Rivers & Bryan, Inc. v. HBE Corp.

• Decision Date: 15 July 1993
• Docket Number: No. 91-CV-882.,91-CV-882.
• Court: D.C. Court of Appeals
• Parties: RIVERS & BRYAN, INC., Appellant, v. HBE CORPORATION, Appellee.

628 A.2d 631

RIVERS & BRYAN, INC., Appellant, v. HBE CORPORATION, Appellee.

No. 91-CV-882.

District of Columbia Court of Appeals.

Argued November 3, 1992.

Decided July 15, 1993.

Anne K. Howard, Bethesda, MD, for appellant.

Edwin A. Sheridan, Washington, DC, for appellee.

Before ROGERS, Chief Judge, and STEADMAN and SCHWELB, Associate Judges.

STEADMAN, Associate Judge:

This is an appeal from an order of the trial court entering judgment in favor of appellee, HBE Corporation ("HBE"), in the amount of $300,000 against appellant, Rivers & Bryan, Inc. ("Rivers & Bryan"),¹ on HBE's third-party complaint for indemnification arising out of a contractual agreement. Rivers & Bryan contends that the trial court erroneously ruled that the contract between the parties provided that Rivers & Bryan was required to indemnify HBE for HBE's own wrongful actions. We agree that the trial court misapplied controlling principles of law relating to the interpretation of such indemnity agreements and accordingly reverse.

I.

On December 23, 1986, Broanagene Edwin Conner, an employee of Rivers & Bryan, fell through a hole in the roof of a building on which he was performing masonry work. He died as the result of the twenty-six foot fall to the ground below. Rivers & Bryan had been hired as the masonry subcontractor by HBE, the general contractor of the project.

After the accident, both HBE and Rivers & Bryan were cited by the Occupational Safety and Health Administration ("OSHA") for violations of OSHA safety regulations.² HBE was cited for three violations, Rivers & Bryan for four. One violation was common to both.³ Neither Rivers & Bryan nor HBE contested the citations.

Doris Conner, the decedent's mother and personal representative of his estate, filed a survival and wrongful death action against HBE, Janco Enterprises ("Janco") (the roofing subcontractor who one week previously had created the hole through which decedent fell), and Transit Employees Federal Credit Union (the "Credit Union") (the owner of the property),⁴ alleging various acts of negligence as well as a violation of OSHA, 29 C.F.R. § 1926.500(b)(1). See note 3, supra. As refined in her pretrial statement, Ms. Conner set forth her claims as follows:

II. Liability

The Plaintiff contends that the decedent's death was caused by the negligence of the Defendants in the following respects:

1. Janco Enterprise, Inc.

(a) in creating the hole in the roof of the building through which decedent fell to his death and failing to provide proper warnings and guarding with respect to the same;

(b) in violating the safety standards set forth in 29 C.F.R. § 1926.500(b)(1).

2. HBE Corporation

(a) in causing and permitting the hazardous condition created by the presence of the aforementioned hole in the roof of said building to exist and in failing to require Janco Enterprises, Inc. to correct said situation;

(b) in failing to provide proper warnings and guarding with respect to the hole in the roof;

(c) in violating the safety standards set forth in 29 C.F.R. § 1926.500(b)(1) and .450(a)(1).⁵

3. Transit Employees Federal Credit Union

(a) in failing to properly supervise its agents which it retained to construct the subject building;

(b) in failing to conduct regular and proper inspections of the construction site.

Three other parties were subsequently drawn into the litigation: Aetna Casualty & Surety Company ("Aetna"), Adams Fabricated Steel Corporation ("Adams"), and Rivers & Bryan. Aetna, which was Rivers & Bryan's workers' compensation carrier and had paid death benefits to the decedent's estate, sought to be subrogated to the rights of plaintiff to recover from the defendants the amount Aetna had paid in workers' compensation benefits. HBE filed a third-party complaint against Adams (the subcontractor hired by HBE to supply and erect the structural steel, which in turn had hired Janco as a sub-subcontractor).⁶

Finally, with respect to the matter immediately at issue before us, HBE brought a third-party claim against Rivers & Bryan for indemnification based upon a clause in the subcontract agreement entered into between HBE and Rivers & Bryan. In this third-party complaint, HBE contended that Rivers & Bryan was liable to HBE for any amount that HBE was found to owe the plaintiff. The indemnification clause read:

Subcontractor agrees to observe and comply with all federal, state and local statutes and/or ordinances relating to the performance of this subcontract (including the Occupational Safety and Health Act of 1970, as amended),* to assume all responsibilities of the Contractor thereto, and to indemnify and hold harmless Contractor from all penalties, damages or other loss resulting from subcontractor's failure to do so. Subcontractor shall pay the cost of permits and licenses required to perform this subcontract.

* Subcontractor is not responsible for others who are not in conformance with OSHA.

The subcontract was on a pre-printed form, but the asterisk symbol was written in by the parties, and the language to which the asterisk refers ("Subcontractor is not responsible for others who are not in conformance with OSHA") was typed in at the bottom of the page.

Plaintiff settled with HBE, Janco, and Adams several months prior to trial for a total of $450,000, of which $300,000 was contributed by HBE. The action against the Credit Union, the several cross-complaints, and the third party action against Adams were disposed of prior to trial as well. This left unresolved only HBE's third-party indemnification claim against Rivers & Bryan, which was heard at a bench trial on June 12, 1991. The facts were stipulated and no witnesses were presented;⁷ counsel merely argued their respective interpretations of the contract clause in question. Ruling orally at the end of the proceedings, the trial court found in favor of appellee HBE for the entire $300,000. It is from this judgment that Rivers & Bryan appeals.

II.

Both parties agree that the outcome of this appeal turns upon the interpretation of the indemnification clause in the subcontract and that since no extrinsic evidence was introduced at trial, the interpretation is a question of law before this court. See Jessamy Fort & Ogletree v. Lenkin, 551 A.2d 830, 831 (D.C.1988); see also Sacks v. Rothberg, 569 A.2d 150, 154 (D.C.1990). Moreover, HBE does not seek to have the clause interpreted to provide HBE with partial indemnity or contribution; HBE's argues only for total indemnity.

We note at the outset that the indemnification clause does not cover all loss suffered by HBE that relates to its subcontract with Rivers & Bryan; it speaks only of failure by Rivers & Bryan to comply with OSHA and other statutes with resultant loss to HBE. An examination of Ms. Conner's original complaint and her pretrial statement, however, indicates that her claims were based not merely on violations of OSHA but also on broad allegations of negligence. Moreover, the complaint alleged negligence not just on the part of HBE, but on the part of Janco and the Credit Union as well. Additionally, HBE was not the only party that settled. HBE only agreed to pay $300,000 of the $450,000 settlement.⁸

While parties are free to enter into indemnification agreements, even ones providing that an employer who would otherwise be protected by the Workers' Compensation statute will indemnify a third party, such agreements are narrowly construed by the courts "so as not to read into them any obligations the parties never intended to assume," Haynes v. Kleinewefers & Lembo Corp., 921 F.2d 453, 456 (2d Cir.1990). If parties seek to provide indemnification not just for the actions of the indemnitor, but also for the actions of the indemnitee, so that the indemnitee would be entitled to full reimbursement pursuant to the indemnification clause (in this case $300,000) when the indemnitee is itself negligent, the criterion is even stricter. In order to find that a party contracted away its own liability by receiving full indemnity therefor, there must be a clear intention to do so that is apparent from the face of the contract. District of Columbia v. Royal, 465 A.2d 367, 368-69 (D.C.1983) ("reviewing court must be `firmly convinced that such an interpretation reflects the intention of the parties' ... and such an intention should be plainly evident from the face of the contract" (quoting United States v. Seckinger, 397 U.S. 203, 211, 90 S.Ct. 880, 885, 25 L.Ed.2d 224 (1970))); Moses-Ecco Co. v. Roscoe-Ajax Corp., 115 U.S.App. D.C. 366, 368, 320 F.2d 685, 687 (1963) (intent must "plainly appear from the agreement"). Thus, if the alleged intention to provide this type of protection for the indemnitee is at all ambiguous, this standard is not satisfied. Contractual language is ambiguous if it is susceptible to more than one reasonable interpretation, Howard Univ. v. Best, 484 A.2d 958, 966 (D.C.1984), and the question of whether a contract is ambiguous is reviewed by this court de novo, Sacks, supra, 569 A.2d at 154.

The general rule for contract interpretation is that if a contract is determined by the court to be ambiguous, then external evidence may be admitted to explain the surrounding circumstances and the positions and actions of the parties at the time of contracting. See Howard Univ., supra, 484 A.2d at 966-67; Rich v. Sills, 130 A.2d 920, 922 (D.C.1957). The ultimate interpretation then becomes a question for the finder of fact. Howard Univ., supra, 484 A.2d at 966. Conversely, if a court determines that a contract is unambiguous, the interpretation is a question of law for the court. Id. at 966-67; Spellman v. American Sec. Bank, 504 A.2d 1119, 1127 (D.C.1986). In this area of indemnity, however, where a party purports to have the right to indemnity for its own negligence, there are unique rules. If the court determines that the contract is ambiguous on the issue of indemnifying the negligence of the indemnitee, then rather than the...