No. 80-192
I N THE SUPREMF: COURT O THE STATE O M N A A
F F OTN
TOWN PUMP, I N C . , and BOZEMAN
TOWN PUMP, I N C . ,
P l a i n t i f f s and A p p e l l a n t s ,
W L A E DITEMAN,
AL C
D e f e n d a n t and Respondent.
Appeal from: D i s t r i c t Court of t h e E i g h t e e n t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e County o f G a l l a t i n .
The Honorable Frank B l a i r , J u d g e p r e s i d i n g .
Counsel o f Record:
For Appellant:
Landoe, Brown, P l a n a l p , Kommers & L i n e b e r g e r ,
Bozeman, Montana
For Respondent :
Page W e l l c o m e , Bozeman, Montana
S u b m i t t e d on b r i e f s : November 20, 1980
~ e c i d e d :J a n u a r y 1 2 , 1 9 8 1
Filed: J ! - 18 19Ql
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Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
Town Pump, Inc. and Rozeman Town Pump, Inc. appeal from
an adverse judgment in their indemnity action against Wallace
Diteman d/b/a W. D. Construction, rendered in the District
Court, Eighteenth Judicial District, Gallatin County.
Town Pump's indemnity claim arose out of an action by
various landowners whose water wells had been polluted by
gasoline escaping from a gasoline station in Bozeman, owned
by Town Pump. The original suit was brought against Town
Pump, owner of the gas station, and Wallace Diteman, d/b/a
W. D. Construction Company, the construction company building
the gasoline station. In the original action, Town Pump
cross-claimed against Diteman for indemnity. The first jury
trial brought in a verdict against both Town Pump and Diteman
in favor of the landowners. Town Pump's suit for indemnity
was dismissed by the court in the original action. On
appeal to this Court, we reversed the jury award and ordered
a new trial on the question of damages. We also reversed
the District Court's dismissal of the indemnity action. Ferguson
v. Town Pump, Inc. (1978), Mont . -, 580 P.2d 915, 35
St.Rep. 824.
The new trial on the question of damages resulted in an
award to the landowners in the sum of $96,224.52. This
award was paid one-half each by Town Pump and Diteman.
The indemnity action was tried in the District Court
before a jury. Town Pump had moved for a summary judgment
which was denied. After the jury trial, a verdict was
returned in favor of Diteman. Town Pump appeals from the
denial of the summary judgment and the jury verdict.
Diteman cross-appealed, claiming he is entitled to
attorney fees for his successful defense of the indemnity
action.
Town Pump's brief on appeal does not set forth the
legal issues it raised for our consideration. It is clear,
however, that Town Pump contends that under Ferguson, the
cause was remanded on the theory of indemnity based on
contract and that therefore consideration of theories of
"active" or "passive" as well as "primary" and "secondary"
negligence was inappropriate. Diteman contends that each
party was guilty of respective failures to fulfill duties
which they owed to the landowners, and to each other, so as
to be - -
in pari delecto in the proximate cause of the landowners'
damages. Diteman's cross-appeal for attorney fees arises
because Town Pump claimed attorney fees in the indemnity
action and Diteman claims the reciprocal statute, section
28-3-704, MCA, entitles him to attorney fees as the successful
party.
We affirm the judgment of the District Court that Town
Pump is not entitled to indemnity in this case, and further
that Diteman is not entitled to recover his attorney fees.
' In the fall of 1972, Town Pump entered into an oral
cost-plus labor contract with Diteman Construction Company
for the construction of a gasoline station on the west end
of Bozeman, Montana. The work included the installation of
two underground storage tanks and lines running from the
tanks to the gasoline pumps. At the completion of construction,
the gas station was leased to third parties for operation.
Patricia Hawkins began employment as the operator of
the Town Pump station in March 1973, and continued to operate
the station until approximately August 1976. Soon after
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assuming her duties, she reported several times to her
supervisor that one of the gas pumps would hesitate upon
being turned on before the gasoline would begin coming out
of the nozzle. The hesitation increased in the morning
after the pump had not been used overnight. It was developed
in the evidence that such hesitation is an indication of
leakage in the lines, since the hesitation results from a
lapse of time for suction when the pump is turned on to
bring the gas to the point of the nozzle.
Town Pump made no response to the reports of Hawkins
respecting the hesitating pump condition.
Patricia Hawkins also noticed in the gasoline inventory
reports which she had to make regularly, that there was an
increasing loss from the regular gasoline storage tank. She
reported her observation of this decreasing inventory to her
superiors again on several occasions. The supervisor for
Town Pump, however, regarded the gasoline deficiencies as
being within normal acceptable limits.
Patricia Hawkins also noticed that a depression had
developed in the asphalt pad in the area where the tanker
trunks parked to unload the gasoline into the storage tanks.
She first observed this condition in the summer of 1973.
She reported this to her supervisor. She also questioned
Diteman about the depression and Diteman said the ground was
probably settling. Diteman told her that the gasoline truck
tankers should not park in the area where the settling was
occurring but should park on the asphalt beside the pumps.
She attempted to get truck drivers to follow these instructions,
but they did not do so. She made a written report of the
asphalt depression to her supervisor on July 1, 1973.
About a year later, Patricia Hawkins was interviewed by
an owner from a nearby trailer court concerning the presence
of gasoline in his well water. She reported this complaint
to her supervisor but Town Pump made no response.
The consequences of gasoline leakage appeared to be
well-known to the Town Pump personnel. Its officers were
aware that gasoline leakage could cause problems such as
water pollution and fire hazards.
On January 22, 1975, the Department of Health issued an
abatement order. Tests had indicated that leakage from the
gasoline lines at the Town Pump station was seeping into
the water wells of the landowners nearby.
In March 1975, Town Pump excavated the gasoline delivery
system. The excavator found a large amount of gasoline in
the area of a 45-degree elbow in the gasoline lines. The
elbow was obviously leaking gasoline. When the lines were
taken apart, it was found that the elbow had been cross-
threaded by Diteman in its original installation and that
the cross-threading was a source of the gasoline leak from
the lines. It further appeared that Diteman had failed to
install swing joints in the gasoline lines (joints designed
to absorb pressure and movement of buried pipelines); and
that the material used for fill around the lines and the
buried gasoline tanks was unstable.
The District Court's instructions to the jury included
these in pertinent part: That the right of indemnity exists
for the benefit of a person who without wrongful conduct on
his part is liable to pay damages caused by the negligence
of another person, which liability arises from a breach by
the other person of an implied contractual duty; if the
fault of the plaintiff and the defendant were equal in grade
and similar in character, indemnity was not available; the
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usual instruction on proximate cause; the contract between
the plaintiff and the defendant implied the defendant would
perform his work in a reasonably skillful and workmanlike
manner; that Town Pump was entitled to rely on Diteman to
discharge the contractual obligation in a reasonably skillful
and workmanlike manner; that Diteman could not use Town
Pump's failure to discover and correct Diteman's breach of
warranty as a defense; and that for the defendant to raise
the defense that Town Pump failed to correct or remove the
dangerous condition, Town Pump must have had actual knowledge
of the existence thereof.
Those instructions, as we shall see, properly tendered
to the jury, the issues to be decided under the facts of
this case.
Town Pump, in making its motion for summary judgment,
and in objecting to certain of the instructions given by the
District Court, was relying on a paragraph from our decision
in Ferguson, as follows:
"However, these cases do not apply to a theory
of indemnity based upon contract. In an indemnity
action arising out of contract, the 'application
of the theories of "active" or "passive" as well
"primary" and "secondary" negligence is appropriate.'
Weyerhaeuser S. S. Co. v. Nacirema Operating Company
(1958), 355 U.S. 563, 569, 78 S.Ct. 438, 442, 2 L.Ed.2d
491, 495; Hill v. George Engine Company (D. La. 19611,
190 F.Supp. 417."
The cited paragraph is a direct quotation from the
Weyerhaeuser case. However, it should not be accepted as
absolute. Even if a breach of implied warranty occurs so as
to cause a defect, the warrantee may also be guilty of
subsequent negligence which concurring with the defect is a
proximate cause of injury to third persons. Such subsequent
negligence not only makes the warrantee liable to the third
person, but negates his right to indemnity for damages paid
by warrantee to the third party as a joint tortfeasor. The
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United States Supreme Court recognized this in Weyerhaeuser
when it said in an earlier passage:
"We believe that respondent's contractual obligation
to perform its duties with reasonable safety related
not only to the handling of cargo, as in Ryan, but
also to the use of equipment incidental thereto, such
as the winch shelter involved here. (Citing cases.)
If in that regard, respondent rendered a substandard
performance which led to foreseeable liability of
petitioner, the latter was entitled to indemnity absent
conduct - - -
on its part sufficient to preclude recovery.
The evidence bearing on these issues--petitioner's
action in making the shelter on its ship available
to respondent's employees in Boston although it
apparently was unsafe, as well as respondent's
continued use of the shelter for five days thereafter
without inspection--was for jury consideration under
appropriate instructions . . ." Weyerhaeuser, 355 U.S.
at 567, 78 S.Ct. at 441, 2 L.Ed.2d at 494. (Emphasis
added. )
Where,as here,a warrantee is supplied a defective
mechanism or system which constitutes a breach of implied
warranty on the part of the supplier, but the warrantee's
subsequent conduct constitutes negligence which concurs as a
proximate cause of injury to third parties, the warrantee
loses his right to indemnity because of that subsequent
conduct which precludes his right to recover. This is the net
effect of the holding of the United States Supreme Court in
Weyerhaeuser.
Whether one regards it as a rule under indemnity, or as
an application of the principal of proximate cause, or of
the rule requiring mitigation of damages, there can be no
recovery for damages which might have been prevented by
reasonable efforts of the claimant. Brown v. First Federal
Sav. & L. Ass'n. of Great Falls (1969), 154 Mont. 79, 88,
In any event, all that is required of the nondefaulting
party in a contractual arrangement is that he act reasonably
under the circumstances so as not to unnecessarily enlarge
damages caused by a default. Business Finance Co., Inc. v.
Red Barn, Inc. (1973), 163 Mont. 263, 268, 517 P.2d 383, 386.
Under t h e i n s t r u c t i o n s of t h e D i s t r i c t C o u r t , t h e r i g h t
of indemnity e x i s t e d f o r t h e b e n e f i t of Town Pump i f w i t h o u t
wrongful c o n d u c t on i t s p a r t , i t w a s l i a b l e t o pay damages
c a u s e d by t h e n e g l i g e n c e o f Diteman, which l i a b i l i t y t o pay
s u c h damages had a r i s e n from t h e b r e a c h by Diteman o f an
i m p l i e d c o n t r a c t u a l d u t y owed t o Town Pump. The s u b s e q u e n t
n e g l i g e n t c o n d u c t of Town Pump, a s a p p a r e n t l y found by t h e
jury, precludes i t s recovery f o r indemnity here.
I n H i l l v. George Engine Company, s u p r a , r e l i e d on by
Town Pump, i t a p p e a r s t h a t t h e e n g i n e company had a c o n t r a c t
t o i n s t a l l an e n g i n e i n a t u g b o a t and d i d s o i n s u c h manner
t h a t it w a s i m p o s s i b l e t o r e v e r s e t h e t u g b o a t e n g i n e s . The
t u g b o a t s t r u c k t h e g a t e of a c a n a l l o c k as a d i r e c t r e s u l t
of t h a t i n a b i l i t y s o t h a t t h e t u g b o a t became l i a b l e t o t h e
Army C o r p o f E n g i n e e r s f o r t h e damages. The t u g b o a t owner
s o u g h t i n d e m n i f i c a t i o n from George Engine Company. Indemnifica-
t i o n w a s allowed. H i l l v. George Engine Company, s u p r a , i s
r e a d i l y d i s t i n g u i s h a b l e from t h i s case, where f o r sometime
a f t e r Town Pump knew o r s h o u l d have known o f t h e d e f e c t i v e
condition, it d i d nothing t o prevent i n j u r y t o t h i r d persons.
W e t h e r e f o r e f i n d t h a t t h e v e r d i c t o f t h e j u r y on t h e
indemnity i s s u e i s b a s e d on s u b s t a n t i a l e v i d e n c e . The
judgment o f t h e D i s t r i c t C o u r t b a s e d on t h a t v e r d i c t i s
affirmed.
On t h e c r o s s - a p p e a l , Diteman c o n t e n d s t h a t h e i s e n t i t l e d
t o recover h i s a t t o r n e y f e e s i n defending t h e indemnity
a c t i o n b r o u g h t by Town Pump. H e bases t h i s c o n t e n t i o n on
t h e f a c t t h a t Town Pump c l a i m e d a t t o r n e y f e e s a s a p a r t of
i t s l o s s on t h e i n d e m n i t y a c t i o n and t h a t under t h e r e c i p r o c a l
s t a t u t e , s e c t i o n 28-3-704, MCA, Diteman i s e n t i t l e d t o h i s
attorney fees a s the successful party.
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The measure and mode of compensation of an attorney is
left to the agreement, express or implied, of the parties.
Section 25-10-301, MCA. Attorney fees are not reasonable
and necessary expenses recoverable as costs in a suit.
Kintner v. Harr (1965), 146 Mont. 461, 480, 408 P.2d 487.
Diteman's oral contract to construct the gasoline station
did not include an express agreement to pay attorney fees to
Town Pump. Section 28-3-704 grants a reciprocal right to
attorney fees only when the other party has an express right
to attorney fees. Since Town Pump did not have an express
right to recover attorney fees Diteman's claimed reciprocal
right to recover attorney fees cannot exist.
The judgment of the District Court is affirmed; the
cross-appeal is dismissed.
Justice
We Concur: U
J tices