Herchelroth v. Mahar

• Decision Date: 03 October 1967
• Citation: Herchelroth v. Mahar, 36 Wis.2d 140, 153 N.W.2d 6 (Wis. 1967)
• Parties: Christian S. HERCHELROTH, Plaintiff, v. Michael P. MAHAR, Defendant, Marvin Belt, d/b/a Marvin Belt Co., Defendant-Appellant, Wolpin Co., a foreign corp., Defendant-Respondent.
• Court: Wisconsin Supreme Court

Page 6

153 N.W.2d 6

36 Wis.2d 140

Christian S. HERCHELROTH, Plaintiff, v. Michael P. MAHAR, Defendant Marvin Belt, d/b/a Marvin Belt Co., Defendant-Appellant Wolpin Co., a foreign corp., Defendant-Respondent.

Supreme Court of Wisconsin.

Oct. 3, 1967.

Rehearing Denied Nov. 28, 1967.

Edward Nager, Madison, for appellant, George A. Jones, Mansfield, Sulzbach & Jones, Detroit, Mich., Robert R. Studt, Jenswold, Studt, Hanson, Clark & Kaufmann, Madison, of counsel.

Whyte, Hirschboeck, Minahan, Harding & Harland, Milwaukee, for respondent. Edward D. Cleveland, Milwaukee, Harold M. Shapero, Detroit, Mich., of counsel.

HANLEY, Justice.

Appellant nowhere in his brief argues in support of his appeal from the order denying his 'motion for declaratory judgment' and motion for summary judgment, nor includes the order in his appendix. This portion of the appeal can, therefore, be dismissed. Schaefer v. Bednarski (1956), 271 Wis. 574, 74 N.W.2d 191.

The respondent's cross complaint alleged that the truck in the accident 'was under written lease' between respondent and appellant, which provided in part as follows:

'* * * The LESSOR agrees to secure and pay for property damage and public liability insurance on the leased equipment and to save the LESSEE harmless from any damage thereby during the duration of this agreement. * * *'

Appellant's first contention is that the above-stated language, which appeared in a rider to the parties' original lease agreement, does not impose liability on him for damages to a third person, incurred solely as a result of the negligence of the lessee-indemnitee because there is no clear and unequivocal language in the indemnification agreement so stated. He argues that his obligation was merely to procure liability insurance and to save respondent harmless from the result of its failure to do so. Appellant had in fact secured insurance but the carrier became insolvent after the accident and cannot apparently be looked to for indemnification.

The trial court held that the only interpretation that could be applied to the 'save harmless' clause is that it provided for the indemnification of Wolpin, the lessee, in the event a third party sustained damage as a result of the leased equipment.

Generally, contracts providing for indemnification in the case of the indemnitee's negligence are considered valid and not contrary to public policy. Mustas v. Inland Construction Inc. (1963), 19 Wis.2d 194, 120 N.W.2d 95, 121 N.W.2d 274; Hartford Accident & Indemnity Co. v. Worden-Allen Co. (1941), 238 Wis. 124, 297 N.W. 436. Wisconsin, however, is one of the many states which favors strict construction of indemnity contracts. Mustas v. Inland Construction Inc., supra; Majestic Realty Co. v. Brant (1929), 198 Wis. 527, 224 N.W. 743. In Mustas the indemnification agreements provided that the subcontractor assumes full responsibility and risk for damage in performance of the contract and agrees to hold the owner and contractor harmless from all claims 'arising out of the subcontractor's operations' or, as alternatively stated in another paragraph of the agreements, 'arising out of or in connection with the performance of the contract.' The court there held that the indemnity contracts did not provide for indemnification for negligence caused solely by the indemnitee because of the lack of express provision to that effect.

Appellant in his brief cites several cases involving indemnity contracts which contain phraseology similar to the 'arising out of the performance of the contract' language of Mustas, in which the courts held that absent clear and unequivocal language to that effect, the indemnitor is not bound to indemnify the indemnitee for the latter's negligence. General Accident Fire and Life Assurance Corp., Ltd., v. Finegan and Burgess, Inc. (6th Cir. 1965), 351 F.2d 168; Kansas City Power & Light Co. v. Federal Construction Corp. (Mo. 1961), 351 S.W.2d 741; Pittsburgh Steel Co. v. Patterson-Emerson-Comstock, Inc. (1961), 404 Pa. 53, 171 A.2d 185.

We are of the opinion, however, that there is a significant difference between the facts in those cases and the facts here for the reason that the intent of the parties here was to affect in some way the respondent-lessee's obligation to bear the cost of his negligent acts and that the dispute is concerning the extent to which the appellant assumed that obligation.

Appellant would be in a better position to avail himself of the strict construction rule here if he were able to show some purpose for the indemnity agreement other than to affect respondent's responsibility for his negligent acts. But here appellant admits that he was under some obligation to purchase liability insurance and thus to protect respondent from the consequences of his negligence at least to that extent. In fact, he contends he has fulfilled that obligation. Thus, the issue here is the effect of the language 'and to save the LESSEE harmless from any damages thereby during the duration of the agreement' on the extent to which appellant has assumed the obligation to become responsible for the negligent acts of the lessee in the use of the leased vehicles.

Appellant argues that the above clause refers to the first clause in the indemnification agreement, '(t)he LESSEE agrees to secure property damage and public liability insurance on the leased equipment.' The sense of the clause would then be, 'The lessor agrees to secure and pay for property damage and public liability insurance on the leased equipment and, by so doing, to save the lessee harmless from any damage caused by operation of the leased equipment for the duration of the agreement.' By this interpretation the second clause in the agreement is surplusage--an explanation of the reason for the purchase of insurance. This would be tenable only if the clause read 'and thereby to save the lessee harmless from any damage during the duration of this agreement.

The word 'thereby,' however, appears after the word 'damages,' and the sense of the clause then is, 'to save the lessee harmless from any damage caused by the operation of the leased equipment during the duration of the agreement.' Read in light of the first clause where the parties could not have but intended that the insurance appellant was to secure and pay for was to protect the respondent from the consequences of his own negligence, the additional language would be meaningless and inoperative if it did not oblige appellant to indemnify respondent for consequences of his own negligent acts.

We believe the second clause was intended to indemnify respondent for consequences of his own negligent acts and that therefore the Mustas Case, supra, and the other cases cited by the appellant do not apply because they involved indemnification clauses containing broad and general language where the language would not be rendered wholly inoperative if the indemnitor was not required to indemnify the indemnitee for its sole negligence.

This construction of the clause is consonant with the rule of construction that a construction of the agreement which gives reasonable meaning to all provisions is preferable to one which leaves part of the language useless or inexplicable or creates surplusage. Goldmann Trust v. Goldmann (1965), 26 Wis.2d 141, 131 N.W.2d 902; Lauterbach v. Brown (1959), 7 Wis.2d 240, 96 N.W.2d 605.

Appellant next contends that the dismissal of its cross complaint when none of the allegations were denied or controverted was error because of sec. 263.26, Stats., which states that:

'Every material allegation of the complaint, and of a counterclaim not controverted as prescribed, shall, for the purposes of the action, be taken as true. But the allegation of new matter in an answer not pleaded as a part of a counterclaim or of new matter in a reply is deemed controverted.'

Appellant's cross complaint was against respondent for indemnity. Appellant, however, incorporated by reference all of his earlier admissions into his cross complaint whereby he admitted the lease provision which the trial court held required him to indemnify. Furthermore, the issue of indemnification was already raised by defendant-respondent's cross complaint and by defendant-appellant's answer thereto, which admitted the existence of the indemnity provision. The legal issue of the effect of the indemnity language was decided adversely to appellant. Appellant's cross complaint against respondent attempts to raise the same issue again. Since the issue was already effectively disposed of and since whatever error there was in no way prevented appellant from litigating any issue that he could not otherwise litigate, we do not think dismissal of the cross complaint without there being a responsive pleading was error. The purpose of sec. 263.13 and sec. 263.26, Stats., is to require the defendant to join issue under pain of otherwise admitting the truth of the allegations of the complaint. Here the issue raised by appellant's cross complaint had already been decided, and, therefore, no further pleading was required.

Appellant further claims that the trial court erred in not allowing him to amend his answer to defendant-respondent's cross complaint to deny that there was in effect a lease with an indemnity provision requiring appellant to indemnify respondent. Respondent's cross complaint against appellant alleged the existence and contents of an indemnity provision in a lease, which appellant in its answer admitted. Several counsel were involved at various stages for the appellant. Trial counsel for appellant argued to the trial court in support of his motion to amend the...