A.M. Welles, Inc. v. Mont. Materials, Inc.

• Court: Montana Supreme Court
• Writing for the Court: Justice BETH BAKER delivered the Opinion of the Court.
• Citation: A.M. Welles, Inc. v. Mont. Materials, Inc., 2015 MT 38, 342 P.3d 987, 378 Mont. 173 (Mont. 2015)
• Decision Date: 10 February 2015
• Docket Number: No. DA 14–0133.,DA 14–0133.
• Parties: A.M. WELLES, INC., and the State of Montana, Plaintiffs and Appellants, v. MONTANA MATERIALS, INC., a Montana corporation, d/b/a L.S. Jensen & Sons, Inc., and/or d/b/a L.S. Jensen Construction & Paving, and/or d/b/a Jensen Paving, Inc.; RSJ, Inc., a Montana corporation, d/b/a Jensen Paving Co., and/or d/b/a Jensen Paving Company; GLJ, Inc., a Montana corporation, d/b/a L.S. Jensen & Sons, Inc., and/or d/b/a L.S. Jensen Construction and Paving; Liberty Mutual Fire Insurance Company, a foreign corporation; Alpine Construction, Inc., a Montana corporation; and John Does I Through V, Defendants and Appellees.

378 Mont. 173

342 P.3d 987

2015 MT 38

A.M. WELLES, INC., and the State of Montana, Plaintiffs and Appellants

v.MONTANA MATERIALS, INC., a Montana corporation, d/b/a L.S. Jensen & Sons, Inc., and/or d/b/a L.S. Jensen Construction & Paving, and/or d/b/a Jensen Paving, Inc.; RSJ, Inc., a Montana corporation, d/b/a Jensen Paving Co., and/or d/b/a Jensen Paving Company; GLJ, Inc., a Montana corporation, d/b/a L.S. Jensen & Sons, Inc., and/or d/b/a L.S. Jensen Construction and Paving; Liberty Mutual Fire Insurance Company, a foreign corporation; Alpine Construction, Inc., a Montana corporation; and John Does I Through V, Defendants and Appellees.

No. DA 14–0133.

Supreme Court of Montana.

Submitted on Briefs Dec. 17, 2014.

Decided Feb. 10, 2015.

For Appellants: Dan L. Spoon ; Bryan L. Spoon, Spoon Gordon Ballew, Missoula, Montana (for A.M. Welles, Inc.), Calvin J. Stacey, Stacey & Funyak, Billings, Montana (for State of Montana).

For Appellees: Steven S. Carey, Carey Law Firm, Missoula, Montana.

Opinion

Justice BETH BAKER delivered the Opinion of the Court.

¶ 1 A.M. Welles, Inc., (Welles) and the State of Montana appeal dispositive orders from the Fourth Judicial District Court, Missoula County. The following issues resolve the appeals:

1. Whether the District Court correctly denied summary judgment to Welles.

2. Whether the District Court abused its discretion by dismissing the State's action against Liberty Mutual Fire Ins. Co. for failure to prosecute.

We conclude that Welles is entitled to summary judgment in its action against Jensen, and that the State's action against Liberty should be reinstated. We vacate and remand.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 2 This case arises out of a highway paving project conducted near Ennis in 2000. The State contracted the job to Welles, which in turn sub-contracted parts of the job to Montana Materials, Inc., RSJ, Inc., and GLJ, Inc. (collectively, “Jensen”). The State and Welles insured the job through Liberty Mutual Fire Insurance Co. (Liberty). On September 30, 2000, Jensen applied primer (oil) and blotter (a sand-like substance) to the road. That night, a storm struck, causing the primer to emulsify in rainwater. The oil splashed onto passing vehicles, causing about $600,000 in damage.

¶ 3 The vehicle owners brought claims against the State, which the State paid. Consistent with the general contract, Welles reimbursed the State for what it paid to the vehicle owners. The State sued Liberty, seeking indemnification under its insurance contract for the costs that Welles did not cover; Welles sued Jensen, seeking indemnification under the subcontract.

¶ 4 Both Welles and Jensen moved for summary judgment on Welles's indemnification claim against Jensen. The District Court denied Welles's motion on April 24, 2008, and granted Jensen's motion on January 25, 2010. In 2012, Liberty moved to dismiss the State's action against it for failure to prosecute. On January 24, 2014, the court granted the motion and dismissed the State's action. In February 2014, the court entered a final judgment. The State appeals the dismissal and Welles appeals the summary judgment orders.

STANDARDS OF REVIEW

¶ 5 We review summary judgment orders de novo. Albert v. City of Billings, 2012 MT 159, ¶ 15, 365 Mont. 454, 282 P.3d 704. Summary judgment is appropriate when the moving party demonstrates the absence of a genuine issue of material fact and the entitlement to judgment as a matter of law. M.R. Civ. P. 56(c) ; Albert, ¶ 15. We review a dismissal for failure to prosecute to determine whether the district court abused its discretion. Westland v. Weinmeister, 259 Mont. 412, 415, 856 P.2d 1374, 1376 (1993). We will vacate the dismissal if, after reviewing the record, we are left with the “definite and firm conviction that the district court committed a clear error in weighing the relevant factors.” Doug Johns Real Estate, Inc. v. Banta, 246 Mont. 295, 298, 805 P.2d 1301, 1303 (1990).

DISCUSSION

¶ 6 1. Whether the District Court correctly denied summary judgment to Welles.

¶ 7 The contract between Welles and Jensen includes the following indemnity clause:

The Subcontractor shall indemnify the Contractor against and save it harmless from any and all claims, suits or liability for injuries to property, injuries to persons including death, and from any other claims, suits or liability on account of any act or omission of the Subcontractor, or any of his officers, agents, employees or servant[s].

(Emphasis supplied). The District Court interpreted this clause to require Jensen to indemnify Welles for foreseeable losses resulting from Jensen's negligent or wrongful conduct. The court determined that Welles failed to raise a triable dispute about whether Jensen acted negligently when it applied the primer. The court therefore denied Welles's motion for summary judgment.

¶ 8 The role of a court interpreting a contract provision is to ascertain and effectuate the parties' mutual intentions. Section 28–3–301, MCA ; Whary v. Plum Creek Timberlands, L.P., 2014 MT 71, ¶ 10, 374 Mont. 266, 320 P.3d 973. The clear and explicit language of the contract reflects the parties' intentions and controls a court's interpretation. Section 28–3–303, MCA ; Whary, ¶ 10. To the extent that there is ambiguity, indemnity clauses generally should be “liberally construed in favor of the party intended to be indemnified.” Lesofski v. Ravalli Cnty. Elect. Coop. Inc., 151 Mont. 104, 107, 439 P.2d 370, 371 (1968).

¶ 9 Welles argues that the District Court erred by interpreting the indemnity clause to require negligent or wrongful conduct. Welles directs the Court's attention to cases in which other courts interpreted similar indemnity clauses and did not require proof of negligence or wrongdoing.

¶ 10 In Fairbanks North Star Borough v. Roen Design Assocs., Inc., 727 P.2d 758 (Alaska 1986), the Alaska Supreme Court interpreted a clause in which a contractor promised to indemnify a principal for particular losses “incurred for or on account of injuries or damages to persons or property as a result of any act or omission of the Contractor in the performances pursuant to this contract.” Fairbanks, 727 P.2d at 759. The court rejected the argument that indemnity turned on whether the contractor was negligent, noting that the clause did “not limit indemnity to ‘tort liability, claims, suits or demands,’ nor to ‘liability claims, suits or demands ... incurred ... as a result of any negligent act or omission of the Contractor.’ ” Fairbanks, 727 P.2d at 760.

¶ 11 Similarly, in Cont'l Heller Corp. v. Amtech Mechanical Servs., Inc., 53 Cal.App.4th 500, 61 Cal.Rptr.2d 668 (1997), a California Court of Appeals interpreted a clause in which a subcontractor agreed to indemnify a general contractor for any loss “which arises out of or is in any way connected with the [sub-contractor's] performance of work under this Subcontract.” Heller, 53 Cal.App.4th at 504–05, 61 Cal.Rptr.2d at 670. The court rejected the argument that indemnity turned on whether the contractor was negligent, noting that the contract stated that the duty to indemnify applied to “any acts or omissions,” and not simply “willful misconduct or negligent conduct.” Heller, 53 Cal.App.4th at 505, 61 Cal.Rptr.2d at 671.

¶ 12 What was true for the indemnity clauses in Fairbanks and Hellerholds true for the indemnity clause in Welles's contract with Jensen. Jensen agreed to indemnify Welles for losses “on account of any act or omission” by Jensen. The clear and explicit language of the contract does not limit the duty to indemnify to negligent or wrongful acts or omissions. If that was the intention of the parties, it would have been easy for them to manifest it in the contract's language. For instance, in Amazi v. Atl. Richfield Co., 249 Mont. 355, 816 P.2d 431 (1991), a contract required indemnification of losses “on account of damage to property [that] ... is the result ... of the [indemnitor's] negligent acts or omissions or willful misconduct.” Amazi, 249 Mont. at 359, 816 P.2d at 433–34 (emphasis supplied). Unlike the parties to the contract in Amazi, Welles and Jensen did not include a negligence requirement in the language of their indemnity clause.

¶ 13 The role of a judge in construing a contract is “simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted or to omit what has been inserted.”Section 1–4–101, MCA ; Cortese v. Cortese, 2008 MT 28, ¶ 10, 341 Mont. 287, 176 P.3d 1064; see also 14 Am. Jur. Pleading and Practice Forms Indemnity § 3 (2013) (“Where parties have expressly contracted with respect to the duty to indemnify, the extent of the duty must be determined from the language of the contract....”). The District Court erred by inserting a negligence requirement where Welles and Jensen omitted any such requirement.

¶ 14 The District Court also accepted Jensen's argument that the losses in this case were not foreseeable. Again, the plain language defeats interpreting the indemnity clause to impose such a requirement. Jensen argues, however, that the indemnity clause's “on account of” language implies foreseeability.

¶ 15 When interpreting a contract, we give words their plain and ordinary meaning unless a technical meaning is apparent. Section 28–3–501, MCA ; Krajacich v. Great Falls Clinic, LLP, 2012 MT 82, ¶ 17, 364 Mont. 455, 276 P.3d 922. We decline to define “on account of” as turning on the technical, legal concept of foreseeability, which derives from tort law. See Sternhagen v. Dow Co., 282 Mont. 168, 176, 935 P.2d 1139, 1144 (1997). The ordinary meaning of “on account of” is “by reason of” or “because of.” The Compact Edition of the Oxford English Dictionary 64 (Oxford University Press, 1971) (providing the example, “He keeps at home now, on account of his great age.”). As used in the indemnity clause, “on account of” simply requires a direct causal relationship between the act or omission and the claimed loss. To the extent...