Chrysler Corp. v. Skyline Indus. Services, Inc., Docket No. 159855
| Decision Date | 19 April 1993 |
| Docket Number | Docket No. 159855 |
| Citation | 502 N.W.2d 715,199 Mich.App. 366 |
| Parties | CHRYSLER CORPORATION, Plaintiff-Appellee, v. SKYLINE INDUSTRIAL SERVICES, INC., Defendant-Counter Plaintiff-Appellant, and Citizens Insurance Company, Defendant-Counter Defendant, and Insurance Marketing Systems and Matthew E. Williams, Third-Party Defendants. |
| Court | Court of Appeal of Michigan — District of US |
Loesch & Ball by Patrick D. Ball, Troy, for Skyline Indus. Services, Inc.
Before DOCTOROFF, C.J., and CAVANAGH and TAYLOR, JJ.
Skyline Industrial Services, Inc., seeks leave to appeal from a December 1, 1992, order of the Wayne Circuit Court denying its motion for summary disposition and granting Chrysler Corporation's motion for summary disposition regarding the issue of indemnification. Because the issues presented are of jurisprudential significance, yet resolvable by sufficient development of persuasive authorities so as not to warrant the delay that would be involved in plenary consideration, we elect to issue this peremptory opinion reversing the order denying Skyline's motion for summary disposition. See Wozniak v. General Motors Corp., 198 Mich.App. 172, 497 N.W.2d 562 (1993); Kerby v. Judges' Retirement Bd. of Michigan, 166 Mich.App. 302, 420 N.W.2d 195 (1988), and cases cited therein.
Chrysler (a Delaware corporation with headquarters in Michigan) and Skyline (a Michigan corporation) entered into a contract whereby Skyline was to provide painting services for Chrysler at its Belvedere, Illinois, assembly plant. The agreement contained an indemnification clause, whereby, if any person was injured on the job, Skyline agreed to indemnify Chrysler and hold it harmless. This portion of the agreement specifically referenced M.C.L. § 691.991; M.S.A. § 26.1146(1), which limits indemnification in construction contracts of this kind by precluding indemnification for any party's sole negligence. See Robertson v. Swindell-Dressler Co., 82 Mich.App. 382, 267 N.W.2d 131 (1978). Elsewhere, the contract obligated Skyline to comply with all applicable state, federal, and local laws.
When one of the workers was injured during the fulfillment of the contract in Illinois, the injured employee brought suit against Chrysler, which in the Illinois proceedings filed a cross-claim against Skyline for indemnification pursuant to the clause in the contract. Skyline claims that the Illinois court dismissed Chrysler's indemnification action, but no copy of the Illinois court order has been provided. Thus, it is unclear whether the dismissal was on a procedural or a substantive basis. However, it seems beyond dispute that, under Illinois law, indemnification clauses of this nature are wholly unenforceable. The Illinois Structural Work Act obligates owners to provide safe appliances and work sites and, further, prohibits owners from obtaining indemnification under construction contracts. Ill Rev Stat 1981, ch 48, p 60 et seq.; Davis v. Commonwealth Edison Co., 61 Ill.2d 494, 336 N.E.2d 881 (1975).
Following dismissal of the Illinois cross-claim, Chrysler brought this action in Michigan for indemnification. Skyline defended on three theories, including res judicata, which is not pursued here. Another defense raised by Skyline was Chrysler's failure to enforce a contractual provision requiring Skyline to insure both itself and Chrysler for any liability arising from execution of the contract. Skyline had supplied Chrysler with a copy of its certificate of insurance, showing only Skyline as the named insured. The Chrysler officer in charge of enforcing and overseeing this aspect of the contract testified that, when he examined the certificate of insurance, he thought it included Chrysler as a named insured, apparently an erroneous reading of the certificate. Skyline contended in the trial court, and asserts here, that Chrysler waived its right to be named as an insured by failing to enforce the insurance clause and thus should be precluded from obtaining indemnification under the contract. Skyline asserts that Chrysler's liability would have been covered by insurance and there would be no suit for indemnification if Chrysler had enforced the provision of the contract requiring it to appear as a named insured.
Accepting arguendo the trial court's finding that the contract calls for application of Michigan law, at least with regard to the terms that address the indemnification issue, it is clear that the indemnification clause is unenforceable because of the Illinois statute. With respect to conflict of laws, Michigan follows the position articulated in 1 Restatement Conflict of Laws, 2d, § 187, p 561. See Hardy v. Monsanto Enviro-Chem Systems, Inc., 414 Mich. 29, 86, n. 60, 323 N.W.2d 270 (1982). 1 Section 187 provides:
(1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.
(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either
(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or
(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.
(3) In the absence of a contrary indication of intention, the reference is to the local law of the state of the chosen law.
The referenced § 188, p 575, provides:
(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.
(2) In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:
(d) the location of the subject matter of the contract, and
(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.
These contacts are to be evaluated according to their relative importance with respect to the particular issue.
(3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189-199 and 203.
With regard to the term "domicil," that concept is inapposite to corporations under the Restatement 2d:
When a domicil is assigned to a corporation, it is always in the state of incorporation. No useful purpose, however, is served by assigning a domicil to a corporation. Most of the uses which the concept of domicil serves for individuals (see Comments c and d) are inapplicable to corporations, which do not, for example, vote, marry, become divorced, beget or bear children and bequeath property....
Attribution of a domicil to a corporation may lead to complications and confusion and should be avoided. [Comment 1 to § 11 of the Restatement 2d, p 46.]
Thus, examining this contract under § 188 of the Restatement 2d, the place of contracting is Michigan, which is also the place of negotiation of the contract. The place of performance and the location of the subject matter of the contract, however, are in Illinois. Chrysler is a Delaware corporation, Skyline a Michigan corporation. Chrysler does business in Michigan and Illinois, and so, at least for purposes of this contract, does Skyline.
The Restatement 2d clarifies that, under these circumstances, the place where the contract is to be performed has the more significant interest in enforcing a statute designed to regulate or deter specified business practices, such as indemnification:
And a state where a contract provides that a given business practice is to be pursued has an obvious interest in the application of its rule designed to regulate or to deter that business practice. [Comment c to § 188 of the Restatement 2d, p 578.]
Further clarification is provided by § 202 of the Restatement 2d, p 645:
(1) The effect of illegality upon a contract is determined by the law selected by application of the rules of §§ 187-188.
(2) When performance is illegal in the place of performance, the contract will usually be denied enforcement.
Here, the place of performance is Illinois, so § 202 clearly intimates that enforcement of the indemnification clause, barred by the Illinois statute, also is precluded when suit is brought in Michigan.
The purpose of the Illinois statute is to prevent injuries to persons employed in dangerous and extrahazardous occupations, so that negligence on...
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