Henry C. Beck Co. v. Fort Wayne Structural Steel Co.

• Decision Date: 08 March 1983
• Docket Number: Nos. 82-2134,82-2135,s. 82-2134
• Citation: 701 F.2d 1221
• Parties: HENRY C. BECK COMPANY, Plaintiff-Appellant, v. FORT WAYNE STRUCTURAL STEEL COMPANY, Defendant-Appellant, and Martin, Incorporated, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1221

701 F.2d 1221

HENRY C. BECK COMPANY, Plaintiff-Appellant, v. FORT WAYNE STRUCTURAL STEEL COMPANY, Defendant-Appellant, and Martin, Incorporated, Defendant-Appellee.

Nos. 82-2134, 82-2135.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 11, 1983.

Decided March 8, 1983.

Arthur G. Surguine, Jr., Hunt, Suedhoff, Borror & Eilbacher, Fort Wayne, Ind., for plaintiff-appellant.

James P. Fenton, Barrett, Barrett & McNagny, Fort Wayne, Ind., for plaintiff-appellee.

George E. Fruechtenicht, Rothberg, Gallmeyer, Fruechtenicht & Logan, Fort Wayne, Ind., for defendant-appellee.

Before PELL, CUDAHY, and POSNER, Circuit Judges.

PELL, Circuit Judge.

In this diversity case, the plaintiff, Henry C. Beck Co. (Beck), and defendant Fort Wayne Structural Steel Co. (FWSS), appeal from the district court's dismissal of Beck's claim and FWSS's cross-claim against Martin, Inc. (Martin) for indemnification. Beck and FWSS seek indemnification for amounts paid a Martin employee in settlement of the employee's damage suit against Beck. The primary issues on appeal are whether the claim and cross-claim are barred by either the statute of frauds or the exclusive remedy provision of the Indiana Workmen's Compensation Act.

I. FACTS

Beck, a Texas corporation, contracted to build an office building in Fort Wayne, Indiana. Beck entered into a subcontract with FWSS, an Indiana corporation. FWSS was to supply and erect structural steel and metal decking for the building and was to furnish the necessary materials, tools, equipment, and labor for this aspect of the construction.

The written contract between Beck and FWSS contained an indemnity provision. Paragraph 7, the portion of the contract stating the terms of indemnification, provides in pertinent part:

The Subcontractor shall indemnify and hold harmless the Agent, the Owner and the Architect, and their agents and employees, from and against all claims, damages, losses and expenses, including attorneys' fees, arising out of or resulting from the performance of the Subcontractor's Work under the Contract Documents, provided that any such claim, damage, loss or expense (a) is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including the loss of use resulting therefrom, and (b) is caused in whole or in part by any negligent act or omission of the Subcontractor or anyone directly or indirectly employed by him or anyone for whose acts he may be liable, regardless of whether it is caused in part by a party indemnified hereunder.... [T]he indemnification obligation under this Paragraph 7 shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for the Subcontractor under workmen's compensation acts, disability benefit acts or other employee benefit acts.

FWSS then subcontracted the actual erection of the structural steel and metal decking to Martin, which is similarly an Indiana corporation. The contract between FWSS and Martin was oral. Martin agreed to be bound by the contract between FWSS and Beck. Pursuant to its agreement with FWSS, Martin furnished Beck and FWSS a certificate of insurance. The certificate of insurance explicitly recites Paragraph 7 of the Beck-FWSS contract, including the clause stating that the indemnification obligation is not limited by "compensation or benefits payable by or for the Subcontractor under workmen's compensation acts."

On August 20, 1975, James Wiist, a Martin employee, was injured while working on the construction project. The workmen's compensation carrier for Martin paid benefits to Wiist.

On August 19, 1977, Wiist filed suit against Beck, seeking damages for his injuries. In his complaint, Wiist alleged the negligence of Beck but made no mention of any negligence by Martin or FWSS.

On September 19, 1977, Beck filed a third-party complaint for indemnification against FWSS. Subsequently, Wiist's suit was settled for $175,000.00. Beck paid $50,000.00 of the amount and FWSS paid the remaining $125,000.00.

On July 17, 1980, Beck filed the instant suit, seeking indemnification from FWSS and Martin. FWSS filed a cross-claim against Martin for indemnification. Martin subsequently moved to dismiss the claim and cross-claim, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for failure to state a claim. Martin's motion was granted by the magistrate and was entered as a final judgment pursuant to Rule 54(b), Fed.R.Civ.P. 54(b).

II. PRELIMINARY ISSUES

Before turning to the principal legal questions raised by these appeals, several preliminary matters must be resolved. First, Martin asserts that there was no "understanding" and certainly no express contract between it and FWSS regarding indemnification. In reviewing the grant of a motion to dismiss pursuant to Rule 12(b)(6), however, we must consider the complaint in the light most favorable to the claimant. Illinois Migrant Council v. Campbell Soup Co., 519 F.2d 391, 394-95 (7th Cir.1975), and must resolve every reasonable Second, Beck's brief discusses at some length why it was improper for the district court to dismiss the claim and cross-claim on the ground that the indemnification agreement failed to meet the stringent standards applicable to an agreement to indemnify a party for his own negligence. The decision and order below, however, both explicitly state that the dismissal is based on the applicability of the statute of frauds and the policy underlying the exclusive remedy provision of the Indiana Workmen's Compensation Act. Even a cursory reading of Paragraph 7 suggests that the right to indemnification from Martin exists only if Martin's negligence were at least a part of the cause for Wiist's injuries. We therefore conclude that the district court neither could properly have nor in fact did dismiss the claims on this ground. ¹

doubt in favor of the claimant, Burns v. Paddock, 503 F.2d 18, 25 (7th Cir.1974). For purposes of this appeal, we must assume that Martin did agree orally to be bound by all terms of the Beck-FWSS written contract and that Martin understood Paragraph 7 of that contract to be an explicit agreement of indemnity.

Finally, Martin urges on appeal that it has no duty whatsoever to Beck because there was no contract between the two parties. Martin's argument must fail, however, if an enforceable contract existed between FWSS and Martin and if Beck was the intended third-party beneficiary of that contract. E.g., Miller v. Farr, 178 Ind. 36, 98 N.E. 805 (1912).

The alleged terms of the FWSS-Martin contract were that Martin agreed to be bound to Beck by the same terms and conditions as FWSS was. Those terms and conditions include the indemnity provision of Paragraph 7. Agreeing to be so bound is strong evidence that Beck was indeed the intended third-party beneficiary.

The certificate of insurance supports this view. Beck, which is termed the "Agent" on the certificate, is assured ten days prior notice of any cancellation or material change in the insurance. The indemnity provision, which is listed as one of the insured risks, is identical to Paragraph 7 of the Beck-FWSS contract. ² The certificate of insurance is entirely consistent, therefore, with the terms of the FWSS-Martin oral contract: Beck was the beneficiary of the indemnity provision.

The final aspect of Martin's argument on this issue is that Martin's insurer (as opposed to Martin) undertook only an obligation to guarantee FWSS's performance of the indemnification provision. No obligation existed unless and until FWSS refused to perform. This argument is not persuasive. The insurance certificate Martin provided Beck does not explicitly mention FWSS, let alone condition Martin's liability on FWSS's nonperformance. The certificate, on its face, is consistent with Martin's having agreed to be bound to Beck in the same manner as FWSS was. The interpretation urged by Martin does not provide a grounds for dismissal of the Beck and FWSS claims.

III. STATUTE OF FRAUDS

The district judge relied in part on the statute of frauds in dismissing the claims against Martin. Section 32-2-1-1 of the Indiana Code provides:

Sec. 1. No action shall be brought in any of the following cases: ...

Second. To charge any person, upon any special promise, to answer for the debt, default or miscarriage of another; ...

Unless the promise, contract or agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith.

Ind.Code Sec. 32-2-1-1 (Burns 1980). The issue is whether the FWSS-Martin contract Martin's primary argument, in support of the district court's holding, is that its agreement with FWSS falls within the literal language of Section 32-2-1-1 because the appellants seek recovery from Martin on the debt owed by Beck, by virtue of Beck's own negligence, to Wiist. Martin asserts that he is being asked therefore to "answer for the debt, default or miscarriage of another." An initial flaw in this argument is that it assumes both that Beck was the sole negligent party and that the Paragraph 7 indemnification agreement establishes Beck's right to be indemnified by Martin (or FWSS) if the negligence is wholly attributable to Beck. As discussed in Section II, supra, the clear language of the agreement appears to preclude the right to indemnification if Beck is solely liable. More importantly, neither of the assumptions upon which Martin relies was decided below. In determining the applicability of the statute of frauds to the indemnification agreement, we must assume, for purposes of reviewing this Rule 12(b)(6) dismissal, that the negligence which resulted in Wiist's injuries is at least partly attributable to Martin.

was one within the scope of this statutory provision.

We are aware of no Indiana case, nor any decision from another jurisdiction,...