in fact anticipated the application of Bond Ply in a manner contrary to the literal requirements of the specifications. Further, Mr. McClellan recommended that Fort use the phasing method because of Fort’s past problems. Thus the jury would not be in error to conclude that Celotex reasonably anticipated that the product would be applied by such a method. This court finds no reason to disturb the jury’s verdict on this issue. The argument that there is no connection between the 1964 and 1968 specifications, and that, therefore, any inadequate premarketing testing relating to the 1964 specification is irrelevant to the 1968 specification, ignores the thrust of plaintiff’s negligence theory. Campus’ theory was that there was inadequate testing both before and after marketing. There is ample evidence to justify the jury’s verdict in favor of the Campus theory. The only evidence of any testing, other than that which was done “on an owner’s roof,” was the three applications of Bond Ply in 1963-64. It is uncontradicted that these applications were only for the purpose of determining the ease of application of Bond Ply, not its ability to adequately perform its function in a built-up roof. In answers to plaintiff’s first set of interrogatories, introduced into evidence during Campus’ case, Celotex either denied knowledge of the existence of any tests concerning Bond Ply or said that they were “not a matter of record” with Celotex. Celotex never put up any evidence to show the existence of other testing prior to 1968. There was, therefore, ample evidence from which the jury could conclude that Celotex was not only negligent but grossly negligent, in adequately testing its product both before marketing it and up to the time of sale in 1968, especially in view of its being sold as a 20-year product. Celotex disputes the definition of what constitutes “adequate testing”. Celotex asserts that its Exhibit PPP, a draft of a study of roofing systems and constituent materials and components, sets the “standards” which were complied with by Bond Ply. This exhibit was never admitted into evidence, thus the document cannot be