Gomez v. American Elec. Power Service Corp., 81-2409

• Decision Date: 30 January 1984
• Docket Number: No. 81-2409,81-2409
• Citation: 726 F.2d 649
• Parties: Ralph GOMEZ, Plaintiff, v. AMERICAN ELECTRIC POWER SERVICE CORPORATION, a corporation; Indiana and Michigan Electric Company, a corporation; Franklin Real Estate Company, a corporation, Defendants-Appellants. and McCulloch Oil Corporation, a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 649

726 F.2d 649

Ralph GOMEZ, Plaintiff, v. AMERICAN ELECTRIC POWER SERVICE CORPORATION, a corporation Indiana and Michigan Electric Company, a corporation; Franklin Real Estate Company, a corporation Defendants-Appellants and McCulloch Oil Corporation, a corporation, Defendant-Appellee.

No. 81-2409.

United States Court of Appeals Tenth Circuit.

Jan. 30, 1984.

Rehearing Denied Feb. 23, 1984.

Tim D. Dunn of Hanson, Russon, Hanson & Dunn, Salt Lake City, Utah, Attorneys for defendant-appellee.

Jay E. Jensen and Denton M. Hatch of Christensen, Jensen & Powell, Salt Lake City, Utah, for defendants-appellants.

Before BARRETT, DOYLE and McKAY, Circuit Judges.

BARRETT, Circuit Judge.

After examining the briefs and the appellate record, this three-judge panel has determined unanimously that oral argument would not be of material assistance in the determination of this appeal. See Fed.R.App.P. 34(a); Tenth Circuit R. 10(e). The cause is therefore ordered submitted without oral argument.

This is an appeal by Defendants American Electric Power Service Corporation, Indiana and Michigan Electric Company, and Franklin Real Estate Company (collectively referred to as AEP) ¹ of an order of partial summary judgment on a crossclaim for indemnification granted against them and in favor of Defendant McCulloch Oil Corporation (McCulloch). This cause was initiated by Ralph Gomez, a coal miner, for injuries he sustained on October 3, 1978, when the wall of a coal mine in which he worked collapsed on top of him. Gomez sued all defendants (AEP and McCulloch) on a theory of negligence.

Braztah Corporation, a wholly-owned subsidiary of McCulloch, was the operator of the mine and, therefore, Gomez's employer. Braztah was immune from suit by Gomez pursuant to the Utah Worker's Compensation Act. After Gomez filed his complaint, AEP brought a crossclaim against McCulloch, alleging that if it were found liable to Gomez, AEP was entitled to indemnity and contribution from McCulloch. ² We are concerned only with the indemnity issues on this appeal. Jurisdiction is based upon diversity of citizenship, 28 U.S.C. Sec. 1332.

FACTS

In 1971, McCulloch purchased some coal mines in Carbon County, Utah. Braztah became the operator of these mines, known as the Braztah Mines. In 1974, McCulloch, Braztah and AEP entered into a contract in which AEP was to pay Braztah for conducting the mining operation and AEP would also purchase the mined coal. However, the 1974 Contract was superseded in 1975 by a new contract which transferred ownership of the mines to AEP. ³ The 1975 Contract provided that Braztah, as operator of the mine, agreed to mine, produce and deliver a specified quality and quantity of coal to AEP, the owner of the mine. AEP agreed to accept and pay for any coal delivered under the Contract.

The Contract provided further that Braztah was solely responsible for the control and direction of the mines' employees. Braztah also agreed to use its best efforts to comply with all applicable governmental laws and regulations regarding mine operations, including those concerning mine safety. Article XXX of the 1975 Contract, provided in pertinent part:

Operator hereby agrees to indemnify, protect and save harmless I & M [AEP] from and against any and all losses, damages, injuries, claims, demands of whatsoever kind and nature asserted by third parties against I & M [AEP] and all expenses, legal or otherwise arising out of or in any way resulting from Operator's operations under or in performance of this Contract....

R., Supp. Vol. XVI at 71.

In Article XXIII(a) of the 1975 Contract, McCulloch covenanted to "cause Operator to perform its agreements and obligations under this Contract." R., Supp. Vol. XVI at 66.

On November 30, 1979, subsequent to Gomez' accident but prior to the time he filed suit, a "Settlement Agreement" was entered into between McCulloch, Braztah and AEP. This Agreement expressly superseded the 1975 Contract and transferred the entire operations of the Braztah Mines to AEP. In the Agreement, the parties also sought to clarify the obligations remaining between them. The parties dispute the extent that the Agreement released McCulloch and Braztah from their obligations under the 1975 Contract. Since the 1979 Agreement was entered into, Braztah has been dissolved.

On appeal, we must determine whether the district court erred by granting summary judgment in McCulloch's favor on the grounds that as a matter of law, AEP is not entitled to indemnity under the 1975 Contract nor under a common law theory.

STANDARD OF REVIEW

At the outset, it is necessary to describe the standard of review we are to follow. Because the sole issue before us is the propriety of the district court's grant of summary judgment, we must view the case in the same manner as did that court. See Western Casualty & Surety Co. v. National Union Fire Ins. Co., 677 F.2d 789, 791 n. 1 (10th Cir.1982); Luckett v. Bethlehem Steel Corp., 618 F.2d 1373, 1377 (10th Cir.1980). Thus, we must determine whether any genuine issue of material fact exists and, if not, whether the substantive law was correctly applied. See Fed.R.Civ.P. 56(c); Western Casualty, supra. In doing so, we must view the record on summary judgment in the light most favorable to the party opposing the motion. 10 Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d Sec. 2716, at 643 (2d ed. 1983) [quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) ]. See also Lindley v. Amoco Production Co., 639 F.2d 671, 672 (10th Cir.1981).

GENUINE ISSUES OF MATERIAL FACT IN CONTRACT ACTIONS

After carefully reviewing the entire record, we hold that the district court did not err by granting summary judgment in McCulloch's favor on the indemnity issue. First, we agree that there is no genuine issue of material fact regarding this proposition. Certainly, the question concerning the interpretation of a written agreement is one of fact. See Corbin on Contracts Secs. 545-554 (1952). Thus, in an ambiguous contract, if the intent of the parties is disputed, a genuine issue of material fact exists which cannot be determined summarily by the court. See 10A Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d Sec. 2730.1, at 273-75 (2d ed. 1983) [quoting Oil Trading Assoc's., Inc. v. Texas City Refining, Inc., 201 F.Supp. 846, 849 (S.D.N.Y.1962) ]. The initial question, however, concerning the existence of an ambiguity is one of law that may be decided summarily by the court. 10A Wright, Miller & Kane, supra Sec. 2730.1, at 275-79. If the language is clear, the parties' intentions are not at issue.

Although AEP and McCulloch dispute the meaning of the language in Article XXIII, the district court could have ⁴ determined it to be unambiguous. Thus, because we hold that the language of Article XXIII is clear, no factual question arises concerning the parties' intentions. Summary judgment is, therefore, the proper procedure to follow in this case.

CONTRACTUAL INDEMNIFICATION

Second, we hold as a matter of law, that the language of the 1975 Contract does not require McCulloch to indemnify AEP. The obligation to indemnify AEP was solely that of the operator, Braztah. Under Utah law, the interpretation of a contractual provision requires the determination of the intentions of the parties at the time it was made. DuBois v. Nye, 584 P.2d 823, 824-25 (Utah 1978); Barrus v. Wilkinson, 16 Utah 2d 204, 398 P.2d 207, 208 (1965). Those intentions may be found from the instrument itself if it is sufficiently clear. Oberhansly v. Earle, 572 P.2d 1384, 1386 (Utah 1977).

Article XXIII(a) clearly states that McCulloch merely covenanted to "cause" or to encourage Braztah to perform its agreements and obligations under the Contract, i.e., indemnification of AEP pursuant to Article XXX. The language does not require McCulloch to "perform" Braztah's obligations. To bolster this reading of Article XXIII(a), it is noteworthy that the language of part (b) of the same Article does in fact require McCulloch to actively perform under the Contract in the event its subsidiaries fail to perform. ⁵ If the parties had intended McCulloch to actually "perform" Braztah's indemnification obligations, they could have expressly said so, as they did in part (b).

We understand that, because Braztah no longer exists, AEP will not be entitled to a contractual right of indemnity from any party under the language of the Contract. However, absent some unconscionability at the time of a contract's formation, courts will not be concerned with how the parties fare thereunder. Holley v. Federal-American Partners, 29 Utah 2d 212, 507 P.2d 381, 383 (1973). We hold, therefore, that the district court did not err by finding no contractual right of indemnity in AEP against McCulloch. ⁶

COMMON LAW INDEMNIFICATION

Finally, we hold as a matter of law, that AEP is not entitled to common law indemnity from McCulloch. AEP contends that the Utah Supreme Court has recognized a right of common law indemnity in a party who is secondarily (passively) liable and who has sustained a loss to the injured party. See Salt Lake City v. Schubach, 108 Utah 266, 159 P.2d 149 (1945). AEP argues that it was passively liable and McCulloch was actively liable for Gomez' injuries; ⁷ thus, it should be allowed a claim of common law indemnity against McCulloch as a matter of law.

The only Utah decision dealing with this indemnity issue is Salt Lake City v. Schubach, supra, written in 1945. Since that opinion was rendered, however, the Utah Legislature has enacted a comparative negligence statute. See Utah Code Ann. Sec. 78-27-37 to -43 (1953). McCulloch contends that by adopting a comparative negligence doctrine, the Utah Legislature has abrogated any theory of common law indemnity. We disagree.

Initially, we note that because this is a diversity case and because there are no Utah state judicial decisions on...