Reyburn Lawn & Landscape Designers Inc. v. Plaster Dev. Co. Inc.

• Decision Date: 02 June 2011
• Docket Number: No. 53518.,53518.
• Citation: 255 P.3d 268,127 Nev. Adv. Op. 26
• Court: Nevada Supreme Court
• Parties: REYBURN LAWN & LANDSCAPE DESIGNERS, INC., Appellant,v.PLASTER DEVELOPMENT COMPANY, INC., a Nevada Corporation, Respondent.

255 P.3d 268

127 Nev. Adv. Op. 26

REYBURN LAWN & LANDSCAPE DESIGNERS, INC., Appellant,

v.PLASTER DEVELOPMENT COMPANY, INC., a Nevada Corporation, Respondent.

No. 53518.

Supreme Court of Nevada.

June 2, 2011.

Appeal from the final district court judgment in a constructional defect action. Eighth Judicial District Court, Clark County; Nancy M. Saitta and David B. Barker, Judges.¹Lemons, Grundy & Eisenberg and Robert Eisenberg, Reno; Luh & Associates and Charlie H. Luh, Las Vegas, for Appellant.Lewis & Roca, LLP, and Daniel F. Polsenberg, Joel D. Henriod, Jennifer B. Anderson, and Jacqueline A. Gilbert, Las Vegas; Pengilly Robbins Slater and Bell and James W. Pengilly and John R. Bell, Las Vegas, for Respondent.Before DOUGLAS, C.J., PICKERING and HARDESTY, JJ.

OPINION

By the Court, HARDESTY, J.:

In this appeal, we consider whether an indemnity clause in a construction contract between a general contractor and a subcontractor obligates the subcontractor to indemnify the general contractor for its partial negligence for constructional defects, regardless of whether the subcontractor is also negligent. In this, we must also determine whether the subcontractor's testimony constituted a judicial admission by a party, rendering it automatically negligent and liable for indemnification. Additionally, we consider the scope of the indemnification clause's duty to defend and appellant's argument that attorney fees and costs in indemnity cases should be apportioned according to the percentage of negligence of the indemnitor.

This appeal arises from a constructional defect action in which a group of homeowners brought suit against the developer and general contractor, respondent Plaster Development Company, Inc. Plaster then filed a third-party complaint against its subcontractor, appellant Reyburn Lawn & Landscape Designers, Inc., based on Reyburn's indemnification obligation and failure to defend Plaster pursuant to the indemnity clause in their contract. During trial, Plaster moved for and was granted judgment as a matter of law after the district court considered Reyburn's owner's testimony to be a judicial admission of liability. As a result of the order granting judgment as a matter of law, the district court precluded Reyburn from submitting any jury instructions, limited the scope of Reyburn's closing argument, and did not allow the jury to determine Reyburn's liability for the constructional defects. Ultimately, the jury found Plaster 99 percent at fault.² The district court held Reyburn liable for the resulting judgment, and Reyburn appealed.

Consistent with our holding in George L. Brown Insurance v. Star Insurance Co., 126 Nev. ––––, 237 P.3d 92 (2010), explaining that the intent of the parties to indemnify another's negligence must be explicitly stated within the contract, we conclude that the indemnification clause in the parties' contract here did not explicitly or expressly state that Reyburn would have to indemnify Plaster for Plaster's own negligence. Rather, the clause links Reyburn's indemnification and defense duties to defects caused or allegedly caused by Reyburn, only. In this, we extend the holding in Brown to require express language of indemnification for contributory negligence as well as the sole negligence of the indemnitor.

Because the district court's indemnification determination was based on its conclusion that Plaster was not solely negligent, since Reyburn had admitted liability at trial, we also take this opportunity to address the standards for determining judicial admissions resulting from oral testimony at trial. Because Reyburn's owner's testimony was not a deliberate, clear, and unequivocal statement of a concrete fact, it was not a judicial admission; and because there was conflicting evidence of Reyburn's liability, we conclude that the district court erred in granting Plaster's motion for judgment as a matter of law on Plaster's contractual indemnity and breach of contract causes of action.

Finally, based on our conclusion that the duty to defend extended only to claims connected with Reyburn's potential negligence, we further conclude that any award of attorney fees to Plaster should have been limited to those fees and damages incurred defending against the causes of action concerning Reyburn's scope of work, not the entire amount of damages and all attorney fees and costs Plaster incurred throughout this eight-year litigation. We therefore reverse the district court's judgment and remand this matter for a new trial. ³

FACTS

Historical facts

Plaster was the developer and general contractor of the Marble Canyon residential construction project in Las Vegas. The terrain of the project required the use of retaining walls to support the residential building lots. The project also required the construction of sidewalls, which were not retaining walls, but rather served as “fence walls.”

Plaster contracted with Bill Young's Masonry, Inc., to construct and backfill the retaining walls and to construct the sidewalls. Plaster contracted with Reyburn to perform the rough and final grading of the building lots, but Reyburn did not design or construct any of the retaining walls and sidewalls in Marble Canyon. Rough grading occurs after the concrete pad or foundation of the home has been poured and establishes the basic elevation and drainage of the lot. Finish grading occurs near the end of construction and, in this case, required Reyburn to apply four inches of sand, or top soil, on the lot and grade it to allow water to drain away from the home, retaining walls, and sidewalls. The sidewalls were not constructed until after the final grading was completed. Once Bill Young's Masonry finished building the sidewalls, Reyburn completed its duties by clearing away any excess materials.

The contract between the contractor, Plaster, and the subcontractor, Reyburn, contained the following indemnification clause:

INDEMNITY: ... Subcontractor agrees to save, indemnify and keep harmless Contractor against any and all liability, claims, judgments or demands, including demands arising from injuries or death of persons (Subcontractor's employees included) and damage to property, arising directly or indirectly out of the obligation herein undertaken or out of the obligations conducted by Subcontractor, save and except claims or litigation arising through the sole negligence or sole willful misconduct of Contractor, and will make good to and reimburse Contractor of any expenditures, including reasonable attorney's fees. If requested by Contractor, Subcontractor will defend any such suits at the sole cost and expense of Subcontractor.

Soon after homeowners moved into Marble Canyon in 1996, they made general complaints about both the retaining walls and the sidewalls. Eventually, they hired an independent engineer to evaluate the structural integrity of the walls, and the results, showing that the walls were engineered and installed improperly, were provided to Plaster. Plaster responded that the walls were in compliance with all applicable codes and had passed inspection.

Procedural facts

The homeowners filed a class-action complaint against Plaster in May 2000, alleging that their perimeter retaining walls and sidewalls were defective as a result of improper design, preparation, materials, and construction. In November 2001, 18 months after initiation of the litigation and 5 years after the homeowners first complained about the walls, Plaster, for the first time, notified Reyburn of the alleged defects in the walls and tendered the defense of the defect claims to Reyburn. Stuart Reyburn, owner of Reyburn, would later testify that he received the tender of defense and attempted to contact Plaster's counsel to inquire about the litigation, but Plaster's counsel never responded. In any event, Reyburn did not take over the defense of the action. In March 2002, Plaster brought a third-party complaint against Reyburn and Bill Young's Masonry for indemnity and/or contribution. ⁴ Plaster also asserted a breach of contract claim against Reyburn for failing to defend, among other things. Reyburn answered, denying any liability.

The homeowners, Plaster, and Reyburn proceeded to trial, which was held in the spring of 2004. The majority of the trial focused on the homeowners' claims: whether the design of the retaining walls was adequate, their conformance to the specifications and design, waterproofing and backfilling, and appropriate drainage. In addition, the homeowners complained about the design of the sidewalls, which was so poor, according to them, that one of the sidewalls blew over in the wind.⁵ Also during trial, some argument was made and testimony taken pertaining to Plaster's third-party complaint against Reyburn. Plaster argued that Reyburn contributed to the retaining walls' defectiveness by obstructing drainage at the base of the wall when it performed the final grading of the building lot. Stuart conceded in his trial testimony that, as a general rule, a contractor should not cover a wall's drainage system with sand and that, if his employees had covered the drainage openings with sand, it would have been a mistake. However, he also testified that even if sand was deposited over the drainage openings, sand is permeable and would have permitted the water to drain.

Near the end of the trial, Plaster orally moved for judgment as a matter of law against Reyburn on the contractual indemnity and breach of contract causes of action, claiming that Stuart's testimony amounted to a judicial admission of liability. The district court granted the motion after minimal argument by counsel and without the benefit of briefing on the issues. The district court found that Stuart had admitted that placing sand over the drainage openings was within Reyburn's scope of work and that it was a mistake to cover the drainage openings during final grading. The district court then explained that the...