Kirkpatrick & Associates v. Wickes Corp.

280 S.E.2d 632 (1981)

KIRKPATRICK & ASSOCIATES, INC. v. The WICKES CORPORATION, t/a Wickes Lumber and Building Supplies.

No. 8110SC44.

Court of Appeals of North Carolina.

August 4, 1981.

*634 Boyce, Mitchell, Burns & Smith by Lacy M. Presnell III, Raleigh, for plaintiff-appellant.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan by Nigle B. Barrow, Jr., Raleigh, for defendant-appellee.

HARRY C. MARTIN, Judge.

Summary judgment is appropriate only when the evidence before the court demonstrates that there is no genuine issue as to any material fact and that a party is entitled to a judgment as a matter of law. N.C.Gen.Stat. 1A-1, Rule 56(c). Here, the facts are not controverted. The sole issue on appeal is whether, as a matter of law, plaintiff is entitled to indemnification by defendant under the terms of the contract.

In interpreting a contract of indemnity, the Court's function is to ascertain and give effect to the intention of the parties, and the ordinary rules of contract construction apply. Dixie Container Corp. v. Dale, 273 N.C. 624, 160 S.E.2d 708 (1968). Where the contractual language is clear and unambiguous, the Court must interpret the contract as written. Corbin v. Langdon, 23 N.C.App. 21, 208 S.E.2d 251 (1974). In an indemnity contract, the agreement will be construed to cover all losses, damages, and liabilities which reasonably appear to have been within the contemplation of the parties, but not those which are neither expressed nor reasonably inferrable from the terms. Dixie Container Corp., supra. Indemnity contracts are entered into to save one party harmless from some loss or obligation which it has incurred or may incur to a third party. Id.

We agree with plaintiff's position that the language in the indemnification clause here in question does require defendant to indemnify plaintiff for any claims made in connection with the work that defendant, as subcontractor, agreed to perform, regardless of whether the claims were occasioned by defendant or by third parties. Defendant agreed

to save and indemnify and keep harmless [plaintiff] against all liability, claims, judgments or demands for damages arising from accidents to persons or property, whether occasioned by [defendant], his agents or employees, provided said accidents occur in connection with [defendant's] work or are occasioned by [defendant], his agents or employees, in connection with other work .... [Emphasis ours.]

The agreement clearly covers an accident which occurs in connection with the roofing work defendant contracted to perform. It would also cover accidents occasioned, or caused, by defendant associated with other work. In either event, the undisputed facts show that Clifford Dunn, at the time he was killed, was performing roofing work that was defendant's obligation or was connected with the same. The fact that his status was that of an independent contractor is irrelevant and does not destroy or alter defendant's contractual obligation. The agreement plainly does not require that defendant itself actually cause the injury or loss upon which recovery is sought.

Defendant contends that because plaintiff admitted its own negligence and that such negligence was a proximate cause of Dunn's death, it is barred from recovering under the contract by the doctrine of contributory negligence or assumed risk. The cases cited by defendant, Etheridge v. Light Co., 249 N.C. 367, 106 S.E.2d 560 (1959); Clark v. Freight Carriers, 247 N.C. 705, 102 S.E.2d 252 (1958), and Dalrymple v. Sinkoe, 230 N.C. 453, 53 S.E.2d 437 (1949), do not involve indemnity contracts. Negligence is not an issue in the case sub judice, as plaintiff's action is based not upon allegations of defendant's negligence but upon the existence of the indemnification contract. See Dixie Container Corp., supra.

*635 Defendant cites the language of Hill v. Freight Carriers Corp., 235 N.C. 705, 710, 71 S.E.2d 133, 137 (1952), as authority for its proposition that public policy opposes contracting against liability from one's own negligence:

Contracts which seek to exculpate one of the parties from liability for his own negligence are not favored by the law.... Hence it is a universal rule that such exculpatory clause is strictly construed against the party asserting it.... It will never be so construed as to exempt the indemnitee from liability for his own negligence or the negligence of his employees in the absence of explicit language clearly indicating that such was the intent of the parties.

(Citations omitted.) Hill was decided under Georgia law, and concerned a situation in which the plaintiff leased his tractor to defendant, a common carrier, under a contract including a provision that the plaintiff "will bear the expense of all losses thru fire, theft & collision to said motor vehicle and [the defendant] is not responsible for any of the above said losses." Id. at 706, 71 S.E.2d at 134. While the plaintiff was operating the tractor on business for the defendant, he was involved in an accident with another driver who was on a trip for the defendant under a similar contract. The defendant sought to exculpate itself from liability for damages incurred by the plaintiff under the fellow servant doctrine and the terms of the contract. The Court, in applying the law of Georgia, held that the contract did not relieve the defendant of liability for two reasons: (1) the language used did not clearly indicate such an intent, and (2) it would be contrary to public policy to permit a common carrier to contract against liability for damages caused by its employees' negligence while engaged in operating its vehicles used in interstate commerce.

Hill has no application to the present case. It is well established in North Carolina that "[i]t is not contrary to public policy for an indemnitee to contract with another to save him harmless from liability to a third party." Gibbs v. Light Co., 265 N.C. 459, 467, 144 S.E.2d 393, 400 (1965).

There is a distinction between contracts whereby one seeks to wholly exempt himself from liability for the consequences of his negligent acts, and contracts of indemnity against liability imposed for the consequences of his negligent acts. The contract in the instant case is of the latter class and is more favored in law.

Id. Accord, Cooper v. Owsley & Son, Inc., 43 N.C.App. 261, 258 S.E.2d 842 (1979). Defendant's ultimate liability to plaintiff is in contract, not in tort. See Hargrove v. Plumbing and Heating Service, 31 N.C.App. 1, 228 S.E.2d 461, disc. rev. denied, 291 N.C. 448, 230 S.E.2d 765 (1976). To construe the language of the indemnity clause to be ineffective under the circumstances of this case would render the provision virtually meaningless.[1]Cooper, supra. There are few situations conceivable where a party would be seeking indemnification had it not been guilty of some fault, for otherwise no judgment could be recovered against it. Id.; Hargrove, supra. Plaintiff's admission of negligence does not bar its claim for recovery based upon the indemnity clause.

Defendant further relies on the fact that it was released and discharged by Clifford Dunn's estate from liability resulting from Dunn's death. It argues that the estate thereby implicitly released plaintiff from claims for which plaintiff may have been liable as a result of defendant's acts; therefore any payments made by plaintiff to the estate were merely voluntary. Although the release was apparently before the trial court, it has not been made a part of the record on appeal, and we are unable to determine if, by its terms, it released all other tortfeasors or was limited to defendant. If defendant had believed the estate's claim against plaintiff was based upon the same acts as the claim against itself, it *636 should have assumed and defended the claim by the estate against plaintiff, as plaintiff requested it to do under the indemnity agreement. Defendant apparently believed the claim against plaintiff arose from a separate tort and refused to assume and defend it. Because of its refusal to do so, plaintiff was entitled to make a good faith settlement with the estate, as the law encourages settlements. See Wheeler v. Denton, 9 N.C.App. 167, 175 S.E.2d 769 (1970); 12 Strong's N.C. Index 3d Torts § 7.7 (1978). Dunn's estate filed separate claims against plaintiff and defendant, and the release in favor of defendant had no effect as to the claim against plaintiff. Plaintiff's right to indemnity does not rest upon any theory of subrogation to the rights of the injured party. Strong's, supra, § 3.1. Indemnity assumes derivative fault, not joint fault. Id.; Edwards v. Hamill, 262 N.C. 528, 138 S.E.2d 151 (1964). Defendant's liability for the claim against plaintiff arose solely from its contractual obligation.

A settlement is presumed to be fair and reasonable, and the burden of showing a lack of good faith is upon the party asserting it. Wheeler, supra. In its complaint, plaintiff alleged that its settlement with Dunn's estate was fair and reasonable. Defendant generally denied the allegation, but offered no forecast of evidence to sustain its motion for summary judgment on this issue. Defendant cannot rely on the bald allegation of its pleadings alone, in the face of the presumption of the regularity of settlements. Therefore, there is no genuine issue of fact as to a bona fide settlement, and plaintiff was entitled to judgment as a matter of law on the basis of the indemnification agreement. The trial court erred in granting summary judgment to defendant and denying plaintiff's motion for the same. The actions of the trial court are

Reversed.

HEDRICK and WELLS, JJ., concur.

NOTES

[1] In its brief, defendant argues that, under the construction it urges, there might still be provided indemnity for such acts as mere negligent supervision by plaintiff. While the logic of this conclusion eludes us, we do not believe that the parties could have intended to draw up a contract of indemnity applicable to so narrow an interpretation.