Mountain Fuel Supply Co. v. Emerson

• Decision Date: 12 May 1978
• Docket Number: No. 4838,4838
• Citation: 578 P.2d 1351
• Parties: MOUNTAIN FUEL SUPPLY COMPANY, a corporation, and Continental Casualty Company, a corporation, Appellants (Defendants below), v. Charles EMERSON, d.b.a. Emerson Well Service, Appellee (Plaintiff below).
• Court: Wyoming Supreme Court

Page 1351

578 P.2d 1351

MOUNTAIN FUEL SUPPLY COMPANY, a corporation, and Continental Casualty Company, a corporation, Appellants (Defendants below), v. Charles EMERSON, d.b.a. Emerson Well Service, Appellee (Plaintiff below).

No. 4838.

Supreme Court of Wyoming.

May 12, 1978.

G. G. Greenlee and R. Patrick Dixon, of Murane, Bostwick, McDaniel, Scott, Greenlee & Owens, Casper, for appellants.

G. J. Cardine, of Cardine, Vlastos & Reeves, Casper, for appellee.

Before GUTHRIE, C. J., and McCLINTOCK, RAPER, THOMAS and ROSE, JJ.

ROSE, Justice.

This is an appeal from a summary judgment arising from a declaratory-judgment action having to do with the rights of Mountain Fuel Supply Company (Mountain Fuel) to indemnification from Charles Emerson, d. b. a. Emerson Well Service (Emerson). Emerson initiated the action, seeking a declaration that an indemnity provision of an agreement between the parties was void and unenforceable under § 30-28.3, et seq., W.S.1957, C.1967, 1975 Cum.Supp. ¹ Mountain Fuel counterclaimed, asserting the provisions' validity and demanding that Emerson defend Mountain Fuel in a wrongful-death action arising out of the death of David K. Hillman, an Emerson employee. In addition, Mountain Fuel challenged the constitutionality of § 30-28.3, supra, in several respects. Summary judgment was rendered in favor of Emerson, declaring that the statute was constitutional; that Mountain Fuel was not, therefore, entitled to indemnity under the express or an implied agreement; and that Emerson had no obligation to appear, defend, respond in damages, or be obligated for any judgment in the Hillman case. The judgment will be reversed and the case remanded for determinations of fault, if any.

On October 9, 1971, the parties entered into a blanket agreement covering such work as might be done by Emerson ("the Contractor") for Mountain Fuel ("the Company") during the following three years. Mountain Fuel, a Utah corporation, was and is a public utility engaged in the production and transmission of natural gas. Emerson was, under the agreement, designated as an independent contractor. On March 21, 1972, Emerson was performing work on an oil and gas well for Mountain Fuel when a valve disengaged from a drilling rig and struck Hillman on the head, killing him. On March 21, 1974, Hillman's estate filed suit against Mountain Fuel, alleging certain negligent acts and omissions on its part. Pursuant to the indemnity provisions of their agreement, Mountain Fuel, by letter dated March 21, 1974, demanded indemnification from Emerson and St. Paul Insurance Company. On April 30, 1974, Emerson was joined by Mountain Fuel as a third-party defendant to the Hillman suit, but was subsequently dismissed by Mountain Fuel on June 26, 1974. In a separate action, by St. Paul Insurance Company against Mountain Fuel, St. Paul was relieved of any duties or liabilities, with respect to the Hillman suit, because of Mountain Fuel's failure to give timely notice. Thereafter, on March 8, 1976, Mountain Fuel again demanded indemnification We are here concerned with the following issues:

from Emerson. Emerson responded by filing this declaratory-judgment action. ²

1. Whether § 30-28.3, supra, is constitutional;

2. If so, whether the statute voids the parties' indemnity agreement in its entirety; and

3. Whether, alternatively, Mountain Fuel was entitled to implied contractual indemnity.

FRUSTRATION OF CONTRACT

Before reaching the major issues, it is appropriate that we dispose of a point raised by Emerson in support of the summary declaratory judgment. Emerson contends that it was relieved of any duty to indemnify Mountain Fuel by virtue of the loss of benefits under the St. Paul insurance policy. This approach is essentially grounded on a frustration-of-contract theory which, if adopted, would avoid the necessity of reaching the remaining issues. Emerson reasons that since the parties' agreement provided for indemnity and the maintenance of insurance, ³ and since § 30-28.3 expressly provides that it does not affect the validity of any insurance contract, the loss of such insurance materially affects the parties' agreement on indemnity. Inherent in Emerson's argument is a belief that agreements, indemnifying the indemnitee from his own negligence, are valid under the statute if insurance is provided. While we are not at all sure about the efficacy of that position (see, Crosby v. General Tire & Rubber Co., 5 Cir., 543 F.2d 1128, 1131), we are unable to reach that question in this case. The St. Paul insurance policy apparently obtained pursuant to the agreement is not in the record. We, therefore, have no idea what the insurance policy covered, or who were the named insureds. These factors are critical to any consideration of the effect of a loss of such insurance. We will not consider any matter upon which the record is silent. Matter of Estate of Reed, Wyo., 566 P.2d 587, 590; and McCarthy v. Croker, Wyo., 549 P.2d 323, 325-326. Accord, Town of Jackson v. Shaw, Wyo., 569 P.2d 1246.

CONSTITUTIONALITY OF § 30-28.3

Mountain Fuel contends that § 30-28.3, supra, is violative of Article 1, §§ 6, 7 and 34, and Article 3, § 27, of the Wyoming Constitution, as well as the Fourteenth Amendment to the United States Constitution. In other words, Mountain Fuel asserts the statute violates equal protection standards, prohibitions against special laws, and principles concerning the freedom to contract.

A. Equal Protection.

The alleged violation of state and federal equal-protection clauses is grounded in Mountain Fuel's argument that § 30-28.3, which voids certain indemnity agreements, applies only to the water well or mineral industries in the state. The appellant urges, therefore, that such a classification which is not expressly applicable to other construction industries is arbitrary, unreasonable, and unrelated to the purposes for which the act was passed. It is clear, according to the stance previously adopted by this court, that there must be some difference which furnishes a reasonable basis for different legislation as to different classes, and the differences must not be arbitrary and without just relation to the subject of the legislation. United States Steel Corporation v. Wyoming Environmental Quality Council, Wyo., 575 P.2d 749, 754; We must reject Mountain Fuel's claim to the effect that for the statute to be held valid it must be applicable to all contracts that contain the prohibited indemnity agreements. We find that there is a reasonable basis for the classification, particularly when we consider that in meeting the difference requirement, the legislature is not required to nullify indemnity agreements in every area where their use might be considered contrary to the public interest.

Bell v. Gray, Wyo., 377 P.2d 924, 926; and Miller v. Board of County Commissioners, 79 Wyo. 502, 337 P.2d 262, 269. Accord, Schakel v. State, Wyo., 513 P.2d 412, 414. One who assails a classification must carry the burden of showing that it does not rest on a reasonable basis, but is essentially arbitrary. Bell v. Gray, supra; and In re Trent's Claim, 68 Wyo. 146, 231 P.2d 180, 185. If any state of facts can be reasonably conceived which sustain the classification, such facts will be assumed. In re Trent's Claim, supra; and Steffey v. City of Casper, Wyo., 357 P.2d 456, reh. den. 358 P.2d 951.

It is generally known that the minerals industry is the single most dominant economic factor in the state. ⁴ There were projected to be 22,991 workers in the "Mining" sector in Wyoming in 1977, representing 11.5% of the total state work force. Mining employment figures were exceeded only by the services, trade and government sectors. ⁵ The growing significance of energy development in the state, and the parallel increase in the relative importance of mining employment are also noted. ⁶ It is also generally known that the drilling and completion of oil and gas wells is always a hazardous undertaking (Pan American Petroleum Corporation v. Like, Wyo., 381 P.2d 70, 74), and that it can be characterized as a particularly hazardous type of work.

While it is conceded that hazardous work also occurs in other industries such as the general construction industry this is not to say that the legislature is barred from addressing a significant portion of the problem. In Illinois Coal Operators Association v. Pollution Control Board, 59 Ill.2d 305, 319 N.E.2d 782, 786, the Illinois Supreme Court upheld environmental noise regulations which exempted sounds emitted by construction equipment but not identical equipment used in mining, saying:

"We would also remark that so far as legislative classification is concerned, it has been recognized that evils in the same field may be of different dimensions and reform may take place one step at a time. The legislature may address itself to one stage of a problem and not take action at the same time as to other phases. Williamson v. Lee Optical of Oklahoma, Inc., 348 U.S. 483, 489, 75 S.Ct. 461, 99 L.Ed. 563; McDonald v. Board of Election Com'rs, 394 U.S. 802, 809, 811, 89 S.Ct. 1404, 22 L.Ed.2d 739; Chicago Allis Manufacturing Co. v. Metropolitan Sanitary District, 52 Ill.2d 320, 331, 288 N.E.2d 436; W. F. Hall Printing Co. v. Environmental Protection Agency, 16 Ill.App.3d 864, 306 N.E.2d 595."

These principles were subsequently applied by the Illinois Supreme Court in upholding a statute which made void any agreement indemnifying one against his own negligence in construction contracts. Davis v. Commonwealth Edison Co., 61 Ill.2d 494, 336 N.E.2d 881. It was noted in Davis that at least three other states, California, Michigan and New York had similar statutes. ⁷

To date, none have been found constitutionally infirm. We hold that § 30-28.3, supra, does not violate the state or federal equal-protection clauses.

B. Special Legislation.

The prohibition against special legislation does not mean that a statute must affect...