Reid v. Royal Ins. Co.

• Decision Date: 13 March 1964
• Docket Number: No. 4653,4653
• Citation: 80 Nev. 137,390 P.2d 45
• Parties: Gilbert F. REID, dba Desert Refrigeration, and Center Air Conditioning, Inc., Appellants, v. ROYAL INSURANCE COMPANY, Ltd., North River Insurance Company, and Lillian G. Norris, Respondents. Gilbert F. REID, dba Desert Refrigeration, Appellant, v. CENTER AIR CONDITIONING, INC., Respondent.
• Court: Nevada Supreme Court

Page 45

390 P.2d 45

80 Nev. 137

Gilbert F. REID, dba Desert Refrigeration, and Center Air

Conditioning, Inc., Appellants, v. ROYAL INSURANCE COMPANY, Ltd., North River Insurance

Company, and Lillian G. Norris, Respondents.

Gilbert F. REID, dba Desert Refrigeration, Appellant, v. CENTER AIR CONDITIONING, INC., Respondent.

No. 4653.

Supreme Court of Nevada.

March 13, 1964.

Rehearing Denied April 2, 1964.

George A. Cromer, Las Vegas, for Center Air Conditioning, Inc.

Singleton & DeLanoy and Rex A. Jemison, Las Vegas, for Gilbert F. Reid, dba Desert Refrigeration.

Tad Porter, Las Vegas, for Royal Ins. Co., Ltd., North River Ins. Co., and Lillian G. Norris.

BADT, Chief Justice.

The appeal presents two interesting legal problems. The first requires an analysis of the third-party practice rule (NRCP 14), and the other concerns the possible application of a non-contractual indemnity principle to the facts of this case. The questions arise under the following circumstances.

A home owner (Lillian Norris) and her subrogated insurance carriers (Royal Insurance Company and North River Insurance Company) joined as plaintiffs in a suit against a general contractor (Desert Refrigeration) to recover damages. The contractor had been hired to remove the existing avaporation-type air cooler and install new refrigeration equipment in the Norris home. It is claimed that the work was negligently done, causing the home to be flooded. By third-party complaint the defendant general contractor impleaded its subcontractor (Center Air), who had been engaged by the general contractor to do the work. The predicate for the claim over was that the plaintiffs' loss was due to the sole negligence of the subcontractor. An express contract of indemnity was not pleaded. Following trial, the lower court found that both the contractor (the defendant) and the subcontractor (the third-party defendant) had been negligent, the former in failing to supervise, and the latter in the manner of doing its work. It entered judgment for the plaintiffs against the defendant and the third-party defendant (though the latter was never named as a defendant in the plaintiffs' case), treating them as though they had been sued jointly as tort-feasors. It also denied the general contractor (defendant and third-party plaintiff) any relief on its claim over against the subcontractor (third-party defendant).

On this appeal all agree that the plaintiffs are entitled to judgment against their defendant, the general contractor. However, the subcontractor asserts that the judgment for the plaintiffs against it cannot stand, for it was never named as a defendant in the plaintiffs' suit; and the contractor, though admitting his liability to the plaintiffs, contends that error occurred when the lower court denied his claim over against the subcontractor.

We have not heretofore had occasion to discuss the third-party practice rule. ¹ It is based upon the theory of indemnity. A defendant is permitted to defend the case and at the same time assert his right of indemnity against the party ultimately responsible for the damage. The application of indemnity (when proper) shifts the burden of the entire loss from the defendant tort-feasor to another who should bear it instead. Prosser, Torts § 46 (2nd Ed.). As a general proposition the third-party practice device is not available in a case involving joint or concurrent tort-feasors having no legal relation to one another, and each owing a duty of care to the injured party. State ex rel. Siegel v. McLaughlin (Mo.App.1958), 315 S.W.2d 499, 507. In such a case the plaintiff has the right to decide for himself whom he shall sue. McPherson v. Hoffman, 6 Cir., 275 F.2d 466, 470; Detroit City Gas Co. v. Syme, 6 Cir., 109 F.2d 366, 369. Rule 14 shall not be used by a defendant for the purposes of offering another defendant to the plaintiff. State ex rel. McClure v. Dinwiddie (1948), 358 Mo. 15, 213 S.W.2d 127. However, if a new party is impleaded, it is optional with the plaintiff whether he will accept the third-party defendant as a defendant in his (the plaintiff's) case. The rule is clear in this respect. It states: 'The plaintiff may assert any claim against the third-party defendant arising out of the transaction or occurrence that is the subject matter of the plaintiff's claim against the third-party plaintiff * * *.'

Because of these clearly defined principles, it is apparent, in the case before us, that the judgment for the plaintiffs against the third-party defendant (subcontractor) cannot stand. The plaintiffs never sought to impose a liability upon the subcontractor. Even after the subcontractor was impleaded by the named defendant (contractor) the plaintiffs did not choose to amend their complaint to accept the subcontractor as an additional defendant in their case. We can only conclude that they were satisfied with the validity of their case against the general contractor and were willing to win or lose on that claim for relief.

The lower court evidently believed that the plaintiffs' failure to accept the subcontractor as another defendant, by filing an appropriate amended pleading, was no more than a procedural irregularity having no particular substantive significance. This is not the fact. Quite to the contrary, by treating the contractor and subcontractor as joint defendants in the plaintiffs' case, the court exposed the subcontractor to a liability which it would not otherwise incur, for in Nevada there is no right of contribution between joint tort-feasors, Gensler-Lee v. Geertson, 73 Nev. 328, 318 P.2d 1113 (and the plaintiffs may choose to satisfy their judgment by proceeding against the subcontractor whom they did not sue, instead of the contractor whom they did sue), nor, in this case (as we discuss later), is there a valid basis upon which to shift the entire loss from the contractor to its subcontractor. We therefore reverse that part of the judgment granting the plaintiffs a recovery against the subcontractor. We turn to discuss the controversy between the third-party plaintiff (contractor) and the third-party defendant (subcontractor).

As previously noted, this case does not involve an express contract of indemnity. The contractor and subcontractor did not make a written or oral agreement requiring the latter to indemnify the former against loss occasioned by the indemnitee's (contractor's negligence. Absent an express contract case, authority is in confusion whether indemnity will be allowed at all, and if so, to what extent and under what circumstances--or, to put it differently when is non-contractual indemnity (indemnity implied in law) permissible? It is not uncommon to recognize a right to indemnification in agency-type relationships (master-servant; principal-agent; independent contractors) if the liability is imposed upon one of the parties solely because of his legal relationship to the person who has committed the tortious act.

Here, the legal relationship of contractor-subcontractor is present. Had the plaintiffs' loss been caused solely by the negligence of the subcontractor we would not hesitate to apply an indemnity principle to shift the entire burden of the loss from the contractor to the subcontractor. ² However, this is not the case before us. For this case, the court found that both the contractor and subcontractor were negligent, and this finding is not challenged. ³ Thus, we are asked to apply the indemnity principle to a case where the parties are in pari delicto.

Reid relies upon Ryan Stevedoring Company v. Pan-Atlantic S. S. Corp., 350 U.S. 124, 133, 76 S.Ct. 232, 100 L.Ed. 133, 142. In that case an employee of the stevedoring contractor sued the shipower for damages for injury resulting from improper stowage of cargo aboard the ship, and the shipower filed a third-party complaint against the stevedoring contractor. Against a dissenting opinion by Justice Black in which Chief Justice Warren and Justices Douglas and Clark joined, the five-member majority held the stevedoring contractor liable to the shipowner. The majority held that the stevedoring company's agreement to stow the pulp rolls implied an agreement to stow them properly and safely, and that this in turn implied in law an agreement to indemnify the shipower against claim of damage if a longshoreman should be injured by reason of the negligent stowage. The majority further held that the shipower's failure to discover and correct the contractor's own breach of warranty could not in such case be used as a defense, nor could it excuse the breach of the stevedoring contractor.

Weyerhaeuser S. S. Co. v. Nacirema Co., 355 U.S. 563, 78 S.Ct. 438, 2 L.Ed.2d 491, decided two years after Ryan, referred to Ryan as holding that if the stevedoring company rendered substandard performance which led to foreseeable liability on the part of the shipowner, the latter was entitled to indemnity absent conduct on its part sufficient to preclude recovery.

In the instant case the finding of negligence on Reid's part is not necessarily confined to Reid's failure to discover and correct the danger, nor was there absent conduct on his part sufficient to preclude recovery.

Although some of the facts are in dispute, the following appears: In the process of installing the refrigeration unit it was necessary to remove the old evaporator cooler. To this evaporator cooler was attached a quarter-inch copper tube which supplied water to the old cooler. Upon removal of the evaporator cooler it was observed that water was flowing through the copper tube. Although employees of Reid, as well as employees of Center, sought to find the shutoff value to shut off the...