Joe Adams & Son v. McCann Construction Company

CALVERT, Chief Justice

(dissenting).

I respectfully dissent.

In what appears from the closing paragraph of the majority opinion to be an overly zealous effort to relieve one of the parties from the normal and readily foreseeable consequences of a contract voluntarily entered into, the court has: (1) misinterpreted and, in effect, overruled one of our former opinions which cannot be distinguished; (2) abandoned usual and customary rules of contract construction; (3) nullified a broadly and carefully written contract of indemnity; (4) left bench and bar completely in the dark as to what is meant by a contract of indemnity for damages incurred for injuries sustained “in connection with the work” of an indemnitor, and (5) brought this state, for all practical purposes, without so stating and contrary to all of our previous declarations, into the group of jurisdictions in which it is held in situations of this character that contracts of indemnity will be held to indemnify against the consequences of the indemnitee’s own negligence only if the contract expressly so provides. While these matters will not be dealt with separately, they will be self-evident from my analysis of the problem, the prior opinions of this and other courts, and the court’s opinion in this case.

The problem posed in this case is not a new one to this court. It was presented in Crews Well Service v. Texas Co., 358 S.W.2d 171 (Tex.Civ.App.—San Antonio 1962, writ ref’d n. r. e., with per curiam opinion, 360 S.W.2d 873), before we faced up to it in Spence & Howe Construction Co. v. Gulf Oil Corp., 365 S.W.2d 631 (Tex.Sup.1963).

In Crews Well Service v. Texas Co., supra, one of Crews’ employees was killed while in the performance of his duties under a well work-over contract in which Crews agreed to indemnify Texas Company for damages paid on account of “injury to or death of Contractor, his agents and his employees * * * arising out of or in connection with the performance of said zvork * * *.”1 The court of civil appeals rejected a Crews’ argument that the death was caused by Texas Company’s negligence and that the parties did not intend to provide indemnity in that situation, stating (358 S.W.2d 173):

“When the ordinary rules of construction are here applied, it is clear that the parties to the indemnity contract intended that appellant fully protect, indemnify and hold appellee harmless against all liability and damages resulting from the work-over job undertaken by appellant, regardless of how it arose or what negligence caused it.”

We reserved the question by our per curiam opinion in 360 S.W.2d 873.

With the question squarely presented in Spence & Howe, we granted a writ, took *727dead aim at the “in-connection-with-the-work” problem, and upheld the right of a general contractor, under that contract language, to indemnity for the consequences of its own negligence.

The majority seek to distinguish our decision in Spence & Howe by completely reversing the logic of the opinion in that case. They recognize that we held in that case that the subcontractor was required to indemnify the general contractor for the consequences of the general contractor’s negligence, but imply that this was solely because the subcontractor “had supervision of the entire operation and was actively using the indemnitee’s crane and employee to do the work it [the indemnitor] had undertaken to perform.” I do not agree with that analysis of Spence & Howe. In my opinion the record does not .support it. Our opinion in the case reflects on its face that the subcontractor’s effort to relieve itself of liability under its “in-connection-with-the-work” contract was keyed to its contention that “in legal effect, there were two operations going on simultaneously— one being conducted by Gulf [indemnitee] with its crane and operator and another by Spence & Howe [indemnitor], consisting of setting piling in place, etc.”; and that the injury to the indemnitor’s employee occurred “in connection with the work” of the indemnitee and not “in connection with the work” of the indemnitor. As is not unusual in the decision-making process, we simply pointed out that the supposed factual basis for the indemnitor’s legal conclusion did not exist; that there were not two separate operations going on simultaneously. 365 S.W.2d 636-637. We did not hold, nor did we imply, that we would agree with the indemnitor’s legal conclusion if the facts had been as it sought to make them. Indeed, our holding in that case was exactly contrary to the majority’s holding here. The record in Spence & Hoive, as reflected in our opinion in that case, shows conclusively that negligence solely on the part of the in-demnitee was the cause of the injury to the employee of the indemnitor, a fact which the majority seem to say in this case precludes indemnification. As a matter of fact, the record in this case presents a stronger case for indemnification than did the record in Spence & Howe.

While the majority quote extensively from the Spence & Howe opinion on general rules to be followed in interpreting indemnity contracts, they fail even to notice the really significant parts of the opinion which will be found in the following quotations (365 S.W.2d 637):

“ * * * In the present case, Cummings was injured as a result of an action directly connected with and growing out of the operations covered by the contract of which the indemnity agreement was a part.
“ * * * As above pointed out, Spence & Howe in this portion of the contract agreed ‘to be responsible for and to indemnify and save Gulf harmless from all loss or damage and any or all claims arising by reason of accidents, injuries or damage to any persons or property in connection with such work/
“This phrase clearly means that Spence & Howe assumed liability for any and all damages growing out of the work covered by the contract, — namely the setting of piling for six propane tanks.”

By the quoted language the court was saying in words too plain to be misinterpreted or misunderstood that by their contract the parties clearly intended that the contractor, Spence & Howe, would indemnify Gulf for all damages paid for injuries sustained in connection with their work in the setting of piling, without regard to whose negligence may have caused or contributed to the injuries and even if they were proximately caused solely by Gulf’s negligence, which, in the particular instance, they were. A diametrically opposite holding is now being made in this case.

In reaching the conclusion that the indemnity clause in the instant contract does not in unequivocal terms express Adams’ obligation to indemnify McCann against *728consequences of the latter’s negligence, the majority read two of the provisions of the indemnity agreement as though they were not separated by the disjunctive “or”. For example, the discussion of the problem is opened with this sentence: “The injuries were thus received, we are told, through or on account of ‘an act or in connection with the work’ of Adams within the meaning of the contract.” The same language is used in other places in the majority opinion, thus creating the impression that the problem is whether there is an agreement to indemnify for injuries received through an act of Adams committed in connection with its work. In this respect the opinion is misleading. McCann insists in its answer to the application for writ of error that the language in the indemnity clause is expressly stated in the disjunctive. This being so, the conditions are alternative; and the question before us is obviously not whether the injuries to the employees were received through or on account of “an act” of Adams, but whether, alternatively, they were received “in connection with the work” of Adams. Here is the crux of the entire case. Here, too, is the provision which determines whether this case is ruled by Spence & Howe, as I have analyzed it, and other cases decided on the same legal theory, or whether it is ruled by decisions based upon different contract provisions.

At this point, I take particular notice of our decision in Ohio Oil Co. v. Smith, 365 S.W.2d 621 (Tex.Sup.1963). We decided that case on the same day we decided Spence & Howe and cited it as authority for our decision in Spence & Howe. I am now convinced that Ohio Oil Co. v. Smith was incorrectly decided and should be distinguished from Spence & Howe and from the instant case.

The indemnity provision in the contract between Ohio Oil Company and Smith was contained in Section 15, captioned “OHIO INDEMNIFIED,” and provided that Smith would indemnify Ohio for any damages it was required to pay “for injury to or death of any person or persons * * * arising out of or attributed, directly or indirectly, to the operations of Contractor [Smith] hereunder.” We held that this provision was “broad enough to cover claims and damages caused by the sole negligence of Ohio.” I am now satisfied, on the basis of decisions to be cited and analyzed, infra, that a contrary decision would have been more logical.

Although there are other persuasive decisions, to be cited and analyzed later, it seems to me that a proper evaluation of this case can be made by a consideration of the Texas decisions in Standard Oil Co. of Texas v. Wampler, 218 F.2d 768 (5th Cir.1955); Westinghouse Electric Corp. v. Childs-Bellows, 352 S.W.2d 806 (Tex.Civ.App.—Fort Worth 1961, writ ref’d); Crews Well Service v. Texas Company, 358 S.W.2d 171 (Tex.Civ.App.—San Antonio 1962, writ ref’d n. r. e.); Spence & Howe Construction Co. v. Gulf Oil Corp., 365 S.W.2d 631 (Tex.Sup.1963); Alamo Lumber Co. v. Warren Petroleum Corp., 316 F.2d 287 (5th Cir. 1963), and Sinclair Oil & Gas Co. v. Brown, 333 F.2d 967 (10th Cir. 1964), The decisions in these cases demonstrate that when the contractual obligation may reasonably be said to require indemnification for damages proximately caused by acts or conduct of a subcontractor in the performance of his work, the contract will not be held to require indemnity for injuries which are proximately caused solely by the negligence of the general contractor. Thus, in cases in which the general contractor’s negligence was the sole proximate cause of injuries, indemnity was denied in Wampler, in which the provision was for indemnity for injuries or damages “that may arise from Contractor’s operations hereunder * * * ”; in Childs-Bellows, in which the provision was for indemnity for damages “growing out of, or incident to or resulting from the performance [by the subcontractor] or failure to perform the Work * * * ”; and in Sinclair Oil & Gas Co. v. Brown, in which the provision was for indemnity for damages “resulting from the operations of *729Contractor hereunder * * On the other hand, when the contractual obligation is more broadly stated as requiring indemnity for injuries sustained “in connection with the work” of the subcontractor, or similar provisions, the contract will be held to require indemnity for injuries proximately caused either by the concurrent negligence of the general contractor or solely by his negligence. Thus, as heretofore pointed out, indemnity was required in Crews Well Service in which the provision was for indemnity for injuries or damages “in connection with said work * * * ”; in Spence & Howe in which the provision for indemnity was for injuries or damages “arising * * * in connection with such work”; and in Alamo Lumber Company in which the provision for indemnity was for injuries or damages “ * * * which arise [s] out of or in connection with the activities of Contractor * *

The Alamo Lumber Company case by the Court of Appeals for the Fifth Circuit and Sinclair Oil & Gas Co. v. Brown by the Court of Appeals for the Tenth Circuit rather graphically illustrate the distinction in the two lines of cases. The opinion in the first case discloses that Alamo contracted to install cabinets in the chemical laboratory of a Warren plant and agreed to indemnify Warren for damages incurred for “injuries to or death of persons, * * * which arises out of or in connection with the activities of Contractor [Alamo] * * in connection with its work, Alamo disconnected and left open a pipe for sewer drainage. Waste gas was discharged through the pipe by Warren and injured two of Alamo’s employees who recovered judgments against Warren based on its negligence. The court, citing its own opinion in the Florida case of American Agricultural Chemical Co. v. Tampa Armature Works, Inc., 315 F.2d 856 (5th Cir. 1963), upheld Warren’s right to indemnity with the following holding:

“The injury in the instant case arose out of the installation of cabinets around the unstopped sewer drain pipe. This was an operation embraced by the contract. Giving the words ‘in connection with’ their natural and ordinary meaning, as in American Agricultural Chemical Co. v. Tampa Armature Works, the injuries were sustained in connection with Alamo’s contract with Warren. Liability for the injuries was therefore within the scope of the indemnity clause.”

In Sinclair Oil & Gas Co. v. Brown, Sinclair sued Brown, a drilling contractor, for attorney fees and costs incurred in defending a suit against it by a Brown employee who was injured while performing services pursuant to a drilling contract between Brown and Sinclair. The contract provided that Brown would hold Sinclair “harmless from any and all liability for damages to the person * * * resulting from the operations of Contractor hereunder.” The court held that the quoted language did not clearly indicate an intent to indemnify Sinclair against the consequences of its own negligence, and said:

“Sinclair relies on Ohio Oil Company v. Smith, Tex., 365 S.W.2d 621, and Spence & Howe Construction Company v. Gulf Oil Corp., Tex., 365 S.W.2d 631, to sustain its position, but the language used in the indemnity agreements in those cases was so much broader than that found in the indemnity agreement in the instant case, that they- have no application here.”

I have said that I now think Ohio Oil Co. v. Smith was incorrectly decided. My reason for so concluding is that the language of the indemnity agreement in that case — “arising out of or attributed, directly or indirectly, to the operations of Contractor hereunder” — rather clearly places it in the category of Wampler, Childs-Bellows and Sinclair Oil & Gas Co. v. Brown, rather than in the category of Spence & Howe, Crews Well Service and Alamo Lumber Company.

The distinction made in the foregoing series of cases is soundly based in both *730logic and law. Except in a narrow, non-delegable duty situation (blasting), not present here, a general contractor is never liable in this jurisdiction for injuries to third persons caused by the work activity of subcontractors unless its negligence was a proximate cause of the injuries. Hence, the only reason for including a provision in such contracts for indemnity for general contractors is to protect them from the consequences of their own negligence. It follows that by inclusion of such a provision in their contracts, the parties intend either to provide for indemnity against the consequences of the negligence of the general contractor, or, alternatively, that the provision shall be meaningless. Surely, we are not prepared to hold, contrary to all established contract construction law, that the parties intend the provision to be meaningless.

By providing for indemnity for damages “that may arise from Contractor’s operations hereunder * * {Wampler); or, “growing out of, or incident to or resulting from performance [by the subcontractor] or failure to perform the Work * * *.” (Childs-Bellows); or “resulting from the operations of the Contractor hereunder * * (Sinclair Oil & Gas Co. v. Brown), the general contractor protects itself against liability for injuries which might be proximately caused by the concurrent negligence of itself and the subcontractor, but not against liability for injuries which might be proximately caused solely by its negligence or by the concurrent negligence of itself and a third person. In the instant case, protection for McCann against its negligence concurring with that of Adams was contained in the provision for indemnity for injuries sustained “through or on account of any act * * * of the Contractor [Adams & Son].” Having thus provided for indemnity for injuries proximately caused by the concurrent negligence of the parties, the added provision for indemnity for injuries sustained “in connection with the work” of the subcontractor was intended by the parties either to add indemnity coverage in other situations, or, once again, to be meaningless. I suggest that the added language was not intended to be meaningless, and that it is broad enough clearly and unequivocally to provide indemnity for injuries proximately caused by the concurrent negligence of the general contractor and a third person or solely by the negligence of the general contractor; and I suggest, further, that it would be foolish to hold that it was intended to provide indemnity in the first situation but not in the second.

There are cases from other jurisdictions which, with virtual unanimity, offer firm support for the distinction I have suggested and for the view that the contract in this case should be held to provide indemnity for McCann.

In St. Paul Mercury Indemnity Co. v. Kopp, 121 N.E.2d 23 (Ohio App.1954), the contract provided for indemnity for loss “growing out of or in any way connected with the performance of the work awarded to Contractor." The court held:

“ * * * Although no specific mention is made of the negligence of the Utility Company, yet the contract, when it calls for indemnity for any and all loss in any way connected with the performance of the work * * * clearly includes loss arising as a result of such negligence. * * *
“We therefore determine that by the plain, unambiguous terms of the contract * * * [indemnity was required].”

Accord: New Amsterdam Casualty Company v. Kilroy Structural Steel Company, 159 N.E.2d 797 (Ohio App.1959), in which indemnity was provided for damage “caused or alleged to have been caused by the subcontractor, or incidental to execution of work under this contract * *

In Fosson v. Ashland Oil & Refining Company, 309 S.W.2d 176 (Ky.1958), the contract provided for indemnity from damages “growing out of or incurred in the prosecution of said work * * In *731holding that the contract required indemnity against the consequences of the indem-nitee’s own negligence, the court said:

“ * * * The use of the word ‘or’, as italicized in the first quoted provision of the contract, rather than the word ‘and’ convinces us that the contractual intent was that the owner be held harmless from all liability incurred in the prosecution of the work or later growing out of the contractor’s acts or omissions.
“ * * * It is true that when there is a doubt as to the meaning of an indemnity clause the construction should be against the contention that the contract was meant to indemnify against an in-demnitee’s own negligence. We have said that every presumption is against such intention. * * *
“ * * * Unless there was required specifically the statement ‘including the owner’s own negligence,’ we can hardly envision a more inclusive indemnity provision. * * * ”

In Smoke v. Turner Construction Company, 54 F.Supp. 369 (D.Del.1944), the contract provided for indemnity by a subcontractor for any and all damages “growing out of or resulting from the execution of the work provided for in this contract, or occurring in connection therewith * * In upholding the right to indemnity for the consequences of the in-demnitee’s own negligence, the court said:

“ * * * The magic words of the agreement fixing liability for an injured employee are ‘occurring in connection therewith’. * * *
“If this agreement is held not to apply to Turner’s negligence, it means nothing, for Turner could he liable only for negligence. * * *
“Struse strenuously argues that a construction that its undertaking applies to Turner’s negligence is unnatural for it would mean that it as a small subcontractor on the construction of one of the country’s larger modern hospitals would assume liability out of all proportion to the value of its contract. It may well be that this was, in truth, an unwise undertaking for Struse to assume, but that circumstance alone is not a persuasive argument against the bald fact that it did assume such a liability.”

In Turner Construction Company v. Belmont Iron Works, 158 F.Supp. 309 (E.D.Pa.1957), an employee of a subcontractor was killed as a result of the general contractor’s negligence. The employee’s widow recovered a judgment against the general contractor for damages, and the general contractor sued the subcontractor on an agreement which provided for indemnity for injuries “growing out of or resulting from the execution of the work provided for in this Contract or occurring in connection therewith.” The subcontractor sought to defeat liability on the ground that it had nothing to do with the dangerous condition of the premises responsible for the death. In rejecting the defense, the court said:

“ * * * There might be ground for the argument (though I do not so decide) if the clause had merely said injury ‘growing out of or resulting from the execution of the work’ and stopped there. However, the clause goes on ‘or occurring in connection therewith.’ Plainly, the parties meant to add something to the concept of an injury caused by or resulting from the work.”

In Buffa v. General Motors Corp., 131 F.Supp. 478 (E.D.Mich.1955), General Motors was sued by an employee of Utley, a contractor, for damages for injuries sustained on the job as a result of the negligence of a General Motors’ employee. General Motors filed a third party action against Utley on an indemnity contract which provided that Utley “assume[d] all risks of damage or injury to property or persons used or employed on or in connection with the work. * * * ” In reject*732ing- Utley’s contention that the contract was not intended to indemnify General Motors against the consequences of its own negligence, the court said:

“ * * * The contract clearly indicates that the undertaking of Utley was, in part at least, to indemnify General Motors against responsibility for injuries to Utley’s employees used on the job in question, regardless of whoever be at fault. Doubtless, more specific language could have been chosen, but this fact, to a certain extent, is true in every instance of draftsmanship and this argument cannot serve to detract from the clear and unequivocal meaning of the words used.”

In Russell, for Use of Continental Cas. Co. v. Shell Oil Company, 339 App. 168, 89 N.E.2d 415 (1949), a case on all-fours with the instant case on the essential facts, Russell contracted to paint the light poles on the premises of a Shell filing station. While Russell’s employee was working from a ladder leaning against a light pole, the pole and its concrete base pulled out of the earth and fell, injuring the employee. Shell’s prior negligence was thus the sole proximate cause of the employee’s injury. Russell’s workmen’s compensation insurer sued Shell to recover sums it had paid. Shell defended on the ground that its contract with Russell provided for its indemnification from claims and liability “resulting from or arising in connection with any of Contractor’s operations * * The trial court’s judgment for Shell was affirmed, the court saying:

“ * * * It seems clear that the injury to Campbell arose in connection with the ‘contractor’s operations.’ As defendant-argues, * * * ‘the indemnifying agreement is expressed in clear and explicit language and the intention of the parties is indicated in unequivocal terms.’ ”

Accord: Northern States Company v. A. Finkl & Sons Company, 8 Ill.App.2d 419, 132 N.E.2d 59 (1956), in which indemnity was provided for injuries or damages “arising directly or indirectly from or in connection with work performed or to be performed under this contract.”

In Tyler v. Dowell, Inc., 274 F.2d 890 (10th Cir. 1960), a drilling contractor agreed in its contract with Phillips Petroleum Company to indemnify and hold Phillips harmless for “damages to persons and property which may occur in the course of contractor’s operations.” In rejecting a contention that the contract was not intended to indemnify Phillips against the consequences of its own negligence, the same court which later decided Sinclair Oil & Gas Co. v. Brown, supra, said:

“ * * * From this ‘all-embracing language,’ * * * it is fair to say that the parties clearly intended to exempt and indemnify Phillips from any liability arising out of the performance of the contract, even against its own negligence. * * * ”

A number of cases in this general area are collated in an annotation in 27 A.L.R.3d 663, and an examination of the annotations discloses that in those jurisdictions in which an express provision against the consequences of one’s own negligence is not required, “in-connection-with-the-work” provisions are held, virtually without exception, to provide such indemnity.

The majority opinion speaks several times of a situation in which a general contractor seeks indemnity against liability for damage “caused solely by his own negligence” and indicates that is the situation in the instant case. I suggest such is not the situation here; the claim is to indemnity for damage as to which McCann’s negligence was the sole proximate cause, but not the sole cause. There is no evidence that the forms, however defective they may have been, would have fallen and injured the employees if the wet concrete had not been poured into them. The pouring of the concrete into the forms “in connection with the work” of Adams was a cause in fact of the injuries. That should be too plain and clear for cavil; and the *733right to indemnity in that situation is not dependent on the cause in fact being also a proximate or legal cause of the injuries.

The majority opinion carefully limits its holding to situations in which the indemni-tee’s negligence is the sole cause of injuries ; but there is no sound basis for holding that while not providing for indemnity in that situation, the contract will provide for indemnity when the indemnitee’s negligence concurs with the negligence of the indemnitor or of a third person as a proximate cause of injury. The net effect of the majority’s holding, therefore, is to nullify “in-connection-with-the-work” provisions as a basis for protecting general contractors and premises owners against liability.

The majority use the provisions of Article V of the contract as demonstrating that the “in-connection-with-the-work” provision in Article VIII is too general to provide indemnity for the consequences of McCann’s negligence. The subject matter of Article V is wholly unrelated to the indemnity provisions of Article VIII; Article V relates to the rights and duties of the parties to each other and Article VIII relates to their joint or separate liabilities to third persons. The majority seem to say that because the parties thought it necessary to qualify the general provision in Article V with a more specific provision, they should have done the same with the general provision of Article VIII if they intended it to be effective. This is, to me, a new rule for the construction of contracts. Moreover, it is less than logical. The specific provision in Article V qualifying the general provision is in the nature of a limitation on, or exception to, the general provision and necessarily had to be in more specific language. The situation with respect to the general language in Article VIII is obviously not comparable.

While holding the “in-connection-with-the-work” provision ineffective for the only logical purposes the parties could have intended it to serve, the majority give no inkling of how a general contractor may provide for indemnity from a subcontractor for the consequences of his own negligence which is the sole proximate cause, or concurs with the negligence of a third party as a proximate cause, of injury to another. As demonstrated by decisions cited supra, a provision for indemnity for injuries “growing out of the operations or acts” of the subcontractor is too narrow to provide it. Cf. City of Beaumont v. Graham, 441 S.W.2d 829, 838 (Tex.1969). By this decision, a provision for indemnity for injuries sustained “in connection with the work” of the subcontractor is too general and broad to provide it. In Mitchell’s, Inc. v. Friedman, 157 Tex. 424, 303 S.W.2d 775 (1957), we held that, to provide it, the parties need not “say in so many words that they intend to protect the indemnitee against liability for negligence.” If the decision of the majority in this case is to stand, it is my opinion that we should 'change the rules of the game as laid down in Friedman and join those jurisdictions which require as a basis for indemnity against the consequences of one’s own negligence that the contract expressly provide for it, thus providing contracting parties with some measure of predictability of their contract rights.

I would affirm the judgment of the court of civil appeals.

STEAKLEY, McGEE and DENTON, JJ., join in dissent.

. Emphasis mine throughout unless otherwise indicated.