Washington Metropolitan Area Transit Authority v. Mergentime Corp.
| Decision Date | 15 May 1980 |
| Docket Number | 79-1628,Nos. 79-1545,s. 79-1545 |
| Citation | 200 U.S. App. D.C. 95,626 F.2d 959 |
| Parties | WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY to the use and benefit of Head Construction Company v. MERGENTIME CORPORATION et al., Appellants, (two cases). |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Daniel Webster Coon, Rockville, Md., with whom Dawn White, Rockville, Md., was on the brief, for appellants.
Edgar T. Bellinger, Washington, D. C., with whom John C. Hayes, Jr. and Leslie M. Shulman, Washington, D. C., were on the brief, for appellee, Head Const. Co.
Before McGOWAN and MacKINNON, Circuit Judges, and PRATT, * United States District Judge for the District of Columbia.
Opinion for the Court filed by Circuit Judge MacKINNON.
The Head Construction Company (hereafter Head), sued a joint venture of the Mergentime Corporation and P&Z Co., Inc., (hereafter Mergentime), and its surety the Federal Insurance Company (hereafter Insurance Company), alleging that Mergentime owes it an unpaid balance of $99,597.65 (J.A. 7) on their subcontract whereby Head undertook to finish the segment of the Metropolitan subway that Mergentime had agreed to construct in its prime contract with the Washington Metropolitan Area Transit Authority (hereafter Transit Authority or owner). Mergentime is withholding the claimed sum on the ground that it is a valid set off for part of the cost of insurance which, under the subcontract, Head was obligated to procure but refused to do so and Mergentime was therefore required to purchase the insurance. That Mergentime is withholding the sum sued for is not in dispute. 1 The case is determined by the interpretation of the relevant contracts.
The controversy in this case involves the construction of the subcontract We find it unnecessary to go beyond the clear and plain wording of the contracts in this case. Upon a de novo review of their language and all their parts, we hold that the district court interpreted the Subcontract incorrectly, and that decision is reversed.
between Head and Mergentime. Under general contract law, the plain and unambiguous meaning of an instrument is controlling, Vogel v. Tenneco Oil Co., 465 F.2d 563, 565 (D.C.Cir.1972), and the Court determines the intention of the parties from the language used by the parties to express their agreement. E. P. Hinkel & Co., Inc. v. Manhattan Co., 506 F.2d 201, 204 (D.C.Cir.1974). In performing this task, the Court should construe the contract as a whole so as to give meaning to all of the express terms. California Pacific Bank v. Small Business Administration, 557 F.2d 218, 223 (9th Cir. 1977). Finally, the question of interpreting the plain language of a contract is a question of law for the Court, Clayman v. Goodman Properties, Inc., 518 F.2d 1026, 1034 (D.C.Cir.1973); Framlau Corp. v. United States, 568 F.2d 687, 691 n.10 (Ct.Cl.1977), and appellate courts are not limited to the clearly erroneous standard of review unless extrinsic evidence was utilized. Thornton v. Bean Contracting Co., 592 F.2d 1287, 1290 (5th Cir. 1979).
The following is a detailed description and analysis of the pertinent parts of the contracts in this case.
Mergentime's Construction Contract with the Transit Authority.
In 1971 Mergentime entered into a contract with the Transit Authority, the "owner" of the project, for the construction of a portion of the subway rail system for the metropolitan area of the District of Columbia. The terms of the contract with the Transit Authority designated Mergentime as the "general contractor", and therein Mergentime obligated itself to the Transit Authority to complete the entire portion of the segment of the project covered by their contract. In return the Transit Authority agreed to pay Mergentime from time to time as the construction progressed.
Mergentime's Management Contract with Head.
On June 17, 1971, Mergentime executed a management contract with Head under which the entire remainder of the work, required of Mergentime under its contract with the Transit Authority, would be under the coordination and supervision of Head. However, since Head had only undertaken a management contract, Mergentime remained directly liable to the Transit Authority for all obligations under the prime contract. Consistent with the undertaking between the parties that the prime contract created, the Transit Authority made all progress payments to Mergentime as the work progressed.
Mergentime's Subcontract with Head for Completion of the Construction.
On August 28, 1973, after 2 years of operations under the management contract, Mergentime and Head entered into a second agreement termed a "Subcontract" (hereafter Second Contract). Under the terms of this Second Contract the parties agreed to:
"cancel and . . . terminate the previous Management Agreement between them, and . . . (the) Subcontract (Second Contract) supersede(d) the prior Management Agreement to the end that the remaining work to be performed under such general contract shall be performed by the Subcontractor (Head) under the terms and conditions of this Subcontract." (J.A. 12-13) (Emphasis added).
In other words, under the Subcontract Head became in effect the prime contractor except that the Transit Authority still looked to Mergentime as the party responsible to it for the completion of the railway segment. 2 The second agreement termed Sec. 4(f) In accordance with Article 2.13 of the Special Conditions of Specification No. 1FB-C-15 of the Prime Contract, it is agreed that the Subcontractor (Head) shall save and keep harmless and indemnify the Contractor (Mergentime) and the Owner (Transit Authority) against any and all liability claims, and the costs of whatsoever kind and nature arising or alleged to arise for injury, including personal injury to or death of any person or persons, and for loss or damage to any property, occurring in connection with or in any way incident to or arising out of the occupancy, use, service, operations, or performance of work in connection with this contract, resulting in whole or in part from the negligent acts, errors or omissions of the Subcontractor (Head) or any employee, agent or representative of the Subcontractor (Head) regardless of whether or not the Owner (Transit Authority) or the Contractor (Mergentime), their directors, officers, agents, or employees may be contributorily negligent in their actions causing such claims. (J.A. 18) (Emphasis added).
Mergentime and Head, the "Contractor" and "Subcontractor" respectively (J.A. 12). Among its terms and conditions, Head agreed in section 4(f) to "keep harmless and indemnify" Mergentime and the Transit Authority against certain claims as follows:
It is significant that in this part of the Second Contract Head undertakes to "indemnify" Mergentime and the Transit Authority "against any and all liability claims . . . ." Id. In addition, he agrees to indemnify Mergentime and the Transit Authority not only for the "negligent acts . . . of (Head and his) employees, but he also assumes all the liability of Mergentime and the Transit Authority even though "the Owner (Transit Authority) or the Contractor (Mergentime), their directors, officers, agents, or employees, may be contributorily negligent in their actions causing such claims." Id. (Emphasis added). So if Head just insured his own direct risks as Subcontractor on the project he would not be protected by insurance covering the risks of the "Owner" (Transit Authority) and "Contractor" (Mergentime) that Head agreed to " indemnify" in Section 4(f) of the Subcontract.
In the next section, 4(g), Head in essence agreed to provide insurance policies to protect the Transit Authority and Mergentime against liability from the risks it had generally agreed to indemnify, which are referred to 3 and more particularly described in Article 2.13 of the Prime Contract:
Sec. 4(g) The Subcontractor (Head) shall procure and maintain, at its own expense, the policies of insurance required by said Article 2.13 4 of the Special Conditions, which article is incorporated herein by reference. 5 Such policies of insurance shall include Contractor's (Mergentime's) comprehensive general liability insurance, including contractual obligations, workmen's compensation, automobile liability insurance, protective liability insurance, and railroad protective insurance, covering the risks described and for the face amount of the policies as specified in Article 2.13 above. (J.A. 18) (Emphasis added).
Since Article 2.13 is part of the prime contract, and describes the insurance requirements of the parties to that contract, 6 it is clear that Head undertook in the Second Contract to procure the same insurance policies that Mergentime had been required to furnish and in addition to cover the "Contractor's (Mergentime's) . . . liability, etc. . . ." Id.
As set forth above, the Second Contract specifically requires that "such policies of insurance shall include Contractor's (Mergentime's) comprehensive liability insurance, including (those specified policies) . . . covering the risks described and the face amount of the policies as specified in Article 2.13." (Emphasis added). In the Second Contract "Contractor" by definition means Mergentime and the capitalization of "Contractor's" indicates that a specific contractor (Mergentime) is being referred to and not "contractors" generally. 7
The terms of the Second Contract are also conclusive on the principal issue here, i. e., that Head agreed to "procure and maintain, at its own expense, the policies of insurance required by said Article 2.13. . . ." (Emphasis added). This means the exact policies that 2.13 requires Mergentime to procure and maintain. Head as a "subcontractor" under Article 2.13 of the prime contract had also been required under Article 2.13(f) "to carry the insurance coverages required...
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