United Engineers & Constructors, Inc. v. Branham

• Decision Date: 01 April 1977
• Citation: 550 S.W.2d 540
• Court: United States State Supreme Court — District of Kentucky
• Parties: UNITED ENGINEERS AND CONSTRUCTORS, INC., Appellant, v. Curtis A. BRANHAM and Hartford Accident & Indemnity Co., Appellees.

Page 540

550 S.W.2d 540

UNITED ENGINEERS AND CONSTRUCTORS, INC., Appellant, v. Curtis A. BRANHAM and Hartford Accident & Indemnity Co., Appellees.

Supreme Court of Kentucky.

April 1, 1977.

Rehearing Denied June 10, 1977.

Robert P. Woods, Kenneth Williams, Jr., Gray, Woods & Cooper, Ashland, for appellant.

Creech, Hogg & Williams, Ashland, for Curtis A. Branham.

Howard VanAntwerp, III, Ashland, for Hartford Acc. & Indem. Co.

PALMORE, Justice.

United Engineers & Constructors, Inc. (hereinafter "United"), appeals from a judgment awarding Curtis A. Branham and Hartford Accident & Indemnity Company (hereinafter "Hartford") the total sum of $78,445.78 for personal injuries suffered by Branham in an industrial accident. $6117.35 of that amount represents Hartford's indemnity claim for workmen's compensation payments made by it to Branham.

The accident happened on May 12, 1965, at a construction project being carried out by United under a contract with Armco Steel Corporation (hereinafter "Armco"), the owner of the premises on which it occurred. Branham was working on a crane, or dragline, leased "F.O. & M." (fully operated and maintained) from E. B. Lowman. Branham's theory of recovery is that his injuries were caused by the negligence of United's employes, for which he has a common-law right of action against United. United's theory, aside from the basic issues of negligence and contributory negligence, is that Branham's right of recovery is limited to his compensation claim against Lowman (paid by Hartford) and that the "exclusive remedy" statute, KRS 342.700 (formerly KRS 342.060), precludes a common-law right of action by Branham against United. Hartford's claim is that its exposure to liability for Branham's compensation benefits resulted from United's negligence and that Hartford therefore has a common-law right of indemnity against United, which right, Hartford contends, is unaffected by any contributory negligence on the part of Branham. Cf. Whittenberg Eng. & Const. Co. v. Liberty Mut. Ins. Co., Ky., 390 S.W.2d 877 (1965).

The case was heard by a jury in September of 1973. It found that the accident resulted from the negligence of United's employes and rejected the defense of contributory negligence. The instruction under which it found against United conditioned liability on a finding that United, through Elmer Decker, its superintendent in charge of the project, had "assumed responsibility" for the particular activity in which Branham was engaged at the time of the accident, thus placing Decker and his workmen under the duty of exercising ordinary care for Branham's safety, and that the accident resulted from their failure to comply with that duty.

Our view of the case, discussed more fully below, is (1) that the employes of United whose negligence is said to have caused the accident were assisting the crane crew in work for which the crane crew was responsible and, in the performance of that particular work, were under the supervision of the crane crew alone, and not of Decker or United; and (2) that even if this were not so, KRS 342.700 denies a common-law recovery to Branham under the "up-the-ladder coverage" principle expressed in Bright v. Reynolds Metals Company, Ky., 490 S.W.2d 474, 477 (1973). Our holding that United was not responsible for negligence of its employes in assisting the crane crew disposes of Hartford's indemnity claim.

The heart of the controversy lies in the legal relationships among the various parties. Branham and Hartford contend, for example, that United was not a prime contractor, but was merely an agent and servant of Armco. United claims that Branham was its "loaned servant" or, in the alternative, that Branham's employer, Lowman, was a subcontractor. Branham's response to these theories is that Lowman was not a subcontractor, but only the lessor of machinery, and that Branham was not a loaned servant of United. Still another contention by Branham and Hartford is that Lowman's agreement was with Armco, and not United, hence Lowman could not have been United's subcontractor.

It all began with a contract in the form of a letter from United to Armco dated and accepted on October 7, 1960, in which United, a construction contractor headquartered in Philadelphia, Pennsylvania, proposed to design facilities and act as constructors in connection with a contemplated expansion of Armco's "Ashland Works" at Ashland, Kentucky. As "Constructors" it agreed, when so ordered and directed by Armco, to execute "with our own forces the construction, and install the machinery and equipment, subletting (our emphasis) parts of the work when it is your advantage to do so, and turn the completed section or sections of the work over to you when ready for regular use." As "Purchasing Agents" it agreed to purchase the necessary construction equipment and materials and, as specified in writing by Armco, to "negotiate, prepare and let contracts for certain sections of the work and act as your own Purchasing Department to the extent you may wish."

Important to the argument that United was an agent rather than a contractor for Armco is this provision of the proposal: "You (Armco) will have full control of all purchases and of the letting of all contracts. All contracts and orders placed by us (United) will be in your name, signed by us as Agents for you." Other terms of the proposal pertinent to this discussion were as follows:

1. United was to furnish at its own expense the services of its executive officers "who will direct and oversee the work performed under this agreement," together with the services of its home office Construction, Purchasing and Accounting Departments.

2. All other costs would be borne by Armco, but paid by United with funds advanced for that purpose by Armco.

3. United would maintain insurance coverage for public liability and property damage, automotive liability, and other specified perils, and save Armco harmless from any liability for injury or damage caused or allegedly caused by Armco employes, United's employes, or any subcontractors or their employes.

4. The cost of insurance for United's sole benefit "other than Workmen's Compensation and Employers' Liability" would be borne by United.

5. The contract would be terminable by Armco on 10 days' notice.

6. United's compensation would be a fixed fee equal to 4% of the total cost of the project.

E. B. Lowman was a contractor in Ashland who owned heavy equipment and leased it out whenever it was available for use by others. Sometimes it was rented "bare" and sometimes with an operating crew paid by Lowman. The rental of the crane involved in this accident was negotiated by A. E. Roscoe, general superintendent for United, with Lowman. It was covered by a purchase order issued by United on February 4, 1965, to which was attached a rental agreement on a printed form headed by United's name. The agreement was signed by United, through Roscoe, as agent for Armco. Nominally, therefore, it was a contract between Lowman and Armco, and this is a basic premise of the argument that Lowman could not have been a subcontractor for United. United, on the other hand, maintains that Armco in effect contracted for the use and benefit of United, which was under contract with Armco to do the work for which the crane was being rented. Right here, we think, is a good place to stop and clear the decks with respect to the relationship between United and Armco.

During the course of pretrial proceedings the trial court entered a summary judgment in favor of United on the theory that United was a contractor and Lowman a subcontractor. Being reminded, however, that this would not dispose of Hartford's indemnity claim based on United's negligence, which would require a trial anyway, the trial court reconsidered and then finally vacated the summary judgment. It is interesting to note that in their brief responding to the motion for summary judgment, counsel for Branham conceded that United's status was that of a general contractor for Armco, a concession that was reflected by this recitation in the body of the summary judgment: "The parties to this action agree that United was the 'contractor' on the job." It is our opinion that on this point they were right the first time.

It would not be disputed that in determining whether one is an agent or servant or an independent contractor, substance prevails over form, and that the main dispositive criterion is whether it is understood that the alleged principal or master has the right to control the details of the work. Here we have a major construction project, undertaken by a company whose principal occupation is construction and for a company whose principal business is to produce steel. There was nothing in the contract between them, or in the evidence, such as it was, bearing upon the manner in which that contract was carried out, to suggest that Armco either had the qualifications and capacity to superintend the construction work, or intended, expected or actually did undertake to do so. The paper relationship between Armco and United obviously was designed for the purpose of placing upon Armco the burden of financing the project from beginning to end. In substance, United was its prime contractor.

Likewise, though it may not be vital to our resolution of the case, we think that the Lowman agreement's being put in the name of Armco as principal was strictly a matter of formality, and again merely a facet of the financial arrangement between Armco and United. It was United that decided where, when and what equipment was needed, and it was United's officer who negotiated and actually executed the rental agreement with Lowman. United's third-party beneficiary theory, though in our opinion certainly apropos, is not really indispensable to this result. The cold fact is that United, the party obligated to do the work for which the crane was needed, was the real party in interest, and w...