Opinion
16-P-180
04-21-2017
D.A. SULLIVAN & SONS, INC. v. CITY OF SPRINGFIELD.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
During the pendency of a school building construction project in Springfield, a dispute arose between the general contractor, D.A. Sullivan & Sons, Inc. (Sullivan), and a subcontractor, J.R.J. Construction Co., Inc. (J.R.J.), about whether certain work was included in the subcontract, or should have been assigned to a different subcontractor. J.R.J. performed the disputed work under protest and later sued Sullivan in Superior Court for payment, on the theory that it had performed "extra work" outside of the specifications of its subcontract. J.R.J. obtained an award of damages against Sullivan, which was affirmed by a panel of this court in a decision pursuant to our rule 1:28. See J.R.J. Constr. Co., v. D.A. Sullivan & Sons, Inc., 75 Mass. App. Ct. 1104 (2009).
In short, the dispute was whether the lath and plaster work was to be performed by J.R.J., or drywall work, to be performed by another subcontractor.
Thereafter, Sullivan brought the instant action against the city of Springfield (city), the "owner" of the project, for reimbursement of its payment to J.R.J. pursuant to the prior judgment. Sullivan's complaint includes three causes of action against the city, for: (i) breach of contract; (ii) unjust enrichment; and (iii) indemnification.
Sullivan's complaint does not specify the legal basis for its indemnification action against the city.
Relying on a broadly worded indemnification clause found at article VIII of the general contract, a Superior Court judge allowed the city's motion for summary judgment, holding that all three of Sullivan's claims are contractually barred by Sullivan's own obligation to indemnify the city for claims or losses arising from the intentional acts of Sullivan or its subcontractors.
Because we disagree with the motion judge about whether the meaning of the indemnity clause is unambiguous in the context presented, we vacate the judgment and remand for further proceedings.
For the benefit of the parties on remand, we note the following procedural concerns. It appears that the city obtained summary judgment, not because it was entitled as a matter of law to judgment on the elements of Sullivan's claims, but because the motion judge found that the city was entitled to judgment on the city's counterclaim for indemnity, and that determination had the effect of "canceling out" Sullivan's original claims. Yet, it also appears that the city's counterclaims were dismissed by stipulation on October 21, 2014. This procedural posture is highly unusual for several reasons. As a threshold matter, final judgment on Sullivan's claims should not have entered unless and until the entire case was resolved or the judge issued the certification required by Mass.R.Civ.P. 54(b), 365 Mass. 820 (1974), allowing for entry of separate and final judgment. Perhaps more importantly, however, the motion judge may have put the cart before the horse in this instance by deciding that Springfield was entitled to indemnity as to Sullivan's claims before determining whether the city faced any liability on those claims in the first place. With the exception of a situation where an insurer has an ongoing obligation to provide a defense to an indemnified claim but declines to do so, the underlying liability is typically established before the question of indemnity as to that same liability is adjudicated. See 275 Washington Street Corp. v. Hudson River Intl., LLC, 465 Mass. 16, 17 (2013) ; Suffolk Constr. Co., v. Benchmark Mechanical Sys., Inc., 475 Mass. 150, 155, 157 (2016) ; Post v. Belmont Country Club, 60 Mass. App. Ct. 645, 646-647 (2004). See also Wolverine Ins. Co. v. Tower Iron Works, Inc., 370 F.2d 700, 705 (1st Cir. 1966) (discussing accrual of common law indemnity claims under Massachusetts law and holding that Massachusetts would typically treat claim as accruing upon payment of claim as to which indemnity right exists). We decline to comment on whether, (i) indemnity was an available defense to Sullivan's claims; or (ii) the city's counterclaim regarding indemnity was ripe for adjudication before any liability it may have on Sullivan's claims had been established. The parties should, however, address these issues on remand to the extent necessary.
Discussion. Indemnity agreements "are to be fairly and reasonably construed in order to ascertain the intention of the parties and to effectuate the purpose sought to be accomplished." Shea v. Bay State Gas Co., 383 Mass. 218, 222 (1981), quoting from New York, N.H. & H.R.R. v. Walworth Co., 340 Mass. 1, 3 (1959). "They are to be interpreted like any other contract, with attention to language, background, and purpose." Herson v. New Boston Garden Corp., 40 Mass. App. Ct. 779, 782 (1996).
Here, the indemnification provision on which the city relies is as follows:
"The [c]ontractor hereby agrees to and shall at all times defend, indemnify and hold the [c]ity and its officers, agents and employees, wholly harmless from any and all losses, cost, expenses (including court costs and attorneys' fees, interest and profits), claims, demands, suits by any person or persons, injuries, damages or death, and other liabilities of whatever kind or nature, caused by, resulting from, incident to, connected with, or arising directly or indirectly out of the negligent or willful act or omission by the [c]ontractor, any [s]ubcontractor, anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable whether or not caused in part by any act or neglect on the part of the [c]ity, its officers, employees, agents or servants, or others, including parties indemnified hereunder. This indemnity shall survive termination of the contract.
The motion judge found that "[t]here is no ambiguity in this extremely broad indemnification clause," reasoning that "willful" means intentional, and does not necessarily imply a malicious motive. Accordingly, the judge found an indemnity right exists here because Sullivan's claims arise out of either (i) its own intentional instruction to J.R.J. to perform the disputed work; or (ii) J.R.J.'s intentional actions in performing that work.
Sullivan argues that a genuine issue of fact exists as to whether it ever instructed J.R.J. to perform the work. The argument is unavailing, however, because it cannot reasonably be disputed that J.R.J. performed the work intentionally, and was acting as Sullivan's subcontractor at the time it did so. Accordingly, Sullivan's factual argument addresses only one, but not both, of the judge's alternative bases for entering summary judgment.
We might agree with the thoughtful and carefully reasoned decision of the motion judge if the claim for which the city were seeking indemnity was a tort claim for damage to person or property arising from Sullivan's work or that of its subcontractor. To be sure, the plain language of the provision before us is not so limited. It does not expressly tie the city's indemnity right to damage to person or property caused by the work to be performed under the contract, nor is it limited to damage or loss arising from any specific categories of acts or omissions. Accordingly, this indemnity clause is unusually broad.
Nonetheless, a contract will be interpreted "to give it effect as a rational business instrument," and to ascribe meaning to all of its provisions. Kingstown Corp. v. Black Cat Cranberry Corp., 65 Mass. App. Ct. 154, 158 (2005), quoting from New York Cent. R.R. v. New England Merchs. Natl. Bank, 344 Mass. 709, 714 (1962). See J.A. Sullivan Corp. v. Commonwealth, 397 Mass. 789, 795 (1986). The parties' intent must be gleaned "from a fair construction of the contract as a whole and not by special emphasis upon any one part." Kingstown, supra, quoting from Ucello v. Cosentino, 354 Mass. 48, 51 (1968). Additionally, "a reading of a contract ‘which gives a reasonable meaning to all [its] provisions ... is ... preferred to one which leaves a part useless or inexplicable.’ " Ibid., quoting from Worcester Mut. Ins. Co. v. Marnell, 398 Mass. 240, 245 (1986).
The city's interpretation of this contractual clause, that its application would negate other important provisions of the contract by preventing Sullivan from pursuing any claim related to the city's obligation to pay the contract price pursuant to article XV of the general contract and article 9 of the general conditions of the contract, is flawed. This is so because any payment claim Sullivan could possibly make will always be connected to deliberate or intentional acts of Sullivan or its contractors.
For example, [c]ount 1 of Sullivan's complaint includes a $5,000 claim for nonpayment under the general contract, separate and apart from Sullivan's claim for reimbursement of its payment to J.R.J. The city does not argue that this portion of Sullivan's claim is barred by the indemnification clause, but instead suggests that J.R.J. waived it by not making a specific argument about it in its summary judgment opposition. This portion of Sullivan's claim was squarely pleaded in Sullivan's [c]omplaint, and is not waived by a failure to address it in response to a summary judgment motion. See Attorney Gen. v. Bailey, 386 Mass. 367, 371 (1982) (burden of showing it is entitled to summary judgment rests on moving party even as to issues as to which nonmoving party would have burden at trial). More importantly, however, the [c]ity's hesitancy to argue that the indemnification clause bars this portion of J.R.J.'s claim is a tacit acknowledgment that the city's indemnity right cannot be construed as barring all claims resulting from intentional acts of Sullivan or its contractors because such an interpretation would render the city's payment obligations unenforceable and would fail to treat the contract as a rational business instrument when read as a whole. See Kingstown, supra.
Accordingly, here, where the indemnity clause is not expressly limited to claims for personal injury or property damage, and does not expressly exclude payment claims, the broad phrase "arising directly or indirectly out of the negligent or willful act or omission" introduces an ambiguity. See Post v. Belmont Country Club, 60 Mass. App. Ct. 645, 652 (2004), quoting from Fashion House, Inc. v. K mart Corp., 892 F.2d 1076, 1083 (1st Cir. 1989) ("Contract language is ambiguous where ‘an agreement's terms are inconsistent on their face or where the phraseology can support reasonable difference of opinion as to the meaning of the words employed and the obligations undertaken’ ").
In her summary judgment decision, the motion judge readily dismissed Sullivan's argument, made without citation, that an indemnity clause such as the one found in the instant contract cannot be applied to first-person or "inter se" claims generally. Sullivan has not repeated this argument on appeal, but the matter is now remanded for further proceedings. Plainly, inter se indemnity agreements are not generally unavailable. See, e.g., Post, 60 Mass. App. Ct. at 646, 654 (enforcing indemnity clause found in golf club membership agreement against injured club member). It appears, however, that Massachusetts courts have not adopted (nor specifically rejected) a default rule that would apply indemnity clauses only to third-party claims in the absence of explicit language indicating to the contrary. See Caldwell Tanks, Inc. v. Haley & Ward, Inc., 471 F.3d 210, 212-218 (1st Cir. 2006).
Additionally, a mixed question of fact and law is presented on this record as to whether (i) Sullivan's actions, or the actions of J.R.J., were performed in compliance with a contractual obligation to perform the contemplated work, and (ii) performance in compliance with such obligations can be considered "willful" for purposes of the city's claim to be indemnified against Sullivan's claims for payment for that very same work.
Article 4 of the general conditions to the general contract concerns claims and disputes. A "[c]laim" is "a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of [c]ontract terms, payment of money, extension of time or other relief with respect to the terms of the [c]ontract." Art. 4.3.4 goes on to state, "Pending final resolution of a [c]laim including arbitration, unless otherwise agreed in writing the [c]ontractor shall proceed diligently with performance of the [c]ontract and the [o]wner shall continue to make payments in accordance with the [c]ontract [d]ocuments." J.R.J.'s subcontract is not in the record.
Notwithstanding that "willful" may be synonymous with "intentional" or "deliberate" in some circumstances, we question whether intentional or deliberate actions are necessarily willful in the instant context, where willfulness will arguably trigger an indemnity right as to payment claims arising from the very same acts alleged to be willful. See Black's Law Dictionary at 1599 (6th Ed. 1990) (offering numerous definitions of "willful" and stating that the construction of this word is often influenced by its context). This question may be explored on remand.
In the case cited by the motion judge, the Supreme Judicial Court interpreted the word "willful" in the context of an environmental statute as requiring that the "violator undertook intentionally the act that caused the violation," and as not requiring a showing that the violator was aware of the existence of the applicable law or intended to violate it. See Franklin Office Park RealtyCorp. v. Commissioner of the Dept. of Envtl. Protection, 466 Mass. 454, 464 n.12, 466 (2013).
Sullivan did not articulate this precise argument in its written opposition to the city's summary judgment motion, but it did invoke the claims procedures set forth in the contract more generally, and it argued specifically that applying the indemnification clause to Sullivan's current claims is "contrary to the terms and conditions of the [c]ontract and clear statutory law ... obligating the [c]ity to pay for additional work ... and authorizing contractors like D.A. Sullivan to sue the [c]ity for breach of contract." We view the argument that Sullivan and J.R.J. were obligated to perform (and, thus, not acting willfully) as an issue to be resolved on remand.
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For all of the reasons stated herein, we respectfully disagree with the motion judge's legal determination that the word "willful" as used in the subject indemnification clause is unambiguous and synonymous with "intentional." We vacate the judgment for the city as to Sullivan's claims, and remand for further proceedings consistent with this memorandum and order.
So ordered.
Vacated and remanded.