UNITED STRUCTURAL SYSTEMS, LTD. v. ERI FALLS, INC.; HEITMAN CAPITAL MANAGEMENT, LLC; KENNEDY-WILSON KENTUCKY MANAGEMENT, INC.; AND KENNEDY WILSON PROPERTIES, LTD.
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RENDERED:
NOVEMBER 23, 2005; 10:00 A.M.
MODIFIED:
FEBRUARY 10, 2006, 2:00 P.M.
ORDERED NOT PUBLISHED BY THE KENTUCKY SUPREME COURT:
OCTOBER 12, 2006
(2006-SC-000208-D)
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-002103-MR
UNITED STRUCTURAL SYSTEMS, LTD.
v.
APPELLANT
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE THOMAS L. CLARK, JUDGE
ACTION NO. 01-CI-00544
ERI FALLS, INC.; HEITMAN
CAPITAL MANAGEMENT, LLC;
KENNEDY-WILSON KENTUCKY
MANAGEMENT, INC.; AND KENNEDY
WILSON PROPERTIES, LTD.
APPELLEES
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE:
JUDGE.1
COMBS, CHIEF JUDGE; McANULTY, JUDGE; PAISLEY, SENIOR
COMBS, CHIEF JUDGE:
United Structural Systems, Ltd. (United
Structural) appeals from a summary judgment of the Fayette
1
Senior Judge Lewis G. Paisley sitting as Special Judge by assignment of the
Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and
KRS 21.580.
Circuit Court that awarded the sum of $44,452.30 to the
appellees on their claims for indemnity.
United Structural
argues that there were genuine issues of material fact which
rendered summary judgment inappropriate as a matter of law.
agree.
We
Thus, we vacate and remand.
The appellees are:
ERI Falls, Inc.; Kennedy-Wilson
Kentucky Management, Inc.; Heitman Capital Management, LLC; and
Kennedy Wilson Properties, Ltd. (collectively, “ERI Falls”).
They either own or manage the Stoney Falls apartment complex in
Lexington, Kentucky.
Appellant, United Structural, is a
business that repairs buildings.
In the fall of 1999, ERI Falls
contracted with United Structural for the replacement of two
sets of stairs on each of the twenty-two buildings in the
apartment complex.
United Structural agreed to provide “all
equipment, labor and materials” to complete the project.
In
addition, United Structural was required to maintain sufficient
insurance to cover fully and to indemnify ERI Falls against:
any loss due to injury or damage to person,
including death, or property (including
adjacent property) caused by the Contractor
or any other party pursuant to the
performance of the agreement. (Emphasis
added.)
United Structural also agreed to indemnify ERI Falls under the
following circumstances:
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To the extent allowable by law, the
Contractor shall indemnify, defend and hold
harmless [ERI Falls], and each of their
respective principals, partners, directors,
officers, shareholders, beneficiaries,
trustees, employees, agents, successors, and
assigns from any and all claims, suits and
causes of action, for personal injury or
property damage arising or in any way caused
by the performance of the work hereunder or
any acts by the Contractor, its
subcontractors, and their respective agents,
servants, or employees, or for infringement
of patents or violation of patent or other
intellectual property rights, including all
costs, expenses, and attorneys’ fees
incurred by an indemnified party in
defending any claim, suits or causes of
action, indemnified hereunder, when they
arise. (Emphasis added.)
After work began and renovations had been completed on
one of the buildings in the apartment complex, ERI Falls
demanded that United Structural change the design of the stairs.
Although ERI Falls had previously approved the design, the
owners/managers were not satisfied with the final appearance of
the stairs.
Several employees of ERI Falls, including its
engineers, J.C. Elston and Frank Bastida, undertook the redesigning of the stairs.
Their plans for the reconstruction
were conveyed to United Structural by Ron Pennington, a
consultant who was hired by ERI Falls in December 1999 to
oversee the project.
United Structural’s involvement in the project ended
abruptly on March 1, 2000 -- with some measure of controversy
-3-
surrounding its departure.
United Structural contends that
after it had completed the newly designed stairs on ten of the
buildings, ERI Falls again changed the design of the stairs.
Moreover, ERI Falls demanded that United Structural should
undertake the newest set of alterations to all ten of the
renovated buildings at its own cost.
Frustrated by the costly
changes, United Structural abandoned the project on its own.
ERI Falls claims that United Structural did not
voluntarily quit but that it was fired by ERI Falls for its
refusal to obtain a building permit for the project.
Regardless
of what act or which party precipitated the termination of the
agreement, ERI Falls formally notified United Structural by
letter of March 13, 2000, that it no longer desired the services
of United Structural for the project.
Ron Pennington, who had been hired in December 1999 to
oversee the project, was then chosen to complete the remodeling
of the stairs.
On March 2, 2000, one day after taking over the
project, Pennington learned from a building inspector that the
stairs failed to comply with certain requirements of the
Kentucky Building Code.
Although he began to bring the stairs
into compliance with the code, neither he nor ERI Falls took any
measures to warn the residents of the apartment complex of any
dangers involved in the construction of the stairs by United
Structural.
-4-
On March 23, 2000, Edith Holland, a resident of the
Stoney Falls complex, fell on the stairs and sustained an injury
to her back and left wrist.
She filed a lawsuit in which she
named United Structural and all of the appellees as defendants.
Prior to her accident, Holland had suffered a stroke -- as a
result of which her left leg was braced from her foot to her
knee.
She claims that while ascending a flight of stairs, she
was unable to grasp and hold onto the rail cap because it was
too wide.
Consequently, she fell backward.
She contended that
the excessive width of the rail deviated from the standards set
by the Kentucky Building Code; that United Structural breached
its duty “to construct the premises consistent with the use of
residents”; and that its violation of the building code
constituted negligence per se.
Holland also alleged that ERI Falls was aware of the
problem with the stairs and that her landlord had “failed to
take appropriate measures to correct the problem” or to warn her
of the dangers entailed in the new construction.
ERI Falls filed a cross-claim against United
Structural seeking total indemnification for any amounts awarded
to Holland and for all attorneys’ fees and costs incurred in
defending the lawsuit.
United Structural denied that it was
required to indemnify ERI Falls under the contract.
In the
alternative, it alleged that the negligence of ERI Falls was
-5-
primary and that its alleged negligence -- if any -- was passive
or secondary, thereby precluding indemnity on its part.
After all pleadings were filed, Holland’s complaint
was referred to mediation.
In a confidential agreement not
filed in the record, Holland settled her claim against all the
defendants.
ERI Falls Paid Holland the sum of $35,000 pursuant
to the agreement.
In its order of May 29, 2003, the trial court
dismissed Holland’s complaint but specifically reserved for
later adjudication the resolution of the cross-claims for
indemnity.
Based on the contractual provisions pertaining to
indemnity and insurance, ERI Falls filed a motion for summary
judgment on its cross-claim against United Structural.
As well
as relying on the contract theory, it also argued that it was
entitled to indemnity under the common law.
Without
articulating its reasoning or reciting any grounds, the trial
court entered a final order on September 9, 2004, in which it
granted the motion for summary relief.
In addition to the
partial settlement award of $35,000 paid to Holland, the Court
ordered United Structural to reimburse ERI Falls in the amount
of $9,452.30 for its costs and attorneys’ fees.
This appeal
followed.
The scope of our review of an order granting summary
relief is well defined:
-6-
The standard of review on appeal of a
summary judgment is whether the trial court
correctly found that there were no genuine
issues as to any material fact and that the
moving party was entitled to judgment as a
matter of law. Kentucky Rules of Civil
Procedure (CR) 56.03. . . . “The record
must be viewed in a light most favorable to
the party opposing the motion for summary
judgment and all doubts are to be resolved
in his favor.” Steelvest, Inc. v. Scansteel
Service Center, Inc., Ky., 807 S.W.2d 476,
480 (1991). Summary “judgment is only
proper where the movant shows that the
adverse party could not prevail under any
circumstances.” Steelvest, 807 S.W.2d at
480, citing Paintsville Hospital Co. v.
Rose, Ky., 683 S.W.2d 255 (1985).
Consequently, summary judgment must be
granted “[o]nly when it appears impossible
for the nonmoving party to produce evidence
at trial warranting a judgment in his favor.
. .” Huddleston v. Hughes, Ky.App., 843
S.W.2d 901, 903 (1992), citing Steelvest,
supra (citations omitted).
Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App. 1996).
In
reviewing the record under this stringent standard, we are
persuaded that it reveals the existence of a material issue of
fact precluding an award of indemnity as a matter of law under
either the contract or the common law as argued by ERI Falls.
A finding of liability to the injured party is
required before indemnity can arise at common law.
Hauck Mfg. Co., 910 S.W.2d 247, 253 (Ky. 1995).
“Indemnity” is repayment to one party, by
the party who caused the loss, of such
amounts the first party was compelled to
pay. Liberty Mut. Ins. Co. v. Louisville
-7-
Clark v.
and Nashville Railroad Company, Ky., 455
S.W.2d 537, 541 (1970).
. . . .
Both indemnity and contribution depend upon
liability by one or both parties to the
original claimant who suffered the original
loss.
Poole Truck Line, Inc. v. Commonwealth, Transportation Cabinet,
Dept. of Highways, 892 S.W.2d 611, 613-614 (Ky.App. 1995).
Contractual indemnity also depends upon a finding that
either the indemnitor (United Structural) or the indemnitee (ERI
Falls) is liable to Holland (the original injured party).
In
reversing an award for indemnity based upon a written contract
in ARA Services, Inc. v. Pineville Community Hospital, 2 S.W.3d
104 (Ky.App. 1999), this court noted:
Contracts are, of course, to be construed
according to their terms. Blue Diamond Coal
Co. v. Robertson, 243 Ky. 584, 49 S.W.2d
335, 336 (1932). Here, the terms of the
contract are clear. ARA assumed all claims
for loss or damage attributable to ARA’s
sole negligence, acts or failure to act.
The jury determined that ARA was not
negligent; hence ARA is not contractually
liable to the Hospital.
In the case before us, there has been no finding
establishing the proximate cause of Holland’s fall, which is an
essential element in ERI’s claim for indemnity.
In settling the
underlying tort claim, neither ERI Falls nor United Structural
admitted or addressed the issue of fault or proximate cause
resulting in injuries.
ERI Falls argues in its appellate brief
-8-
that Holland’s injuries were caused entirely by United
Structural:
[Holland] fell down the stairs constructed
by United Structural when she was unable to
grasp the handrail because United Structural
constructed it too wide in violation of the
Kentucky Building Code.
(Appellees’ brief at p. 17.)
Even if one could assume that
United Structural was negligent per se in its construction of
the railing, it would nonetheless incur no liability for
Holland’s injuries unless and until its alleged negligence was
determined to be the “proximate or contributing cause” of
Holland’s fall.
Louisville Taxicab and Transfer Co. v. Holsclaw
Transfer Co, 344 S.W.2d 828, 829 (Ky. 1961).
The issue of causation is generally referred to a jury
for resolution.
See, Lewis v. B & R Corporation, 56 S.W.3d 432,
438 (Ky.App. 2001); Pathways, Inc. v. Hammons, 113 S.W.3d 85
(Ky. 2003).
Although causation may at times be determined as a
matter of law, the record before us is not sufficient to sustain
a legal determination that the width of the railing was a
substantial factor in causing Holland’s accident.
Accordingly,
the summary judgment awarding indemnity was premature and
inappropriate, and this matter must be remanded for a
determination of the questions of fact pertaining to the
causation of the accident.
-9-
Although we are remanding for further proceedings, we
will address ERI Falls’s arguments that it is entitled to
indemnity regardless of whether it be found to be jointly or
partially liable for causing Holland’s fall.
ERI Falls contends
that United Structural made a sweeping promise to indemnify it - even for the negligence of ERI Falls.
Thus, ERI Falls
believes that it is entitled to indemnity regardless of the
issue of fault.
The proper interpretation of a written agreement is a
question of law.
Morganfield National Bank v. Damien Elder &
Sons, 836 S.W.2d 893, 895 (Ky. 1992).
The primary rule to be
applied in ascertaining the intent of contracting parties is
that “all words and phrases in the contract are to be given
their ordinary meanings.”
Fay E. Sams Money Purchase Pension
Plan v. Jansen, 3 S.W.3d 753, 757 (Ky.App. 1999), citing O’Bryan
v. Massey-Ferguson, Inc., 413 S.W.2d 891 (Ky. 1966).
If the
contract is plain and unambiguous, the intent of the parties
“must be gathered from the four corners of [the written]
instrument.”
Hoheimer v. Hoheimer, 30 S.W.3d 176, 178 (Ky.
2000).
ERI Falls correctly observes that the indemnity and
insurance terms of the contract are identical in all relevant
aspects to those in Fosson v. Ashland Oil & Refining Company,
309 S.W.2d 176 (Ky. 1958).
In that case, our highest court
-10-
analyzed the language employed in the indemnity provision of the
contract as well as its insurance provisions.
It held that the
contractor was required to indemnify the owner for damages
arising from the wrongful death of an employee -- even though
the damages were caused by the owner’s own negligence.
Id., at
177-178.
However, the facts in this case are significantly
distinguishable from those in Fosson.
Unlike the injury in
Fosson, Holland’s accident occurred after the contract between
ERI Falls and United Structural had been terminated.
Her
complaint against ERI Falls alleged a breach of duties owed to
her after ERI Falls had replaced United Structural with another
contractor.
We can find no language in the contract which can
be interpreted as obligating United Structural to indemnify ERI
Falls indefinitely (or for acts of negligence committed by ERI
Falls) after United Structural was no longer on the premises or
involved in the project.
Thus, if on remand it is determined
that a superseding act of negligence by ERI Falls caused
Holland’s injuries, ERI Falls will not be entitled to indemnity
under the contract.
Finally, ERI Falls argues that it is entitled to
indemnity under our common law.
Our adoption of the doctrine of
comparative fault has not altered Kentucky tort law with respect
to claims for indemnity.
-11-
[A]pportionment of liability arose from
statutory provisions permitting contribution
and several liability among joint
tortfeasors in pari delicto. It has no
application to the common law right of a
constructively or secondarily liable party
to total indemnity from the primarily liable
party with whom he/she is not in pari
delicto. (Emphasis added.)
Degener v. Hall Contracting Corp., 27 S.W.3d 775, 780 (Ky.
2000).
There is evidence from which a jury could determine
that the parties may have been in pari delicto with respect to
the deviation of the railings from the required measurement of
the building code.
Specifically, the record contains evidence
from which a jury could determine that ERI Falls was responsible
for the flaws in the design of the stairs constructed by United
Structural.
Contrary to the emphatic declaration of ERI Falls
that its only involvement related to the aesthetics of the
project, John Lockhart, an employee of United Structural,
testified as follows:
Mr. Pennington was a consultant who said,
“Build [the stairs] this way, exactly this
way,” and those were his words, “and you
will get paid; if you do not, you will not
get paid.” (Emphasis added.)
A finding of such responsibility on the part of ERI Falls would
preclude a claim for indemnity based on traditional common law
principles as it would be deemed to have been in pari delicto
-12-
with United Structural.
As noted by Degener, apportionment of
liability will supersede and preclude indemnity if there is a
finding that the parties acted in pari delicto.
Degener, supra,
at 780; see also, Brown Hotel Co. v. Pittsburgh Fuel Co., 311
Ky. 396, 224 S.W.2d 165 (1949).
The judgment of the Fayette Circuit Court is vacated,
and this matter is remanded for further proceedings consistent
with this opinion.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF AND ORAL ARGUMENT FOR
APPELLEES:
Guy R. Colson
Casey C. Stansbury
Christina L. Vessels
Lexington, KY
Bryan H. Beauman
Lexington, KY
ORAL ARGUMENT FOR APPELLANT:
Casey C. Stansbury
Lexington, KY
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