Hydro-Dyne, Inc. v. Ecodyne Corp.

• Decision Date: 13 January 1987
• Docket Number: No. 85-3574,INC,HYDRO-DYN,85-3574
• Parties: Unpublished Disposition NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. , Plaintiff-Appellee, v. ECODYNE CORPORATION, Trans Union Corporation, Defendants, The Affiliated FM Insurance Company a/k/a Factory Mutual System a/k/a Factory Mutual Engineering, Third-Party Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1407

812 F.2d 1407

Unpublished Disposition

NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.

HYDRO-DYNE, INC., Plaintiff-Appellee, v. ECODYNE CORPORATION, Trans Union Corporation, Defendants The Affiliated FM Insurance Company a/k/a Factory Mutual System a/k/a Factory Mutual Engineering Third-Party Defendant-Appellant.

No. 85-3574.

United States Court of Appeals, Sixth Circuit.

Jan. 13, 1987.

Before MARTIN, MILBURN and BOGGS, Circuit Judges.

MILBURN, Circuit Judge.

Third-party defendant-appellant The Affiliated FM Insurance Company ("Affiliated") appeals from the judgment of the district court granting summary judgment in favor of plaintiff-appellee Hydro-Dyne, Inc. ("Hydro-Dyne") on its breach of contract claim and against Affiliated on its counterclaim for indemnification. Having concluded that no genuine issue of material fact exists and that Hydro-Dyne is entitled to judgment as a matter of law on both claims, we affirm.

I.

The present litigation arises out of a series of contractual agreements in which Hydro-Dyne agreed to construct pressure vessels for Ecodyne Corporation. Hydro-Dyne retained Affiliated to perform inspections of the pressure vessels to insure that they complied with the provisions of the American Society of Mechanical Engineers ("ASME") Code.

The pressure vessels which are the subject of the present litigation were constructed by Hydro-Dyne at its plant in Massillon, Ohio. On March 21, 1980, final testing of the vessels was completed, and the vessels were approved by Affiliated's inspector. The vessels were then shipped to their final destination, a paper mill construction site in Rumford, Maine. Subsequently, the pressure vessels were found to be defective because they did not comply with the ASME Code, and Ecodyne incurred $382,335.67 in expenses related to the repair of the pressure vessels.

On July 16, 1980, Hydro-Dyne filed an action in the Court of Common Pleas for Stark County, Ohio, against Ecodyne for the contract price. Ecodyne removed the case to the United States District Court for the Northern District of Ohio pursuant to 28 U.S.C. Sec. 1441(a). In its answer, Ecodyne raised defenses including breach of warranty and failure of consideration. Ecodyne also filed a counterclaim for the amount of damages incurred as the result of Hydro-Dyne's failure to deliver pressure vessels complying with the ASME Code.

Hydro-Dyne then filed a third-party complaint against Affiliated, alleging that Affiliated had inspected the pressure vessels in a negligent and reckless manner, that Affiliated had breached its contract with Hydro-Dyne, and that it had breached written and implied warranties that the pressure vessels were constructed in accordance with the code. Hydro-Dyne further alleged that Affiliated was guilty of reckless, wanton, malicious, and unprofessional conduct in failing to uphold the inspections and certificates it made for the pressure vessels after they arrived in Maine. Hydro-Dyne asserted that any damages sustained by Ecodyne resulted from Affiliated's conduct.

Affiliated then filed an answer, alleging that Hydro-Dyne had waived any claims against it. Affiliated asserted that it had disclaimed any warranties relative to the inspection service, and that Hydro-Dyne had itself breached the contract. Affiliated also filed a counterclaim against Hydro-Dyne, alleging that Hydro-Dyne had assumed full responsibility for compliance with the ASME code of each object manufactured for Ecodyne, and that Hydro-Dyne had agreed to hold Affiliated harmless for any liability to Hydro-Dyne or others for property damage caused by or in any way connected with the services to be performed under the contract. Thus, Affiliated asserted that it was entitled to indemnification from Hydro-Dyne for any damages that it was required to pay as a result of the ongoing litigation.

Ecodyne then filed a cross-claim against Affiliated, alleging that Ecodyne had relied on the inspection certificates provided by Affiliated, and that as a result of this reliance, Ecodyne had accepted the pressure vessels in Rumford, Maine. Because the pressure vessels did not meet code requirements, Ecodyne was required to expend in excess of $300,000 to remedy the defects. Ecodyne alleged that it had a right to rely on the inspection agreement, because the code requirements were established for the protection of the customer of the products and the public, and that Affiliated was liable for the expenses incurred by Ecodyne in repairing the pressure vessels.

Thereafter, Affiliated amended its counterclaim against Hydro-Dyne, alleging that under the terms of the Hydro-Dyne-Affiliated inspection agreement, Hydro-Dyne would be required to indemnify Affiliated for any damages it was required to pay as a result of its dispute with Ecodyne. After giving notice to Hydro-Dyne, Affiliated settled its dispute with Ecodyne for $140,000.

On September 27, 1983, Affiliated filed a motion to sever the claims between Affiliated and Hydro-Dyne from those claims involving Hydro-Dyne and Ecodyne. The motion was granted, and the action between Hydro-Dyne and Ecodyne proceeded to trial.

On December 27, 1983, the district court entered findings of fact and conclusions of law with respect to the action between Hydro-Dyne and Ecodyne. The district court concluded that Ecodyne had accepted the vessels when they were approved by Affiliated's inspector in Massillon, Ohio, and, therefore, Hydro-Dyne was entitled to the full contract price. The district court allowed Ecodyne to recover on its counterclaim in the amount of $224,037.51. This amount was set off against the remaining contract price, and Hydro-Dyne's remaining liability to Ecodyne was $108,139.51.

Subsequently, the proceedings between Hydro-Dyne and Affiliated began. Affiliated filed a motion for summary judgment, contending that it was entitled as a matter of law to indemnification for the amount it had paid in settlement to Ecodyne, pursuant to the indemnification provision in its contract with Hydro-Dyne. Affiliated also contended that it was entitled to judgment as a matter of law on the claims presented against it by Hydro-Dyne. Hydro-Dyne filed a cross-motion for summary judgment, contending that it was entitled to recover for Affiliated's breach of contract, and that Affiliated was not entitled to indemnification for the amount that Affiliated had paid in settlement with Ecodyne.

The district court granted Hydro-Dyne's motion for summary judgment with respect to its third-party complaint and entered summary judgment against Affiliated on its counterclaim for indemnification. The order granting summary judgment as to liability was filed on December 7, 1984, and the district court ordered a hearing to determine damages. Following the hearing, judgment against Affiliated was entered in the amount of $189,164.43. This appeal followed.

II.

A.

As an initial matter, Hydro-Dyne asserts that Affiliated's notice of appeal was not timely filed and that, consequently, this court is without jurisdiction to entertain it. Although the district court entered an order fixing liability between Hydro-Dyne and Affiliated on December 7, 1984, the order awarding damages was not entered until June 14, 1985. Affiliated filed its notice of appeal on July 11, 1985.

A summary judgment determining liability of the parties but reserving determination of damages is not a final judgment. Fed.R.Civ.P. 56(c). See, e.g., Liberty Mutual Insurance Co. v. Wetzel, 424 U.S. 737, 744 (1976); General Television Arts, Inc. v. Southern Railway Co., 725 F.2d 1327, 1331 (11th Cir.1984); R.J. Wolf v. Banco Nacional de Mexico, S.A., 721 F.2d 660, 662 (9th Cir.1983). See generally, 10A, C. Wright, A. Miller and M. Kane, Federal Practice and Procedure Sec. 2736, at 453 (1983). Therefore, the final judgment in this case was not entered until June 14, 1985. Affiliated's notice of appeal was timely filed under Fed.R.App.P. 4(a), and this court has jurisdiction to entertain it.

B.

Affiliated argues that the district court erred in granting summary judgment as to liability in favor of Hydro-Dyne. ¹ The relationship between Affiliated and Hydro-Dyne was governed by two substantially identical shop inspection service agreements. The agreement governing their relationship at the time the pressure vessels in question were certified became effective on February 1, 1980. Paragraph 1 of the agreement provides that "[t]he design, material and workmanship shall comply with the requirements of the applicable A.S.M.E. Boiler and Pressure Vessel Code and the existing regulations in the locality where the Object will be installed and used." Joint Appendix at 40.

Paragraph 2 of the agreement provided that Hydro-Dyne would assume "[f]ull responsibility ... for compliance of each Object manufactured by him with the A.S.M.E. requirements or local regulations as respects design, material, construction, workmanship, testing and stamping." Id. Paragraph 5 of the agreement provided that Affiliated "shall provide such inspections and services as are necessary to conform to the applicable A.S.M.E. Code, the requirements of the National Board of Boiler and Pressure Vessel Inspectors, and applicable local laws." Id. Finally, Paragraph 10 of the agreement contained an indemnification clause which provided:

The Manufacturer [Hydro-Dyne] agrees to hold the Company [Affiliated] harmless from any liability to the Manufacturer or to others for bodily injury or property damage, including loss of earnings or profits caused by or in any way connected with the services to be performed hereunder, or the omission of any such services, or arising out of any defect in or accident to property of the Manufacturer or of others.

Joint Appendix at...