Moses-Ecco Company, Inc. v. Roscoe-Ajax Corporation, Roscoe-Ajax Corporation v. Charles Detwiler

320 F.2d 685

• Court: Court of Appeals for the D.C. Circuit
• Decided: July 9, 1963
• Docket: 16970_1
• Status: Published

Opinions

BAZELON, Chief Judge.

These consolidated appeals involve third-party complaints of Roscoe-Ajax Corporation, the general contractor for certain construction in the District of Columbia, against Moses-Ecco Company, Inc., its subcontractor for concrete work, and the subcontractor’s superintendent, Charles Detwiler.

The main action was brought against Roscoe-Ajax in March 1959 by George W. Williamson, an employee of Moses-Ecco, and his wife. They alleged that, as a result of the negligence of Roscoe-Ajax in failing properly to install and maintain certain guard rails, Williamson fell five and one-half stories and sustained serious injuries. Roscoe-Ajax promptly filed the present third-party complaint under Rule 14 of the Federal Rules of Civil Procedure against Moses-Ecco and Detwiler for all sums which might be adjudged against Roscoe-Ajax in the main action.

The claim against Moses-Ecco was based upon an indemnification provision in the subcontract which we describe later. The claim against Detwiler for indemnification or contribution was based on an allegation that Williamson’s injuries were caused solely by the negligence of Detwiler or jointly by Detwiler and Roscoe-Ajax.

Two jury trials of the main action were commenced. In the first, after the jury had returned a verdict of $120,000 against Roscoe-Ajax, the trial judge declared a mistrial because of prejudicial remarks in plaintiffs’ closing argument to the jury. Hence, the third-party complaint was not reached. At the second trial, and near its completion, plaintiffs and defendant agreed to a settlement of the main action under which a consent judgment of $45,000 was entered in favor of plaintiffs.

Thereafter, in a trial of the third-party action, without a jury, the court entered judgment in favor of Roscoe-Ajax against Moses-Ecco for $45,000 plus costs and expenses and attorneys’ fees incurred in defending against plaintiffs’ claim; and it dismissed the third-party complaint against Detwiler. These consolidated appeals followed.

Moses-Ecco’s main contention is that the indemnification provision of the subcontract lacks the positiveness which the law requires to indemnify Roscoe-Ajax for its own affirmative negligence. That provision reads:

“The Subcontractor [Moses-Ecco] agrees in the performance of this contract * * * that he will at all times indemnify and save harmless the Owner and the Contractor [Roscoe-Ajax] against any loss, because of injury or damage to persons or property arising or resulting from the performance of this contract, including any and all loss, cost, damage or expense which the Owner and/or Contractor may sustain or in- ■ cur on account of any claim, demand or suit made or brought against them or either of them by or on behalf of any employee of ,[Moses-Ecco] * *

Losses incurred by Roscoe-Ajax through its own negligence are not specifically included. And Moses-Ecco urges here, as it did below, that no intention to include such losses “is otherwise clearly and unequivocally revealed.”

We accept the principle that where, as here, the agreement does not specifically refer to losses incurred by the indem-nitee’s own negligence, the intent to cover such losses must otherwise plainly appear from the agreement. Maiatico v. Hot Shoppes, Inc., 109 U.S.App.D.C. 310, 287 F.2d 349 (1961). “No particular form or words are needed but the intent to waive negligence must be clear.” Maiatico v. Hot Shoppes, Inc., supra; and see General Acc. Fire & Life Assur. Corp., Ltd., v. Smith & Oby Co., 272 F.2d 581, 77 A.L.R.2d 1134 (6th Cir. 1959).

The District Court concluded that the language of the indemnification agreement in the present case was so broad and sweeping as to plainly reveal an intent to encompass losses incurred in whole or in part by the negligence of the indemnitee. In reaching this conclusion, the court relied upon Chesapeake Beach R. Co. v. Hupp Automatic Mail Exchange Co., 48 App.D.C. 123 (1918); Princemont Construction Corp. v. Baltimore & O. R. Co., 131 A.2d 877 (D.C.Mun.Ct.App.1947); and Atlantic Coast Line R. Co. v. Robertson, 214 F.2d 746 (4th Cir. 1954) (citing cases). We think the view of the District Court is correct.¹

It is difficult to conceive of any phraseology broader than Moses-Ecco’s agreement to indemnify Roscoe-Ajax against “any and all loss, cost, damage, or expense * * * on account of any claim, demand or suit * * * by or on behalf of any employee of [Moses-Ecco] * Since the parties specified that “all” losses on “any” claims included those of Moses-Ecco’s employees, we think further specification would be superfluous and ritualistic. Moreover, it would appear that no valid claim by an employee of Moses-Ecco could arise against Roscoe-Ajax except through Roscoe-Ajax’s own negligence. Consequently to exclude losses caused by Roscoe-Ajax’s negligence would deprive that part of the clause which refers to the claims by employees of Moses-Ecco against Roscoe-Ajax of virtually the only meaning it can possibly have. See Rice v. Pennsylvania R. Co., 202 F.2d 861 (2d Cir. 1953); cf. Farrell v. Eastern Bridge & Structural Co., 291 Mass. 323, 197 N.E. 68 (1935)²

An additional argument advanced by Moses-Ecco is that in the claim over for indemnification, Roscoe-Ajax had the burden of proving that it had suffered an “actual liability,” and that since the issue of Roscoe-Ajax’s liability to plaintiffs was not adjudicated in either the main action or the third-party action, indemnification will not lie for the payment in settlement of plaintiffs’ claim. This position is apparently taken on the view that a settlement may not be deemed to reflect an “actual liability” and that they are somehow mutually exclusive. Support for this view is rested on the following language of the Court of Appeals for the Second Circuit:

“A claim for indemnity * * * requires that an actual liability be sustained by the indemnitee, and if he settles a claim without a determination of the rights in question, he bears the risk of proving an actual liability in the action over for indemnity.” [The Toledo, 122 F.2d 255, 257 (2d Cir.), cert. denied Isbrandtsen-Moller Co. v. The Toledo, 314 U.S. 689, 62 S.Ct. 302, 86 L.Ed. 551 (1941).]

We think, however, that this must be read to mean only that, if an indemnitor challenges a settlement as imprudent, the indemnitee must justify it as prudent. This meaning is supported by a very recent decision of the Second Circuit recognizing that recovery by an in-demnitee is not precluded simply because he settled the main claim rather than litigate it to final judgment:

“[W]hen * * * the shipowner defendant [indemnitee] settles before judgment with the longshoreman plaintiff the stevedore [indem-nitor] still may be liable over to the shipowner on the stevedore’s contractual obligation of indemnification. [Cites omitted.] A contrary result that would require the pursuit of the action to a judgment would conflict with the policy, which pervades all areas of the law, of encouraging settlement wherever it is possible. In cases in which the main action has been so settled, it is of course incumbent upon the court which entertains the claim for indemnity to determine before requiring the stevedore to indemnify the shipowner whether it was reasonable for the shipowner to have entered into the settlement.” [Paliaga v. Luckenbach Steamship Co., 301 F.2d 403, 409-410 (2d Cir. 1962) (Citing cases.)]

And this accords with Justice Holmes statement that “a sum paid in the prudent settlement of a suit is paid under the compulsion of the suit as truly as if it were paid upon execution.” St. Louis Dressed Beef & Provision Co. v. Maryland Casualty Co., 201 U.S. 173, 182, 26 S.Ct. 400, 50 L.Ed. 712 (1906). Moreover, the parties did not contract to exclude indemnification for settlement. On the contrary they included indemnification for loss “on account of any claim demand or suit * * (Emphasis supplied.) This clearly encompasses settlements and is not limited to litigated judgments.

It follows that Roscoe-Ajax did not lose its contract right to indemnification simply because it settled plaintiffs’ claim. And in the trial of the claim over for indemnification, there was no need for an adjudication of Roscoe-Ajax’s liability to plaintiffs because the issue before the trial judge was whether Roscoe-Ajax was reasonable and prudent in settling, not whether it had been negligent and was therefore legally liable to plaintiffs.

Although Moses-Ecco says in one breath that “the reasonableness of the settlement is not in dispute * * * ” it says in the next breath that indemnification will not lie because Roscoe-Ajax abandoned certain defenses to plaintiffs’ claim. We lay aside this apparent inconsistency and discuss the merits of the later statement. The main defense to which Moses-Ecco refers is that plaintiffs’ exclusive remedy was to seek benefits under the District of Columbia Workmen’s Compensation Act, D.C.Code § 36-501 et seq. (1961),³ and that Roscoe-Ajax was not a “third person” within the meaning of the Act, 33 U.S.C. §§ 904, 905, 933 (Supp. III, 1962), against whom plaintiffs could maintain a common-law action for damages. It appears, however, that this court has never decided whether a general contractor is a “third person” who can be sued at common law by an employee of a subcontractor whose employees are covered by the District of Columbia Workmen’s Compensation Act; that question has been subject to differing resolutions in other jurisdictions with similar statutes. See Jonathan Woodner Co. v. Mather, 93 U.S.App.D.C. 234, 210 F.2d 868, cert. denied, 348 U.S. 824, 75 S.Ct. 39, 99 L.Ed. 650 (1954); Smith v. John B. Kelly, Inc., 107 U.S.App.D.C. 140, 275 F.2d 169 (1960) (concurring opinion of Washington, J.); and authorities cited therein.

Thus, it may be said that plaintiffs’ claim rested on a question of law open and debatable in this jurisdiction. Ordinarily a settlement between the parties in such cases is motivated by a mutual desire to avoid the expense and risks of litigation. There is no allegation that a different motive prevailed here. In these circumstances a settlement payment, made when the law was uncertain, cannot be successfully attacked on the basis of any subsequent resolution of the uncertainty. Otherwise the public policy of encouraging settlements⁴ would be seriously undermined.

Finally, Moses-Ecco asserts that the court below erred in allowing attorneys’ fees as part of Roscoe-Ajax’s recovery. It is of course true that attorneys’ fees may not be taxed to either party unless provided for either by law or by agreement between the parties. D.C.Code § 11-1501 (1961); Rosden v. Leuthold, 107 U.S.App.D.C. 89, 274 F.2d 747 (1960). We think that the agreement of Moses-Ecco to indemnify Roscoe-Ajax for “any and all loss, cost, damage or expense” clearly includes attorneys’ fees. Cf. General Acc. Fire & Life Assur. Corp., Ltd. v. Smith & Oby Co., supra; B & G Electric Company v. G. E. Bass & Company, 252 F.2d 698 (5th Cir. 1958).

Affirmed.⁵

1 . Maiatico v. Hot Shoppes, Inc., supra, is not to the contrary. There the issue was whether the landlord’s covenant to repair fire damages promptly and at his own expense constituted a waiver by the landlord of his claim against the tenant for fire damages caused by the tenant’s negligence. Our holding that the covenant did not spell out an intent to exculpate the tenant from the legal consequences of his own negligence turned lai’gely upon considerations peculiar to the relationship of landlord-tenant, and particularly upon the fact that “[t]he parties were not contracting with respect to any subject except the matter of who was to take the steps necessary to render the leased premises usable [after a fire].” In the present case the parties were contracting with specific reference to indemnification and hence the issue is whether exculpation is spelled out in an indemnification clause. Though governed by the same general principles of law, tkis is quite different from the issue whether exculpation is spelled out in a covenant to repair.

2 . Moses-Ecco relies heavily on Batson-Cook Co. v. Industrial Steel Erectors, 257 F.2d 410 (5th Cir. 1958), wherein the court construed a broad indemnification clause not to include recovery for losses caused by the general contractor-indemnitee’s own negligence. But the clause in that case did not contain specific reference to claims brought by employees of the subcontractor-indemnitor and as the court pointed out, there were many situations other than negligence of the indemnitee to which the clause might apply. 257 F.2d at 413-414.

To the extent that the Batson-Cook case may appear to require the use of special legal terms such as “fault,” “negligence” or “liability,” we decline to follow it. Maiatico v. Hot Shoppes, Inc., supra; General Acc. Fire & Life Assur. Corp., Ltd. v. Smith & Oby Co., supra.

3 . This provision makes the Longshoremen’s and Harbor Workers’ Compensation Act, 33 U.S.C. § 901 et seq. (1958), applicable in the District of Columbia.

4 . Uline v. Uline, 92 U.S.App.D.C. 281, 205 F.2d 870 (1953); Clark v. Barlow, 74 App.D.C. 328, 122 F.2d 337, cert. denied, 314 U.S. 675, 62 S.Ct. 188, 86 L.Ed. 540 (1951) (citing cases); Rommel v. West American Ins. Co., 158 A.2d 683 (D.C.Mun.Ct.App.1960), and authorities cited therein; 11 Am.Jur. Compromise and Settlement §§ 5, 6, 7, 31 (1937); cf. Martello v. Hawley, 112 U.S.App.D.C. 129, 300 F.2d 721 (1962); McKenna v. Austin, 77 U.S.App.D.C. 228, 234, 134 F.2d 659, 665, 148 A.L.R. 1253 (1943).

5 . We do not reach Roseoe-Ajax’s appeal from the judgment in favor of Detwiler since Roscoe-Ajax has advised us that it wishes to pursue that appeal only if we reverse its judgment against Moses-Ecco.