Title: Stone Bldg. Co. v. Star Elec. Contractors, Inc.
Citation: 796 So. 2d 1076
Docket Number: 1990085
State: Alabama
Issuer: Alabama Supreme Court
Date: December 15, 2000

796 So. 2d 1076 (2000)
STONE BUILDING COMPANY
v.
STAR ELECTRICAL CONTRACTORS, INC.
1990085.

Supreme Court of Alabama.
December 15, 2000.
Rehearing Denied May 4, 2001.
*1077 Stephen D. Heninger and R. Edwin Lamberth of Heninger, Burge, Vargo &amp; Davis, L.L.P., Birmingham; and K. Donald Simms of Lusk, Fraley, McAlister &amp; Simms, P.C., Birmingham, for appellant.
Carol Ann Smith, Brenen G. Ely, and J. Tobias Dykes of Smith &amp; Ely, L.L.P., Birmingham, for appellee.
JOHNSTONE, Justice.
A contractor, Stone Building Company (hereinafter "Stone"), appeals an adverse summary judgment on its cross-claim against a subcontractor, Star Electrical Contractors, Inc. (hereinafter "Star"), for Stone's expenses in defending and settling the main action filed by Dennis Cline and his wife for injuries Dennis suffered on the job site on August 6, 1991. In order to procure an electrical subcontract dated *1078 April 20, 1990, Star had promised to obtain liability insurance covering Stone and to "indemnify and save harmless and exonerate" Stone if it were sued for injuries resulting from the job. After Cline suffered his job-site injuries; and after he and his wife sued a number of entities, including Stone and Star, by successive pleadings filed over the course of several years; and after Stone filed cross-claims against Star on the basis of its promises to Stone; and after Stone and Star filed motions for summary judgment against each other on Stone's cross-claims against Star; and after the trial court considered the record that had accumulated over the course of seven years of litigation and considered the arguments of counsel, the trial court entered summary judgment in favor of Star. We affirm in part and reverse and remand in part that summary judgment.
The subcontract between Stone and Star reads, in pertinent part, as follows:
(C.R. 469, emphasis added.)
While installing drywall on this job in the employment of another subcontractor, Cline's metal tape-measure touched a live, uninsulated electrical wire, and the consequent shock injured him and caused him to fall from his ladder and to suffer injuries from his fall as well. Through an original complaint, dated July 2, 1992, and successive amendments, Cline and his wife sued a number of defendants, including Stone and Star.[1] Adding Stone as a defendant in an amendment to the complaint dated September 9, 1992, the Clines alleged:
(C.R. 15, emphasis added.) Adding Star as a defendant on March 2, 1995, the Clines amended three paragraphs of their original complaint. Two of the amended paragraphs are pertinent:
(C.R. 107-08, emphasis added.) During the course of the litigation, the Clines produced sufficient evidence supporting these allegations against Star to withstand three motions for summary judgment before trial and two motions for judgment as a matter of law during trial, before a jury eventually found in favor of Star on the Clines' claims.
In the process of defending the suit by the Clines, on September 17, 1997, Stone filed its cross-claim against Star. There Stone alleged, in pertinent part:
(C.R.511-13.) Stone later amended this cross-claim on June 30, 1998, to include the following claims:
(C.R. 1185-91, emphasis added.)
On March 13, 1998, Stone sent Star a letter stating:
"Section (8) of the Uniform Subcontract also provides as follows:
(C.R. 2474-75, emphasis added.) In a letter dated March 20, 1998, Star responded:
(C.R. 2485-86, emphasis added.)
On July 22, 1998, the Clines (through counsel) sent Stone a letter containing a settlement demand for $1,750,000.00:
(C.R.2506-07.) The following day, by letter, Stone demanded that Star settle the Clines' claims "on behalf of Stone":
(C.R. 2512-13, emphasis added.) Star did not respond at all to this July 23, 1998 demand by Stone.
On August 17, 1998, Stone sent Star a third letter:
(C.R. 2520, emphasis added.) Star did not respond. On August 25, 1998, Stone and the Clines finalized the settlement agreement for $495,000.00 to be paid by Stone to the Clines.
After the trial court denied Star's third motion for summary judgment on the Clines' claims against Star, those claims proceeded to trial. There the trial court denied Star's motions for judgment as a matter of law and submitted the Clines' claims to the jury; but, on March 5, 1999, the jury returned a defense verdict in favor of Star, and the trial court entered judgment accordingly for Star on the Clines' claims.
The following September, the trial court decided motions for summary judgment that Stone and Star had filed against each other on Stone's cross-claims against Star. Although the trial court had necessarily found enough evidence that Star itself had negligently injured Cline to defeat all of Star's motions for summary judgment and motions for judgment as a matter of law on the Clines' claims against Star, the trial court misinterpreted the jury verdict in favor of Star on the Clines' claims to signify that, "[t]herefore, there was no evidence that Star, or someone acting `by [or] for and on behalf of Star, including Stone, negligently committed any acts complained of by Cline for which Stone paid damages and now seeks indemnification." (Trial court order dated September 2, 1999, C.R. 2874.) Accordingly, the trial court "overruled" Stone's motion for summary judgment, granted Star's motion for summary judgment, "dismissed" all of Stone's claims against Star, and certified the judgment as final pursuant to Rule 54(b), Ala. R. Civ. P., as other cross-claims against other entities were still pending. Stone appeals.
*1087 Summary judgment is appropriate only when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Rule 56(c)(3), Ala. R. Civ. P., and Dobbs v. Shelby County Economic &amp; Indus. Dev. Auth., 749 So. 2d 425 (Ala.1999). "Our review of a summary judgment is de novo, and in determining whether a summary judgment was proper we must view the evidence in a light most favorable to the nonmoving party. Hightower &amp; Co. v. United States Fidelity &amp; Guar. Co., 527 So. 2d 698 (Ala.1988)." Young v. La Quinta Inns, Inc., 682 So. 2d 402, 403 (Ala.1996). All reasonable doubts must be resolved in favor of the nonmoving party. Ex parte Ryals, 773 So. 2d 1011 (Ala.2000).
Star contends that the summary judgment in its favor should be affirmed on the ground that Stone filed nothing in opposition to the particular motion for summary judgment granted by the trial court. Stone, however, had previously filed its opposition materials in response to a similar, unsuccessful motion for summary judgment previously filed by Star challenging Stone's same cross-claims; and Stone also filed its own motion for summary judgment, properly supported by evidentiary materials, immediately after Star filed its last motion for summary judgment; and the trial judge considered and decided the two motions for summary judgmentStar's last and Stone'sboth directed to Stone's cross-claims against Startogether, and granted Star's and "overruled" Stone's. Thus, Star's contention before us exalts form over substance. Stone's evidentiary materials were properly before the trial court.
Stone contends that Star breached three primary duties it undertook in its subcontract with Stone: the duty to obtain liability insurance covering Stone; the duty to indemnify Stone for sums it might pay in settlement of, or damages for, claims for job-site injuries suffered by third parties like Cline; and the duty to indemnify Stone for the expenses of its defense of such claims. We will discuss Stone's claims grounded on Star's alleged breaches of those duties seriatim.
Stone contends that Star failed to provide insurance to cover Stone against liability for the Clines' claims, as required by the 1990 subcontract. Star did, in fact, procure insurance to cover itself but not to cover Stone. Stone alleges breach of contract, misrepresentation, negligent and wanton failure to procure insurance, and negligent and wanton failure to settle.
Jim Cooper, who, as an employee of Stone, executed the 1990 subcontract with Star, stated in his affidavit as follows:
(C.R. 2232-34, emphasis added.) In the letter referenced as Exhibit "B" in Cooper's affidavit, Cooper requested of Star as follows:
(C.R. 2228, emphasis added.) The initial certificate of insurance names Star as the only insured and names Stone as only the "certificate holder." No certificate of record names Stone as an insured during any coverage period that would include the August 6, 1991 date of Cline's job-site injury. (C.R.2235-38.)
On the one hand, the text of the subcontract required Star to obtain liability insurance covering both Star and Stone, and the insurance Star did obtain covered only Star and not Stone. On the other hand, Star timely sent Stone the certificate of insurance negotiated and required by Stone's own agent Cooper; this certificate revealed Stone's non-coverage; and Stone accepted the certificate without reservation. While Cooper's affidavit, as parol evidence, cannot contradict the terms of the subcontract, the affidavit can and does establish a waiver of the requirement that Star procure insurance to cover Stone. In fact, Stone did not question or challenge Star about the adequacy of the insurance until Stone amended its cross-claim against Star on June 30, 1998, over seven years after Stone received the certificate of insurance (dated "02/05/91") from Star. Of course, after Cline's injury, Star no longer could procure insurance to cover Stone against the Clines' claims. Thus, had Stone's agent Cooper not waived the requirement for the coverage, Star would have suffered prejudice from Stone's delay in demanding strict compliance with the contract. The legal defects in Stone's contract, fraud, negligence, and wantonness claims against Star grounded on its failure to obtain insurance coverage for Stone are too patent to require further discussion. Accordingly, the summary judgment, insofar as it resolves these claims in Star's favor, is due to be affirmed.
Star first argues that the record contained no substantial evidence that any negligence by Star caused Cline's injuries. Star's most voluble argument is that, because its job was located on the fifth floor of the building and Cline was injured on the fourth floor, where the job of another unrelated electrical subcontractor, 4 Star, had been located, Star's conduct could not have caused Cline's injuries. The defect in this argument is that the effects of Star's acts and omissions could extend to the fourth floor. The record does contain substantial evidence that negligence by Star in its electrical demolition work on the fifth floor proximately caused Cline's shock and fall injuries on the fourth floor. Hank Mol, an expert on electrical and construction safety, testified that Star performed all of the electrical demolition on the fifth floor, "including that which ran through the poke-throughs in the ceiling of the fourth floor." (C.R.2404-05.) Mol testified that the condition of the exposed "hot" wire, running from a panel on the fifth floor down through a poke-through in the fourth floor, was a violation of industry standards as codified in the National Electrical Code. (C.R. 2391-94; 2396-98.) Finally, Mol testified that Star had a duty to inspect the premises after Star had finished its demolition work. (C.R.2407-08.)
Star next argues that the eventual jury verdict, and the judgment thereon, against Cline on his claims against Star defeated Stone's right to indemnification for the settlement money Stone had paid the Clines for a release from liability for the torts of Star or others in injuring Cline. The subcontract in this case, in Section 8, unambiguously obligated Star to indemnify Stone for "all liability, claims *1090 and demands for bodily injury ... arising out of the work undertaken by [Star]." The general rule is that, "if indemnity is sought against an indemnitor without notice of either the original suit or of the settlement by the indemnitee," then the indemnitee has the burden of establishing that it was actually liable to the plaintiff and that the settlement was a reasonable one. Watts v. Talladega Fed. Sav. &amp; Loan Ass'n, 445 So. 2d 316, 320 (Ala.Civ.App.1984). However, if the indemnitor has been given notice of the action against the indemnitee and has been given an opportunity to defend or to settle the action, then the indemnitor "is precluded from contesting the indemnitee's liability in a subsequent indemnity or third-party action." Id.
41 Am.Jur.2d Indemnity § 46 (1995) (footnotes omitted).
Star next argues that Stone did not afford Star an opportunity to participate in the settlement negotiations with Cline. The record contains substantial evidence to the contrary. First, Star learned of Cline's claims when Cline sued Star in 1993. Second, Star is charged with knowledge of its obligation to indemnify Stone as provided by the 1990 subcontract between Star and Stone. Third, Star learned of Stone's intent to seek indemnification when Stone cross-claimed against Star in 1997. Fourth, Star itself had participated in mediation with the Clines. Fifth, Stone had, by its March 13, 1998 letter, demanded that Star settle the Clines' claims and "indemnify, hold harmless, and otherwise exonerate Stone...." Star had rebuffed this demand by Stone. Sixth, Stone had, by its July 23, 1998 letter, supplied Star the details of the Clines' settlement demand and had demanded again that Star *1091 settle the Clines' claims and indemnify, exonerate, and hold harmless Stone pursuant to the subcontract. Star had ignored this second pre-settlement demand letter. Thus, the record contains substantial evidence that Stone provided Star notice and opportunity to participate in the negotiations which culminated in Stone's August 1998 settlement with the Clines.
Finally, Star argues that Stone was too tardy in notifying Star of the Clines' suit and of Stone's demand for indemnification under the contract. On the one hand, Stone was tardy in notifying Star. In fact, by the time Stone notified Star by cross-claiming against Star, Star itself had already been sued by the Clines. On the other hand, Star has not pleaded or argued, much less demonstrated, that it was prejudiced in any way by Stone's tardiness. Indeed, Star's motion to dismiss Stone's cross-claims, denied by the trial court on January 30, 1998, asserted that Stone's cross-claim for indemnification was premature, not tardy. There Star asserted that Stone's claim for indemnification would not even accrue unless and until the Clines won their claim for damages against Stone. Neither this motion to dismiss nor any other motion or pleading filed by Star challenged Stone's delay in notifying Star of the Clines' suit or Stone's delay in demanding indemnification from Star; and no motion or pleading filed by Star mentioned or suggested any prejudice to Star from Stone's delay. The absence of any claim or proof by Star that it suffered any prejudice from Stone's tardiness is the distinguishing feature between the case now before us and the similar case of Cochrane Roofing &amp; Metal Co. v. Callahan, 472 So. 2d 1005 (Ala.1985), cited by Star. In Cochrane, unlike in the case before us, the indemnitor, a roofing subcontractor, pleaded and proved without contradiction that, because of the delay of the indemnitee, the general contractor, in notifying the indemnitor of the suit for defective roofing, "the roof, the subject of the suit, had been recovered by another contractor, preventing the subcontractor [the indemnitor] from investigating the problem." 472 So. 2d  at 1007. See Restatement (Second) of Judgments § 57, cmt. e ("The notice must be timely in that it must not come so late that the indemnitor is prejudiced in preparing the defense...."). Conversely, tardiness without prejudice provides no defense.
In summary, Star has demonstrated neither the absence of genuine issues of material fact nor a right to judgment as a matter of law on Stone's claim for indemnification for the $495,000 in settlement money paid by Stone to the Clines. Accordingly, summary judgment on this claim is not authorized by Rule 56, Ala. R. Civ. P.
In pertinent part, the subcontract between Stone and Star required Star to "indemnify and save harmless and exonerate" Stone from certain claims.
Jack Smith Enters. v. Northside Packing Co., 569 So. 2d 745, 746 (Ala.Civ.App.1990) (emphasis in original). See generally Winn-Dixie Montgomery, Inc. v. Stimpson, 574 So. 2d 782, 783-84 (Ala.1991) (indemnity agreement providing that "[Winn Dixie] agrees to indemnify and save harmless the Landlord from any claim or loss" entitled Winn Dixie to indemnification "for all expenses incurred as a result of the judgment ..., including a reasonable attorney fee"); and Freeman Wrecking Co. v. City of Prichard, 530 So. 2d 235, 236 (Ala.1988) (indemnity agreement providing that "[t]he City of Prichard agrees to hold FREEMAN WRECKING COMPANY, INC., harmless, and shall further indemnify it for any liability" entitled the indemnitee to an award of attorney fees). Thus, Stone's right to indemnification by Star extends to Stone's expenses of defense, including attorney fees, attributable specifically to Stone's defense against the Clines' claims and accruing after, and only after, Stone demanded indemnification from Star. Accordingly, the summary judgment, insofar as it denies Stone any recovery for attorney fees and other expenses of defending the Clines' claims, is due to be reversed.
For the reasons stated, the summary judgment is affirmed insofar as it adjudicates in Star's favor the claims of Stone relating to Star's failure to provide liability insurance coverage to Stone. The summary judgment is, however, reversed insofar as it adjudicates adversely to Stone its claim against Star for indemnification for the $495,000 in settlement money Stone paid to the Clines and Stone's claim against Star for the expenses of defense, including attorney fees; and the case is remanded to the trial court for proceedings on those claims consistent with this opinion.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
HOOPER, C.J., and MADDOX, COOK, and LYONS, JJ., concur.
[1]  The litigation began on July 2, 1992 when Cline sued 4 Star Electric and fictitious defendants A, B, C, X, Y, and Z. Although they have similar names, 4 Star Electric is a completely separate entity from Star. Cline added Stone as a defendant on September 9, 1992 and added Star as a defendant on March 2, 1995. On June 5, 1995, the trial court granted 4 Star's motion for summary judgment. 4 Star began Chapter 7 bankruptcy proceedings on December 21, 1995. (C.R.365.) Stone and Star (not 4 Star) are the only parties to this appeal.
[2]  Stone also alleged fraudulent suppression and conspiracy to defraud. However, Stone has abandoned those claims on appeal.