Becker v. Central Telephone and Utilities Corporation
| Decision Date | 23 October 1973 |
| Docket Number | No. CIV 73-4003.,CIV 73-4003. |
| Citation | 365 F. Supp. 984 |
| Parties | E. G. BECKER, d/b/a Rent-It-Center, and Employer's Commercial Union Insurance Company, Plaintiffs, v. CENTRAL TELEPHONE AND UTILITIES CORPORATION et al., Defendants. |
| Court | U.S. District Court — District of South Dakota |
Deming Smith and Michael F. Pieplow, of Davenport, Evans, Hurwitz & Smith, and Joe W. Cadwell, of Braithwaite & Cadwell, Sioux Falls, S. D., for plaintiffs.
John L. Morgan and John F. Cogley, of Morgan & Fuller, Mitchell, S. D., for defendant Central Telephone & Utilities Corp.
A. D. Sommervold, of Woods, Fuller, Shultz & Smith, Sioux Falls, S. D., for defendant Black & Veatch Consulting Engineers.
Donald J. Porter, of Martens, Goldsmith, May, Porter & Adam, Pierre, S. D., for defendant Hood Corp.
Plaintiffs recovered judgment against defendants Hood Corporation (a contractor), Central Telephone & Utilities Corporation (Cengas, a utility which distributes gas), and Black & Veatch Consulting Engineers. Plaintiffs recovered for property damage caused by an explosion of gas which leaked from a Cengas pipeline. The pipeline was installed in 1968; the explosion occurred in 1971. All defendants were found causally negligent by a jury.
It was agreed by the parties that the question of indemnity would be tried to the court and three basic issues are here for decision.
1. Whether Black & Veatch has a right to common law indemnity from Hood and Cengas?
2. Whether Cengas has a right to common law indemnity from Black & Veatch and Hood?
3. Whether Cengas has a right to indemnification under its indemnity contract with Hood?
1. Black & Veatch's claim for common law indemnity from Hood and Cengas.
The general conception of indemnity is that it lies only in favor of one who is held responsible solely by imputation of law because of his relation to the actual wrongdoer, as where an employer is vicariously liable for the tort of a servant. There is considerable case law, however, to support the proposition that it also lies in favor of one who is himself personally at fault in certain instances. According to Prosser:
For a further discussion of active versus passive negligence, the Degan Court cited the California case of Cahill Bro., Inc. v. Clementina Co., 208 Cal.App.2d 367, 25 Cal.Rptr. 301, 307 (1962), which states:
"The difference between primary and secondary liability is not based on a difference in degrees of negligence or on any doctrine of comparative negligence —a doctrine which, indeed, is not recognized by the common law; . . It depends on a difference in the character or kind of the wrongs which cause the injury and in the nature of the legal obligation owed by each of the wrongdoers to the injured person." Builders Supply Co. v. McCabe, 366 Pa. 322, 77 A.2d 368 (1951).
The duty owed to the plaintiffs by Black & Veatch was more than of a derivative nature. Black & Veatch is not like the municipal corporation, cited in Prosser, which was held liable for failure to discover a defect in a street caused by another party and which was trying to recover indemnity from that other party. Although the liability of the municipal corporation is not vicarious liability in a pure sense, the municipal corporation cannot be said to have actively participated in the actions which resulted in the injury. Although they failed to discover the defect, their duty to inspect is very unlike Black & Veatch's duty to the plaintiffs, especially in light of the dangerous substance with which they were dealing. Black & Veatch owed a duty to inspect those pipes before the trenches were filled. Had Black & Veatch exercised their duty in the proper manner the accident could have been prevented — for they were hired for the very purpose of preventing dangerous situations like the one in this case by making Cengas aware of them. This was a high duty owed to the plaintiffs and breach of that duty constituted active negligence as a matter of law, and therefore Black & Veatch are not entitled to indemnity.
In the case of concurrent or joint tortfeasors, having no legal relation to one another, each of them owing the same duty to the injured party, and involved in an accident in which the injury occurs, there is complete unanimity among the authorities everywhere that no right of indemnity exists on behalf of either against the other; in such a case, there is only a common liability and not a primary and secondary one, even though one may have been very much more negligent than the other. Builders Supply, supra.
2. Cengas' claim for common law indemnity from Hood and Black & Veatch.
Cengas is not entitled to common law indemnity as the jury could have based their decision, from the instructions, on conduct by Cengas which would be considered active negligence, that is, failure to maintain the pipelines in a safe condition, or failure to take all reasonable steps to prevent an explosion after notification of the leak.
3. Cengas' claim for indemnity from Hood based on contract.
The issue here is: whether a negligent indemnitee (Cengas) has a right to indemnification by a negligent indemnitor (Hood) under an indemnity contract which does not explicitly state that indemnification extends to damages occasioned, at least in part, by the indemnitee's negligence.
This Court holds that Cengas does have a right to indemnification under the facts of this case, and bases its decision on a reading of South Dakota law, especially the interpretation of that law given by the 8th Circuit Court of Appeals in Associated Engineers, Inc. v. Job, 370 F.2d 633 (8th Cir. 1966).
In the Job case, Grand Electric Cooperative, Inc., was the owner seeking indemnity under its contract with Troy Cannon Construction Company, Inc. Both parties had been found negligent toward the plaintiff Job. The contract there contained the following indemnity provision:
The bidder (Troy) shall hold the owner (Grand) harmless from any and all claims for injuries to persons or for damage to property happening by reason of any negligence on the part of the bidder or any of the Bidder's agents or employees during the control by the Bidder of the Project or any part thereof.
The Court allowed indemnification while agreeing with the general rule that where the indemnitee asserts a contractual right to recover for loss occasioned at least in part by his own negligence, the court must be "firmly convinced" that such an interpretation of the contract reflects the intention of the parties in clear and unequivocal, though not necessarily express, language. Job, supra at 650; United States v. Seckinger, 397 U.S. 203, 211, 90 S.Ct. 880, 25 L.Ed. 2d 224 (1970).
In reaching the result in Job, the court found five factors to be of significance.
1. The use of the word "any" connoted broad coverage and the court felt that the contract was not restricted to claims produced by the indemnitor's negligence unaccompanied by other causative elements.
2. No inference could be drawn from other provisions in the Grand-Troy contract because none referred to concurrent fault on the part of Grand or to its effect on the liability of Troy.
3. Job was not a case in which a negligent indemnitee sought to hold responsible a non-negligent indemnitor.
4. The parties could not have intended by the contract to deprive Grand of quasi-contractual indemnity rights, yet this result would have followed were the contract to be construed as precluding indemnification on the facts of Job.
5. Job, supra 370 F.2d at 650, 651.
The significant portion of the contract in this case reads as follows:
Contractor shall, at its 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 from claims made on account of work done under the contract.
Factors one, three and five from Job are certainly relevant to the decision in this case and should be accorded great weight.
Factor 1. Whereas the Job provision used the words "any and all claims", "claims" is used here. If anything, the wording of the Cengas-Hood contract is stronger, since the Troy-Grand contract is restricted to "any negligence on the part of the Bidder or any of the Bidder's agents or employees during the control by the Bidder of the Project or any part thereof", Job, supra at 648, and the Cengas-Hood provision contains no such restriction, encompassing all "claims made on account of work done under the contract." (Emphasis added.)
Factor 3. This case, like Job, is not a situation in which a negligent indemnitee is seeking to hold...
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