Niya I Townsend v. Scripps Park Associates LLC ( 2014 )

STATE OF MICHIGAN
COURT OF APPEALS
Estate of GARRETT TOWNSEND, JR., by UNPUBLISHED
SHIRLEY CONERLY and MARSHA WEBB, Co- November 20, 2014
Personal Representatives,
Plaintiffs,
v No. 317133
Wayne Circuit Court
SCRIPPS PARK ASSOCIATES, L.L.C., and LC No. 09-028671-NO
SLAVIK COMPANY,
Defendants,
and
FIELEK BUILDERS, L.L.C., FIELEK
CONSTRUCTION SERVICES, L.L.C., and
FIELEK ENTERPRISES, L.L.C.,
Defendants/Cross-Defendants,
and
NTH CONSULTANTS, LTD., a/k/a NEYER
TISEO & HINDO, LTD.,
Defendant/Cross-Plaintiff-
Appellant,
and
EXSPEC CONTRACTING, L.L.C.,
Defendant/Cross-Defendant-
Appellee.
NIYA I. TOWNSEND, a Minor, by her Next
Friend, SHIRLEY CONERLY,
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Plaintiff,
v No. 317135
Wayne Circuit Court
SCRIPPS PARK ASSOCIATES, L.L.C., and LC No. 10-013593-NO
SLAVIK COMPANY,
Defendants,
and
FIELEK BUILDERS, L.L.C., FIELEK
CONSTRUCTION SERVICES, L.L.C., and
FIELEK ENTERPRISES, L.L.C.,
Defendants/Cross-Defendants,
and
NTH CONSULTANTS, LTD., a/k/a NEYER
TISEO & HINDO, LTD.,
Defendant/Cross-Plaintiff-
Appellant,
and
EXSPEC CONTRACTING, L.L.C.,
Defendant/Cross-Defendant-
Appellee.
Before: BORRELLO, P.J., and WILDER and STEPHENS, JJ.
PER CURIAM.
In these consolidated cases, defendant NTH Consultants, Ltd. (“NTH”), appeals as of
right, challenging the trial court’s order denying its motion for summary disposition and granting
summary disposition in favor of defendant ExSpec Contracting, L.L.C. (“ExSpec”), with respect
to NTH’s cross-complaint for indemnification. We reverse in part and remand for further
proceedings.
This litigation arises from a drowning death that occurred at a construction site. An
underground storage tank was discovered during construction at the Woodbridge Estates
Condominiums. NTH, an environmental consulting firm, retained ExSpec, an excavating
company, to remove contaminated soil at the site. ExSpec was responsible for site safety,
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including fencing, pursuant to the parties’ contract. Water accumulated in the hole that was
created by the excavation. Plaintiffs’ decedent drowned while trying to save a young child
trapped in the hole. Plaintiffs filed suit against NTH, ExSpec, and other contractors working at
the construction site. NTH filed a cross-claim against ExSpec, asserting that ExSpec had a duty
to defend and indemnify it for plaintiffs’ litigation. The contract between NTH, designated as
the “Engineer,” and ExSpec, identified as the “Subcontractor,” contained the following pertinent
provisions:
Warranties & Guaranties Subcontractor warrants that its work shall be
free from defects and shall be suitable for the use intended. In the event that any
deficiencies in Subcontractor’s work are discovered within one year after
completion of the project, Subcontractor shall, at its sole cost, repair, replace or
repeat any defective work, including repair of any portion of the project or
property damaged by repair, replacement or repeating of defective work. This
warranty is in addition to any other remedy which Engineer may have.
***
Indemnity Subcontractor agrees to defend, indemnify and hold
harmless Engineer, its officers, employees, shareholders and agents from and
against any and all claims, damages, liability, suits, actions and expenses,
including reasonable attorney’s fees, relating to any and all losses or damages
sustained by or alleged to have been sustained by any person, including
employees of the parties hereto, and arising or allegedly arising from
Subcontractor’s performance or failure to perform the services set forth in this
Agreement, regardless of whether or not concurrently caused by the negligence of
Engineer, except that Subcontractor shall not be required to defend, indemnify
and hold harmless Engineer from claims, damages or liability arising from the
sole negligence or willful misconduct of Engineer.
***
Job Site Safety Subcontractor shall be solely responsible for the
safety of persons or property on, or adjacent to the job site. Subcontractor shall
be responsible for his/her activity and that of Subcontractor’s employees or agents
on the job site with respect to job site safety. Neither the professional activities
nor the presence of Engineer or its employees, Contractors, and Subcontractors
shall be understood to control the operations of others.
***
Subcontractor is responsible for providing, at its own expenses, all
personal protective clothing and equipment required for its employees to perform
their work in a safe manner and in compliance with all applicable local, state, and
federal laws and regulations including, but not limited to OSHA standards.
Subcontractor is responsible for ensuring that such equipment is in good condition
and is properly inspected and maintained. In cases where a Job Safety Plan has
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been prepared or adopted by Engineer or its client, Subcontractor must, at a
minimum, use the equipment and follow the procedures described in that plan.
This does not relieve the Subcontractor of the responsibility to provide equipment
and institute procedures affording a greater degree of protection than those
specified in the Job Safety Plan, if such equipment and procedure are necessary
for the Subcontractor to perform its tasks in a safe manner and in compliance with
applicable local, state, and federal regulations.
Relying on the terms of the contract, NTH filed a motion for summary disposition of its
cross-claim pursuant to MCR 2.116(C)(10). The trial court denied NTH’s motion, holding that
there were disputed factual issues, but granted summary disposition in favor of ExSpec pursuant
to MCR 2.116(I)(2). Afterward, NTH filed a motion for summary disposition of plaintiffs’
claims, which the trial court granted. The case proceeded to trial against the remaining
defendants. A jury found that ExSpec was negligent, but its negligence was not the proximate
cause of plaintiffs’ injuries. After entry of a judgment in favor of plaintiffs against other
contractors, NTH filed this appeal, challenging the trial court’s earlier order denying its motion
for summary disposition and granting summary disposition in favor of ExSpec with respect to
the cross-claim for indemnification.
I. STANDARD OF REVIEW
A trial court’s decision to grant or deny summary disposition is reviewed de novo. Ter
Beek v City of Wyoming, 495 Mich. 1, 8; 846 NW2d 531 (2014). A motion premised on MCR
2.116(C)(10) tests the factual support of the complaint. Hanlin v Saugatuck Twp, 299 Mich. App.
233, 239; 829 NW2d 335 (2013). “The moving party has the initial burden to support its claim
for summary disposition by affidavits, depositions, admissions, or other documentary evidence.”
McCoig Materials, LLC v Galui Constr, Inc, 295 Mich. App. 684, 693; 818 NW2d 410 (2012).
Once this burden is satisfied, the nonmoving party must demonstrate that a genuine issue of
disputed fact exists for trial. Id. Summary disposition is proper if “there is no genuine issue as
to any material fact, and the moving party is entitled to judgment as a matter of law.” MCR
2.116(C)(10). If the court determines that the opposing party, instead of the moving party, is
entitled to judgment, the court may enter judgment in favor of the opposing party. MCR
2.116(I)(2); AFP Specialties, Inc v Vereyken, 303 Mich. App. 497, 513; 844 NW2d 470 (2014).
Thus, if the terms of a contract demonstrate that the nonmoving party is entitled to judgment as a
matter of law, the court may enter summary disposition pursuant to MCR 2.116(I)(2). Id. at 514.
II. INDEMNIFICATION
“Generally, indemnification is an equitable doctrine that shifts the entire burden of
judgment from one tortfeasor who has been compelled to pay it, to another whose active
negligence is the primary cause of the harm.” St Luke’s Hosp v Giertz, 458 Mich. 448, 453; 581
NW2d 665 (1998). A claim for indemnification may be premised on an express contract, an
implied contract, or the common law. Dep’t of Transp v Christensen, 229 Mich. App. 417, 425;
581 NW2d 807 (1998). This case involves an indemnification provision in an express contract.
In cases involving contractual indemnity, a party’s entitlement to indemnification is determined
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by the terms of the contract to which the parties agreed. Grand Trunk W R, Inc v Auto
Warehousing Co, 262 Mich. App. 345, 351; 686 NW2d 756 (2004).
An indemnification contract is interpreted in the same manner as other contracts. Zahn v
Kroger Co of Mich, 483 Mich. 34, 40; 764 NW2d 207 (2009). The interpretation of a contract
presents a question of law that the appellate court reviews de novo. Miller-Davis Co v Ahrens
Constr, Inc, 495 Mich. 161, 172; 848 NW2d 95 (2014). The goal of contract construction is to
first determine and then enforce the parties’ intent. Harbor Park Market, Inc v Gronda, 277
Mich. App. 126, 130; 743 NW2d 585 (2007). When interpreting a contract, the examining court
must ascertain the intent of the parties by evaluating the language of the contract in accordance
with its plain and ordinary meaning. In re Egbert R Smith Trust, 480 Mich. 19, 24; 745 NW2d
754 (2008). When the contract language is clear and unambiguous, the contract must be
enforced as written. Id. In Meagher v Wayne State Univ, 222 Mich. App. 700, 722; 565 NW2d
401 (1997), this Court delineated the following principles of contract construction:
If the contract is subject to two reasonable interpretations, factual
development is necessary to determine the intent of the parties and summary
disposition is therefore inappropriate. If the contract, although inartfully worded
or clumsily arranged, fairly admits of but one interpretation, it is not ambiguous.
The language of a contract should be given its ordinary and plain meaning. Parol
evidence is not admissible to vary a contract that is clear and unambiguous, but
may be admissible to prove the existence of an ambiguity and to clarify the
meaning of an ambiguous contract. [Citations omitted.]
In Miller-Davis, our Supreme Court discussed the nature of indemnification in
relationship to construction contracts, stating:
An indemnity contract creates a direct, primary liability between the
indemnitor and the indemnitee that is original and independent of any other
obligation. In the construction context, indemnity clauses between general
contractors (indemnitees) and subcontractors (indemnitors) are common, with
general contractors and subcontractors ultimately liable to the project owner.
Michigan law provides contracting parties with broad discretion in negotiating the
scope of indemnity clauses. The only legal restriction upon indemnity in the
subcontractor context is the prohibition on indemnification against the “sole
negligence” of the contractor . . . . [Miller-Davis, 495 Mich. at 173 (footnotes
omitted).]
The initial inquiry whether a contract’s indemnity clause applies to a particular set of facts
requires the court to conduct a straightforward analysis of the facts in relationship to the terms of
the contract. Id. at 174. A contract with an express indemnification provision delineates the
extent of the duty as set forth in the contract. Id. An indemnification clause that uses the terms
“all” or “any” imparts the broadest possible obligation. Id. at 175. “In essence, an
indemnification provision is to be construed to effectuate the intentions of the parties to the
contract, which is determined through review of the contract language, the situation of the
parties, and the circumstances involved in the initiation of the contract.” Ajax Paving Indus, Inc
v Vanopdenbosch Constr Co, 289 Mich. App. 639, 644; 797 NW2d 704 (2010). “On appeal, this
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Court interprets an indemnification provision in a manner that will serve to provide a reasonable
meaning to all the terms contained therein.” Id.
In DaimlerChrysler Corp v G-Tech Prof Staffing, Inc, 260 Mich. App. 183, 184; 678
NW2d 647 (2003), the plaintiff, DCC, sued to enforce an indemnity clause in a written contract
with the defendant, G-Tech, the entity that furnished supplemental workers. The underlying
litigation arose from a motor vehicle accident in which a worker supplied by G-Tech struck and
killed a pedestrian. DCC moved for summary disposition in light of the language of the
indemnity provision, and the trial court granted summary disposition in its favor. Id. On appeal,
G-Tech alleged that indemnification for personal injuries only occurred when the worker
supplied to DCC was performing tasks for DCC. Id. This Court rejected G-Tech’s position,
holding:
G-Tech, in essence, argues that it must indemnify DCC only for personal
injuries that occur when the workers it supplied to DCC are actually performing
tasks for DCC. Given the undisputed facts and the unambiguous contract
language, G-Tech’s position lacks merit. The parties do not dispute: (1) that G-
Tech supplied [worker Shane] Smith to DCC pursuant to their contract, (2) that
Smith was driving a DCC-owned Jeep with the permission of DCC, and (3) that
Smith would not have been driving the DCC Jeep but for working for DCC at its
TAP engineering department. The parties also do not dispute that the contract at
issue provides that G-Tech “shall assume all risk of . . . bodily injury . . . in
connection with the work, and . . . bodily injury . . . wherever located, resulting
from or arising out of any action, omission or operation under the contract or in
connection with the work.” Further, the contract requires G-Tech to indemnify
DCC “from and against any and all . . . claims, or legal actions . . . arising out of
the bodily injury . . . arising out of or related to the performance of any work in
connection with this contract . . . .”
The plain language of the indemnity clause does not require that personal
injury occur while work is being performed. It only requires that the personal
injury arise out of, or be related to, the performance of any work in connection
with the contract. The trial court correctly concluded that the contract language is
expansive. The word “related” ordinarily means being “associated” or
“connected.” See Random House Webster’s College Dictionary (2d ed., 1997).
Likewise, “connection,” in the context clearly employed here, plainly means
“logical association or development . . . to make a connection between two
events.” Id. The undisputed facts of this case show a logical association
connecting the contract, and Smith’s work under the contract, to the accident.
The trial court correctly found that connection: G-Tech supplied Smith to DCC
under the contract and Smith had use of the DCC Jeep he was driving at the time
of the accident through his work at DCC. [Id. at 186-187.]
An indemnity contract may be construed against the drafter only when an ambiguity is presented
and all other avenues of construing the ambiguity are exhausted. Id. at 187.
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A. DUTY TO DEFEND
“The duty to defend and the duty to indemnify are distinct and separable duties.” Mich
Ed Employees Mut Ins Co v Turow, 242 Mich. App. 112, 116-117; 617 NW2d 725 (2000). The
duty to defend is broader than the duty to indemnify. Busch v Holmes, 256 Mich. App. 4, 9; 662
NW2d 64 (2003). However, it too arises from the language of the contract. Mich Ed Employees
Mut Ins Co, 242 Mich. App. at 117. A contracting party has the duty to defend if the allegations
in an underlying lawsuit arguably fall within the terms of the contract. See Citizens Ins Co v
Secura Ins, 279 Mich. App. 69, 74; 755 NW2d 563 (2008).
In the context of insurance contracts, this Court has delineated the following rules
regarding the duty to defend:
The duty of an insurance company to defend its insured arises solely from
the language of the insurance contract. The insurer’s duty to defend is determined
by the allegations in the complaint against the insured. An insurer has a duty to
defend, despite theories of liability asserted against any insured which are not
covered under the policy, if there are any theories of recovery that fall within the
policy. This duty is not limited to meritorious suits and may even extend to
actions which are groundless, false, or fraudulent, so long as the allegations
against the insured even arguably come within the policy coverage. [Farmers &
Merchants Mut Fire Ins Co v Le Mire, 173 Mich. App. 819, 824; 434 NW2d 253
(1988) (citations omitted).]
The duty to defend is premised upon the language of the contract, and the duty is invoked
if the allegations in the underlying suit arguably fall within the terms of the contract. Citizens Ins
Co, 279 Mich. App. at 74; Mich Ed Employees Mut Ins Co, 242 Mich. App. at 117. The duty to
defend is summoned even if the underlying complaint raises claims that are not governed by the
terms of the contract, provided any theory of recovery is controlled by the contractual language.
See Farmers & Merchants Mut Fire Ins Co, 173 Mich. App. at 824.
The contract between NTH and ExSpec provided that ExSpec agreed to “defend [NTH] .
. . from and against any and all claims . . . relating to any and all losses or damages sustained by
or alleged to have been sustained by any person . . . arising or allegedly arising from [ExSpec’s]
performance or failure to perform the services set forth in this Agreement, regardless of whether
or not concurrently caused by the negligence of [NTH][.]” The use of the terms “all” or “any”
impart the broadest possible obligation. Miller-Davis, 495 Mich. at 175. The use of the term
“related” means an “association” or “connection.” DaimlerChrysler Corp, 260 Mich. App. at 187.
A contract that uses the terms “any,” “all,” and “related,” is an expansive agreement. Id.
Plaintiffs’ complaints sought to hold NTH responsible for its own acts of negligence, the
collective acts of negligence by all defendants, and ExSpec’s negligence. Plaintiffs alleged that:
(1) ExSpec created the excavation hole which gave rise to an unreasonable risk of harm; (2) that
ExSpec failed to protect the excavation hole with an adequate barrier or fence; (3) that all
defendants acted in concert to create the hole and allowed it to be filled with water; and (4) the
defendants collectively acted to excavate a hole 100 feet wide and 20 feet deep that filled with
water and was unstable, creating an unreasonably dangerous condition. Plaintiffs sought to hold
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NTH liable for its own alleged acts of negligence, as well as the alleged negligence committed
by ExSpec with regard to its excavation and failure to protect the area with barriers or fencing,
and the claimed collective acts of negligence by all defendants. Plaintiffs’ complaints included
allegations that were governed by the broad contractual language requiring ExSpec to defend
NTH from claims related to NTH’s and ExSpec’s performance. Therefore, the trial court erred
in denying NTH’s motion for summary disposition with regard to the duty to defend.
In support of affirming the trial court’s decision, ExSpec contends that plaintiffs’ claims
did not arise from ExSpec’s performance of the contract. This argument is contrary to the
language of plaintiffs’ complaints, which sought to hold ExSpec responsible for its own alleged
negligence in failing to adequately provide barriers and fencing following the excavation.
ExSpec also asserts that the summary disposition ruling should be affirmed because NTH
agreed to perform a “breadth” of professional services, NTH directed ExSpec regarding the
removal of the soil and did not instruct it to backfill the hole, ExSpec’s performance was limited
to three days, and it was never the intention to have ExSpec act as a professional liability
insurance carrier. None of these claims overcome the broad contractual language requiring
ExSpec to defend NTH from claims related to NTH’s and ExSpec’s performance. Michigan law
presumes that one who signs a contract knows its nature and understands its contents. McKinstry
v Valley Obstetrics-Gynecology Clinic, PC, 428 Mich. 167, 184; 405 NW2d 88 (1987). The
purpose of the rule is to ensure the integrity and stability of written instruments. Id. Regardless
of ExSpec’s limited performance of the contract with NTH to a period of three days, it agreed to
the terms of the contract, which included a warranty that the work was free from defects, suitable
for the use intended, and defects were to be repaired or replaced at the sole cost of ExSpec if
found within a year after completion of the project. Thus, the completion of its work on a given
day did not absolve ExSpec of liability. ExSpec also agreed to assume a duty to defend and
indemnify, as well as the job-site safety provision. In light of the plain language of the terms of
the contract to which ExSpec agreed, it cannot be absolved of liability by relying on its limited
involvement with the construction project.
Finally, ExSpec asserts that it performed the contract as directed, that NTH accepted the
standard fencing, and the claims of negligence raised by plaintiffs pertained to “extras” not
contained in the contract, and accordingly, the duties to defend and indemnify were not invoked.
As indicated, the duty to defend is broad and may extend to even meritless suits so long as the
allegations arguably fall within the terms of the contractual provision. Farmers & Merchants
Mut Fire Ins Co, 173 Mich. App. at 824. An examination of plaintiffs’ complaints indicates that
they questioned the reasonableness of the barriers and fencing in light of soil erosion. ExSpec’s
contention that it satisfied the contract and was not in breach is not controlling for purposes of
the duty to defend because the allegations in the complaint govern the scope of that duty.
Accordingly, we reverse the trial court’s order denying NTH’s motion for summary
disposition and granting summary disposition in favor of ExSpec with respect to the duty to
defend, and remand for a determination of defense costs associated with that duty.
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B. DUTY TO INDEMNIFY
To the extent that NTH argues that the trial court also erred by concluding that ExSpec
did not have a duty to indemnify NTH, we conclude that it is unnecessary to address this issue
because it is moot. After the trial court granted summary disposition in favor of ExSpec
regarding the duty to defend and indemnify, NTH was dismissed from the litigation on May 1,
2012, when the trial court granted its motion for summary disposition of plaintiffs’ claims
against it. The duty to defend may encompass the costs and attorney fees associated with NTH’s
defense of the action until summary disposition of plaintiffs’ claims was granted. Because NTH
was subsequently dismissed from the litigation, thereby eliminating any possibility that it could
be held liable for any damages to plaintiffs, any question involving ExSpec’s duty to indemnify
NTH has been rendered moot. An issue is moot when a judicial determination cannot have any
practical legal effect on the existing controversy. Gen Motors Corp v Dep’t of Treasury, 290
Mich. App. 355, 386; 803 NW2d 698 (2010). In light of NTH’s dismissal, there can be nothing
for ExSpec to indemnify. Thus, any claim involving ExSpec’s duty to indemnify NTH presents
only an abstract question of law. This Court does not decide moot issues. B P 7 v Bureau of
State Lottery, 231 Mich. App. 356, 359; 586 NW2d 117 (1998).
Reversed in part and remanded for further proceedings consistent with this opinion. We
do not retain jurisdiction.
/s/ Stephen L. Borrello
/s/ Kurtis T. Wilder
/s/ Cynthia Diane Stephens
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