Summary
describing three sources of indemnity: common law, implied contract, and express contract
Summary of this case from In re Granada Partnership Sec. Lit.Opinion
Docket No. 60762.
Decided April 5, 1983. Leave to appeal applied for.
Vandeveer, Garzia, Tonkin, Kerr Heaphy, P.C. (by Dennis B. Cotter), for D-M-E Corporation and VSI Corporation.
Kitch, Suhrheinrich, Smith, Saurbier Drutchas, P.C. (by M. Sean Fosmire), for American Model Pattern, Inc.
Before: D.C. RILEY, P.J., and D.F. WALSH and WAHLS, JJ.
Third-party plaintiffs, D-M-E Corporation and VSI Corporation (hereinafter collectively designated "D-M-E"), appeal the circuit court's entry of summary judgment in favor of third-party defendant, American Model Pattern, Inc. (hereinafter "American"). GCR 1963, 117.2(1).
While American and the trial court both cited GCR 1963, 117.2(3), it appears that the arguments and analysis more closely reflect grounds associated with GCR 1963, 117.2(1).
D-M-E sold American a mold sampler, a device used to inject hot, molten wax under pressure into various molds. Plaintiff Randy Skinner, an employee of American, was severely injured when, while he was operating the mold sampler, the machine exploded. Plaintiffs filed suit against D-M-E, alleging negligence and breach of implied warranty of merchantability. D-M-E joined American as a third-party defendant, seeking indemnification for any damages D-M-E might be forced to pay plaintiffs in connection with the explosion. After American's successful request for summary judgment in the third-party action, which is the subject matter of this appeal, the principal action between plaintiffs and D-M-E was settled and dismissed.
There has been no attempt to make the mold sampler's Japanese manufacturer a part of the principal or third-party action.
In granting American's motion for summary judgment, the trial court rejected D-M-E's theories of both common-law indemnity and implied contractual indemnity.
Michigan courts have recognized three possible sources of a right to indemnity: the common law, an implied contract, and an express contract. See Langley v Harris Corp, 413 Mich. 592, 596-597; 321 N.W.2d 662 (1982); Reed v St Clair Rubber Co, 118 Mich. App. 1; 324 N.W.2d 512 (1982). "Common law indemnity is based on the equitable principle that where the wrongful act of one results in another being held liable, the latter party is entitled to restitution from the wrongdoer", Hill v Sullivan Equipment Co, 86 Mich. App. 693, 696; 273 N.W.2d 527 (1978), lv den 406 Mich. 880 (1979); "the right can only be enforced where liability arises vicariously or by operation of law from the acts of the party from whom indemnity is sought", Langley v Harris Corp, supra, p 601. An implied contract to indemnify arises only if there is "a special relationship between the parties or a course of conduct whereby one party undertakes to perform a certain service and impliedly assures indemnification". Palomba v East Detroit, 112 Mich. App. 209, 217; 315 N.W.2d 898 (1982). An express indemnity contract is construed strictly against its drafter and against the indemnitee; the indemnitor's obligation to indemnify the indemnitee must be described clearly and unambiguously. Fireman's Fund American Ins Cos v General Electric Co, 74 Mich. App. 318, 323-324; 253 N.W.2d 748 (1977); Reed v St Clair Rubber Co, supra, p 8.
The significance of the would-be indemnitee's personal negligence has been a subject of some confusion in the reported decisions of our state. It is universally recognized that a contract which purports to confer an express right to indemnification against the consequences of one's own negligence is subject to strict construction and will not be so construed unless the contract language clearly evidences that such was the intended effect. Meadows v Depco Equipment Co, 4 Mich. App. 370, 375-376; 144 N.W.2d 844 (1966); Palomba v East Detroit, supra, p 217. It is also beyond dispute that common-law indemnification is not available to a party who is not free from active negligence. Langley v Harris Corp, supra, p 597; Palomba v East Detroit, supra, pp 215-216; Hill v Sullivan Equipment Co, supra, p 696. This requirement of freedom from negligence applies with equal force to a claim for implied contractual indemnification. Dale v Whiteman, 388 Mich. 698, 705; 202 N.W.2d 797 (1972); Hill v Sullivan Equipment Co, supra, pp 698-699 (dissenting opinion of Judge WALSH); Reed v St Clair Rubber Co, supra, p 10. A right to indemnity under a theory of implied contract can arise only from the conduct of the parties or from their special relationship; the requisite specificity and clarity required to give rise to a right to indemnity against the consequences of one's own negligence in the case of an express contract can never be found by implication.
To the extent that the Hill majority found that freedom from active negligence on the part of the indemnitee was not a prerequisite to the maintenance of a cause of action for implied contractual indemnity, we decline to follow it.
We perceive the trial court's order as granting summary judgment for American (the alleged indemnitor) under GCR 1963, 117.2(1). (See fn 1, supra.) A motion for summary judgment under this subrule challenges only the legal sufficiency of the pleadings, not the adequacy of factual support for the opposing party's claim. A party is entitled to summary judgment under this subrule if the opposing party's claim is so clearly unenforceable as a matter of law that no factual development can possibly justify a right to recover. Reed v St Clair Rubber Co, supra, p 5.
Applying this standard, we affirm the trial court's determination that D-M-E had not stated a common-law indemnity claim. The principal plaintiff's complaint must be examined to determine whether D-M-E is alleged to have been actively negligent or merely vicariously liable, its liability being derived from the negligent acts of American. Only in the latter case would common-law indemnity be available. Hill v Sullivan Equipment Co, supra, pp 696-697.
In this case, the principal plaintiffs alleged two theories of recovery against D-M-E: negligence and breach of implied warranty of merchantability. Had the principal action proceeded to trial and had the principal plaintiffs recovered on a negligence theory, common-law indemnity clearly would have been precluded. D-M-E's claim for common-law indemnity would have fared no better had the principal action ended with a determination that D-M-E was liable strictly on an implied warranty theory. In sole support of the claim that D-M-E had breached its implied warranty of merchantability, the principal plaintiffs alleged the mold sampler's defective manufacture or design. A finding of the seller's liability under this theory, which arises solely by operation of law and without regard to the seller's negligence, MCL 440.2314; MSA 19.2314, could support a claim for common-law indemnity. It is clear, however, that D-M-E's implied warranty liability would have arisen from the conduct of the product's manufacturer and not from that of American. The claim for common-law indemnity, therefore, would have been against the manufacturer and not against American. For this reason summary judgment was properly entered for American on that theory.
Piercefield v Remington Arms Co, Inc, 375 Mich. 85, 96-97; 133 N.W.2d 129 (1965). See also Smith v E R Squibb Sons, Inc, 405 Mich. 79, 89; 273 N.W.2d 476 (1979).
Summary judgment was also entered for American on D-M-E's theory of implied contractual indemnity. D-M-E based its implied contract claim on a "special condition of sale" which was included, along with other special conditions and the terms of payment for the mold sampler, in a May 5, 1978, letter to American. The pertinent condition provided:
According to D-M-E, the letter was delivered to American by hand at the time the mold sampler was delivered.
"5. It will be the responsibility of American Model to employ proper safety procedures when using the Large Mold Sampler. A suitable face shield, long gloves, protective apron, etc. must be used as safety protection for the operator."
It is not disputed that American did not employ those "proper safety procedures" described in ¶ 5 of the letter.
We are persuaded the summary judgment was improvidently granted to American on D-M-E's claim of implied contractual indemnification. The course of conduct between these parties was substantially similar to that in Hill v Sullivan Equipment Co, supra, where the third-party defendant, the employer of the plaintiff in the principal action, expressly rejected a proposed safety device and advised the third-party plaintiff, the manufacturer of the machine, that the machine would be inaccessible to workers. The Court found that these allegations satisfied the requirements of the statement of a cause of action for implied contractual indemnity.
American, which took possession of the mold sampler and made payment according to the terms of the May 5 letter, effectively agreed to comply with the specified conditions of sale. 1 Corbin, Contracts, § 62, p 257. See and compare Ensign Painting Co v Alfred A Smith, Inc, 385 Mich. 268; 188 N.W.2d 534 (1971). Indeed, American has never denied that the May 5 letter constituted the parties' sales agreement but characterizes ¶ 5 as a mere "suggestion" or "instructions regarding proper use of the machine". We are not persuaded by American's restrictive characterization of this "special condition of sale". Paragraph 5 is not couched in directory terms but describes a mandatory contractual obligation. Closely analogous is Proctor Schwartz, Inc v United States Equipment Co, 624 F.2d 771 (CA 6, 1980), where it was alleged that the contract between the third-party plaintiff, the manufacturer and seller of a machine, and the third-party defendant, the employer of the plaintiff in the principal action, provided that the latter was to furnish and install necessary safety devices on the machine which eventually caused the employee's injuries. The court found that the trial court had erred in granting summary judgment for the third-party defendant on third-party plaintiff's theory of implied contractual indemnity. Similarly, we are persuaded that D-M-E has pleaded sufficient facts to state a claim for recovery of damages for injuries sustained as a result of American's failure to comply with ¶ 5.
Our reliance on Proctor Schwartz is limited. We disagree with the Court's rejection of the notion that fault is an "invariable bar" to recovery on a theory of implied contractual indemnity. 624 F.2d 775.
In this case, a settlement was negotiated between the principal plaintiffs and D-M-E. The fact of settlement would not absolve American of its otherwise proven obligation of indemnity. Lieberman v Solomon, 24 Mich. App. 495, 501; 180 N.W.2d 324 (1970), lv den 384 Mich. 769 (1970).
We conclude that the pleadings adequately support D-M-E's theory of implied contractual indemnity and that summary judgment was improvidently granted on that theory. In the third-party action, D-M-E must prove, prerequisite to proof of its indemnity claim itself, that it was in fact liable to the principal plaintiffs and, to satisfy the requirement of freedom from personal fault, that its liability was exclusively grounded on its breach of the implied warranty of merchantability. See 42 CJS, Indemnity, § 32, pp 613-620.
Affirmed in part; reversed in part; remanded for further proceedings consistent with this opinion.