Unpublished Disposition, 841 F.2d 1129 (9th Cir. 1981)

MEMORANDUM^* 

Amcord appeals the district court's granting of summary judgment in favor of Muskin.

In February 1981 Muskin and Amcord entered into a sale agreement by which Muskin acquired substantially all the assets of Amcord's Leisure Products Group and the assumption of specified liabilities of the Group. The Leisure Products Group manufactured above-ground swimming pools. The agreement was made effective as of January 31, 1981. The agreement allocated all existing and future liabilities of the Leisure Products Group between the parties. According to Section 1.3 of the agreement entitled Assumed Liabilities Muskin assumed "certain of the obligations and liabilities of the Group existing as of the Effective Date and all obligations and liabilities of the Group incurred after the Effective Date," and pursuant to Section 1.4 of the agreement Amcord retained " [a]ll other liabilities of the Group arising prior to the Effective Date ..." Section 2.3 of the agreement entitled Assumption of Liabilities and Obligations further required each side to indemnify the other from any liabilities or claims arising out of the liabilities it respectively assumed or retained. There is no express language requiring Muskin to assume liability for personal injury claims arising out of pools manufactured and sold by Amcord.

Numerous lawsuits were filed against Amcord and Muskin arising out of alleged personal injuries sustained in swimming pools manufactured and sold by Amcord prior to the effective date. The parties construed the provisions of the agreement to place the liability for the injury on Muskin if the injury occurred after the effective date and on Amcord if it occurred prior to the effective date. Amcord tendered and Muskin accepted responsibility for approximately 20 personal injury lawsuits in which the injury occurred after the effective date and Muskin tendered and Amcord accepted responsibility for all suits in which the injury occurred before the effective date.

In July 1986 Muskin filed a complaint in district court seeking declaratory relief to the effect that Muskin had no liability for personal injuries sustained after the effective date of the agreement by users of swimming pools manufactured and sold by Amcord prior to that date.

This court reviews the district court's grant of summary judgment de novo. Evangelista v. Inlandboatmen's Union of the Pacific, 777 F.2d 1390, 1394 (9th Cir. 1985). This court reviews questions of state law under the same independent de novo standards as are applied to questions of federal law. In Re McLinn, 739 F.2d 1395, 1397 (9th Cir. 1984) (en banc). Viewing the evidence in the light most favorable to the party against whom summary judgment is to be granted, this court must determine whether there is any genuine issue of material fact and whether the prevailing party is entitled to judgment as a matter of law. Brazil v. Giuffrida, 763 F.2d 1072, 1075 (9th Cir. 1985).

While Muskin is a Nevada corporation, Amcord's principal place of business is Dallas, Texas. A provision in the agreement provided that the agreement shall be governed and construed in accordance with the laws of the State of Texas.

Amcord argues that the district court's granting of summary judgment was incorrectly premised on the belief that the sections of the agreement in dispute are indemnity provisions as opposed to assumption of liability provisions.

Amcord's contention is that if the agreement is not to be construed as an indemnity agreement, then the "clear and equivocal" test and the "express negligence" test which superseded it (both discussed infra) are not applicable and Muskin remains liable in negligence-based actions. Amcord suggests in the alternative that even if the agreement contains an agreement to indemnify, both "clear and unequivocal" and "express negligence" tests are satisfied.

We disagree with Amcord's contentions and we affirm.

A clear reading of the agreement shows that it is an indemnity agreement. The language of indemnity is obvious.

Under the "clear and unequivocal" test a provision purporting to indemnify the indemnitee against its own negligence had to be stated clearly and unequivocally.

In Fireman's Fund Ins. Co. v. Commercial Standard Ins. Co., 490 S.W.2d 818, 822 (Tex.1972), the Texas Supreme Court, citing prior cases,¹  held:

The above cases stand for the general rule followed in Texas and a majority of other jurisdictions that a contract of indemnity will not afford protection to the indemnitee against the consequences of his own negligence unless the contract clearly expresses such an obligation in unequivocal terms. These decisions indicate a progressively stricter application of the rule in this State....

We have, in fact, progressed toward the so-called 'express negligence' rule as near as is judicially possible without adopting it and thereby requiring, in so many words, that they intend to save the indemnitee harmless from liability for his own negligence.... [B]road general statements of the indemnity obligation are not sufficient to protect an indemnitee against his own negligence....

In Eastman Kodak Co. v. Exxon Corp., 603 S.W.2d 208, 211 (Tex.1980), the Texas Supreme Court explicitly reaffirmed the clear and unequivocal standard:

Over the last three decades, the trend of Texas case law has been progressively stricter in applying the rule that a contract of indemnity will not protect an indemnitee against his own negligence unless the obligation of the indemnitor to do so is expressed in clear and unequivocal terms.

See also McClane v. Sun Oil Co., 634 F.2d 855 (5th Cir. 1981); Haywood v. Southwestern Electric Power Co., 708 F.2d 163 (5th Cir. 1983).

In Dorchester Gas Corp. v. American Petrofina, Inc., 710 S.W.2d 541, 543 (Tex.1986), the Texas Supreme Court held:

Generally, in Texas, an indemnity provision will not give protection to the indemnitee against the consequences of his own negligence unless the contract expresses such an obligation in clear and unequivocal terms. A broad general statement of indemnity is insufficient to protect an indemnitee against his own negligence.

Last year, after the district court granted Muskin summary judgment, the Texas Supreme Court finally adopted the express negligence rule. In Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 707 (Tex.1987), the court held:

As we have moved closer to the express negligence doctrine, the scriveners of indemnity agreements have devised novel ways of writing provisions which fail to expressly state the true intent of those provisions. The intent of the scriveners is to indemnify the indemnitee for its negligence, yet be just ambiguous enough to conceal that intent from the indemnitor. The result has been a plethora of lawsuits to construe those ambiguous contracts. We hold the better policy is to cut through the ambiguity of those provisions and adopt the express negligence doctrine.

The express negligence doctrine provides that parties seeking to indemnify the indemnitee from the consequences of its own negligence must express that intent in specific terms. Under the doctrine of express negligence, the intent of the parties must be specifically stated within the four corners of the contract. We now reject the clear and unequivocal test in favor of the express negligence doctrine.

We agree with the district court that the agreement establishes that Muskin did not explicitly assume Amcord's liability for injuries sustained after the effective date of the agreement for pools manufactured and sold by Amcord before the effective date. Under Texas law, a contract which indemnifies a party against "all liabilities" will not entitle the indemnitee to indemnification against his or her own negligence or strict liability, unless such an obligation is expressly stated.

We hold that specific language is required in the contract to satisfy the express negligence test and not merely, as Amcord suggests, that the intent to indemnify be "unambiguously disclosed." We find no such language satisfying the express negligence test, to wit, that Muskin expressly agreed to indemnify Amcord's negligence.

Finally, we reject Amcord's contention that the Uniform Commercial Code governs the subject contract and that as such, evidence of the parties' course of performance²  is not parol evidence and thus is admissible to determine both the meaning of the contract and its terms.

We need not reach the issue of the applicability of the UCC or the issue of admissibility of course of performance evidence because the express negligence rule tells us so. Ethyl Corp. specifically instructs that the intent to indemnify must be stated "within the four corners of the contract." The true intention of the parties must be expressed in the instrument. Crown Central Petroleum Corp. v. Jennings, 727 S.W.2d 739, 741 (Tex.Ct.App.1987). By the very language of these two cases we are precluded from looking outside the Muskin-Amcord sale agreement. The agreement failed to contain a specific intent to indemnify and thus Muskin appropriately prevailed in its action for declaratory relief.

Accordingly, we AFFIRM the district court's grant of summary judgment.

AFFIRMED.