Case Title: Wyoming Johnson, Inc. v. Stag Industries, Inc.

Citation: 

Docket Number: 5806

State: wyoming

Court: Wyoming Supreme Court

Date: 1983-04-13T00:00:00Z

Document:
Wyoming Johnson, Inc. v. Stag Industries, Inc.1983 WY 36662 P.2d 96Case Number: 5806Case Number: 5806Decided: 04/13/1983Supreme Court of Wyoming
WYOMING JOHNSON, INC., 
AND AETNA CASUALTY & SURETY COMPANY, APPELLANTS (PLAINTIFFS),

v.

STAG INDUSTRIES, INC., 
APPELLEE (DEFENDANT). No. 5806

Appeal from the District 
Court, NatronaCounty, Dan Spangler, 
J.

Michael J. 
Sullivan and David G. Lewis of Brown, Drew, Apostolos, Massey & Sullivan, 
Casper, for appellants. 

William S. Bon 
of Schwartz, Bon, McCrary & Walker, Casper, for appellee.

Before ROONEY, C.J., and RAPER, THOMAS, ROSE and 
BROWN, JJ.

BROWN, 
Justice.

[¶1.]     Appellant Wyoming 
Johnson was the general contractor of a construction project. Appellee Stag 
Industries, Inc. was a subcontractor; Thomas Doyle, an employee of Stag, was 
injured on the project. Appellant Aetna Casualty & Surety Company, was the 
liability insurer for Wyoming Johnson at the time of Doyle's injury, and paid 
the personal injury settlement and costs of defense. Appellants brought an 
action for indemnity against Stag; the trial court granted summary judgment in 
favor of Stag.

[¶2.]     The issues 
are:

"1. Do the contractual 
provisions provide Wyoming Johnson with indemnity protection under the 
circumstances of this case?

"2. Did the trial court 
err in failing to find a breach of contract sufficient to entitle Wyoming 
Johnson to recover?

"3. Is a passively 
negligent general contractor/indemnitee entitled to indemnification under the 
contractual provisions?"

[¶3.]     We will 
affirm.

[¶4.]     Thomas Doyle was 
injured after falling through a hole in the roof while working on a construction 
project to remodel a building owned by Natrona County School District No. 1. 
After the injury Doyle applied for and received worker's compensation benefits 
through the account maintained by Stag. Doyle also filed suit against Wyoming 
Johnson, its job superintendent, and a roofing subcontractor for personal 
injuries. The complaint alleged numerous acts of negligence against Wyoming 
Johnson.1 Wyoming Johnson defended on the 
basis of lack of negligence, comparative negligence, and lack of a causal 
relationship between any alleged negligence of Wyoming Johnson or its employees 
and the injuries suffered.

[¶5.]     Wyoming Johnson and 
Stag had entered into a contract, which, among other things, set out the 
parties' indemnity arrangement. A demand was made upon Stag and the defense of 
the Doyle action tendered to it under the contract between Wyoming Johnson and 
Stag. Stag refused the tender and the case was settled. Appellants then 
instituted this action for recovery of the settlement amount and related costs 
on the theories of contractual indemnity and implied 
indemnity.

[¶6.]     Wyoming Johnson does 
not need to prove actual liability to Doyle to support a claim for indemnity 
against Stag. It need only prove potential liability to Doyle, since the 
indemnitor Stag declined to approve the proposed settlement with Doyle or to 
assume the burden of defense. Pan 
American Petroleum Corporation v. Maddux Well Service, Wyo., 586 P.2d 1220 
(1978). Wyoming Johnson denies negligence in the Doyle case, but contends that 
if it was negligent, its negligence was only passive. In effect Wyoming Johnson 
concedes that it was potentially liable in the Doyle case. If this were not so, 
the settlement by appellants would cast them in the role of a volunteer and they 
would be barred from seeking indemnity.

I

[¶7.]     Appellants' principal 
theory is that the contract between Wyoming Johnson and Stag expressly provided 
that Stag would indemnify Wyoming Johnson. The relevant terms of the 
contract between Wyoming Johnson and Stag for the construction project 
are:

"FIRST: The subcontractor 
agrees to * * * perform all work * * * in accordance with the general 
conditions, special conditions, specifications and contract documents between 
the Contractor and Owner. The 
subcontractor agrees to be bound to the Contractor by the same terms, as the 
Contractor's contract with the Owner and assume toward the Contractor all 
obligations and responsibilities which the Contractor by contract, assumes 
toward the Owner. * * *" (Emphasis added.)

"SECOND: * * * The 
Subcontractor further agrees to carry sufficient compensation, contractual 
liability and public liability insurance in the minimum amounts stipulated in 
the contract documents, to protect his workmen at all times and save the 
Contractor harmless, and to fully 
indemnify the Contractor from any liability or suit arising from the acts or 
omissions of the Subcontractor, including all costs attached to the same. * 
* *" (Emphasis added.)

"NINTH: The Subcontractor 
specifically further obligates himself to the Contractor in the following 
respect, to-wit: To indemnify Contractor 
against and save him harmless from any and all claims, suits or liability 
for injuries to property, injuries to persons including death and from any other 
claims, suits or liability on account of 
any act or omission of Subcontractor, or any of his officers, agents, employees 
or servants." (Emphasis added.)

[¶8.]     In the contract between 
Wyoming Johnson and Stag the ninth paragraph provides that Stag will indemnify 
Wyoming Johnson for liability incurred on account of "any act or omission of 
subcontractor." The second paragraph of this agreement provides for insurance to 
indemnify Wyoming Johnson for liability arising from "acts or omissions of the 
subcontractor." The second paragraph of such contract does not expand the 
coverage, but only indicates what risk the subcontractor must insure against, 
that is, liability that Wyoming Johnson may incur because of "acts or omissions 
of the subcontractor," Stag. The acts of negligence alleged in the Doyle 
complaint are acts or omissions of Wyoming Johnson, its foreman, or the roofing 
subcontractor, but are not acts or omissions of Stag. Furthermore, the complaint 
did not allege that Wyoming Johnson was vicariously liable because of negligent 
acts of appellee Stag or because of some theory of no fault liability, or 
because of a nondelegable duty. Appellants' claim for indemnity, then, must fail 
under the ninth paragraph of the Wyoming Johnson-Stag 
contract.

[¶9.]     The subcontract also 
incorporated by reference the terms of the prime contract between Wyoming 
Johnson and the owner, Natrona County School District No. 1.2 The relevant terms 
include:

"4.18.1 To the fullest 
extent permitted by law, the Contractor * * * shall indemnify and hold harmless the 
Owner and the Architect * * * and their agents and employees from and against all claims, damages, 
losses and expenses, including but not limited to attorneys' fees, arising out 
of or resulting from the performance of the Work, provided that any such claim, 
damage, loss or expense (1) is attributable to bodily injury, * * * and (2) is caused in whole or in part by any 
negligent act or omission of the Contractor, * * * anyone directly or indirectly 
employed by any of them or anyone for whose acts any of them may be liable, 
regardless of whether or not it is caused in part by a party indemnified 
hereunder. Such obligation shall not be construed to negate, abridge, or 
otherwise reduce any other right or obligation of indemnity which would 
otherwise exist as to any party or person described in this Paragraph 4.18." 
(Emphasis added.)

 

[¶10.]  The indemnification clauses further 
provided that any indemnification obligation would not be limited in any way by 
worker's compensation acts.

[¶11.]  Appellants argue that the first paragraph 
of the Wyoming Johnson-Stag contract imposes the same liability for indemnity on 
Stag as Wyoming Johnson had to the owner, Natrona County School District No. 1, 
including its own negligence. The indemnity provision in the owner-Wyoming 
Johnson contract is much broader than the indemnity provisions in the Wyoming 
Johnson-Stag contract. The former says indemnity for "all claims, damages, 
losses and expenses," while the latter is limited to indemnity for "acts or 
omissions of the subcontractor."

[¶12.]  We must determine, then, if the contract 
between Wyoming Johnson and Stag imposed liability on Stag to indemnify Wyoming 
Johnson for losses it incurred in circumstances other than for the acts or 
omissions of Stag, as provided for in the ninth paragraph of the subcontract. 
There is abundant authority that it does not.

[¶13.]  An examination of these authorities 
discloses that contracts for indemnity are to be construed strictly against the 
indemnitee.

"A contract of indemnity 
purporting or claimed to relieve one from the consequence of his failure to 
exercise ordinary care must be strictly construed. Accordingly, it is frequently 
stated as the general rule that a contract of indemnity will not be construed to 
indemnify the indemnitee against losses resulting from his own negligent acts 
unless such intention is expressed in clear and unequivocal terms, or unless no 
other meaning can be ascribed to it. Mere general, broad, and seemingly 
all-inclusive language in the indemnifying agreement has been said not to be 
sufficient to impose liability for the indemnitee's own negligence. It has been 
so held, for instance, with regard to the words `any and all liability.' * * *" 
41 Am.Jur.2d, Indemnity, § 15, pp. 699, 700 (1968).

"Where the injury was 
caused by the concurrent negligence of the indemnitor and the indemnitee, the 
courts have frequently read into contracts of indemnity exceptions for injuries 
caused in part by the indemnitee, although there is authority to the contrary. 
Even the fact that the contract requires the indemnitor to hold the indemnitee 
harmless from damage caused by the indemnitor's `negligent acts and omissions' 
has been held insufficient to make the indemnity clause applicable in a case 
where the indemnitee's negligence concurred with that of the indemnitor to cause 
the injury." 41 Am.Jur.2d, Indemnity, § 16, pp. 703, 704 
(1968).

[¶14.]  Generally, contracts exculpating one from 
the consequences of his own acts are looked upon with disfavor by the courts. Kansas City Power & Light Company v. 
United Telephone Company of Kansas, Inc., 458 F.2d 177 (10th Cir. 1972). 
Therefore, an agreement for indemnity is construed strictly against the 
indemnitee, particularly when the indemnitee was the drafter of the instrument. 
Allison Steel Manufacturing Co. v. 
Superior Court in and for County of Pima, 22 Ariz. App. 76, 523 P.2d 803 
(1974). If the indemnitee means to throw the loss upon the indemnitor for a 
fault in which he himself individually shares, he must express that purpose 
beyond any peradventure of doubt. Mostyn 
v. Delaware L. & W.R. Co., 160 F.2d 15 (2nd Cir. 1947). The test is 
whether the contract language specifically focuses attention on the fact that by 
the agreement the indemnitor was assuming liability for indemnitee's own 
negligence. Sweetman v. Strescon 
Industries, Inc., Del. Super., 389 A.2d 1319 
(1978).

[¶15.]  A provision in the subcontract that the 
subcontractor is obligated to the general contractor the same as the general 
contractor is obligated to the owner under the prime contract is not a clear and 
unequivocal agreement to indemnify the general contractor on account of its own 
negligence. Allison Steel Manufacturing 
Co. v. Superior Court in and for 
County of Pima, supra; and Goldman v. 
Ecco-Phoenix Electric Corporation, 41 Cal. Rptr. 73, 62 Cal. 2d 40, 396 P.2d 377 (1964).

[¶16.]  In Goldman v. Ecco-Phoenix Electric 
Corporation, supra, the contract between the general contractor and the 
owner provided that the general contractor would indemnify and save harmless the 
owner from liability of every kind arising from the performance of a contract or 
work, regardless of the responsibility for negligence. The subcontract agreement 
provided that the subcontractor would be bound to the general contractor in the 
same manner and to the same extent as the general contractor would be bound to 
the owner under the principal contract to the extent of work provided for in the 
subcontract agreement. The California Supreme Court, in holding that the 
subcontractor had no obligation to indemnify the contractor against his own 
negligence, stated:

"* * * In view of the 
general rule that an implied indemnity does not reach to protect the indemnitee 
from a loss to which his negligence has contributed, we must look at least for 
an express undertaking in the document that he is to do so. If one intends to do 
more than merely incorporate the general rule into the written document, he will 
be required to fix the greater obligation in specific terms. And the extent of 
the purported indemnitor's liability must be determined from an objective 
assessment of the language of the instrument. Goldman v. Ecco-Phoenix Electric 
Corporation, supra, at 379.

* * * * * 
*

"* * * We conclude only 
that an indemnification agreement calling for financial protection against one's 
own negligence cannot rest upon language so loose and obscure as that of the 
instant contract. * * * In the special circumstances of this undertaking of the 
subcontractor to hold the contractor harmless for its own negligence and in the 
use of this printed form contract for that purpose, we hold that the imposition 
of the obligation must be clear and express." Id., at 382.

[¶17.]  In Allison Steel Manufacturing Company v. 
Superior Court of Pima, supra, the general contractor attempted to bring the 
subcontractor under the indemnity provisions of the prime contract by making 
reference to the general conditions in the subcontract. The indemnity provision 
in the prime contract in Allison, paragraph 4.18.1, AIA Document A201, is the 
identical indemnity provision provided for in the prime contract here, the 
agreement between the owner and Wyoming Johnson. In Allison, a provision in the 
subcontract is substantially the same as the first paragraph in the subcontract 
here. It attempts to impose on the subcontractor the same obligation that the 
contractor had to the owner. The Arizona Court of Appeals held that the 
incorporation by reference of the general conditions which included paragraph 
4.18.1 on indemnification failed to express an intent in clear and unequivocal 
terms to indemnify the contractor against its own 
negligence.

[¶18.]  The first paragraph of the Wyoming 
Johnson-Stag contract provides in part:

"The subcontractor hereby 
agrees to be bound to the Contractor, by the same terms, as the Contractor's 
contract with the Owner and assumes toward the Contractor all obligations and 
responsibilities which the Contractor, by contract, assumes toward the Owner. * 
* *"

This provision 
of the contract does not mention the word "indemnity" or "indemnification." The 
language could easily be construed to refer to materials to be furnished and 
work to be performed. Work and materials are discussed in the other provisions 
of the first paragraph. In context then, it is logical to construe the first 
paragraph of the parties' contract to mean that the subcontractor is obligated 
to the contractor in the same manner as the contractor is obligated to the owner 
to furnish materials and perform work contemplated by the contract, and we 
assume that the trial court so construed it. The broad indemnity provisions 
contained in the owner-Wyoming Johnson contract for indemnity to the owner for 
all "claims, damages, losses or expenses," even if caused in part by Wyoming 
Johnson, has no application here and cannot be used to extend an indemnity 
obligation to Stag.

[¶19.]  In holding as we have here, we recognize 
that it has never been judicially determined that Wyoming Johnson was negligent. 
Furthermore, we are not assuming negligence on the part of Wyoming Johnson. Our 
holding is limited to a determination that the subcontract between Wyoming 
Johnson and Stag is not sufficient to extend Stag's liability for 
indemnification further than the liability set out in the ninth paragraph of the 
subcontract, that is, for "act or omission of the subcontractor, or any of his 
officers, agents, employees or servants." The negligence in issue in this case 
and the underlying suit was the possible negligence of Wyoming Johnson, not 
Stag. The subcontract is insufficient to impose the same liability for 
indemnification on Stag as the prime contract imposed on Wyoming Johnson to the 
owner.

II

[¶20.]  Appellants assert that they are entitled 
to indemnity because of an express contract. Alternatively, they assert their 
claim for indemnity on the theory of breach of contract. Appellants also contend 
that Wyoming Johnson's negligence, if any, was only passive while Stag's 
negligence was active, and therefore, Wyoming Johnson is entitled to indemnity, 
citing Mountain Fuel Supply v. 
Emerson, Wyo., 578 P.2d 1351, 1358 (1978); and Miller v. New York Oil Company, 
Wyo., 34 Wyo. 272, 243 P. 118 (1925). These theories of 
indemnification are essentially implied indemnification theories or common law 
theories.

[¶21.]  Appellants cite Cline v. Sawyer, Wyo., 600 P.2d 725 
(1979), for the principle that there is an implied warranty in construction 
contracts that the work will be performed in a "skillful, careful, diligent and 
workmanlike manner." Appellant contends that Stag breached this implied 
warranty, and that appellants incurred damages attributable to the breach, and 
therefore, are entitled to indemnity.

[¶22.]  Here Wyoming Johnson and Stag had a 
contract. The contract set out the indemnity agreement of the parties. It has 
not been suggested that this specific indemnity agreement did not reflect the 
intention of the parties. The area of indemnity has been preempted by an express 
agreement setting out the extent and limitation of the indemnity understanding. 
We do not think that the indemnity agreement of the parties should be expanded, 
enlarged, or rewritten for them. Implied theories of indemnity are not viable in 
the face of an express indemnity agreement. Frederick v. Hess Oil Virgin Islands 
Corporation, 492 F. Supp. 1338 (D.C.V.I. 1980); Jones & Laughlin Steel Corp. v. 
Johns-Manville Sales Corp., 453 F. Supp. 527 (D.C.W.D.Pa. 1978); City and Borough of Juneau v. Alaska 
Electric Light & Power Company, Alaska, 622 P.2d 954 (1981); County of Alameda v. Southern Pacific 
Company, 55 Cal. 2d 479, 11 Cal. Rptr. 751, 360 P.2d 327 (1961); Howard, Needles, Tammen and Bergendoff v. 
Steers, Perini & Pomeroy, Del.Super., 312 A.2d 621 (1973); Waller v. J.E. Brenneman Company, Del. 
Super., 307 A.2d 550 (1973); Quilico v. 
Union Oil Co. of California, 58 Ill. App.3d 87, 15 Ill.Dec. 784, 374 N.E.2d 219 (1978); Royer Foundry & Machine 
Company v. New Hampshire Grey Iron, Inc., 118 N.H. 649, 392 A.2d 145 (1978); 
Eazor Express, Inc. v. J.R. Barkley, 441 Pa. 429, 272 A.2d 893 
(1971).

"We also agree with the 
court below that the question of liability is not to be determined under any 
common law obligation apart from the contract. We think it important to examine 
the rules of the common law in order more accurately to determine the meaning of 
the written contract. This we shall develop hereafter. But, since the parties 
have themselves dealt with the question of indemnity in their written contract, 
we think it is fair to say that they intended it, rather than some general 
common law rule, to govern their rights and liabilities in this situation." Booth-Kelly Lumber Co. v. Southern Pacific 
Co., 183 F.2d 902, 906, 907 (9th Cir. 1950).

[¶23.]  There are hundreds of cases involving 
indemnity actions between a general contractor and its subcontractor. 
Ordinarily, indemnity on the theory of breach of contract or passive negligence 
as opposed to active negligence is asserted when there is no express contractual 
provision for indemnity. In the cases where there is an express contractual 
provision for indemnity and the parties raise as alternative theories of 
indemnity, breach of contract or passive negligence, the courts usually hold 
that the express contractual provision for indemnity governs, and that the 
theories of breach of contract or passive negligence should not be allowed to 
enlarge upon or expand the express contractual provisions for indemnity. The 
rationale is that the parties knowingly and adequately set out their intention 
in the express contractual agreement with respect to 
indemnity.

[¶24.]  In Howard, Needles, Tammen and Bergendoff v. 
Steers, Perini & Pomeroy, supra, there was a written contract that 
expressly set forth the indemnity liability of the party for whom indemnity was 
sought. In that case the Delaware court said:

"* * * We hold, however, 
that when the parties to a contract have entered into a written agreement, 
expressly setting forth one party's indemnity liability, there is no room for 
any enlargement of that obligation by implication. * * *" Id., at 
624.

"Where a written contract 
exists which includes a specific indemnification provision setting forth the 
rights and duties of the parties, the specific provision should govern and the 
courts should not enlarge the right to indemnification by implication. 
[Citations.] Brenneman and G & H specifically outlined their rights and 
duties as to indemnification in the subcontract. This provision should govern; 
no additional right of indemnification should be implied from the breach of an 
independent provision of the subcontract. Waller v. J.E. Brenneman Company, 
supra, at 553.

[¶25.]  In Eazor Express, Inc. v. J.R. Barkley, 
supra, at 895, the court said:

"The appellant in its 
brief relies on various cases in which our Court has recognized an implied contract of indemnity in favor 
of a person who, without active fault on his part, has been legally obliged to 
pay damages caused by the negligence of another. [Citations.] These cases, 
however, are not apposite where, as here, there is a written contract setting 
forth the rights and duties of the parties. The contract must then govern. * * 
*"

"* * * In an indemnity 
action arising out of contract, the `application of the theories of "active" or 
"passive" as well as "primary" and "secondary" negligence is inappropriate.' 
[Citations.]" Ferguson v. Town Pump, Inc., 177 Mont. 122, 580 P.2d 915, 
920 (1978).

"When the contractual 
obligation supersedes the common-law rules respecting the rights to 
indemnification or contribution by one of two negligent parties there is another 
consequence to contractual indemnification which the appellant Industry ignores. 
In that area the application of the theories of `active' and `passive,' as well 
as `primary' or `secondary,' negligence becomes inappropriate. [Citations.]" Southern Pacific Company v. Morrison-Knudsen 
Company, 216 Or. 398, 338 P.2d 665, 670-671 (1958).

[¶26.]  We hold that when parties have entered 
into a written contract which includes an express indemnification provision, the 
express provision controls. It is inappropriate to enlarge or add rights of 
indemnification to the express provision by implication. In this case, where the 
express indemnity agreement was insufficient to impose liability on Stag for the 
potential negligence of Wyoming Johnson, the law will not create the liability 
by using a common law theory to rewrite the contract.

[¶27.]  Affirmed.

FOOTNOTES

1 Negligent acts alleged 
in complaint:

"* * * Negligent by 
failing to provide a safe place in which the plaintiff could safely work, failed 
to properly plan and coordinate work schedules in a safe manner, failed to hire 
competent subcontractors, failed to provide adequate safety supervision on the 
job site, failed to provide adequate supervision of the work, failed to provide 
adequate inspections of the work as it was being completed, failed to require 
and install handrails around the above described hole in the roof or otherwise 
make it safe to work in that area, and otherwise failed to comply with safety 
requirements and standards of the Wyoming Occupational Health and Safety 
Commission. * * *"

2 The prime contract 
between the owner, Natrona County School District No. 1, and Wyoming Johnson is 
a standard contract which says that it is to be used with the latest edition of 
AIA Document A201, General Conditions of the Contract for Construction.