1997 -NMCA- 14, Reagan v. McGee Drilling Corp., No. 17419

• Docket Nº: No. 17419
• Citation: 123 N.M. 68, 933 P.2d 867, 1997 NMCA 14
• Case Date: January 16, 1997
• Court: Court of Appeals of New Mexico

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933 P.2d 867 123 N.M. 68, 1997 -NMCA- 14 Wilburn Jackson REAGAN, Jr., Plaintiff,
v.
McGEE DRILLING CORPORATION, Defendant-Appellee,
and
McDonnold Operating, Inc., Defendant-Appellant. No. 17419. Court of Appeals of New Mexico. Jan. 16, 1997.
Certiorari Denied Feb. 17, 1997.

Larry D. Beall and Thomas L. Murphy, Beall & Biehler, P.A., Albuquerque, for Defendant-Appellant.

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Michael T. Worley and Kelly Mack Cassels, Sanders, Bruin, Coll & Worley, P.A., Roswell, for Defendant-Appellee.

OPINION

PICKARD, Judge.

¶1 A Texas oil well operator, McDonnold Operating Company [Operator], contracted in Texas with a Texas driller, McGee Drilling Corporation [Driller], to drill an oil well in New Mexico. The contract declared that Texas law governed, and it called for Operator to indemnify Driller for injuries to all persons except Driller's employees. Such indemnity provisions, though void under New Mexico law, are valid under Texas Law in certain circumstances. Plaintiff, William Reagan [Plaintiff], another company's employee, was injured during the operation, apparently through Driller's negligence, and Driller sought indemnification from Operator. We must decide whether the indemnity provisions are so offensive to New Mexico public policy that we should not enforce them. We conclude that the indemnity provisions are enforceable under either our conflict of laws rules or the parties' own choice of law because they do not promote a policy at odds with New Mexico policy, nor do they violate some fundamental principle of justice or rule of public morals. We affirm.

FACTS

¶2 On August 17, 1994, Plaintiff, an employee of Halliburton Energy Services, was working on an oil rig in Lea County, New Mexico, when a stabbing board on which he was standing collapsed. Plaintiff fell to the floor of the rig and suffered injuries. The stabbing board belonged to Driller. Driller had control and custody of the defective stabbing board, and Operator did not.

¶3 Plaintiff sued Driller, Operator, and other defendants for injuries resulting from his fall. Driller and Operator cross-claimed for indemnity against each other. Driller based its claim on the indemnity provisions in its drilling contract with Operator; Operator based its claim on a common law theory of indemnification. Plaintiff settled with all defendants, and the only remaining issue is the indemnity cross-claims between Driller and Operator.

¶4 The parties, both Texas corporations, negotiated and signed the drilling contract in Midland, Texas. The contract contained mutual indemnity provisions. The indemnity provisions of the contract applicable to this case stated:

18.11 Operator's Indemnification of Contractors: Operator agrees to protect, defend, indemnify, and save Contractor [Driller], its officers, directors, employees and joint owners harmless from and against all claims, demands, and causes of action of every kind and character, without limit and without regard to the cause or causes thereof or the negligence of any party or parties, arising in connection herewith in favor of Operator's employees or Operator's contractors or their employees or Operator's invitees other than those parties identified in Paragraph 18.10 [in which Driller agreed to indemnify Operator for the claims of Driller's employees] on account of bodily injury, death or damage to property. Operator's Indemnity shall be without regard to and without any right to contribution from any insurance maintained by Contractor [Driller] pursuant to paragraph 16.

18.15 Indemnity Obligation: Except as otherwise expressly limited herein, it is the intent of parties hereto that all indemnity obligations and/or liabilities assumed by such parties under terms of this Contract, including without limitation, paragraphs 18.1 through 18.14 hereof, be without limit and without regard to the cause or causes thereof (including pre-existing conditions), the unseaworthiness of any vessel or vessels, strict liability, or the negligence of any party or parties, whether such negligence be sole, joint or concurrent, active or passive.

Section 23 of the contract declared that the contract should "be governed and interpreted under the laws of TEXAS."

¶5 The trial court found that: (1) Texas law should govern because New Mexico follows the law of the place of contract in resolving conflict of laws questions; (2) the parties intended Texas law to govern the contract by placing the choice of law provision

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in the contract; and (3) Operator was required to indemnify Driller pursuant to the contract for any negligence action "arising in connection herewith in favor of operator's employees or operator's contractors or their employees." Operator now appeals, and we affirm. DISCUSSION

¶6 Ordinarily, we would first need to decide which state's law to apply to a dispute between parties that is being litigated in a New Mexico forum, but that involves Texas parties and a Texas contract that stipulates Texas law as governing. The Restatement (First) of Conflict of Laws (1934) derived its rules from the vested rights doctrine and provided that issues of validity of contractual provisions were to be determined by the local law of the place of contracting. Restatement (Second) of Conflict of Laws, Intro. Note to Ch. 8, Contracts, p. 557 (1971). Noting that the vested rights doctrine had not prevailed in the courts, id., the Restatement (Second) of Conflict of Laws adopts the rule that the law to be applied may be chosen by the parties and otherwise is determined by an interest analysis. Restatement (Second) of Conflict of Laws, §§ 186-188 (1971).

¶7 Our Courts have strongly endorsed the view that the rights of the parties to a contract are primarily determined by the terms of the contract. United Wholesale Liquor Co. v. Brown-Forman Distillers Corp., 108 N.M. 467, 471, 775 P.2d 233, 237 (1989); Jim v. CIT Fin. Servs. Corp., 87 N.M. 362, 364, 533 P.2d 751, 753 (1975); General Elec. Credit Corp. v. Tidenberg, 78 N.M. 59, 62, 428 P.2d 33, 36 (1967); City of Artesia v. Carter, 94 N.M. 311, 314, 610 P.2d 198, 201 (Ct.App.), cert. denied, 94 N.M. 628, 614 P.2d 545 (1980). This strong endorsement may counsel that, if the issue were squarely presented, New Mexico would likely adopt the Restatement (Second) approach to choice of law under circumstances in which the parties had expressly chosen the law. In this connection, we note...