Beloit Power Systems v. Hess Oil Virgin Islands

• Decision Date: 31 March 1983
• Docket Number: Civ. No. 80-94.
• Citation: 561 F. Supp. 279
• Parties: BELOIT POWER SYSTEMS, INC., and Kemper Insurance Companies, as Subrogee, Plaintiffs, v. HESS OIL VIRGIN ISLANDS CORP., Defendant/Third Party Plaintiff, v. LITWIN CORPORATION, Third Party Defendant.
• Court: U.S. District Court — Virgin Islands

561 F. Supp. 279

BELOIT POWER SYSTEMS, INC., and Kemper Insurance Companies, as Subrogee, Plaintiffs, v. HESS OIL VIRGIN ISLANDS CORP., Defendant/Third Party Plaintiff, v. LITWIN CORPORATION, Third Party Defendant.

Civ. No. 80-94.

District Court, Virgin Islands, D. St. Croix.

March 31, 1983.

R. Eric Moore, Law Offices of R. Eric Moore, Christiansted, St. Croix, V.I., for plaintiffs.

Britain H. Bryant, Bryant, Lenahan & Eltman, Christiansted, St. Croix, V.I., for defendant/third party plaintiff-HOVIC.

James W. Diehm, Isherwood, Hunter & Diehm, Christiansted, St. Croix, V.I., for third party defendant-Litwin Corp.

MEMORANDUM AND ORDER

CHRISTIAN, Chief Judge.

At issue in this lawsuit is the question of which party must either ultimately bear the entire burden of paying a sizeable civil judgement entered against the plaintiff in this cause in an action styled Norwilton Murray v. Beloit Power Systems, Inc., docketed in this division of our court at Civil No. 76-539 (affirmed 3rd Cir., 610 F.2d 149 (1979), or, at least of sharing the load with plaintiff Beloit Power Systems, Inc. (Beloit). Presently, before the court are crossmotions by Beloit and defendant/third party plaintiff Hess Oil Virgin Islands Corporation (HOVIC) for summary judgment. In hot dispute, Indemnity or contribution. Third party plaintiff, HOVIC, hoping to leave the field completely unscathed, has haled third-party defendant Litwin Corporation, (Litwin) into the fray, moving for summary judgment against the latter, indemnity being its sole weapon. Litwin, not willing to be found at the bottom of the pile, has filed its cross motion for summary judgment. Fed.R.Civ.P. 56.

BACKGROUND

On or about June 14, 1973, HOVIC entered into a contract with Beloit wherein Beloit would supply certain equipment for installation at the HOVIC refinery on St. Croix, Virgin Islands. On or about September 23, 1973, HOVIC contracted with Litwin for the installation of the equipment HOVIC had agreed to purchase from Beloit. On July 21, 1974, Norwilton Murray, a Litwin employee, was seriously injured while installing the Beloit equipment at the HOVIC refinery. Murray brought action against Beloit alleging alternative theories of strict liability under the Restatement (Second) of Torts § 402A, and common law negligence. The jury returned a verdict finding Beloit liable under both the strict products liability and the negligence counts. The jury found Murray's own negligence to account for five per cent of his injuries. The jury's net award was $1,747,000. That verdict was affirmed on appeal. Murray v. Fairbanks Morse, 610 F.2d 149 (3d Cir. 1979). Beloit's insurer, the Kemper Group, made payment of $1,937,500 (this included post judgment interest) on January 29, 1980.

On May 23, 1980, Beloit and its insurer brought the present action against HOVIC for contractual indemnity based on the contract of sale, (between Beloit and HOVIC,) for the equipment or in the alternative, for common law contribution. Defendant HOVIC then impleaded Litwin, as a third party defendant, arguing that if HOVIC owes anything to Beloit, then through the operation of an indemnity provision in HOVIC's contract with Litwin, Litwin is required to indemnify HOVIC. It is in this setting that the pending summary judgment motions were filed.

DISCUSSION

1. THE BELOIT-HOVIC CONTRACTUAL INDEMNITY CLAIM

The contract between HOVIC and Beloit is embodied in a HOVIC purchase order form. On the reverse side of the purchase order were standard printed "Terms and Conditions." Paragraph 8 of this printed matter was an indemnity provision running in favor of HOVIC, under the terms of which Beloit would indemnify HOVIC for any claims arising from "any act or neglect on the part of the Seller Beloit ..." Paragraph 1 of the printed "Terms and Conditions" was a warranty provision.

After negotiation, HOVIC, at Beloit's request, typed on the front of the purchase order, a provision supplied to HOVIC by Beloit entitled "Warranty". This provision reads as follows:

N. Warranty

The supplier guarantees that the equipment is free from fault in workmanship and material, and is of sufficient size and capacity and is of proper material to fulfill satisfactorily the operating conditions specified. Should any defect in material, workmanship or operating characteristics develop during 12 months after start-up or 18 months after shipment, whichever occurs first, the supplier agrees to make all necessary or desirable alterations, repairs and replacements of defective equipment, free-of-charge, F.O.B. factory. No allowance will be made for alterations or repairs made by others without written consent or approval of supplier. If the defect or failure to function cannot be corrected, the supplier agrees to replace promptly, free-of-charge, said equipment or to remove the equipment and refund the full purchase price. Under no circumstances shall the seller have any liability for liquidated damages or for collateral, consequential or special damages or for loss of profits or for actual losses, or for loss of production or progress of construction, whether resulting from delays in delivery or performance, breach of warranty, claims of or negligent manufacture or otherwise. The aggregate total liability of the seller under this contract, whether for breach of warranty or otherwise, shall in no event exceed the contract price. Buyer agrees to indemnify and hold harmless seller from all claims by third parties which extend beyond the foregoing limitations on seller's liability.

The balance of "Terms and Conditions" stated on the reverse side of the purchase order remains in effect.

Beloit now seeks indemnity from HOVIC for the sums it paid to Norwilton Murray, on the basis of the above language. It is Beloit's claim that this provision is a valid indemnity agreement which supercedes the indemnity clause printed on the reverse of the purchase order. HOVIC, on the other hand, argues that this is a warranty clause which Beloit now wishes to transform into an indemnity provision and that, as such, it is insufficient to transfer liability to HOVIC for Beloit's own negligence.

We begin our analysis of this question with the premise that in order for a party to be contractually indemnified for its own negligence, such an intention must be clearly and unambiguously expressed in the contract. United States v. Seckinger, 397 U.S. 203, 90 S.Ct. 880, 25 L.Ed.2d 224 (1970); Draper v. Airco 580 F.2d 91 (3d Cir.1978) (construing Pennsylvania law); Gimbel Brothers v. Vanderherchen, 468 F.2d 597 (3d Cir.1972) (construing Pennsylvania law). As the Supreme Court stated:

A contractual provision should not be construed to permit an indemnitee to recover for his own negligence unless the court is firmly convinced that such an interpretation reflects the intention of the parties. This principle, though variously articulated, is accepted with virtual unanimity among American jurisdictions.

Seckinger, 397 U.S. at 211, 90 S.Ct. at 885 (footnote omitted). Not only must the language be clear and unequivocal, but the burden of proof falls on the party seeking such indemnification. Gimble Brothers, 597 F.2d at 599. This burden is even greater where the party seeking indemnification drafted the language. Seckinger, 397 U.S. at 210, 90 S.Ct. at 884, Gimble Brothers, 597 F.2d at 599.

In the instant case the quoted contractual language was proposed by Beloit and HOVIC inserted it on its purchase order. See plaintiff's answers to HOVIC's first set of interrogatories, number 29. Hence we may state at the outset that Beloit has the burden of showing that the language clearly and unequivocally intended that Beloit should be indemnified for its own negligence. Moreover, any ambiguity will be construed "most strongly" against Beloit as drafter of the provision. Seckinger, 397 U.S. at 210, 90 S.Ct. at 884.

Beloit argues that the heading of the provision as "warranty" is not controlling and that the clause specifically mentions "claims of or negligent manufacture". We agree that the title of the provision is not controlling. However, the phrase "claims of or negligent manufacture" must be taken in the context of the sentence in which it is found. That sentence states, in essence, that Beloit shall not be liable for any of the eight types of contract damages listed, whether they result from "... claims of or negligent manufacture or otherwise." The next sentence provides, "The aggregate total liability of the seller under this contract, whether for breach of warranty or otherwise, shall in no event exceed the contract price." This sentence, particularly the "or otherwise" phrase, lacks the unambiguous and clear intention that Beloit be indemnified for its own negligence.

Beloit also points to the final sentence of the clause as manifesting a clear intention that HOVIC should indemnify Beloit for Norwilton Murray's injuries. It reads: "Buyer HOVIC agrees to indemnify and hold harmless seller Beloit from all claims by third parties which extend beyond the foregoing limitations on seller's liability." In Gimbel Brothers, supra, the court stated:

The cases have distinguished situations where the indemnity clause explicity referred to liability for a party's own negligence from situations where there was "an obligation to indemnify for `all liability' or `all loss.'"

468 F.2d at 599 (citation omitted). Here we have a situation which merely cites "all claims..." While it might not be necessary to specifically refer to liability for a party's own negligence, a provision makes no such specific reference from the language actually used, evidence a clear and unequivocal intent to do so. Such is not the case here. We are satisfied that this sentence, and indeed even the entire provision taken as a whole, does not clearly or unequivocally show an intention that Beloit be indemnified for third party personal injury claims caused by Beloit's negligence. An examination of cases...