Opinion ID: 1617003
Heading Depth: 1
Heading Rank: 5

Heading: Did Trial Court Improperly Award Indemnity to ITT on its Cross-Claim?

Text: ITT filed a cross-claim against Honeywell. Count I was for indemnity, alleging, inter alia, ITT's liability, if any, would be only derivative or vicarious, the duty was delegated to Honeywell by contract, and Honeywell's negligence would be active or primary while ITT's would be passive or secondary. Count II cross-claimed for contribution, which does not concern us here. Trial court found the Appliance Center's claims were those on which ITT was secondarily liable and Honeywell primarily liable. It found Honeywell sold, installed, and maintained the computer under an express warranty the machine was free from defects in workmanship, fabrication, or material, and that ITT notified Honeywell of the complaints and its intent that the latter defend any action against ITT and indemnify it in the event of judgment. Trial court concluded ITT's involvement was passive, Honeywell's was active, and that ITT's liability resulted from its reliance on Honeywell. Accordingly, it awarded ITT indemnity for the total damages of $221,000, together with interest, attorney fees, expenses and costs. Appealing, Honeywell relies on express terms of its contract with ITT that provide ITT's exclusive remedy and Honeywell's entire liability in contract, tort or otherwise shall be the repair or exchange of equipment parts; and that [i]n no event will Honeywell be liable for any indirect, special or consequential damages arising out of this Agreement or the use of any equipment, Software Product, documentation or service provided under this Agreement. Honeywell asserts trial court completely disregarded these provisions. There is considerable question whether trial court's attention was directed to these provisions. There is no mention of them in Honeywell's answer to the cross-claim. In its oral motion to dismiss the claim, it simply stated that the contract in and of itself shows they are not entitled to contribution or indemnity. Honeywell further argues trial court's finding that ITT's involvement was passive was belied by the jury's verdicts finding both defendants liable for compensatory and punitive damages. ITT's brief on appeal does not raise the issue that contract provisions were not relied on in trial court. It contends the provisions are unclear; the contract was prepared by Honeywell and must be construed against it; the provision as interpreted by Honeywell is unconscionable. ITT continues to argue its conduct was passive and that it should be only secondarily liable because it had no part in the design, construction, operation, or maintenance of the computer. It points out the jury was not given an opportunity to apportion responsibility between the defendants. Our working rules relating to such indemnity were set out in McCarthy v. J.P. Cullen & Son Corp., 199 N.W.2d 362, 371-73 (Iowa 1972). The remedy was extensively analyzed, together with the active-passive distinction, in Sweeny v. Pease, 294 N.W.2d 819, 821-23 (Iowa 1980). We have considerable doubt that the active-passive ground for indemnity is applicable under this record, but do not reach that issue because we hold the contract between these defendants waives ITT's right to assert the action. Assuming the contract was prepared by Honeywella fact not disclosed in the recordwe can find no ambiguity in the provisions limiting ITT's remedy and Honeywell's liability under the contract. The rule of construction ITT asserts thus affords it no relief. The fifty-one page agreement was not a consumer, adhesion-type agreement. Obviously it was structured by two large corporations, negotiating at arm's length. It is replete with handwritten modifications, additions, and deletions. On the record before us, we find no ground to hold it was unconscionable. It is likely the problem arising here was not contemplated by the parties. Nonetheless, the broad language of the agreement leaves no flexibility, a feature that might have been included at the time.