Wood River Pipeline Co. v. Willbros Energy Services Co., 59567

• Decision Date: 12 June 1987
• Docket Number: No. 59567,59567
• Citation: 241 Kan. 580,738 P.2d 866
• Parties: WOOD RIVER PIPELINE COMPANY, Appellant, v. WILLBROS ENERGY SERVICES COMPANY, Appellee.
• Court: Kansas Supreme Court

Page 866

738 P.2d 866

241 Kan. 580

WOOD RIVER PIPELINE COMPANY, Appellant, v. WILLBROS ENERGY SERVICES COMPANY, Appellee.

No. 59567.

Supreme Court of Kansas.

June 12, 1987.

Syllabus by the Court

1. The interpretation of a written contract which is free from ambiguity is a judicial function and does not require parol evidence to determine the contract's meaning.

2. Ambiguity in a written instrument does not appear until application of the pertinent rules of interpretation to the face of the instrument leaves it genuinely uncertain which one of two or more meanings is the proper meaning.

3. The intent of the parties and the meaning of a contract are to be determined from the plain, general, and common meaning of terms used.

4. In construing a written instrument, language used anywhere in the instrument should be considered and construed in harmony with all provisions and not in isolation.

5. If a handwritten provision in a contract conflicts with a typewritten or printed provision, the handwritten provision controls.

6. The general rule that doubtful language in a contract is construed against the drafter is of little consequence where the parties are of equal bargaining power and have each had an opportunity to fully examine proposed contract provisions before the contract is executed.

Mikel L. Stout, of Foulston, Siefkin, Powers & Eberhardt, Wichita, argued the cause and Jerry G. Elliott and Terry C. Cupps, of the same firm, were with him on the brief, for appellant.

Steven D. Gough, of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, argued the cause and Forrest James Robinson, Jr., of the same firm, was with him on the brief, for appellee.

HERD, Justice:

This case requires construction and interpretation of a written contract. The plaintiff/appellant, Wood River Pipeline Company (Wood River), appeals from the district court's grant of summary judgment in favor of the defendant/appellee, Willbros Energy Services Company (Willbros).

On July 27, 1980, Wood River and Willbros entered into a contract in which Willbros agreed to build 109.5 miles of 24-inch pipeline from Bethany, Missouri, to Mason City, Iowa. The contract expressly provided the pipeline was to be built in a right-of-way easement owned by Williams Pipeline Company. Further, the pipeline was to be built approximately 10 feet from and generally parallel to the Williams pipelines located in the same easement.

The contract was typewritten with the exception of paragraph 2.03 of section 3, which was handwritten and inserted by the parties on the date the contract was executed. The clause, which is the subject of this litigation, provides:

"2.03 All settlements by company [Wood River] of claims in the name of contractor [Willbros] shall be based on substantial evidence of contractor's liability that the claims are valid and are reasonable in amounts.

"Contractor shall not be liable under any circumstances or responsible to company for consequential loss or damages of any kind whatsoever including but not limited to loss of use, loss of product, loss of revenue or profit.

RW 7/27/80

GB 7/27/80"

On January 20, 1982, the pipeline built by Willbros for Wood River ruptured at a point southeast of Des Moines, Iowa. Wood River filed a three-count petition on September 29, 1983, seeking over $1 million in damages resulting from the rupture of the pipeline and alleging the rupture was caused by the negligence, breach of implied warranties, breach of express warranties, and breach of contract by Willbros. In count III of its petition, Wood River sought damages to real property at the site of the oil spill, the costs of replacing oil lost in the spill, the costs of repairing the pipeline, and the costs of recovering oil spilled.

Approximately one and a half years after Wood River brought suit, Willbros filed a motion for partial summary judgment, claiming that Wood River's claims for damages contained in count III of the petition, except its claim for the cost of repairing the pipeline, were precluded by paragraph 2.03 of section 3 of the contract.

On October 9, 1985, the district court granted partial summary judgment and held that paragraph 2.03 of section 3 of the contract is clear and unambiguous and bars liability on the part of Willbros for consequential damages resulting from the pipeline rupture. The parties later settled their differences regarding count I and count II, and the cost of repairing the pipeline set forth in count III of Wood River's petition. To reflect this settlement, a journal entry of dismissal with prejudice was filed on April 18, 1986. Thus, Wood River appeals only from the journal entry of partial summary judgment entered on October 9, 1985.

The first issue on appeal is whether the trial court properly determined the contract was clear and unambiguous and that Wood River's claims for consequential damages were thus barred as a matter of law.

We recently restated the "fundamental legal concepts" to be applied where the rights of parties relative to the terms of a written agreement are in controversy "The doctrine has been well established and frequently applied that where parties have carried on negotiations, and have subsequently entered into an agreement in writing with respect to the subject matter covered by such negotiations, the written agreement constitutes the contract between them and determines their rights. [Citations omitted.] The interpretation of a written contract which is free from ambiguity is a judicial function and does not require oral testimony to determine its meaning. [Citations omitted.] Ambiguity in a written instrument does not appear until the application of pertinent rules of interpretation to the face of the instrument leaves it genuinely uncertain which one of two or more meanings is the proper meaning. [Citation omitted.] If a written contract is actually ambiguous concerning a specific matter in the agreement, facts and circumstances existing prior to and contemporaneously with its execution are competent to clarify the intent and purpose of the contract in that regard but not for the purpose of varying and nullifying its clear and positive provisions." Hall v. Mullen, 234 Kan. 1031, 1037, 678 P.2d 169 (1984).

Thus, we must first apply the pertinent rules of interpretation to determine whether the contract in question is free from ambiguity. If we hold the contract is ambiguous, then we can consider extrinsic evidence to determine its meaning.

In the instant case, both parties argue the contract is unambiguous. However, they place conflicting interpretations upon paragraph 2.03 of section 3 of the contract. Thus, our interpretation of this provision is the crux of this case.

Paragraph 2.0 of section 3 is of particular importance and is quoted in full here:

"2.01 Contractor shall defend, protect, indemnify and save Company harmless from and against all claims, demands and causes of action of every kind and character arising in favor of any person, including Contractor, Company's employees, Contractor's employees, or other persons, on account of personal injuries or death or damage to property in anywise incident to or arising out of the work performed by Contractor hereunder (except normal damages to growing crops and timber on Company's right-of-way, incident to laying or taking up a pipeline, lia- [Paragraph 2.03 is inserted, handwritten, at this point in the original contract.] bility does not arise out of the Company's sole negligence. Contractor further agrees to pay Company for damages to its property and to indemnify and hold Company harmless against the payment of any and all taxes, penalties, interest, liens or indebtedness or claims against its property, or for work performed, or measured by the work performed, growing out of or incident to Contractor's operations hereunder.

"2.02 With respect to all claims for damage to property of every kind, Company may settle any claim at any time or may turn any claim over to Contractor for disposition as follows:

"1. Company may settle any claims in the name of Contractor which, in Company's opinion, are valid and reasonable; all other claims shall be turned over to Contractor for disposition under the terms of Subparagraph (2) below.

"2. If, within 20 days after any claim has been turned over by Company to Contractor for disposition, settlement has not been made or litigation has not been commenced, Company may notify Contractor that Company believes that the failure to settle such claim will harm its relations with the claimants, or others; if, within 10 days after such notice, settlement has not been made or litigation has not been commenced, Company may settle such claim.

"3. If such settlement is made by Company, Company will charge to Contractor the amount of such...