Spence & Howe Const. Co. v. Gulf Oil Corp.

• Decision Date: 06 March 1963
• Docket Number: No. A-9045,A-9045
• Citation: 365 S.W.2d 631
• Court: Texas Supreme Court
• Parties: SPENCE & HOWE CONSTRUCTION COMPANY, Petitioner, v. GULF OIL CORPORATION, Respondent.

Page 631

365 S.W.2d 631

SPENCE & HOWE CONSTRUCTION COMPANY, Petitioner, v. GULF OIL CORPORATION, Respondent.

No. A-9045.

Supreme Court of Texas.

March 6, 1963.

Fulbright, Crooker, Freeman, Bates & Jaworski, Newton Gresham and Larry W. Starr, of above firm, Houston, for petitioner.

Baker, Botts, Andrews & Shepherd, Finis E Cowan, and William Harvin, with above firm, Houston, for respondent.

NORVELL, Justice.

This Court granted writ of error upon petitioner's point which asserted that:

'The Court of Civil Appeals erred in holding that the written contract sued upon provided indemnity to Respondent for an accident which the jury found upon sufficient evidence was solely caused by Respondent's own negligence and by equipment furnished by Respondent.'

We are in agreement with the Court of Civil Appeals that liability herein is controlled by a written agreement designated as a 'purchase order' which bears date of November 3, 1954. The accident which gave rise to this litigation occurred on October 29, but the written memorandum of agreement-the 'purchase order' recites that the work commenced on October 26 and it appears that the form of 'purchase order' employed was identical in form with the last previous contract between the parties relating to a similar piece of work. We need not add to the discussion of this matter which is contained in the opinion of the Court of Civil Appeals. See, Gulf Oil Corporation v. Spence & Howe Construction Co., Tex.Civ.App., 356 S.W.2d 382.

A question relating to the construction of an indemnity contract is presented. We are to take the wording of the instrument, consider the same in the light of the surrounding circumstances, and apply the pertinent rules of construction thereto and thus settle the meaning of the contract. The issue is squarely joined in that the respondent asserts that:

'The Court of Civil Appeals properly held that the contract was so worded as to afford Respondent the right to indemnity on the basis of the relevant jury findings and the undisputed evidence.'

The problem is one of contract construction and not public policy, and is so treated by the parties. Only a few jurisdictions, and Texas is not one of them, hold that a contract of indemnity against the results of one's negligence is contrary to public policy in that such contracts tend to encourage careless conduct. This theory or doctrine is not regarded as being sound and has been described as being somewhat faniful. From a public policy standpoint, an indemnity agreement against one's negligence issued by an insurance company would be as objectionable for encouraging carelessness as would an indemnity contract issued by any other form of entity or by a natural person. See Griffiths v. Broderick, 27 Wash.2d 901, 182 P.2d 18, 175 A.L.R. 1, and annotation following in the American Law Reports. Of course, certain types of indemnity agreements may be contrary to public policy for various other reasons, Restatement of the Law of Contracts, §§ 572, 575, but the contract with which we are concerned cannot be so classified. Ordinarily, however, one does not contract against the results of his own negligence. Such agreements, except for insurance contracts, must be regarded as exceptional rather than usual in the majority of business transactions. Before such indemnity contracts may be enforced it must clearly appear that the contracting parties intended that the indemnitor would be held liable for damages resulting from the negligence of the indemnitee.

Spence & Howe Construction Company is a contracting firm engaged in heavy construction, the building of docks and related work. It had been doing pile driving work for Gulf Oil Corporation for a number of years. As a usual thing, these jobs were done in pursuance of a written order from Gulf to Spence & Howe. These orders were on a purchase order form and the particular one here involved was dated November 3, 1954 and addressed to Spence & Howe. Among other provisions it contained the following clauses:

(You agree to) 'Furnish labor, supervision and equipment and drive piling for six propane tanks as per your proposal of October 27, 1954. * * *

'In the performance of this contract you agree to assume liability for doing or failing to do anything that may result in death of or bodily injury to any person and loss of or damage to any property.

'Certificate of insurance showing expiration date 10-1-55 now in our possession, is satisfactory. By oral agreement, work under this order commenced on October 26, 1954.

Price

Unit price as per your proposal dated October 27, 1954.

Autho. A-3657-221 Propane Storage Tanks

F.O.B.

West Port Arthur, Texas.'

The order provided that it was subject to the instructions and conditions printed on the reverse side thereof. The following stipulation was among such provisions:

'13-In case of entry by the Seller, (Spence & Howe) or of any of Seller's agents or employees, upon the property or premises of the Purchaser, for the purpose of construction, erection, inspection or delivery under this order, the Seller agrees to provide all necessary sufficient safeguards and to take all proper precautions against the occurrence of accidents, injuries or damages to any persons or property, and to be responsible for and to indemnify and save harmless the Purchaser from all loss or damage and any or all claims arising by reason of accidents, injuries or damage to any persons or property in connection with such work, and from all fines, penalties or loss incurred by reason of the violation of any law, regulations or ordinance; and further agrees to defend at the Seller's expense, any and all suits or actions, civil or criminal arising out of such claims or matters; and further agrees to procure and carry such insurance of employees as may be required by any workmen's compensation act or other law, regulation or ordinance, which may apply in the premises.' (Emphasis supplied)

Three days after the work had commenced on the propane tank installation, W. C. Cummings, a nineteen-year-old employee of Spence & Howe, was severely injured while working in the leads of the pile driving machine. The operator of the crane which was used to raise and set the piling in place abruptly lifted a piling timber and Cummings, in an effort to avoid being struck by the piling, came in contact with a cable and pully of the machine and sustained injuries to his hand. The crane was owned by Gulf and at the time of the accident was being operated by a Gulf employee. Gulf made a settlement of an action which Cummings brought against it and then sued Spence & Howe for indemnity. In the present case the jury found that such settlement was reasonable and had been made in good faith. The jury also absolved Spence & Howe of any negligence and found that the negligence of the crane operator and the use of Gulf equipment was solely responsible for Cummings' injuries. The trial court entered judgment that Gulf take nothing. This judgment was reversed by the Court of Civil Appeals which in turn rendered judgment in favor of Gulf and against Spence & Howe for the recovery of $31,000. 356 S.W.2d 382.

In Mitchell's, Inc. v. Friedman, 157 Tex. 424, 303 S.W.2d 775, this Court discussed the rule that an indemnity agreement will not protect the indemnitee against the consequence of his own negligence unless the obligation is expressed in unequivocal terms. The obvious purpose of this rule is to prevent injustice. A contracting party should be upon fair notice that under his agreement and through no fault of his own, a large and ruinous award of damages may be assessed against him solely by reason of negligence attributable to the opposite contracting party. See, Perry v. Payne, 217 Pa. 252, 66 A. 553. Texas does not, however, follow the refinement of the rule which requires that the agreement, in order to effectually embrace the negligence of the indemnitee, should expressly so state. It was stated in Friedman that, 'It is not necessary * * * for the parties to say in so many words that they intend to protect the indemnitee against liability for negligence.' The rule is that when the wording of the contract is sufficiently broad to cover the negligence of the indemnitee and the situation of the parties with reference to the subject matter of the contract is such that it can clearly be said that the parties intended that the negligence of the indemnitee should be covered by the indemnity agreement, then liability thereunder will be sustained whenever the injury asserted as a basis for indemnity is one which arose out of the operations embraced by the contract.

In Friedman the lease of a building for business purposes was involved. The lease provided that the 'Lessee accepts said premises as suitable for the purposes for which same are leased and accepts the building and each and every appurtenance thereof, and waives defects therein and agrees to hold the Lessor harmless from all claims for any such damage,' that is, damages for injuries sustained by Lessee's...