Fall River Housing Authority v. H.V. Collins Co.

• Decision Date: 23 December 1992
• Citation: 604 N.E.2d 1310,414 Mass. 10
• Parties: FALL RIVER HOUSING AUTHORITY v. H.V. COLLINS COMPANY; Cape Cod Lath & Plaster, Inc., third-party defendant.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1310

604 N.E.2d 1310

414 Mass. 10

FALL RIVER HOUSING AUTHORITY v. H.V. COLLINS COMPANY; Cape Cod Lath & Plaster, Inc.,

third-party defendant.

Supreme Judicial Court of Massachusetts Suffolk.

Argued Nov. 3, 1992.

Decided Dec. 23, 1992.

Paul W. Goodale, Providence, R.I., for H.V. Collins Co.

Peter J. Gagne, Boston, for Cape Cod Lath & Plaster, Inc.

Before LIACOS, C.J., and WILKINS, NOLAN, LYNCH and GREANEY, JJ.

NOLAN, Justice.

Once again we must work our way through the brambles surrounding the right to indemnity at common law. In this case, there are two issues: (1) whether there is an implied right of indemnification arising from the terms of a subcontract between the general contractor and the subcontractor; and (2) if the right exists in this case, when does an action based on implied contractual indemnity accrue? We hold that there is no implied contractual indemnity in this case, and, consequently, we do not reach the second issue.

This case began on March 16, 1988, by a complaint founded on a contract dispute between the Fall River Housing Authority (Fall River) and the H.V. Collins Company (Collins), the general contractor on a housing development for the elderly. On April 27, 1988, Collins filed a third-party complaint against Cape Cod Lath and Plaster, Inc. (Cape Cod), a subcontractor on the development, for contribution and indemnification of any payments which Collins might have to make to Fall River. On April 9, 1990, the Superior Court judge granted Cape Cod's motion for summary judgment on the third-party claim and subsequently denied Collins' motion for reconsideration on September 25, 1990. The judge ruled that Collins' claim against Cape Cod was barred by the statute of limitations, ¹ and judgment was entered on February 5, 1991, dismissing Collins' third-party complaint as well as all remaining parties and claims in the case. However, when Collins turned to Fall River and moved for summary judgment on the ground that Fall River's claims against Collins were likewise time barred, a different judge on the Superior Court denied Collins' motion. The judge held that Fall River's claim against Collins, in contrast to Collins' third-party claim against Cape Cod, was not barred by the statute of limitations. ² In reaching her decision, the judge ruled that the previous decision was not controlling on the action between Fall River and Collins because it was based upon the subcontract between Collins and Cape Cod to which Fall River was not a party. Collins then settled with Fall River, and judgment was entered against Collins for $85,000 on November 15, 1990. Collins appeals only from the grant of summary judgment to Cape Cod on the third-party claim. ³

"An order granting or denying summary judgment will be upheld if the trial judge ruled on undisputed material facts and his ruling was correct as a matter of law." Commonwealth v. One 1987 Mercury Cougar Automobile, 413 Mass. 534, 536, 600 N.E.2d 571 (1992), citing Community Nat'l Bank v. Dawes, 369 Mass. 550, 556, 340 N.E.2d 877 (1976). In the present case, no material facts are in dispute, and, therefore, we review only whether Collins may maintain a claim against Cape Cod for implied contractual indemnity as a matter of law. The judge ruled that Collins' claim against Cape Cod accrued at the time Cape Cod allegedly breached its subcontract with Collins. Therefore, since Cape Cod's work was completed no later than October 31, 1981, and yet the complaint against Cape Cod was not filed until April of 1988, the judge ruled that Collins' claim against Cape Cod was barred by the six-year statute of limitations. We affirm.

In contrast to the procedural history, the facts of this case are quite straightforward. On October 9, 1980, Fall River contracted with Collins for the construction of a low-income elderly housing project. Collins then subcontracted with Cape Cod to install a synthetic stucco wall system manufactured by Dryvit System, Inc. (Dryvit). Cape Cod's work was finished by October, 1981; the work was certified as complete in November, 1981, and the subcontractors were paid the same month. The entire project was certified as substantially complete on March 22, 1982, and accepted by Fall River on November 11, 1983. Not until March of 1987, were any defects found in the exterior wall system. At that time an inspector discovered that water had penetrated the walls and damaged the insulation. In March, 1988, nearly six years after the project was certified complete, Fall River sued Collins, Collins' insurer, and Dryvit to recover the costs of removing and reinstalling the wall system and repairing all other damage caused by the leakage.

The subcontract between Collins and Cape Cod provides that Cape Cod will indemnify Collins for claims, damages, and expenses arising out of Cape Cod's negligent performance. The parties agree, however, that this provision does not apply to their situation. The subcontract also states that "[s]uch obligation shall not be construed to ... reduce any other right or obligation of indemnity which would otherwise exist as to any party...." We have held that indemnity provisions will be construed "fairly and reasonably ... to ascertain the intention of the parties and to effectuate their purpose." Whittle v. Pagani Bros. Constr. Co., 383 Mass. 796, 798, 422 N.E.2d 779 (1981), citing Shea v. Bay State Gas Co., 383 Mass. 218, 221-223, 418 N.E.2d 597 (1981), and cases cited. Collins contends that this provision preserves an implied right of contractual indemnity; we disagree.

When there is an express agreement of indemnity in a contract, a claim for indemnity accrues when there is a breach of that provision. See Ryan Stevedoring Co., Inc. v. Pan-Atlantic S.S. Corp., 350 U.S. 124, 130, 76 S.Ct. 232, 235, 100 L.Ed. 133 (1956) (formal indemnity bond creates independent contract right to recovery). ⁴ For example, in this case if a person were injured due to Cape Cod's negligence, then a breach of contract would occur when Collins pays damages to the injured person because Cape Cod expressly agreed to pay such damages. Consequently, a claim against Cape Cod for contractual indemnity would accrue from the time the indemnity provision was breached. Compare Peterson v. Abbe, 234 Mass. 467, 469-470, 125 N.E. 611 (1920) (express indemnity contract creates surety relationship so that indemnity claim accrues from failure of defendant principal to indemnify plaintiff surety), with Nutter v. Mroczka, 303 Mass. 343, 346, 21 N.E.2d 979 (1939) (indemnity claim accrues when payment violates express contract provision, but absent express indemnity clause, claim based only on breach of contract to pay mortgage). See Black's Law Dictionary 1442, Suretyship, Contract of (6th ed. 1990) (surety has indemnification claim against principal based on surety contract).

Lacking an express indemnity provision applicable to the facts of this case, Collins asks this court to find an implied right of contractual indemnity so that an equitable resolution may be reached. A contractual right to indemnity arises from the relationship between the parties. Araujo v. Woods Hole, Martha's Vineyard, Nantucket S.S. Auth., 693 F.2d 1, 2 (1st Cir.1982). We shall recognize an implied right to contractual indemnity only when there are "special factors" surrounding the contractual relationship which indicate an intention by one party to indemnify another in a particular situation. See Decker v. Black & Decker Mfg. Co., 389 Mass. 35, 38-39, 449 N.E.2d 641 (1983) (citing as persuasive Araujo, supra at 2-3). For example, we held that a contractual agreement by a town to provide police protection at a fireworks display implies an agreement by the town to indemnify the fireworks company for damages paid to a spectator who came too near the display and was injured. Monadnock Display Fireworks, Inc. v. Andover, 388 Mass. 153, 156, 445 N.E.2d 1053 (1983). Where a lessor agreed to make all outside repairs on a particular property, we construed the agreement as implying an obligation on the lessor to indemnify the lessee for damages arising from the failure to make the promised repairs. Great Atl. & Pac. Tea Co. v. Yanofsky, 380 Mass. 326, 331-332, 403 N.E.2d 370 (1980). In contrast, there is nothing in the contract or in the relationship between the parties in this case which compels us to find a right of implied contractual indemnity. Cf. New Bedford Gas & Edison Light Co. v. Maritime Terminal, Inc., 380 Mass. 734, 405 N.E.2d 653 (1980) (nothing in contract or relationship between parties to imply obligation to indemnify against liability for personal injury); Decker, supra 389 Mass. at 38-40, 449 N.E.2d 641. The provision to...