Gordon H. Ball, Inc. v. Oregon Erecting Co.

• Decision Date: 18 September 1975
• Citation: 539 P.2d 1059,273 Or. 179
• Parties: GORDON H. BALL, INC., a Nevada Corporation, Appellant, v. OREGON ERECTING CO., an Oregon Corporation, Respondent. . *
• Court: Oregon Supreme Court

Page 1059

539 P.2d 1059

273 Or. 179

GORDON H. BALL, INC., a Nevada Corporation, Appellant, v. OREGON ERECTING CO., an Oregon Corporation, Respondent.

Supreme Court of Oregon, In Banc. ^*

Argued and Submitted July 9, 1975.

Decided Sept. 18, 1975.

Jeffrey M. Batchelor, Portland, argued the cause for appellant. With him on the briefs were John Gordon Gearin and Gearin, Cheney, Landis, Aebi & Kelley, Portland.

Marvin S. Nepom, Portland, argued the cause for respondent.

McALLISTER, Justice.

Although this proceeding is erroneously called a declaratory judgment proceeding, it is in reality an action at law based on an express contract of indemnity. The action is brought by plaintiff Gordon H. Ball, Inc. against defendant Oregon Erecting Co.

Plaintiff Ball, as the prime contractor, contracted with the Oregon State Highway Department to construct the LaGrande section of the Old Oregon Trail Highway in Union County. The Oregon Erecting Company entered into a subcontract with the plaintiff to erect the bridges which were required by Ball's contract with the highway department.

On April 6, 1971, Cyril Dornan, an employee of Oregon Erecting fell to his death from a nearly completed bridge structure. There was evidence from which the jury could have found and did find in the case at bar that Dornan's death was caused by the negligence of his employer, Oregon Erecting, and that finding is not challenged on appeal.

In August, 1971, Dornan's widow and dependent children filed a wrongful death action in the Superior Court of California for Alameda County against Ball and others to recover $600,000 damages. The complaint contained three causes of action. The first and third charged wrongful, willful, reckless and wanton misconduct; the second cause alleged only simple negligence. The defense of the California action was tendered to Oregon Erecting but the tender was refused. Venue was changed to Contra Costa County, California.

Immediately prior to trial, the case was settled by Ball, Inc., which paid $107,500 to the Dornan heirs, and incurred $18,522.50 in costs and attorneys' fees. A consent judgment was entered.

Ball, having settled the action brought against it by the Dornan heirs, brought this action against Oregon Erecting to recover the amount paid the Dornan heirs plus its costs and attorneys' fees. Plaintiff Ball alleged that it had fully performed all the conditions of the subcontract and that Dornan's death was caused by defendant Oregon Erecting's breach of its duty to provide its workmen a safe place to work. Plaintiff Ball brought the indemnity action upon the express contract of indemnity given by Oregon Erecting to Ball as one of the provisions of their subcontract.

Defendant Oregon Erecting denied that it was under any obligation to indemnify plaintiff Ball because it alleged that Dornan's death was solely caused by plaintiff Ball's 'failure to provide adequate materials for walkways.'

Defendant Oregon Erecting further argued to the court that indemnity was barred (1) by its compliance with the Oregon Workmen's Compensation Law, (2) by the California consent judgment which established that Dornan's death was caused by plaintiff Ball's sole, willful and wanton negligence, and (3) by the fact that the death of Dornan was on premises under the joint control and supervision of both parties.

In the trial of the case at bar, the jury found in favor of Ball and against defendant Oregon Erecting. In a special verdict the jury found that Dornan's death was caused by the negligence of the defendant Oregon Erecting and it was not caused by any failure on the part of plaintiff Ball to furnish materials for walkways. Based on the jury verdict, the court entered a judgment in favor of plaintiff Ball against defendant Oregon Erecting for the sum of $126,022.50. ¹ However, the court later granted defendant's motion for a judgment notwithstanding the verdict.

The trial court's opinion, filed in letter form stated:

'I conclude that the language of ORS 656.018 makes clear the intention of the legislature to provide compensation as the exclusive remedy for the injured workman vis-a-vis his employer. I do not think that ORS 656.154, which authorizes an election to pursue a claim for damages against a third party not in the same employ and not a contributing employer exercising joint supervision and control, was intended to allow a circuitous recovery back against the injured workman's employer upon a theory of common law indemnity, * * *; or upon a theory of express contractual indemnity, * * *. To do so would be contrary to the public policy of the State of Oregon.'

The judgment for plaintiff Ball was set aside and judgment was entered for defendant Oregon Erecting for its costs and disbursements.

Defendant Oregon Erecting argued, and the trial court found, that ORS 656.018(1) ² bars an action for indemnity whether based on common law indemnity or on an express contract for indemnity. The trial court held that to find otherwise would be contrary to public policy.

Contracts for indemnity are not void as against public policy in Oregon. So. Pacific Co. v. Morrison-Knudsen Co., 216 Or. 398, 418, 338 P.2d 665 (1959). An indemnitee may legally contract for indemnity based in whole or in part on its own negligence if not wanton or criminal in nature. Waggoner v. Oregon Auto. Ins. Co. 99 Or.Adv. 1850, 1853, 526 P.2d 578 (1974).

The defendant Oregon Erecting voluntarily contracted Inter alia to indemnify the plaintiff Ball against any and all claims, demands, damages, judgments, awards, attorneys' fees, costs and expenses arising out of any failure of Oregon Erecting to perform conditions and terms of the contract between them or which were caused by any negligence of Oregon Erecting unless the same was caused by the sole negligence or willful misconduct of plaintiff Ball. ³ The jury verdict in the present case established that the death of Dornan, Oregon Erecting's employee, was caused by the negligence of defendant Oregon Erecting and was not caused by the negligence of plaintiff Ball.

Oregon's Workmen's Compensation Law allows an injured employee, or his beneficiary, to elect to sue a third party whose negligence caused or contributed to his injury. ORS 656.154 and ORS 656.578--595. It was this potential liability of Ball that Oregon Erecting agreed to assume by contract. The purpose of the legislature in adopting the Workmen's Compensation Law was to maintain certain benefits for the employee, avoid the expense of litigation, and limit the liability of a complying employer. Minutes, House Committee on Labor & Mamagement, Jan. 15, 1965. There is no indication that the legislature in enacting ORS 656.018(1) intended to preclude an employer from Voluntarily contracting with a third party to indemnify it for damages paid to an injured employee.

By the clear language of the statute, the immunity conferred on the employer by ORS 656.018 (1) is only against actions for damages on account of an employee's injury. Since the present case arises out of a contractual relationship between Oregon Erecting and Ball, it is governed by the decision in United States Fidelity & Guaranty Co. v. Kaiser Gypsum, Or., 539 P.2d 1065 (decided this day), that an action for indemnity based on the breach of an independent duty owed by the employer is not barred by ORS 656.018(1). Plaintiff Ball alleged that Oregon Erecting breached its independent duty to provide a safe place for its workmen to work and that this breach resulted in the death of Dornan. If there had been no express contract of indemnity, plaintiff Ball might have brought this action based on the alleged breach of the independent duty.

In this action, plaintiff Ball relies entirely on the contract of indemnity with Oregon Erecting.

'The courts are unanimous in holding that the workmen's compensation acts do not bar a claim for indemnity by the third party from the employer when that claim is based on an express contract of indemnity.' Note, Contribution and Indemnity, 42 Va.L.Rev. 959, 969 (1956).

See also, 2 Larson, Workmen's Compensation Law 76.41 (1975); Tucci & Sons, Inc. v. Carl T. Madsen, Inc., 1 Wash.App. 1035, 467 P.2d 386, 389--90 (1970). The only authority to the contrary cited by defendant Oregon Erecting is Gulf Oil Corp. v. Rota-Cone Field Operating Co., 84 N.M. 483, 505 P.2d 78 (1972), a case which appears to stand alone and is not persuasive. We hold, with the vast majority of jurisdictions, that the exclusive liability provisions of the workmen's compensation law do not bar a claim based on an express contract of indemnity.

Defendant next argues that because the consent judgment entered in California established plaintiff Ball's willful, wrongful, and reckless negligence, under either the principles of Res judicata or collateral estoppel, plaintiff Ball is barred by the terms of the contract from obtaining indemnity. The trial court held that the consent judgment did not constitute a conclusive determination that the death of Dornan resulted from the sole negligence or willful misconduct of plaintiff Ball. We agree.

The consent judgment entered in California is entitled to full faith and credit in Oregon. Harding v. Harding, 198 U.S. 317, 341, 25 S.Ct. 679, 49 L.Ed. 1066 (1905). The Oregon rule, and the majority rule, is that a consent judgment is binding and conclusive upon the parties and those in privity with them to the same extent as a judgment rendered upon controverted facts at a contested trial. State ex rel. Dean v. Dean, 136 Or. 694, 698, 300 P. 1027 (1931); Annot., Consent Judgment as Res Judicata, 2 A.L.R.2d 514, 520--21 (1948); Annot., Consent Judgment as Res Judicata, 97 L.Ed. 1188, 1191--92 (1953). Courts have generally also held that consent judgments do not have any greater validity or broader scope than judgments rendered upon matters actually litigated. United States v. International Bldg. Co., 345 U.S. 502, 506, 73 S.Ct. 807...