City of Haverhill v. George Brox, Inc.

• Decision Date: 15 September 1999
• Docket Number: No. 97-P-1896,97-P-1896
• Citation: 47 Mass.App.Ct. 717,716 N.E.2d 138
• Parties: CITY OF HAVERHILL v. GEORGE BROX, INC.; Gordon Construction Corporation, third-party defendant.
• Court: Appeals Court of Massachusetts

Page 138

716 N.E.2d 138

47 Mass.App.Ct. 717

CITY OF HAVERHILL v. GEORGE BROX, INC.; Gordon Construction Corporation,

third-party defendant.

No. 97-P-1896.

Appeals Court of Massachusetts,

Essex.

Argued April 14, 1999.

Decided Sept. 15, 1999.

Kara Larzelere, Boston, for Gordon Construction Corporation.

John A. Lacaire, Burlington, for George Brox, Inc.

Present: GREENBERG, LENK, & SPINA, JJ.

SPINA, J.

George Brox, Inc. (Brox), filed a third-party complaint against Gordon Construction Corp. (Gordon) seeking indemnification under the terms of a public works subcontract for payment made on a negligence claim. A Superior Court judge allowed Brox's motion for summary judgment and denied Gordon's cross motion for summary judgment. On appeal, Gordon challenges the judge's rulings (1) that the subcontract became effective before the effective date of G.L. c. 149, § 29C, and that consequently the statute had no impact on the indemnification clause of the subcontract, and (2) that Maine law, which prohibits such indemnification clauses, does not apply. We affirm, but for reasons different than those relied on by the motion judge.

The material facts are not disputed. ¹ Brox was awarded a general contract by the Commonwealth's Department of Public Works (DPW) on January 14, 1985, to resurface Route 125 in the city of Haverhill (city). Gordon, a Maine corporation authorized to do business in Massachusetts, submitted quotes to Brox for subcontracting work, and Brox responded favorably on March 4, 1985, by mailing to Gordon a subcontract and various other forms, including a subcontractor's certification that Gordon would comply with certain antidiscrimination and affirmative action requirements. Gordon executed the subcontract in Maine on March 8, 1985, and mailed it back to Brox with the other completed forms. Section 19 of the subcontract stated "[t]his subcontract shall become effective upon approval of the subcontractor by" the DPW. On March 13, 1985, Brox sent a letter to the DPW requesting approval of Gordon as Brox's subcontractor. On April 7, 1985, G.L. c. 149, § 29C, set forth in the margin, ² became effective. On June 5, 1985, the DPW approved Gordon as a subcontractor to Brox.

Brox began work on the Haverhill project on March 20, 1985. Gordon began its work under the subcontract on November 19, 1985. On November 20, a reserve police officer from the Haverhill police department was working a paid detail at Brox's request. ³ It was the officer's job to provide traffic control in the construction area. The police officer was following two Gordon employees down the highway with his automobile when he struck and injured them. The two Gordon employees, who were residents of Maine, received workers' compensation benefits from Gordon's workers' compensation insurer pursuant to the laws of Maine.

The two employees filed a personal injury action against the police officer, the city of Haverhill, and Brox. The city settled the claims against it and then brought this action against Brox seeking indemnification under the terms of the general contract between the DPW and Brox. Brox, with contribution from Gordon, settled with the city. Brox then looked to Gordon for indemnification of the amount it paid, based upon Section 7 of the subcontract, which provided that Gordon, as subcontractor, would "indemnify and save harmless [Brox, as general contractor] from any and all claims ... arising out of the performance of work hereunder."

1. Central to this case is the meaning of the phrase "effective upon approval" appearing in Section 19 of the subcontract. Gordon argues that Section 19 created a condition precedent to the formation of the subcontract such that the subcontract did not come into existence until June 5, 1985, when the DPW approved Gordon as a subcontractor on the project. If Gordon is correct, then G.L. c. 149, § 29C, which became effective on April 7, 1985, would operate to nullify the indemnification clause of the subcontract. See Harnois v. Quannapowitt Dev., Inc., 35 Mass.App.Ct. 286, 619 N.E.2d 351 (1993). Brox contends that the subcontract came into existence on March 8, 1985, when it was executed by Gordon, and that Section 19 created a condition precedent to the parties' rights to immediate performance under the subcontract. The motion judge agreed that the subcontract was formed on March 8, 1985, but found that Section 19 created a condition subsequent which, if unmet, would void the subcontract. In the view of the judge and Brox, the subcontract came into existence before § 29C became effective and thus escaped its reach. See Jones v. Vappi & Co., 28 Mass.App.Ct. 77, 81, 546 N.E.2d 379 (1989).

Contract conditions precedent generally are of two kinds. The first involves issues of offer and acceptance which precede and determine the formation of a contract. See Massachusetts Biographical Soc. v. Howard, 234 Mass. 483, 125 N.E. 605 (1920); Tilo Roofing Co. v. Pellerin, 331 Mass. 743, 122 N.E.2d 460 (1954). The second arises from the terms of a valid contract and defines an event which must occur before a right or obligation matures under the contract. See Sechrest v. Safiol, 383 Mass. 568, 571, 419 N.E.2d 1384 (1981); Massachusetts Mun. Wholesale Elec. Co. v. Danvers, 411 Mass. 39, 45, 577 N.E.2d 283 (1991); Wood v. Roy Lapidus, Inc., 10 Mass.App.Ct. 761, 763 n. 5, 413 N.E.2d 345 (1980). See also Corbin, Contracts § 628 (1960 & [47 Mass.App.Ct. 720] Supp.1999); 5 Williston, Contracts § 666A (3d ed. 1961 & Supp.1999); Restatement (Second) of Contracts § 224 (1981). In contrast "[a] condition subsequent is a condition which relieves a party of the obligation of further performance" under a valid contract. Wood v. Roy Lapidus, Inc., 10 Mass.App.Ct. at 764 n. 6, 413 N.E.2d 345.

Where the language of a contract is not ambiguous, the words will be given their plain meaning, Freelander v. G. & K. Realty Corp., 357 Mass. 512, 515-516, 258 N.E.2d 786 (1970), or their well established meaning, Erhard v. F.W. Woolworth Co., 374 Mass. 352, 355, 372 N.E.2d 1277 (1978). The phrase "effective upon approval" in Section 19 is not without ambiguity. Gordon equates it with existence; Brox, with operation. Where the terms of an instrument are ambiguous, a court must determine meaning from the intent of the parties upon consideration of the words in question, the entire instrument, and surrounding circumstances. See Massachusetts Mun. Wholesale Elec. Co. v. Danvers, 411 Mass. at 45-46, 577 N.E.2d 283. "Justice, common sense and the probable intention of the parties are guides to construction of a written instrument." Stop & Shop, Inc. v. Ganem, 347 Mass. 697, 701, 200 N.E.2d 248 (1964). "So far as reasonably practicable [a contract] should be given a construction which will make it a rational business instrument and will effectuate what appears to have been the intention of the parties." Bray v. Hickman, 263 Mass. 409, 412, 161 N.E. 612 (1928).

The subcontract at issue has all the components of a valid contract: offer, acceptance, consideration, and terms setting forth the rights and obligations of the parties. It was executed under seal. The parties are content that the subcontract was a complete expression of their agreement and that no other terms were left to negotiate. The condition of the DPW approval was created by express provision of the subcontract, and, upon such condition being met, the rights and obligations of the parties as defined by the subcontract would spring forth without need for any further action by the parties. This could only occur if the subcontract was in existence at the time the condition was met. Contrast Massachusetts Biographical Soc. v. Howard, 234 Mass. 483, 125 N.E. 605, where a signed document, on its face a valid contract, was found not intended by the parties to become a contract unless and until the defendant notified the plaintiff, pursuant to a contemporaneous oral agreement, that he accepted the writing as a contract. As such, the document was merely an offer by the plaintiff, acceptance of which had never been communicated, and no contract was formed. Id. at 488, 125 N.E. 605. Similarly, in Tilo Roofing Co. v. Pellerin, 331 Mass. 743, 122 N.E.2d 460, parol evidence was properly admitted to show that a writing purporting to be a home improvement contract was never intended by the parties to be a contract at the time it was signed, and would not become a contract unless and until the homeowners notified the contractor that they were willing to accept the writing. Id. at 746, 122 N.E.2d 460. Although there the court reasoned that a contract never had been formed due to the absence of acceptance by the homeowners, the facts suggest that the homeowners did accept the contract, but that the parties had agreed such acceptance could be revoked, and it was. In both Massachusetts Biographical Soc., supra, and Tilo Roofing Co., supra, a condition precedent applied to the formation of the contract. Here, Gordon accepted Brox's terms, and a contract was formed without provision for either party, respectively, to revoke either offer or acceptance.

Significantly, Gordon concedes that beginning March 8, 1985, the executed subcontract eliminated the risk to Brox that Gordon would refuse to sign ⁴ the subcontract once the DPW approved Gordon as subcontractor; and the subcontract eliminated the risk to Gordon that Brox would employ a different subcontractor regardless of whether Gordon was approved. Gordon does not explain how these protections could arise from a writing that was not binding upon the parties. Rather, we see such protections arising from an irrevocable relationship under an existing contract. Gordon alternatively contends that these protections arose by reason of its detrimental reliance on Brox's offer, under principles of promissory estoppel, apart from the existence of a contract. See Loranger Constr. Corp. v. E.F. Hauserman Co., 376 Mass. 757, 760, 384 N.E.2d 176 (1...