Industrial Indemnity Co. v. McIntosh

No. 14827
IN THE SUPREME COURT OF THE STATE OF MONTANA
1979
INDUSTRIAL INDEMNITY COMPANY,
a corporation,
Plaintiff and Respondent,
DAVID McINTOSH,
Defendant and Appellant.
Appeal from: District Court of the Thirteenth Judicial District,
Honorable Robert H. Wilson, Judge presiding.
Counsel of Record:
For Appellant:
Olsen, Christensen & Gannett, Billings, Montana
Paul G. Olsen argued, Billings, Montana
For Respondent :
Anderson, Symmes, Brown, Gerbase, Cebull & Jones,
Billings, Montana
Steve Harman argued, Billings, Montana
Submitted: December 13, 1979
Decided :
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Filed:
Clerk
Mr. Chief Justice Frank I. Haswell delivered the Opinion
of the Court.
Defendant David McIntosh appeals from a judgment
entered against him in Yellowstone County District Court.
The judgment grants plaintiff Industrial Indemnity Co.
indemnification from McIntosh for the amount paid in
settlement of a Workmen's Compensation claim. We affirm.
The case was submitted to the District Court on agreed
facts as follows: In a written contract dated April 30,
1974, McIntosh, an interstate hauler, agreed to provide a
truck and driver for Lewis Grover of Idaho Falls, Idaho.
Grover is an interstate carrier, certified by the Interstate
Commerce Commission (ICC). The contract contained two clauses
which are of particular importance to the resolution of the
case. They are:
" (11) . . . Contractor [McIntosh] shall save
carrier harmless from any liability arising
from the relationship between the contractor
and any of contractor's employees, agents and
servants, whether under industrial accident
laws, workmen's compensation laws, or any other
state or federal law applicable to employees
and employers. Contractor [McIntosh] shall
maintain workmen's compensation coverage for
all employees, agents or servants employed by
the contractor in the performance of this
contract . . .
" (13) Subject to the requirements of the
Interstate Commerce Commission and of any
state or provincial regulatory authorities
having jurisdiction (a) The contractor
[McIntosh] shall direct, in all respects,
the operation of the equipment used in the
performance of this contract.. . ."
Pursuant to the contract, McIntosh supplied Grover
with a truck and driver. On May 23, 1974, Michael Weldon,
the driver, was killed in an accident near Lolo, Montana.
McIntosh had not obtained Workmen's Compensation coverage
for Weldon as agreed in the contract. Weldon's widow filed
a claim with the Workmen's Compensation Division against Grover
and his insurer, Industrial Indemnity Co., the plaintiff
herein.
Industrial Indemnity settled the claim with Weldon's
widow for $75,000 and now seeks to recover that amount from
McIntosh. In ruling in favor of Industrial Indemnity, the
District Court held that McIntosh had breached his contractual
duty to provide Workmen's Compensation coverage and alternatively,
that he breached his contractual duty to indemnify Grover
and his insurer. The validity of the contract is the dis-
positive issue on appeal.
McIntosh argues the contract is void because it is
unlawful. Pursuant to 49 U.S.C. §304(e) ( 2 ) , the ICC has the
authority to promulgate regulations to insure that an inter-
state carrier using another's equipment shall "have full
direction and control of such vehicles and will be fully
responsible for the operation thereof. . ." The ICC's resulting
regulation provides:
". .. authorized carriers may perform author-
ized transportation in or with equipment which
they do not own only under the following conditions.
"(a) Contract requirements: The contract, lease,
or other arrangement for the use of such equipment:
"(4) ...Shall provide for the exclusive poss-
ession, control, and use of the equipment, and
for the complete assumption of responsibility in
respect thereto, by the lessee for the duration
of said contract, lease or other arrangement . . ."
49 C.F.R. s1057.4.
The contract obligates McIntosh to "direct, in all respects,
the operation of the equipment used in the performance of
the contract." According to McIntosh, this violates the ICC
regulation. He concludes the contract is "contrary to public
policy, unlawful . . . and should be declared void.' We
disagree.
The regulation imposing carrier control and responsibility
is intended:
"(1) to prevent I.C.C. carriers from avoiding
safety standards imposed by the I.C.C. by
the simply practice of leasing equipment from
non-regulated carriers; (2) to promote high-
way safety by insuring that drivers furnished
by exempt carriers as part of the lease
agreement do not violate safety regulations
in the operation of the leased equipment; and
(3) to provide shippers and other members of
the public with financially responsible carriers."
Indiana Refrigerator Lines, Inc. v. Dalton
(6th Cir. 19751, 516 F.2d 795, 796.
The regulation "makes and keeps [the carrier] responsible to
the public, the shipper, and the Commission." Transamerican
Freight v. Brada Miller (19751, 423 U.S. 28, 39, 96 Sect.
229, 46 L. Ed. 2d 169. It was not intended to shield the owner
of equipment from the consequences of its breach of contract.
Moreover, the provision of the contract that McIntosh
claims is illegal is expressly "subject to the requirements
of the Interstate Commerce Commission." We fail to understand
how the contract violates ICC rules.
Upon examination of the entire contract, it is apparent
that Grover, the carrier, was expressly made responsible for
any injuries or damages sustained by a member of the public;
for any damages sustained by a shipper; and to the ICC for
compliance with its rules and regulations. So that the carrier
could comply with ICC regulations, McIntosh was to supply it
with the logs of his driver, vehicle reports, scale tickets,
toll receipts, delivery receipts and other documents on a
daily basis. McIntoshls express contractual duties included
supplying a driver who met ICC regulations, being responsible
for the payroll and expenses of his employees, paying the
operating and maintenance expenses of the equipment as well
as all taxes and fees incurred in transporting the consigned
goods. He was also to maintain the equipment, and subject
to ICC regulations, "be solely responsible for the direction
and control of [his] employees, agents, and servants ...
including selecting, hiring, supervising, directing,
setting wages, hours and working conditions, paying and
adjusting grievances.. . ."
We cannot hold the contract illegal. The policy of
the ICC regulation was met by making the carrier exclusively
responsible to the public, the shippers and the ICC. 40 C.F.R.
1057.4. The duties undertaken by McIntosh were essentially
ministerial and do not contravene the regulation or the policy
behind it. Transamerican Freight v. Brada Miller, supra;
for similar contracts held not to violate 40 C.F.R. 1057.4:
see Carolina Freight Carrier Corp. v. Pitt County Transp.
Co. (4th Cir. 1974), 492 F.2d 243; Continental Ins. Co. v.
Daily Express (1975), 68 Wis. 2d 581, 229 N.W.2d 617.
The clause of the contract wherein McIntosh agreed to
indemnify the carrier for any Workmen's compensation liability
it might incur as to McIntoshls employees is not contrary to
the requirement of carrier control and responsibility. 40
supra
C.F.R. 1057.4; Transamerican Freight v. Brada ille el%. Indiana
Refrigerator Lines, Inc. v. Dalton (6th Cir. 1975), 516 F.2d 795;
Indiana Insurance Co. v. Parr Trucking Service, Inc. (6th
Cir. 1975), 510 F.2d 490; Jones Truck Lines, Inc. v. ~ y d e r
Truck Lines, Inc. (6th Cir. 1974), 507 F.2d 100; Carolina
Freight Carrier Corp. v. Pitt County Transp. Co., supra;
Watkins Motor Lines Inc. v. Zero Refrigerated Lines (N.D.111.
1974), 381 F. Supp. 363, aff'd (7th Cir. 1975), 525 F.2d 538;
General Express, Inc. v. Schreiber Freight Lines, Inc. (N.D.
Ill. 1974), 377 F. Supp. 1159; Continental Ins. Co. v. Daily
i
Express, supra; Cooper Jarretg Inc. v. J. Miller Corp. (19721,
70 Misc. 2d 88, 332 N.Y.S.2d 177; Newsome v. Surratt (1953),
237 N.C. 297, 74 S.E.2d 732; accord Truck Ins. Exchange v.
Transport ~ndemnityCo. (1979), Mont . , 591 P.2d
McIntosh, having accepted a benefit under a lawful
contract may not now repudiate his obligations arising under
the same contract. Section 2 8 - 2 - 5 0 3 ( 2 ) , MCA.
Affirmed.
\
Chief Justice
We Concur:
...............................
Justices
Mr. Justice John C. Sheehy specially concurring:
I concur, but only because of the inescapable language
of the United States Supreme Court in Transamerican Freight
Lines Inc. v. Brada Miller Freight Systems (1975), 423 U.S.
28, 96 S. Ct. 229, 46 L. Ed. 2d 169. That case holds that leases
of trucking equipment such as here which give the lessor
(owner) of the truck "operational control and responsibility"
are not in violation of the ICC regulations. When that court
shoots holes of that size in the regulatory fabric, it will
not hold against the wind for any decision we might render
to enforce the regulations realistically. Otherwise we could
apply the principle that when parties - -
in pari delicto to
an unlawful contract seek to enforce its terms, the law leaves
them where it finds them. See for example, May v. Whitbeck
(1941), 111 Mont. 568, 113 P.2d 332.