Becker v. Black and Veatch Consulting Engineers

• Decision Date: 31 December 1974
• Docket Number: 73--1918,Nos. 73--1912,s. 73--1912
• Citation: 509 F.2d 42
• Parties: E. G. BECKER, d/b/a Rent-It-Center, et al., Appellees, v. BLACK & VEATCH CONSULTING ENGINEERS, Appellant. E. G. BECKER, d/b/a Rent-It-Center, et al., Appellees, v. HOOD CORPORATION, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 42

509 F.2d 42

E. G. BECKER, d/b/a Rent-It-Center, et al., Appellees, v. BLACK & VEATCH CONSULTING ENGINEERS, Appellant.

E. G. BECKER, d/b/a Rent-It-Center, et al., Appellees, v. HOOD CORPORATION, Appellant.

Nos. 73--1912, 73--1918.

United States Court of Appeals,

Eighth Circuit.

Submitted June 10, 1974.

Decided Dec. 31, 1974.

A. D. Sommervold, Sioux Falls, S.D., made argument for Black & Veatch Consulting Engineers.

Donald J. Porter, Pierre, S.D., made argument for Hood Corporation.

John L. Morgan, Mitchell, S.D., made argument for Central Telephone & Utilities Corp.

Before BRIGHT, STEPHENSON, and WEBSTER, Circuit Judges.

WEBSTER, Circuit Judge.

In these consolidated appeals we consider the indemnity claims of two defendants found liable with a third defendant ¹ for injuries sustained in a gas pipeline explosion.

In the jury trial below, plaintiffs named as defendants the public utility, Central Telephone & Utilities Corporation (Cengas); the contractor which had installed the pipeline, Hood Corporation; and the consulting engineer for the installation, Black & Veatch Consulting Engineers. ² The defendants filed cross-claims against each other for indemnity. The jury returned a verdict against all defendants in the amount of $90,000 and pursuant to special interrogatories apportioned liability among the defendants as follows: Cengas--45%; Hood--35%; Black & Veatch--20%. Since the trial court reserved resolution of the indemnity claims to itself pursuant to stipulation, such claims were not submitted to the jury.

Following the verdict, the District Court (1) denied Black & Veatch's claim of common law indemnity against Cengas, (2) rejected Cengas' claim of common law indemnity against Hood, but (3) awarded Cengas full indemnity against Hood under the construction contract. Hood and Black & Veatch appeal from the adverse rulings. District Judge Fred J. Nichol's opinion is reported at 365 F.Supp. 984 (D.S.D.1973).

Cengas, a public utility with its principal place of business in Lincoln, Nebraska, operates a natural gas distribution system in Sioux Falls, South Dakota. In November, 1968, Cengas engaged Hood Corporation, a California based pipeline construction company, to install a four mile section of pipeline in Sioux Falls. Cengas also retained Jim Moore, an employee of Black & Veatch Consulting Engineers, to inspect Hood's work for compliance with the contract. Black & Veatch had been the engineer and Hood the contractor on another Cengas Sioux Falls project that was completed immediately prior to the project here in question.

The new 12-inch pipe was laid across and over an existing 4-inch cast iron gas line at the intersection of Tenth Street and Blaine Avenue. While this procedure is not unusual, there was evidence that neither the space between the pipelines nor the clearance below street level met contract requirements. The project was completed and accepted with the approval of Moore and H. A. Hovik, Cengas' Sioux Falls plant manager, on November 23, 1968.

On the morning of December 16, 1971, persons in the area of Tenth and Blaine noticed a strong gas odor. Two persons notified Cengas by telephone at approximately 9:30 a.m. and Elwin Leffers, an investigator for the company, arrived on the scene at about 10:10 a.m. ³ Leffers noted the strong gas odor and decided that the situation required immediate attention because of the probability that a gas main under the street was leaking or had broken. He made a radio call to the company's crew trucks, and when none of them responded he directed the dispatcher to send a crew to the area as soon as possible. Leffers then went to a Cengas Service Center to check the maps to determine the location of gas lines in the area. He was on the scene for approximately five to eight minutes. At 10:35 a.m., prior to the arrival of any other Cengas' personnel, a gas explosion occurred in plaintiff's building at the corner of Tenth and Blaine when an employee turned on an electric drill. The cause of the explosion was subsequently determined to be ignition of combustible gas leaking from the 4-inch pipe, which had broken under the weight of the 12-inch line. Except for a small piece of rubber tire, the 12-inch pipe was found resting directly on top of the 4-inch pipe.

On these facts the court submitted the case to the jury for its determination of the negligence of the respective defendants on the following theories: (1) that Hood failed to properly install the crossover; (2) that Black & Veatch failed to inspect and therefore discover the defective installation; (3) that Cengas failed to inspect and discover the defective installation; (4) that Cengas failed to inspect and maintain the pipeline system during the three-year period between completion of the project and the explosion; and (5) that Cengas failed to respond properly to the emergency on the day of the explosion. The jury found all the defendants causally negligent and, as previously noted, apportioned their liability as follows: Cengas--45%; Hood--35%; Black & Veatch--20%.

These appeals are addressed to certain of the District Court's orders on the indemnity issues following the jury verdict. Black & Veatch appeals from that portion of the decision denying it indemnification on the ground that its failure to inspect was merely passive negligence (No. 73--1912). Hood appeals from the holding that Cengas was entitled to full indemnity under the contract notwithstanding its own negligence which contributed to the cause of plaintiff's injury (No. 73--1918).

I. Indemnity Claim of Black & Veatch

In No. 73--1912, we find no merit in Black & Veatch's argument that its failure to inspect the crossover was merely passive negligence. When it addressed this issue, the District Court noted that while in some circumstances a failure to inspect may constitute mere passive negligence, here Black & Veatch had been employed for the express purpose of inspecting Hood's work. It ruled that this employment created a high duty on the part of Black & Veatch, the breach of which constituted active negligence as a matter of law. 365 F.Supp. at 985--986. We agree.

Because Black & Veatch's negligence was active, it was not entitled to common law indemnity under South Dakota law. See Highway Construction Co. v. Moses, 483 F.2d 812 (8th Cir. 1973); Rogers v. Black Hills Speedway, Inc., S.D., 217 N.W.2d 14 (1974); Degen v. Bayman, 86 S.D. 598, 200 N.W.2d 134 (1972). The judgment under No. 73--1912 is affirmed on the basis of Judge Nichol's well-reasoned opinion.

II. Cengas' Indemnity Claim

In No. 73--1918, Hood challenges a number of the trial court's rulings and asserts that (1) there can be no contractual indemnity between a utility and a contractor when both of them were causally negligent during the term of the contract, (2) the indemnity provisions of the contract are not applicable to the circumstances giving rise to this case, and (3) the contract is contrary to public policy and void because it serves to relieve a public utility of all responsibility for its own negligent conduct. ⁴

We note at the outset that this case presents issues of contractual indemnity rather than common law indemnity. As we said in Northern Natural Gas Co. v. Roth Packing Co., 323 F.2d 922, 929 (8th Cir. 1963):

(W)e are not confronted with the problem of whether the negligence of the respective parties was active or passive, or primary or secondary. In contractual indemnity, liability is controlled by the provisions of the contract.

In Associated Engineers, Inc. v. Job, 370 F.2d 633 (8th Cir. 1966), cert. denied, 389 U.S. 823, 88 S.Ct. 59, 19 L.Ed.2d 77 (1967), we addressed many of the same issues presented by this case and held that under the terms of a construction contract an indemnitee was entitled to contractual indemnification from a negligent indemnitor, its own negligence notwithstanding, so long as the parties' intention to that effect was expressed in clear and unequivocal terms in the contract.

Herein, the indemnity clause of the contract between Cengas and Hood provides:

20. Claims and Damages

Contractor shall, at his own cost, settle and discharge all claims made by reason of the acts or omissions of the Contractor, his agents, employees, or sub-contractors and indemnify and save harmless the Owner from loss and damage and from claims made on account of work done under this contract.

This clause manifests a clear undertaking by Hood not only to protect Cengas against claims resulting from acts or omissions of the contractor, but also to indemnify it against loss or claims made 'on account of work done under this contract.' This unequivocal undertaking is limited by its terms only to work done under the contract, and it is broad enough to include claims founded in part upon Cengas' negligence in connection with such work.

We must therefore examine the contract to determine (A) whether its indemnity clause extends beyond completion of the contract and (B) whether it indemnifies Cengas for those of its own negligent acts subsequent to completion and acceptance of the project which contributed to cause plaintiff's injury.

A.

In construing any particular provision of a contract, it is necessary to examine the contract as a whole, Eberle v. McKeown, 83 S.D. 345, 159 N.W.2d 391 (1968); Moriarty v. Tomlinson, 58 S.D. 431, 235 N.W. 363 (1931). An indemnity contract is to be construed according to the clear and unequivocal expression of the parties' intent embodied in the ordinary meaning of the words used. Associated Engineers, Inc. v. Job, supra; Schull Construction Co. v. Koenig, 80 S.D. 224, 121 N.W.2d 559 (1963). Any doubts are to be resolved in favor of the indemnitor. Id.

Given these general principles, Hood argues that certain other provisions of the contract, relating to payments, bond and insurance, demonstrate that the indemnity clause was applicable only until the contract was fully performed and the...