Case Title: Liccardi v. Stolt Terminals, Inc.

Citation: 

Docket Number: 81930

State: illinois

Court: Illinois Supreme Court

Date: 1997-09-25T00:00:00Z

Document:
Liccardi v. Stolt Terminals, Inc., No. 81930 (9/25/97) 
 
 
      NOTICE: Under Supreme Court Rule 367 a party has 21 days after the filing of the 
      opinion to request a rehearing. Also, opinions are subject to modification, correction 
      or withdrawal at anytime prior to issuance of the mandate by the Clerk of the Court. 
      Therefore, because the following slip opinion is being made available prior to the 
      Court's final action in this matter, it cannot be considered the final decision of the 
      Court. The official copy of the following opinion will be published by the Supreme 
      Court's Reporter of Decisions in the Official Reports advance sheets following final 
      action by the Court. 
 
               Docket No. 81930--Agenda 19--May 1997. 
     ARDIS LICCARDI et al. v. STOLT TERMINALS, INC., et al. (Stolt 
     Terminals, Inc., Appellee, v. Gundersen/Viking, Inc., Appellant). 
                 Opinion filed September 25, 1997. 
 
          JUSTICE HARRISON delivered the opinion of the court: 
          This appeal is before the court on a certificate of importance from the First 
     District of the Appellate Court. 155 Ill. 2d R. 316. Two questions are presented 
     for our consideration: (1) whether an employer may contractually waive the cap 
     on contribution liability recognized by this court in Kotecki v. Cyclops Welding 
     Corp.,  146 Ill. 2d 155  (1991), and (2) whether the contractual provisions in this 
     case do waive the Kotecki cap or are, instead, void and unenforceable under the 
     Construction Contract Indemnification for Negligence Act (740 ILCS 35/0.01 et 
     seq. (West 1994)) on the grounds that they require the employer to indemnify a 
     third party for the third party's own negligence. For the reasons that follow, we 
     continue to hold, as we did in Braye v. Archer-Daniels-Midland Co., 175 Ill. 2d 201 (1997), that an employer may enter into a valid and enforceable contractual 
     agreement to waive the Kotecki limitation on an employer's contribution liability. 
     We further conclude that one of the contractual provisions in this case is valid and 
     does operate to waive the Kotecki cap. 
          These are the facts. Stolt Terminals (Stolt) hired Gundersen/Viking, Inc. 
     (Gundersen), to clean the interior of one of its storage tanks. During the course 
     of the cleaning operation, Arthur Farmer, a Gundersen employee, was knocked 
     from the scaffolding where he was working. Farmer died from his injuries, and 
     his family sued Stolt under the Structural Work Act (740 ILCS 150/0.01 et seq. 
     (West 1994)). 
          Stolt subsequently brought a third-party action against Gundersen. Stolt's 
     complaint was in three counts. Counts I and II were based on the provisions of the 
     written contract between Gundersen and Stolt for the cleaning work. Count I 
     invoked paragraph seven of the contract, which states: 
               "If Vendor performs services *** hereunder, Vendor agrees to 
                    indemnify and hold harmless Stolt Terminals (Chicago) Inc. from 
                    all loss or the payment of all sums of money by reason of all 
                    accidents, injuries, or damages to persons or property that may 
                    happen or occur in connection therewith." 
     According to Stolt, this paragraph obligated Gundersen to indemnify Stolt for all 
     costs, fees losses or payments incurred by or awarded against Stolt in the 
     underlying proceeding "to the extent said costs, fees losses or payments are the 
     proximate result of the wrongful acts or omissions of [Gundersen]." 
          Count II sought damages based on Gundersen's alleged breach of 
     paragraph eight of the complaint, which provides: 
               "Vendor represents and warrants that no Federal or State Statute or 
                    regulation, or Municipal Ordinance, has been or will be violated in 
                    the manufacturing, sale, and delivery of any article or service sold 
                    and delivered hereunder, and if such violation has or does occur, 
                    Vendor shall indemnify and hold harmless Stolt Terminals 
                    (Chicago) Inc. from all loss, penalties, or the payment of all sums 
                    of money on account of such violation." 
          Unlike counts I and II, count III of Stolt's third-party complaint was not 
     premised on the parties' contract. It asserted a contribution claim against 
     Gundersen for that portion of any damage award received by plaintiffs attributable 
     to Gundersen's acts or omissions. 
          Gundersen moved to strike certain portions of count III, asserting that 
     under this court's decision in Kotecki v. Cyclops Welding Co.,  146 Ill. 2d 155 
     (1991), Gundersen's contribution liability could not exceed the amount of workers' 
     compensation benefits paid in connection with Farmer's injury and death. The 
     circuit court granted Gundersen's motion in part, agreeing that Kotecki limited the 
     company's contribution liability to the amount of its workers' compensation 
     liability. 
          Stolt moved for reconsideration, arguing that through its contract with 
     Stolt, Gundersen had waived the Kotecki limitations on its contribution liability. 
     Gundersen, in turn, moved for summary judgment as to counts I and II of Stolt's 
     third-party complaint, asserting that the contractual provisions on which those 
     counts were based violated the Construction Contract Indemnification for 
     Negligence Act (740 ILCS 35/0.01 et seq. (West 1994)), which provides: 
                    "With respect to contracts or agreements, either public or 
                    private, for the construction, alteration, repair or maintenance of a 
                    building, structure, highway bridge, viaducts or other work dealing 
                    with construction, or for any moving, demolition or excavation 
                    connected therewith, every covenant, promise or agreement to 
                    indemnify or hold harmless another person from that person's own 
                    negligence is void as against public policy and wholly 
                    unenforceable." 740 ILCS 35/1 (West 1994). 
          The circuit court agreed with Gundersen's argument and granted its motion 
     for summary judgment as to counts I and II. In the same order, the court denied 
     Stolt's motion for reconsideration, adhering to its previous determination that 
     Kotecki limited the company's contribution liability to the amount of its workers' 
     compensation liability. Because Gundersen had tendered its workers' compensation 
     lien to the court, the court further held that Stolt's contribution claim, set forth in 
     count III, should be dismissed with prejudice. 
          In disposing of these matters, the court made an express written finding 
     pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)) that there was no 
     just reason to delay enforcement or appeal. Stolt thereupon appealed to the 
     appellate court. In that appeal, Stolt did not take issue with the circuit court's 
     entry of summary judgment against it on counts I and II of its third-party 
     complaint. Rather, it challenged only the court's determination that Kotecki limited 
     Gundersen's contribution liability to the amount of its workers' compensation 
     liability and that Gundersen was therefore entitled to dismissal of Stolt's 
     contribution claim in count III after tendering its workers' compensation lien. 
          The appellate court reversed and remanded. 283 Ill. App. 3d 141. 
     Following Herington v. J.S. Alberici Construction Co., 266 Ill. App. 3d 489 
     (1994), and Braye v. Archer-Daniels-Midland Co., 276 Ill. App. 3d 1066 (1995), 
     aff'd in part, rev'd in part, 175 Ill. 2d 201 (1997), the court accepted Stolt's 
     argument that an employer can, by contract, elect to waive the contribution limit 
     available to it under Kotecki. The court further determined that Gundersen had 
     waived that limit under its contract with Stolt here. 
          In reaching this conclusion, the court looked to the same provisions of the 
     contract that were at issue in counts I and II of Stolt's third-party complaint and 
     the subject of Gundersen's successful motion for summary judgment. The 
     appellate court agreed with the circuit court that paragraph seven, the contractual 
     provision involved in count I, was void and unenforceable under the Construction 
     Contract Indemnification for Negligence Act because it allowed Stolt to be 
     indemnified for its own negligence. The court opined, however, that paragraph 
     eight, the provision at issue in count II, was, in effect, a call for contribution 
     rather than indemnity; that it was not invalid under the Act; and that its effect was 
     to permit contribution from Gundersen unrestricted by the workers' compensation 
     liability cap. 
          On Gundersen's application, the appellate court granted a certificate of 
     importance pursuant to Supreme Court Rule 316 (155 Ill. 2d R. 316), and the 
     matter is now before us for review. As noted at the outset of this disposition, two 
     basic issues have been presented to us. First is the question of whether an 
     employer may contractually waive the cap on contribution liability recognized by 
     this court in Kotecki v. Cyclops Welding Corp.,  146 Ill. 2d 155  (1991). This issue 
     will not detain us for long, because it has already been decided by our court. In 
     the recent case of Braye v. Archer-Daniels-Midland Co., 175 Ill. 2d 201 (1997), 
     we held, as did the appellate court here, that an employer may relinquish by 
     contract the liability limitation set forth in Kotecki. We continue to adhere to that 
     view. 
          The second issue before us is whether the particular contractual provisions 
     in this case operated as a waiver of the Kotecki cap on Gundersen's contribution 
     liability or whether they are void and unenforceable under the Construction 
     Contract Indemnification for Negligence Act on the grounds that they require 
     Gundersen to indemnify Stolt for Stolt's own negligence. In addressing this issue, 
     we begin by noting an anomaly that the appellate court overlooked, but that will 
     seem obvious once we point it out. 
          In order to have a contractual waiver of the Kotecki cap, there must, of 
     course, be some valid contractual provision by which the waiver is made. In this 
     case, Stolt's claim of contractual waiver is founded exclusively on paragraphs 
     seven and eight of its agreement with Gundersen. As we have previously 
     indicated, however, the trial court adopted Gundersen's argument that paragraphs 
     seven and eight were void and unenforceable under the Construction Contract 
     Indemnification for Negligence Act. That is the very reason why the court granted 
     summary judgment in favor of Gundersen and against Stolt on counts I and II of 
     Stolt's counterclaim. 
          Once the court entered summary judgment against Stolt and entered its 
     written finding pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)), 
     making the judgment appealable, it was incumbent on Stolt to appeal the court's 
     disposition of counts I and II if it believed that paragraphs seven and eight of 
     contract were, in fact, valid. This is so because, as a general rule, the failure of 
     a party to challenge a legal decision when it has the opportunity to do so renders 
     that decision " `the law of the case for future stages of the same litigation, and 
     [that party is] deemed to have waived the right to challenge that decision at a later 
     time.' " See Aardvark Art, Inc. v. Lehigh/Steck-Warlick, 284 Ill. App. 3d 627, 632 
     (1996), quoting Williamsburg Wax Museum, Inc. v. Historic Figures, Inc., 810 F.2d 243, 250 (D.C. Cir. 1987); Baird & Warner, Inc. v. Gary-Wheaton Bank, 122 
     Ill. App. 3d 136, 138-39 (1984). 
          When Stolt chose not appeal to the court's judgment as to counts I and II, 
     thereby rendering the court's decision on those counts the law of the case and 
     precluding Stolt from assailing the invalidity of the contractual provisions at issue 
     in those counts, there was no longer any basis for Stolt's claim under count III 
     that Gundersen had contractually waived the Kotecki cap on its contribution 
     liability. If the provisions were void and unenforceable for the purposes of counts 
     I and II, they were void and unenforceable for the purposes count III as well. 
     There is no legal or factual basis for differentiating the situations. Accordingly, 
     Stolt should not have been permitted to contend on appeal that paragraphs seven 
     and eight were valid and sufficient to waive the Kotecki cap on Gundersen's 
     contribution liability. 
          Having noted this inconsistency, we also note that the inconsistency was 
     not raised by Gundersen in the appellate court and has not been raised by 
     Gundersen in our court. To the contrary, Gundersen has proceeded as if the 
     problem is nonexistent. At every stage of the appellate process, it has willingly 
     addressed the merits of Stolt's arguments regarding the validity of the contractual 
     provisions. Under these circumstances, and considering that the law of the case 
     doctrine is not a limit on the court's power (People v. Patterson,  154 Ill. 2d 414 , 
     468-69 (1992)), we believe that Gundersen has waived any right to complain that 
     Stolt's arguments were not properly before the appellate court and should not be 
     considered by us. 
          Turning then to the merits of Stolt's contractual waiver claims, we agree 
     with the appellate court that the circuit court's judgment should be reversed and 
     the cause remanded, but we reach this conclusion for a different reason. The 
     appellate court agreed with the circuit court that paragraph seven of Gundersen's 
     contract with Stolt is void and unenforceable under the Construction Contract 
     Indemnification for Negligence Act, but reversed and remanded based on 
     paragraph eight. Our analysis differs. In our view, paragraph seven is valid and 
     there is no need to address paragraph eight. 
          Paragraph seven states: 
                    "If Vendor performs services *** hereunder, Vendor agrees 
                    to indemnify and hold harmless Stolt Terminals (Chicago) Inc. 
                    from all loss or the payment of all sums of money by reason of all 
                    accidents, injuries, or damages to persons or property that may 
                    happen or occur in connection therewith." 
          In reviewing this provision, the appellate court opined that there is nothing 
     in the provision's language that would prevent Gundersen from indemnifying Stolt 
     for its own negligence, nor is there anything that calls for distribution of loss 
     according to relative culpability. 283 Ill. App. 3d at 148. Although there is merit 
     to the appellate court's view, our recent decision in Braye v. Archer-Daniels- 
     Midland Co., 175 Ill. 2d 201, demonstrates that the literal terms of a contract are 
     not necessarily dispositive on the issue of whether it is void under the 
     Construction Contract Indemnification for Negligence Act. In Braye we 
     emphasized that a contract should not be deemed illegal unless it is expressly 
     contrary to the law or public policy. The law and the public policy of Illinois 
     permit and require that competent parties be free to contract with one another. 
     Whether a contract violates public policy depends on the peculiar facts and 
     circumstances of each case, as well as the language of the contract itself. Braye, 
     175 Ill. 2d  at 215-16. 
          In upholding the contract at issue in Braye, this court relied on the well- 
     established principle of contract law that statutes and laws in existence at the time 
     a contract is executed are considered part of the contract. The parties are presumed 
     to have entered into their agreement with knowledge of the existing law. In 
     addition, "a construction of a contract which renders the agreement enforceable 
     rather than void is preferred." Braye, 175 Ill. 2d  at 217. 
          As was the case with the third-party plaintiff in Braye, we believe that at 
     the time of the parties' contract in this case, Stolt was presumed to know that 
     indemnity promises in construction contracts are void in violation of public policy 
     and that a court would not enforce any contractual language that would suggest 
     such a promise. Moreover, there is no indication that Stolt ever believed that the 
     contract here entitled it to indemnification for its own negligence. To the contrary, 
     it is clear from the specific allegations in count I of Stolt's third-party action that 
     Stolt understood paragraph seven as authorizing recovery from Gundersen of the 
     costs, fees, losses or payments incurred by or awarded against Stolt in the 
     underlying proceeding only "to the extent said costs, fees losses or payments are 
     the proximate result of the wrongful acts or omissions of [Gundersen]." 
          Because Stolt did not construe paragraph seven as relieving it of liability 
     for its own acts or omissions, that paragraph did not extinguish Stolt's incentive 
     to exercise due care, and the primary purpose behind the Construction Contract 
     Indemnification for Negligence Act was not implicated. Accordingly, paragraph 
     seven is not void under the Act and can be invoked by Stolt to establish a waiver 
     of the cap to which Gundersen would otherwise be entitled under Kotecki. Braye, 
     175 Ill. 2d  at 217-18. 
          Having reached this conclusion, there is no need to address the validity of 
     paragraph eight concerning the violation of state or federal statutes or regulations 
     or municipal ordinances. The only statute, regulation or ordinance at issue in this 
     case is the Structural Work Act, and under the facts alleged here, any liability 
     Gundersen might have to Stolt under paragraph eight it would also have under 
     paragraph seven. As a result, if paragraph seven is sufficient to waive the Kotecki 
     cap, that is all that is necessary. It does not matter that the cap might be waived 
     by paragraph eight as well. 
          In sum, we agree with the appellate court that Kotecki cap can be waived 
     by contract, that the contract here contained a valid waiver of the Kotecki cap, that 
     the circuit court therefore erred in dismissing count III of Stolt's third-party 
     complaint based on Kotecki, and that the cause should be remanded to the circuit 
     court for further proceedings. 
          For the foregoing reasons, the judgment of the appellate court is affirmed. 
 
      Affirmed.