Unpublished Dispositiongerald M. Helper, Plaintiff, v. International Heating and Air Conditioning Corporation, Defendant,andinternational Heating and Air Conditioning Corporation,plaintiff-appellant, v. Arco Comfort Products Corporation, Defendant-appellee,andarco Comfort Products Corporation, Plaintiff, v. Snydergeneral Corporation, Defendant, 933 F.2d 1008 (6th Cir. 1991)Annotate this Case
Before KENNEDY and BOYCE F. MARTIN, Jr., Circuit Judges, and SPIEGEL, District Judge.*
This appeal requires us to construe the terms of an indemnity provision in the contract of purchase of the assets of a manufacturer of gas furnaces. The District Court held that there was no ambiguity in the contract and that appellee did not agree to indemnify appellant. Finding that there is an ambiguity, we shall reverse the grant of summary judgment.
The case arises from a products liability suit brought after the death of Gerald M. Helper, Sr., who died from carbon monoxide poisoning in January 1988, allegedly due to a defective gas furnace. Mr. Helper's estate, through Gerald M. Helper, Jr., sued the manufacturer of the gas furnace, International Heating and Air Conditioning Corporation (International), as well as other parties, based on theories of strict product liability and negligence. International, as a third-party plaintiff, in turn sued ARCO Comfort Products Corporation (ARCO), based on a theory of contract indemnity. ARCO then sued SnyderGeneral Corporation, also based on a theory of contract indemnity. Helper and International settled, and that settlement is not part of the present dispute. Following that settlement, International moved for summary judgment in its suit against ARCO, which the District Court denied. The District Court then granted ARCO's subsequent motion for summary judgment.
The gas furnace around which this dispute is centered was manufactured in 1970 by International. It was installed in the Helper home in 1972. At that time, International was a division of the Weil-McLain Corporation. That corporation later became known as the Weil-McLain Division of the Marley-Wylain Company, and then International became part of the Friedrich Division of the Marley-Wylain Company. In April of 1981, the Resource Acquisition Corporation, the Friedrich Acquisition Corporation and the Friedrich Company, which will be referred to collectively as "Friedrich," purchased all the assets, properties and rights of Friedrich Division, including International, from the Marley-Wylain Company.
In connection with the purchase, Marley-Wylain Company and Friedrich executed a contract which included an indemnity provision requiring Friedrich to indemnify Marley-Wylain for:
All liabilities to third parties for injury to person or damage to property ... determined to have been caused by the products manufactured by the Friedrich Division of Wylain or its predecessors ("product liability")....
In August of 1981, Northrup, Inc., purchased from Friedrich those assets which Friedrich had purchased from Marley-Wylain, including International. Northrup later changed its name to ARCO, and the Court will refer to it by its present name, ARCO. Those clauses of the contract between ARCO and Friedrich which are relevant to this suit are as follows:
1.22 "CHAC" shall mean unitary heating and cooling equipment as shown on Schedule 1.22.
Except as expressly set forth in this Agreement, Northrup shall not, and does not, by the execution and performance of this Agreement or otherwise, agree to ... incur any liability of any nature for any liability, obligation, contract or commitment of or claim against Friedrich or its predecessors in interest ... including, but not limited to claims for products liability....
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Northrup agrees to and shall indemnify Friedrich, and its successors, subsidiaries, affiliates, assigns and legal representatives against and holds each of them harmless from all such liabilities, claims, costs, damages, loss and expenses, including reasonable attorney's fees, for personal injuries or death or property damage by reason of any defective or unmerchantable CHAC product, assembly, part or component, or by reason of negligence of any kind, providing that such claim is based on an occurrence after the Initial Closing Date.
Schedule 1.22, CHAC or CHAC Products:
1. Unitary heating and cooling equipment of the sorts and types on the Friedrich Central Heating and cooling Dealer and Distributor Price Lists dated March 16, 1981, excluding hot water generators....
The gas furnace involved in the underlying products liability case is not one of those listed on the March 16, 1981 list. The District Court concluded that the indemnity clause did not include the furnace involved here, and that ARCO was therefore entitled to summary judgment. International appeals, contending that the furnace here is "of the sort and type" on the March 16, 1981 price list and is therefore covered by the indemnity provision of the contract or that at the least the contract is ambiguous and extrinsic evidence of the intent of the parties should be considered.
The parties agree that California law governs the interpretation of the acquisition agreement. Under California law, " 'an indemnity provision of a contract is to be construed under the same rules governing other contracts with a view of determining the actual intent of the parties.' " Gribaldo, Jacobs, Jones and Associates v. Agrippina Versicherunges, 91 Cal. Rptr. 6, 476 P.2d 406, 410 (Cal.1970) (quoting J.A. Payton v. Kuhn-Murphy, Inc., 253 Cal. App. 2d 278, 281). The language of the contract controls its interpretation unless it is ambiguous. See Hillman v. Leland E. Burns, Inc., 257 Cal. Rptr. 535, 539 (Cal.App.1989). A contract is ambiguous if it is "capable of two or more constructions both of which are reasonable." Suarez v. Life Insurance Co. of North America, 254 Cal. Rptr. 377, 380 (Cal.App.1988). " 'The determination of whether a written instrument is ambiguous is a question of law. As such, an appellate court independently reviews the instrument to determine whether there is an ambiguity.' " Hillman, 257 Cal. Rptr. at 539 (citations omitted).
The District Court, which ruled from the bench, concluded that the indemnity clause of the contract is unambiguous, and that as a matter of law, ARCO was entitled to summary judgment. The District Court considered the affidavits submitted by the two parties and concluded that they did not aid the interpretation of the contract, but that the intent of the parties could be determined from the words of the contract itself. See Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal. Rptr. 561, 565 (Cal.1968) (" [R]ational interpretation requires at least a preliminary consideration of all credible evidence offered to prove the intention of the parties.") " ' [W]hether an indemnity agreement covers a given case turns primarily on contractual interpretation, and it is the intent of the parties as expressed in the agreement that should control.' " Morton Thiokol, Inc. v. Metal Building Alteration Co., 193 Cal. App. 3d 1025, 1028-29, 238 Cal. Rptr. 722, 724 (Cal.App.1987) (quoting Rossmoor Sanitation, Inc. v. Pylon, Inc., 13 Ca.3d 622, 633 (Cal.1975)).
International argues that the contract is capable of two reasonable constructions, and that summary judgment was therefore inappropriate. In support of this, International offers its interpretation that the phrase "of the sorts and types" expands the CHAC definition beyond those models on the March 16 list, and was meant to refer to all heating and cooling units produced by Friedrich's corporate predecessors, including International. According to International's theory, the gas furnace involved in this case is included in the CHAC definition, even though the model type is not included on the March 16 list.
International offers a reasonable interpretation of the indemnity clause. It is not clear what the phrase "of the sorts and types means if it is not meant to expand the CHAC definition. Although in the end the District Court may find that that was not what was intended by the parties, that is not the standard under which the agreement must be considered on a motion for summary judgment. The District Court correctly concluded that ARCO's interpretation is reasonable, and it is certainly not clear why the parties went to the trouble of including the March 16 list in the agreement if they intended to include more than that list in the CHAC definition. However, under California law, a contract is unambiguous only if it is not susceptible to more than one reasonable interpretation. The fact remains that the parties included the phrase "of the sorts and types" in the CHAC definition. A reasonable interpretation of the CHAC definition is that it includes all predecessor models, including that involved in Helper's product liability case.
Because there are two reasonable interpretations of the pertinent clause, the District Court erred in concluding that the indemnity clause of the acquisition agreement was unambiguous. Accordingly, the District Court's judgment is REVERSED, and the action is REMANDED for further proceedings consistent with this opinion.
The Honorable S. Arthur Spiegel, United States Judge of the Southern District of Ohio, sitting by designation