Title: Oman Construction Co. v. Tennessee Central Ry. Co.
Citation: 370 S.W.2d 563
Docket Number: N/A
State: Tennessee
Issuer: Tennessee Supreme Court
Date: September 11, 1963

370 S.W.2d 563 (1963) OMAN CONSTRUCTION COMPANY, Inc., McKenzie Construction Company, and Bertrand Goldberg Associates, Petitioners, v. TENNESSEE CENTRAL RAILWAY COMPANY, Respondent. Supreme Court of Tennessee. September 11, 1963. *564 Goodpasture, Carpenter, Woods &amp; Courtney, Nashville, for Oman Const. Co., Inc., and McKenzie Const. Co. Stephenson, Lackey &amp; Holman, Nashville, for Bertrand Goldberg Associates. Joseph Martin, Jr., John D. Whalley and Carmack Cochran, Nashville, Martin &amp; Cochran, Nashville, of counsel, for respondent. HOLMES, Justice. This suit was instituted by the Tennessee Central Railway Company against the Oman Construction Company, Inc., McKenzie Construction Company and Bertrand Goldberg Associates to recover damages alleged to have been sustained by plaintiff as a result of the tunneling of a sewer under its freight depot in Nashville and blasting done in connection with the construction of such sewer. In the Circuit Court there was a judgment for the plaintiff for $30,000.00 against all of the defendants. The case was appealed to the Court of Appeals where a majority of that Court affirmed the Circuit Court judgment. This Court has granted writs of certiorari prayed for by all of the defendants and has set the case for oral argument, which has been had. For convenience, hereinafter we shall refer to the defendand Oman Construction Company, Inc., as "Oman", the defendant McKenzie Construction Company as "McKenzie" and the defendant Bertrand Goldberg Associates as "Goldberg". The plaintiff's declaration is in three counts. The first count is based on an alleged breach of contract by the defendants. The second and third counts sound in tort. The first count of plaintiff's declaration alleges *565 that on August 18, 1952 Goldberg, a firm of architects-engineers, and another similar firm entered into a contract with the City of Nashville by which Goldberg and the other firm were employed by the City as engineers in connection with the construction of a sewage collection and disposal system for the City. Under the terms of this contract Goldberg and the other firm were employed to review and report on an existing design for such sewage system and to supervise and inspect the proposed construction work. This count of the declaration further alleges that on June 29, 1953 the contract of August 18, 1952 was amended so as to separate the work of Goldberg from that of the other firm. By this amendment Goldberg alone became the supervising engineer for the proposed sewer construction. It is alleged that, as supervising engineer under the terms of its contract with the City, Goldberg agreed as follows: This count of the declaration further alleges that on May 20, 1954 the City and the plaintiff entered into an agreement by which plaintiff granted unto the City, "its, servants, agents and/or contractors permission to enter upon the property of plaintiff for the purpose of constructing an 84-inch pipe tunnel sewer across the plaintiff's station grounds and under the station and office building and tracks of plaintiff." This quoted language from the declaration is the conclusion of the pleader as to the terms of the contract between the plaintiff and the City, which contract, has hereinafter stated, was made a part of the record in the cause. The contract itself, after describing the size and location of the sewer across plaintiff's property and providing that the top of said sewer shall not be less than 13 feet below the surface states: It is further alleged in this count that on June 29, 1954 the City entered into a contract with Oman for the construction of the sewer. This contract, among other things, provided: It is next alleged that Oman sub-contracted the entire work to McKenzie, who undertook to construct the sewer. The defendants Oman and McKenzie do not contend that there is any difference in their status in this case. In count one of the declaration it is further alleged that all of the defendants breached the foregoing contracts, that the building and platforms and tracks of plaintiff were caused to sink and were damaged as a result of such breach of contract, that this damage comes within the provisions of the contract of May 20, 1954 between the City and the plaintiff, the obligations of which were assumed by Oman and McKenzie and that it is also within the provisions of the contract between Oman and the City. Plaintiff further alleges Goldberg was bound by the terms of the contract between the City and plaintiff, that the damage was done by Oman and McKenzie under the supervision of Goldberg and that Goldberg breached his own contract by permitting the breach of contract by Oman and McKenzie. The second count of the declaration is in tort and is based upon alleged acts of negligence. It charges Oman and McKenzie with a number of specific acts of negligence and alleges that Goldberg was negligent in the supervision of the work by allowing and approving the negligent and careless acts of the contractors, Oman and McKenzie. The third count of the declaration is also in tort and alleges negligence generally in that all of the defendants jointly came upon the plaintiff's property and negligently damaged its buildings and other improvements by tunneling under same and removing pilings and by blasting. The defendants craved oyer of all the contracts sued on. An order was entered making relevant parts of the contract between Oman and the City as well as all of the other contracts above referred to a part of the record in the cause. After these contracts were made a part of the record, Goldberg filed a demurrer, the first ground of which was that the declaration and the contracts in the record do not show that Goldberg ever promised to pay plaintiff for any damages it might suffer nor do they show that Goldberg was in any way contractually liable to the plaintiff. Other relevant grounds of this demurrer went to the second and third counts of the declaration, the basis of these grounds of demurrer being that since Goldberg was not contractually liable to the plaintiff there was a misjoinder of parties defendant since all of the causes of action stated in the declaration do not affect all of the parties defendant. The defendants Oman and McKenzie also demurred to the declaration. The grounds of the demurrer of these defendants are: Both the demurrer of Goldberg and that of Oman and McKenzie were overruled in their entirety by the Trial Judge. This action of the Court was assigned as error in the Court of Appeals and the action of the Court of Appeals in affirming the Trial Court in this regard is made the basis of Goldberg's assignments of error Numbers 1, 2 and 3 in this Court and assignments of error Numbers 1 and 2 of Oman and McKenzie. In considering these assignments, it is necessary first to consider the extent to which the averments of a declaration are admitted by a demurrer. In Tennessee "it is fundamental that a demurrer admits only facts that are well pleaded and reasonable inferences of fact but not deductions, inferences and conclusions of law." In re Eppinger's Estate, 207 Tenn. 53, 57, 336 S.W.2d 28, 30. The above quoted rules as to the extent to which the allegations of the declaration are admitted by demurrer have been applied in numerous other cases decided by this Court, including Hackney Company v. Robert E. Lee Hotel, 156 Tenn. 243, 252, 300 S.W. 1; Freeman v. Dayton Scale Company, 159 Tenn. 413, 418, 419, 19 S.W.2d 255; Zager v. Cobb, 192 Tenn. 79, 83, 237 S.W.2d 560. In applying these rules to the declaration in this case, it appears that the allegations of the declaration as to the meaning and interpretation of the written contracts sued on are not admitted by the demurrer. The legal effect of these instruments presents a question of law for the Court. Godson v. MacFadden, 162 Tenn. 528, 531, 39 S.W.2d 287. In stating the substance of count one of the declaration, we have quoted all of the provisions of the contracts which are relied upon by the respective parties in their briefs. The undertaking of Goldberg in its contract with the City is primarily to see that the City gets a sewer and disposal plant that measures up to that for which the City contracted. Goldberg did not agree to pay any damage to anyone nor did it contract to save the City harmless from any claim. In none of the contracts are such obligations expressly placed upon Goldberg. On the other hand, Oman in its contract with the City expressly contracted to restore at its expense all damage or injury to public or private property on account of any act, omission, neglect or misconduct in the execution of the work or in consequence of the non-execution thereof by the contractor; or to make good such injury or damage in an acceptable manner. Oman also expressly contracted to save and keep the City harmless from any liability or expense for injuries, damages or repairs to any existing structures and property. Also Oman agreed in its contract with the City to save the City harmless from any damages resulting from blasting in the progress of the work. The "sole and final responsibility for the safety of workmen, work and structures" is expressly placed upon Oman and is assumed by that defendant in its contract with the City. Had it been the intention of the parties that Goldberg be contractually liable to the plaintiff or others, it would have been a simple matter to have included in Goldberg's contract the same clear and unambiguous provisions for assumption of liability that were contained in Oman's contract with the City, or at least to have expressly *570 placed such responsibility on Goldberg in one of the other contracts. On May 20, 1954 the City in the easement contract with the plaintiff agreed that all damages to facilities of plaintiff as a consequence of the construction of the sewer would be borne by the City, its servants, agents and/or contractors. A little over a month after the execution of that contract the City entered into the contract with Oman by which Oman agreed to be responsible for all damages arising out of the work and agreed to indemnify and save the City harmless from such damages and to be solely responsible for the safety of structures in or adjacent to any excavation. In the majority opinion of the Court of Appeals holding that the first count of the declaration stated a cause of action in contract against Goldberg, it is stated: We are unable to agree with this conclusion of the Court of Appeals. The averments of the declaration on which this holding is based are averments of legal conclusions drawn by the pleader from the provisions of unambiguous contracts. We have heretofore pointed out that a demurrer does not admit conclusions of law. The proper interpretation of the contracts is a question of law to be determined by the Court. We find no provisions in Goldberg's contract with the City or in the contract between Oman and City or in the contract between the plaintiff and the City which expressly provide for any contractual liability on the part of Goldberg to the plaintiff. The City saw fit to place solely on Oman the responsibilities undertaken by it in its contract with plaintiff. The easement contract between the plaintiff and the City does not in any way specify what "servants, agents and/or contractors" in addition to the City are to bear the expense of damage to plaintiff's facilities as a consequence of the construction or operation of the sewer across its premises. If it were intended by the language used to bind every servant, agent and contractor of the City, there would have been no occasion to use the phrase "and/or contractors". It is necessary to examine all of the contracts to determine what are the rights and obligations of the respective parties to this litigation. The rule that several contracts relating to one transaction are to be construed together is stated in 17 C.J.S. Contracts § 298, pages 714, 715, in the following language: Our Court of Appeals in Real Estate Management v. Giles, 41 Tenn.App. 347, 293 S.W.2d 596, 599, recognized and applied this rule in stating: Construing the contracts relied upon in conformity with the above stated rule, it is seen that in the City's contract with Goldberg every obligation undertaken by the engineer is for the benefit of the City alone. An examination of the contract between Oman and the City shows that in such contract Oman alone assumed the obligations to pay damages and restore damaged property. In Oman's contract under the general heading "LEGAL RELATIONS AND RESPONSIBILITY TO PUBLIC", subheading (9) "Protection and Restoration of Property", the only duty placed upon the engineer is to forward the contractor's application to enter upon private property to the property owner and to the Director of Public Works of the City. It is in these same paragraphs dealing with legal relations and responsibility to public that Oman expressly agrees to be responsible for "all damage or injury to property of any character resulting from any act, omission, neglect or misconduct in the manner or method of executing the work or due to his non-execution of the work or at any time due to defective work or materials". In these same paragraphs Oman further agrees to make good all damage to public or private property occasioned by any act, omission, neglect or misconduct in the execution of the work or in consequence of the non-execution thereof on the part of the contractor. It thus appears that in the Oman contract under the title "LEGAL RELATIONS AND RESPONSIBILITY TO PUBLIC" no duties or obligations with respect to any damage to any property are placed upon Goldberg. Under the general heading "SEWERS IN TUNNELS" in Oman's contract, sub-heading (6) "Care of Existing Structures and Property", paragraph (a) Oman alone assumes responsibility to support and protect all structures from injury during the construction "and to be liable for all damages to such structures and property" and to save the City harmless from any liability for damage to same. The Engineer is not so much as mentioned in this paragraph. Under this same general heading "SEWERS IN TUNNELS", sub-heading (16) "Sheeting Bracing and Lining", paragraph (b), the contract between Oman and the City provides: It thus clearly appears that all obligations to pay damages or to indemnify the City or restore damaged property are made the obligation of Oman alone and no such obligations are placed upon Goldberg in the contract between Oman and the City. It is contended that Goldberg accepted the benefits of the contract between the City and plaintiff and thereby became liable in contract to plaintiff. We have heretofore pointed out that this easement contract does not provide what "servants, agents and/or contractors" are to be responsible for damages to plaintiff's property. *572 In construing a statute containing the expression "and/or" this Court stated, "The expression `and/or' in this statute must be held to include the meaning to be ascribed if `or' was used alone." Hood v. State, 187 Tenn. 501, 505, 216 S.W.2d 14, 16. It is generally held that when the expression "and/or" is used in contracts its interpretation depends upon the circumstances and it must be construed to express the intention of the parties. Newlon v. Newlon, 310 Ky. 737, 220, S.W.2d 961, 963. See also cases collected in 3 Words and Phrases, Permanent Edition, p. 640 et seq. Webster's New International Dictionary, 1949 Edition, defines "and/or" as meaning either "and" or "or". In construing all of the contracts together, it is clear that the City placed the legal responsibility for all damages to property on Oman alone in the contract between Oman and the City which was executed shortly after the execution of the contract between the City and plaintiff. When the contract between the plaintiff and the City is properly construed, Goldberg is in no sense a party thereto. None of the contracts makes the plaintiff a third party beneficiary of any obligation assumed by Goldberg. In determining whether or not one was a third party beneficiary of a contract, it was stated in Rutherford County v. City of Murfreesboro, 202 Tenn. 455, 459, 460, 304 S.W.2d 635, 637. The rule for determining the parties to a contract is stated in 17 C.J.S. Contracts § 346, pages 802, 803, in the following language: When these rules are applied to the contracts upon which count one of the plaintiff's declaration is based, it is our opinion that neither by express language nor by implication is the plaintiff contractually the beneficiary of any obligation undertaken by Goldberg. The fact that Goldberg is charged with knowledge of the easement contract between the plaintiff and the City does not bind him in contract to pay damages to the plaintiff. It was also charged with knowledge of the terms of the contract between Oman and the City which expressly bound Oman alone to pay such damages. Goldberg's knowledge of the easement contract *573 would not create liability under same where none existed. It is further contended by the plaintiff that since the contracts are with a municipality they are public contracts and that the first count of the declaration states a cause of action against Goldberg by reason of the rule stated in Paragraph (b) of Restatement, Contracts, Sec. 145, which is as follows: In the brief filed in support of Goldberg's petition for certiorari, it is stated: In this brief, counsel for Goldberg has also made an excellent analysis of the cases supporting the text in 2 Williston on Contracts (3rd Ed. 1959) Sec. 374, dealing with this same subject. After examining the texts and the cases cited therein, we are convinced that Goldberg's contention as to the proper application of Paragraph (b) of Section 145, Restatement, Contracts, is correct. We have been unable to find cases holding contrary to those analyzed in Goldberg's brief and evidently counsel for plaintiff has found none, for no such cases are cited in the reply brief of plaintiff. If the rule of Paragraph (b) of the above quoted section of Restatement, Contracts, were applicable to Goldbert in this case, there would be no occasion to have the exception to the rule of non-liability in contract stated in Section (a), and rare indeed would be the case that would fall under the general rule of non-liability in contract stated in this section. We hold that in this case the general rule quoted above from Restatement applies to Goldberg and not the exception stated in Paragraph (b). For the reasons above stated, we sustain Goldberg's assignment of error number one and hold that the first count of the declaration does not state a cause of action in contract against Goldberg. The second assignment of error relied upon by this defendant is based upon the *574 Court of Appeals' failure to sustain the following ground of Goldberg's demurrer: In support of this assignment this defendant relies upon Teas v. Luff-Bowen Co., 147 Tenn. 651, 251 S.W. 44, and Smith v. Archer, 197 Tenn. 101, 270 S.W.2d 375, as well as general texts. Each of these cases deals with a misjoinder of parties plaintiff. Smith v. Archer quotes with approval the holding in the Teas case that: The authorities seem to be uniform in holding that the rule applied to the joinder of parties plaintiff in these cases is equally applicable to parties defendant. The rule is stated as follows in 1 C.J.S. Action § 98a, page 1284: In 1 Am.Jur.2d, Actions, Sec. 123, Page 643, it is stated: In this same Section, at Page 644, this text further states: We have been cited to no cases contrary to the two Tennessee cases or the above quoted texts relating to joinder of parties and our investigation has revealed none. We, therefore, sustain Goldberg's second assignment of error and hold that this defendant's demurrer should have been sustained as to all counts of the declaration. This leaves for decision the questions raised by the assignments of error of Oman and McKenzie. As heretofore stated, assignments of error one and two of these defendants relate to the action of the Court of Appeals in affirming the Trial Court in overruling the two grounds of demurrer of Oman and McKenzie hereinabove set forth. What has been stated with reference to the obligations undertaken by these defendants in the contract between Oman and the City clearly shows that these defendants come within the rule of Paragraph (a) of Sec. 145, Restatement, Contracts. The plaintiff is a third party beneficiary of Oman's contract with the City and count one of the declaration states a cause of action against these defendants in contract. The fact that Goldberg was improperly joined is not a ground for dismissal of a suit as to those properly joined. Payne v. Berry, 3 Tenn.Ch. 154. 67 C.J.S. Parties § 138, p. 1141, and § 140, p. 1146; 39 Am. Jur. Parties, Sec. 120. By the second ground of the demurrer of these defendants heretofore quoted, it is contended that in the second count of the declaration these defendants are sued in both tort and upon contract in the same *575 count. This count of the declaration simply incorporates by reference the "averments of the first count showing the status and relationship of the parties" and then alleges five specific acts of negligence on the part of Oman and McKenzie and alleges that, as a result of this negligence, the plaintiff sustained certain described damage. There can be no doubt but that the gravamen of the action stated in count two sounds in tort. The existence of a contract may furnish the occasion for a tort obligation. In this case we have determined, as did the Court in Carne v. Maryland Casualty Company, 208 Tenn. 403, 408, 346 S.W.2d 259, 262: See also Prosser on Torts (2nd Edition) Sec. 81. The same applies to the third count of the declaration. We, therefore, overrule assignments of error one and two of these defendants. The third assignment of these defendants complains of the action of the Court of Appeals in affirming the Trial Court in overruling Oman and McKenzie's motion for a directed verdict. This motion was grounded upon the contention that these defendants were not liable in contract and that their negligence was not proven. We have already held that the contract count stated a cause of action against these defendants. An examination of the record shows that there was ample proof introduced at the trial to make an issue for the jury as to negligence on the part of Oman and McKenzie in constructing the tunnel beneath plaintiff's property. Therefore, this assignment of error is overruled. The fourth assignment of these defendants is based upon the affirmance by the Court of Appeals of the Trial Court's action in refusing to charge a special request containing the language that the "contractual agreements of the Oman Construction Company with the City of Nashville are wholly immaterial on the question of the liability of these defendants in this action." What has been heretofore stated shows that we must overrule this assignment of error. We have pointed out that the obligations undertaken by Oman in its contract were for the benefit of those in the position of the plaintiff in this case. The fifth assignment of Oman and McKenzie is that the Court of Appeals erred in failing to hold the Trial Court committed reversible error in charging the jury as follows: By this assignment of error Oman and McKenzie contend that the rule of strict liability for damages caused by blasting "is inapplicable to a contract with a municipality for a public improvement." In support of this contention, these defendants rely upon Wood v. Foster &amp; Creighton Company, 191 Tenn. 478, 483, 235 S.W.2d 1, 3, and the cases cited therein as authority for the statement: All of these cases deal with the rule that all damages necessarily incident to the *576 proper construction of a public improvement must be recovered in a condemnation case and cannot be recovered in an action against the contractor. In none of these cases was there an express agreement upon the part of the contractor that blasting shall be at the contractor's risk and that all damages occasioned thereby shall be paid by the contractor, as is true in this case. Here the City expressly agreed to bear all damage to plaintiff's facilities and, as we have heretofore pointed out, Oman expressly assumed such responsibility and agreed to save the City wholly harmless. In Knoxville v. Peebles, 19 Tenn. App. 340, 87 S.W.2d 1022, with certiorari denied by this Court, it was held that an instruction to the jury applying the rule of strict liability for blasting in a suit against the City and its contractor for damage sustained as a result of blasting in constructing a sewer was correct. We find no error in the instruction complained of by this assignment under the uncontroverted facts of this case. Assignments of error six and seven of these defendants relate to the admission of certain testimony given by the witness Bertrand Goldberg over the objection of these defendants. This testimony related to the understanding of the witness as to the duties of his firm under its contract with the City. We have examined this testimony and agree with the Court of Appeals that the error, if any, in admitting the testimony complained of was harmless error and not ground for reversal under T.C.A. 27-117. The eighth and last assignment of Oman and McKenzie relates to the Trial Court's charge to the jury as to the measure of damages. The Trial Court took the part of the charge complained of from the contract between Oman and the City. These defendants contend that this was error because they should not have been put to trial on the contract count and the charge did not correctly state the measure of damages in tort. We have already ruled that the plaintiff made out a case for the jury both in contract and in tort. The bill of exceptions does not show that any special request relating to the measure of damages was tendered, nor is there any claim that the verdict was in any way excessive. In the absence of a request for additional instructions on the measure of damages, these defendants are not in a position to complain when the Court used the very language of their contract to state the measure of damages. Also, there is no showing that they were prejudiced by the action of the Court in so charging the jury. Therefore, this assignment of error is overruled. It results that the action of the Court of Appeals in affirming the judgment of the Trial Court as to the defendant Goldberg is reversed and the cause is dismissed as to that defendant. In all other respects, the decree of the Court of Appeals is affirmed.