Barrons v. J. H. Findorff & Sons, Inc.

• Decision Date: 30 May 1979
• Docket Number: No. 76-666,76-666
• Citation: 89 Wis.2d 444,278 N.W.2d 827
• Court: Wisconsin Supreme Court
• Parties: Thomas E. BARRONS and Travelers Indemnity Company, Plaintiffs, v. J. H. FINDORFF & SONS, INC., and Badger Cordage Mills, Inc., Defendants, United States Steel Corporation, Third-Party Defendant-Appellant, Reinke & Schomann, Inc., Third-Party Defendant-Respondent.

Page 827

278 N.W.2d 827

89 Wis.2d 444

Thomas E. BARRONS and Travelers Indemnity Company, Plaintiffs, v. J. H. FINDORFF & SONS, INC., and Badger Cordage Mills, Inc. Defendants United States Steel Corporation, Third-Party Defendant-Appellant Reinke & Schomann, Inc., Third-Party Defendant-Respondent.

No. 76-666.

Supreme Court of Wisconsin.

Argued April 30, 1979.

Decided May 30, 1979.

United States Steel Corporation, third-party defendant-appellant, appeals from a judgment dismissing its third-party complaint against Reinke & Schomann, Inc., third-party defendant-respondent, and from an order denying its motion for reconsideration or a new trial.

Gilbert W. Church, Robert L. Binder (argued), Milwaukee, for third-party defendant-appellant; Foley & Lardner, Milwaukee, on the brief.

William P. Croke (argued), for third-party defendant-respondent; John E. Feldbruegge, Terrence C. Thom and Prosser, Wiedabach & Quale, S. C., Milwaukee, on the brief.

HANSEN, Justice.

This case arose as a result of an accident in which Thomas E. Barrons, an employee of Merle A. Patnode Company, a subcontractor of Reinke & Schomann, Inc., was injured while working on a construction project. The action of Barrons for damages for personal injuries he sustained has been settled and therefore is not involved in this appeal.

The appeal concerns the general contractor, three subcontractors and two indemnity agreements. The parties to the appeal are two of the subcontractors, United States Steel Corporation, third-party defendant and appellant, and Reinke & Schomann, Inc., third-party defendant and respondent.

J. H. Findorff & Sons, Inc., as general contractor for the construction of an office building in Madison, Wisconsin, subcontracted specialty steel work to the United States Steel Corporation. United States Steel furnished the steel but subcontracted the work to Reinke & Schomann, Inc. Reinke & Schomann subcontracted the caulking work to the Merle A. Patnode Co. The plaintiff in the original action was Thomas E. Barrons, an employee of Patnode.

Barrons was injured when a rope which held the scaffold on which he was working broke. He was not wearing a safety belt or line as required by the Department of Industry, Labor & Human Relations rules. In addition, the rope in question had been damaged by acid used to wash down the building walls because splash guards, also required by ILHR Department rules, had not been used. As a result of the fall Barrons was totally disabled and became a paraplegic. Following his workmen's compensation award Barrons brought an action against the rope manufacturer and against Findorff for common-law negligence and safe-place statute violations. ¹

Findorff had an indemnity agreement with its subcontractor, United States Steel Corporation, and commenced a third-party action against United States Steel seeking indemnification under its contract. United States Steel also had an indemnity agreement with its subcontractor, Reinke & Schomann, Inc. Therefore, United States Steel tendered the defense of the third-party action Findorff had commenced against it to Reinke & Schomann, Inc., whose insurer rejected the tender. Upon refusal of the tender, United States Steel proceeded to defend the action but kept Reinke & Schomann and its insurer fully advised of all proceedings and settlement negotiations in the principal action.

Findorff, United States Steel and the rope manufacturer ultimately settled with Barrons for $160,000. Findorff and United States Steel each paid $75,000 and the rope manufacturer paid $10,000.

United States Steel then proceeded with its indemnity claim by impleading Reinke & Schomann, Inc., and this action is the subject matter of this appeal. The case was submitted to the trial court on a stipulated statement of issues and facts.

The trial court found that the settlement was reasonable and that the indemnity agreement between United States Steel and Reinke & Schomann would cover attorney's fees. The trial court also found that because United States Steel had tendered the defense to Reinke & Schomann and had offered the settlement for its approval, United States Steel had only to show potential, not actual, liability to prove a right to indemnity. However, the trial court concluded that United States Steel had not shown potential liability because, as stipulated, United States Steel was not itself negligent and, under the terms of its contract with Findorff, it could not be required to indemnify Findorff for Findorff's own negligence. The trial court concluded that United States Steel had made the settlement as a volunteer because United States Steel was not negligent and was not liable for the negligence of Findorff and therefore that Reinke & Schomann, Inc., could not be required to indemnify United States Steel. The trial court dismissed the third-party complaint of United States Steel, and this appeal follows.

The parties to this appeal raise a number of issues and each frame the issues in different language. We have considered all the issues presented and conclude the dispositive issue is whether Reinke & Schomann, Inc., is required by the terms of its indemnity agreement with United States Steel to indemnify United States Steel for the $75,000 it contributed to the settlement of the action commenced by Barrons.

The answer to this question depends upon whether, under the terms of the indemnity agreements, United States Steel would have been required to indemnify Findorff for any judgment against Findorff in favor of Barrons.

The contract of indemnity between Findorff and United States Steel contained the following provision:

"ARTICLE XV. Sub-Contractor shall indemnify and save harmless the Owner, Architect and Contractor against any and all claims and demands for damages to the property of any person, firm or individual and for personal injuries (including death) arising out of or caused in whole or in part, by the execution of the Work, or caused, in whole or in part, by any fault or neglect of Sub-Contractor or its agents, servants and employees, whether the damages or injuries be sustained by any employee of Sub-Contractor, Contractor, Owner or Architect, or otherwise, and whether said claims or demands arise or are made under any provision of any workmen's compensation act or other law or statute, or otherwise. Contractor shall give Sub-Contractor prompt notice of any such claims or demands and shall give Sub-Contractor the opportunity to co-operate in the defense and settlement thereof and Sub-Contractor shall reimburse Contractor for all expenditures made therein by Contractor. Until completion and final acceptance of the Work, Sub-Contractor shall secure and pay for Workmen's Compensation on Sub-Contractor's employees as required by law and shall maintain liability insurance against all claims for damages for personal injury or death suffered by persons other than employees and growing out of the execution of the Work. The Sub-Contractor agrees to carry property damage insurance in such amounts as are deemed necessary by the Contractor and such other insurance as might be required by the specifications. All insurance shall be carried in a company or companies acceptable to Contractor, and as to liability insurance in amounts satisfactory to Contractor. Sub-Contractor agrees to reimburse the Contractor for any contribution which the Contractor is compelled by law to make on account of Sub-Contractor's employees. Before commencing the Work Sub-Contractor shall furnish a certificate from his insurance carrier showing that he has complied with the foregoing provisions of this article and providing that the said insurance policies will not be changed or cancelled during their term until after written notice to Contractor. In the event of failure of Sub-Contractor to furnish and maintain such insurance, Contractor shall have the right to take out and maintain the said insurance for and in the name of Sub-Contractor, and Sub-Contractor agrees to pay the cost thereof and to furnish all necessary information to permit Contractor to take out and maintain such insurance for the account of Sub-Contractor. Compliance by Sub-Contractor with the foregoing requirements as to carrying insurance and furnishing certificates shall not relieve Sub-Contractor from liability under this article."

This contract was incorporated by reference into the contract between United States Steel and Reinke & Schomann, Inc.:

"WHEREAS, Subcontractor has agreed, for and in the stead of U.S. Steel, to fulfill and perform the part of the prime contract that is hereinafter described, and

"WHEREAS, Subcontractor has read and is familiar with all of the terms and conditions of the prime contract and with the respective rights, obligations and liabilities of U.S. Steel and Owner thereunder:"

and

"2. In the performance of this subcontract, Subcontractor shall fully comply with and discharge all of U.S. Steel's obligations and liabilities under the provisions of the prime contract, except such as do not apply to Subcontractor's work hereunder, and said prime contract is hereby incorporated herein and made a part hereof by reference . . ."

The contract between United States Steel and Reinke & Schomann, Inc., also contained the following indemnity provision:

"17. Subcontractor shall assume and pay all claims, demands and liabilities for injuries to and deaths of persons and for damages to and loss of property caused or occasioned by acts or omissions of Subcontractor, its employees, representatives and subcontractors, in connection with or relating to the performance of this subcontract and hereby agrees to indemnify, save harmless and defend U.S. Steel and Owner from and against any and all claims, demands, costs, losses and actions resulting from the failure of Subcontractor to pay and discharge all such claims, demands and liabilities or resulting from the use by Subcontractor of any equipment, tools,...