Ethyl Corp. v. Forcum-Lannom Associates, Inc.

• Decision Date: 20 April 1982
• Docket Number: No. 3-181A7,FORCUM-LANNOM,3-181A7
• Citation: 433 N.E.2d 1214
• Parties: ETHYL CORPORATION and Capitol Products Corporation, Appellants (Defendants and Counter-claimants below), v.ASSOCIATES, INC., Appellee (Plaintiff and Counter-defendant below).
• Court: Indiana Appellate Court

Page 1214

433 N.E.2d 1214

ETHYL CORPORATION and Capitol Products Corporation Appellants (Defendants and Counter-claimants below), v. FORCUM-LANNOM ASSOCIATES, INC., Appellee (Plaintiff and Counter-defendant below).

No. 3-181A7.

Court of Appeals of Indiana, Fourth District.

April 20, 1982.

Stephen Bower, Kentland, for appellants.

George Vann, Barce, Vann & Ryan, Kentland, for appellee.

MILLER, Presiding Judge.

Appellant Ethyl Corporation and its subsidiary Capitol Products Corporation (owner) are appealing a judgment in favor of appellee Forcum-Lannom Associates, Inc. (builder) which enforced the builder's mechanic's lien, and awarded it $34,500 in damages, plus prejudgment interest and $17,505 in attorneys' fees. The owner claims the trial court erroneously entered judgment in favor of the builder on his complaint and against the owner on his counterclaim by: 1) failing to find the contract required the builder to construct the building addition in question in compliance with state building code regulations; 2) allowing prejudgment interest; and 3) awarding excessive attorneys' fees. We find the contract specifically obligated the builder to construct the addition in accordance with the building code regulations; thus we reverse and remand for a new trial on damages only. Because of our disposition of the appellant's first issue we need not address the other two; prejudgment interest and attorneys' fees for the builder were contingent upon judgment in his favor.

FACTS

In the fall of 1977 appellant owner desired to build an addition to his Capitol Products plant in Kentland, Indiana, and to that end contacted appellee builder. On December 22, 1977 the parties executed a written contract whereby the builder would "design and construct" an approximately 45,000 square foot addition to the plant for a sum in excess of $667,700. The contract called for the removal of the west wall of the existing building, resulting in a single, undivided building whose approximate size was in excess of 100,000 square feet. The transaction proceeded without incident until February 17, 1978 when the Indiana State Fire Marshal wrote to the builder and informed him that the builder's plans and specifications for the project did not comply with all required rules and regulations, specifically, that the building "shall have smoke and heat vents ... in accordance with Sec. 3205, UBC 1973," and "an annunciator panel in accordance with Sec. 3113-E, UBC 1973." ¹ The contract was silent with respect to the vents and annunciator, but the "Scope of the Work" section did specifically obligate the builder to "install an ordinary hazard wet sprinkler fire protection system" in the addition. However, the agreement also provided the "CONTRACTOR ... shall be responsible for all work which is implicit or accessory to this Scope of Work whether or not such work is expressly called for ... (a)ll work ... shall be in conformance with all current and applicable codes, rules, regulations, and standards." Furthermore, the "General Conditions" section of the contract explicitly stated:

"(t)he Contractor shall give all notices, comply with all laws, ordinances, rules and regulations bearing on the Work. The Contractor agrees to indemnify and hold Owner harmless from any loss, liability or penalty which might be imposed by reason of asserted or established failure of the Contractor or its employees or agents and/or its subcontractors and/or their employees or agents to comply with any applicable laws, ordinances, rules or regulations."

For several months both parties disputed their contractual liability to pay for the vents and annunciator panel required by the Fire Marshal, until the owner informed the builder, in a letter dated October 10, 1978, that it was going to withhold $34,500 of the contract balance as the estimated cost of engineering, buying and installing the additional equipment for the addition.

After filing its notice to hold a mechanic's lien, the builder brought suit to foreclose the lien, seeking $34,500 in damages plus interest and attorneys' fees. The owner filed a counterclaim in which he alleged the builder breached their contract by failing to place the addition in compliance with the building regulations; the counterclaim sought $47,642 in direct and consequential damages. Following a bench trial, the trial judge entered findings of fact and conclusions of law which stated in relevant part:

"the contract here involved may not reasonably be construed to require the builder (Forcum-Lannom) to pay for and install smoke and heat vents and an enunciator (sic), which are required to be installed in buildings in excess of 50,000 square feet when the plaintiff in this case clearly contracted to build an addition which consisted in floor area of approximately 45,000 square feet."

....

"Moreover, it is a cardinal rule of construction that legal documents will be strictly construed against its author (sic). Likewise, it is not incumbent upon the non-drafting party (in this case Forcum-Lannom) to demonstrate that its version of the contract terms is the only reasonable interpretation that can be made, since an interpretation of a contract against a party who prepared the instrument is preferred where different interpretations are possible or where ambiguities are present."

....

"Business contracts must be construed with business sense, as they naturally would be understood by intelligent men of affairs. The plaintiff in this case ought not to be required to furnish and install the costly items involved in this dispute when neither the scope of work, plaintiff's bid proposal, nor any other contract document specified that they be furnished."

Accordingly, the trial court denied the owner's counterclaim, upheld the builder's lien on the owner's real estate and assessed damages against the owner in the sum of $34,500, plus pre-judgment interest from October 10, 1978 and $17,505.05 attorneys' fees.

At trial the owner argued the regulations regarding smoke and heat vents applied when a building is enlarged to exceed 50,000 square feet, and the annunciator regulations applied if the enlarged building were greater than 100,000 square feet. To support its counterclaim it presented evidence of the installation cost of the vents and annunciator for the 45,000 square foot addition. The builder, inter alia, argued that he only contracted to build a structure containing 45,000 square feet and thus was only obligated to comply with regulations pertaining to structures of 45,000 square feet. Additionally, the builder introduced parol evidence which attempted to establish that at a meeting of representatives of both parties prior to the execution of the agreement it was agreed that the "scope of the work" section of the contract would establish the outer limits regarding what the builder had to do under the contract. ²

DISCUSSION AND DECISION

The critical question in this case is whether or not the builder was bound under the contract to pay for the smoke and heat vents and annunciator panel required by the State Fire Marshal. We hold the builder was obligated to do so. ³

"In deciding cases involving disputes over the meaning of written contracts, courts resort to the application of rules of construction and the receipt of extrinsic evidence only after their careful study of the entire contract itself has failed to make clear its meaning." Evansville-Vanderburgh School Corp. v. Moll, (1976) 264 Ind. 356, 362, 344 N.E.2d 831, 837. In the absence of ambiguity it is not within the function of the judiciary to look outside the instrument to arrive at the parties' intent. Jenkins v. King, (1946) 224 Ind. 164, 171, 65 N.E.2d 121, 123; See Bellew v. Byers, (1979) Ind., 396 N.E.2d 335, 337. In other words Indiana applies the so-called "four corners" rule in the construction of written instruments. E.g., Hauck v. Second National Bank of Richmond, (1972) 153 Ind.App. 245, 286 N.E.2d 852. This rule provides that in construing written instruments, the express language found within the four corners of the instrument, if unambiguous, determines the intent of the parties such that parol or extrinsic evidence is inadmissible to expand, vary or explain the instrument unless there has been a showing of fraud, mistake, ambiguity, illegality, duress or undue influence (defect in the formation of the contract). Lippeatt v. Comet Coal & Clay Co., Inc., (1981) Ind.App., 419 N.E.2d 1332. While an ambiguous adhesion contract is construed in the non-drafting party's favor, an unambiguous contract must be enforced according to its terms. Drake Ins. Co. v. Carroll Cty. Sheriff's Dept., (1981) Ind.App., 427 N.E.2d 1153; Cincinnati Ins. Co. v. Mallon, (1980) Ind.App., 409 N.E.2d 1100. A contract is ambiguous only where reasonable people could find its terms susceptible to more than one interpretation. Marksill Specialties, Inc. v. Barger, (1981) Ind.App., 428 N.E.2d 65; Piskorowski v. Shell Oil Co., (1980) Ind.App., 403 N.E.2d 838. Further, ambiguity is not established by the mere fact the parties assert different interpretations of the contract. Marksill Specialties, Inc. v. Barger, supra; Equitable Life Assurance Society of U.S. v. Short, (1975) 165 Ind.App. 338, 332 N.E.2d 273. Finally, whether an ambiguity exists must be determined by the application of the following principles:

1) Words used in a contract must be given their common meaning unless, from the entire contract and its subject-matter, it is clear that some other meaning was intended, and

2) Words, phrases, sentences and paragraphs of a contract are not to be read alone; the intention of the parties must be gathered from the entire contract.

Marksill Specialties, Inc. v. Barger, supra; Piskorowski v. Shell Oil Co., supra.

We find the contract in the present case is not ambiguous as the builder contends because the express language of the instrument taken as a whole shows the parties contemplated...