Rentenbach Constructors, Incorporated v. Eli Ben

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
OCTOBER 6, 2000 Session
RENTENBACH CONSTRUCTORS, INCORPORATED v. ELI BEN
BOWEN, ET AL.
Direct Appeal from the Chancery Court for Jefferson County
No. 97-039 T.E. Forgety, Jr., Chancellor
FILED NOVEMBER 13, 2000
No. E2000-1213-COA-R3-CV
This appeal from the Jefferson County Chancery Court concerns whether the Chancery Court erred
in determining that Appellant, Rentenbach Constructors, Incorporated is obligated to indemnify
Appellees, Mathews Corporation and Ball Corporation under the terms of a construction contract
entered into between Rentenbach and Ball. We reverse the decision of the Chancery Court in this
respect and remand for further proceedings, if any, consistent with this opinion. We adjudge costs
of the appeal against the Appellees, Ball Corporation and Mathews Corporation.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed in Part;
Cause Remanded
HOUSTON M. GODDARD , P.J., delivered the opinion of the court, in which CHARLES D. SUSANO,
JR.,and D. MICHAEL SWINEY, JJ., joined.
Reggie D. Keaton, Knoxville, Tennessee, for the appellant, Rentenbach Constructor, Incorporated.
Johanna J. McGlothlin, Knoxville, Tennessee, for the appellee, Ball Corporation.
John W. Wheeler, Knoxville, Tennessee, for the appellee, Mathews Corporation.
OPINION
This is an appeal from a declaratory judgment of the Chancery Court of Jefferson County.
Plaintiff/Appellant, Rentenbach Constructors, Incorporated contests the Chancellor's ruling that
Rentenbach is contractually obligated to indemnify Defendants/Appellees Mathews Corporation and
Ball Corporation for defense of personal injury lawsuits filed against them and to indemnify
Mathews for any judgment rendered against Mathews in those lawsuits.
Rentenbach, as general contractor, entered into a contract to construct a warehouse for Ball.
Under a separate agreement between Ball and Mathews, Mathews consented to provide construction
management services in the warehouse construction project.
At Section 14.1 of the contract between Ball and Rentenbach the following indemnity
provision is set forth:
14.1 Except only such injury or damage as shall have been occasioned by sole
gross negligence of the Owner, the Contractor shall be responsible for and
indemnify and save and hold harmless the Owner, its agents, Construction
Manager, and employees, from and against any and all claims, liens, causes of
action, damage, losses, expenses (including attorneys' fees), and liability for
injury, sickness, disease or death to any person or persons, whether of not
employed by or agent of the Owner, Contractor, sub-contractor or any third party,
or for damage to or destruction of any property, tangible or otherwise, including
the loss of use resulting therefrom, or for payments and expenses of any expenses
of any nature caused or alleged to have been caused by the Owner, Contractor, or
subcontractors, their agents or employees, in connection with Work to be
performed herein or incidental to extension of Work to be performed herein by the
Contractor, its agents or employees, or any of its sub-contractors, their agents or
employees, and without regard to whether any ladders, scaffolds, or other
equipment or property belonging to the Owner are used in connection with such
Work. In any and all claims against the Owner or any of its agents or employees
by any employee of the Contractor, any sub-contractor, anyone directly or
indirectly employed by any of them or anyone for whose acts any of them may be
liable, the indemnification obligation of this paragraph shall not be limited in any
way by any limitation on the amount or type of damages, compensation or benefits
payable by or for the Contractor or any sub-contractor under workmen’s
compensation acts, disability benefit acts or other employee benefit acts.
An additional indemnity provision at Section 3.18.1 of the General Conditions of the contract
states:
3.18.1 To the fullest extent permitted by law, the Contractor shall indemnify and
hold harmless the Owner & Construction Manager, Construction Manager’s
consultants, and agents and employees of any of them from and against claims,
damages, losses and expenses, including but not limited to attorneys' fees, arising
out of or resulting from performance of the Work, provided that such claim,
damage, loss or expense is attributable to bodily injury, sickness, disease or death,
or to injury to or destruction of tangible property (other than the Work itself)
including loss of use resulting therefrom , but only to the extent caused in whole
or in part by the negligent acts or omissions of the Contractor, a Subcontractor,
-2-
anyone directly or indirectly employed by them or anyone for whose acts they may
be liable, regardless of whether or not such claim, damage, loss or expense is
caused in part by a party indemnified hereunder. Such obligation shall not be
construed to negate, abridge or reduce other rights or obligations of indemnity
which would otherwise exist as to a party or persons described in this Paragraph
3.18.
In the course of construction, on January 20, 1996 the warehouse collapsed, injuring seven
employees of one of Rentenbach's subcontractors. These employees then filed personal injury
lawsuits in the Jefferson County Circuit Court against Rentenbach, Ball, Mathews and others. Ball
was, thereafter, voluntarily dismissed from the Circuit Court lawsuits.
On April 11, 1997 Rentenbach filed a complaint for declaratory judgment in the Chancery Court
for Jefferson County. In it's complaint Rentenbach sought a judgment declaring the indemnity
provision at Section 14.1 of the contract to be void and unenforceable under T.C.A. 62-6-123 and
relieving Rentenbach of any legal duty to indemnify Ball and Mathews for losses sustained by them
as a consequence of the Circuit Court lawsuits.
By judgment entered October 11, 1999 the Chancellor decreed that, to the extent of the contract
insurance limits, the indemnity provision at Section 14.1 of the contract was not void under T.C.A.
62-6-123, that Rentenbach owed Mathews indemnification for defense of the Circuit Court actions
and that Rentenbach owed Mathews indemnification for any judgment rendered within the purview
of section 14.1. The Chancellor further decreed that 3.18.1 of the General Conditions of the contract
was in conflict with Section 14.1 and was, therefore, invalid.
The following issues, which we restate, are presented for appeal:
I. Whether the indemnity provision at Section 14.1 of the contract is void and unenforceable
under T.C.A. 62-6-123.
II. Whether the indemnity provision at Section 14.1 of the contract, though void and
unenforceable under T.C.A. 62-6-123, is validated by insurance requirements under the contract.
III. Whether the indemnity provision at Section 3.18.1 of the General Conditions of the contract
is valid and enforceable even though Section 14.1 is void and unenforceable.
As mandated by Rule 13(d) of the Tennessee Rules of Appellate Procedure, our standard of
review in this non-jury case is de novo upon the Trial Court record with a presumption of correctness
as to findings of fact by the Trial Court. There is no such presumption as to findings of law.
Campbell v. Florida Steel Corporation, 919 S.W.2d 26, (Tenn. 1996). The case sub judice involves
questions of contract interpretation which are questions of law.
-3-
Tennessee's anti-indemnification statute which applies to construction contracts is set forth at
T.C.A. 62-6-123 and states:
A covenant, promise, agreement or understanding in or in connection with or
collateral to a contract or agreement relative to the construction, alteration, repair
or maintenance of a building, structure, appurtenance and appliance, including
moving, demolition and excavating connected therewith, purporting to indemnify
or hold harmless the promisee against liability for damages arising out of bodily
injury to persons or damage to property caused by or resulting from the sole
negligence of the promisee, the promisee's agents or employees, or indemnitee,
is against public policy and is void and unenforceable.
We construe the indemnity provision at Section 14.1 under the doctrine inclusio unius est exclusio
alterius. Section 14.1 indemnifies Ball, promisee and 'Owner' under the contract, for losses 'except
only such injury or damage as shall have been occasioned by sole gross negligence of the Owner'.
The specific designation of 'sole gross negligence' as the only exception to indemnification of the
promisee Ball leads us to the necessary conclusion that sole simple negligence is not so excepted and
that Section 14.1, therefore, expresses a clear intent to indemnify for loss occasioned by Ball's sole
simple negligence. An indemnity provision in a construction contract which purports to indemnify
a promisee for the sole negligence of the promissee is void and unenforceable under T.C.A. 62-6-
123. Posey v. Union Carbide Corp., 507 F.Supp. 39 (M.D. Tenn. 1980). Accordingly , we find the
indemnity provision at Section 14.1 to be void and unenforceable.
We are not persuaded by Mathews' argument that, even if Section 14.1 is void and unenforceable
as to Ball, it is enforceable as to Mathews. As decreed in the Chancellor's judgment, Mathews is a
third party beneficiary of the contract between Ball and Rentenbach. As a third party beneficiary,
Mathews rights under Section 14.1 do not exceed the rights of Ball. A third party beneficiary's rights
under a contract are derived from and measured by the underlying contract between the original
promisor and promisee. Michael J. Linehan v. Allstate Insurance Company, 1994 WL 164113 (Tenn.
Ct. App.). Section 14.1 is void and unenforceable as between Ball and Rentenbach; therefore, it is
also void and unenforceable as to Mathews.
Ball requests that we rewrite Section 14.1 to make it valid and enforceable under T.C.A. 62-6-123
by striking the word 'gross'. This we decline to do. Ball drafted Section 14.1 and had the
opportunity to draft it in compliance with the statute. A contract must be enforced as written even
though it contains terms which might be found to be harsh and unjust. Frank Rudy Heirs Associates
v. Sholodge, Inc. 967 S.W.2d 810 (Tenn. Ct. App.1987).
Alternatively, Ball suggests that we create a judicial exception to the effect that T.C.A. 62-2-123
will not void an indemnity provision where there are no allegations of sole negligence against the
party seeking indemnification and where that party has been voluntarily dismissed from the lawsuit
for which it seeks defense cost indemnification. Case law in Tennessee provides that it is improper
for the courts to alter or amend a statute. Gleaves V. Checker Cab Transit Corproation,Inc.,15 S.W.
-4-
3d 799. If there are to be any exceptions to T.C.A. 62-6-123 those exceptions will have to be created
by the legislature, not by the courts.
Our review of the Trial Court record in this case persuades us that the Chancellor found an
overriding intent to indemnify Ball and Mathews by reason of the fact that the contract requires
Rentenbach to carry liability insurance endorsed to cover any indemnity agreements in the contract.
The Chancellor determined that T.C.A. 62-6-123 was not intended to invalidate an agreement to
obtain insurance to indemnify and concluded that, to the extent of the insurance limits set forth in
the contract, the indemnity provision at Section 14.1 is valid and enforceable. In essence, the
Chancellor found that the insurance requirements of the contract validate what would have,
otherwise, been a void and unenforceable provision. We respectfully disagree.
The insurance coverage which Rentenbach is required to maintain under the contract does not
extend beyond Rentenbach's own liability. Since the indemnity provision at Section 14.1 is primarily
void and unenforceable under T.C.A. 62-6-123, Rentenbach is not liable for indemnification and the
insurance does not come into play. We find that Rentenbach' duty to carry liability insurance has no
bearing on the validity and enforceability of Section 14.1.
Finally, Mathews and Ball contend that, even if the indemnity provision at Section 14.1 is void
and unenforceable, Rentenbach still has an obligation to indemnify them under Section 3.18.1 of the
General Conditions of the contract.
The indemnity provision at Section 14.1 is contained within the signed agreement between Ball
and Rentenbach. Section 3.18.1 is part of the General Conditions contained within the
Specifications for the construction project. Pursuant to Section 1.1.1 of the General Conditions, the
Contract Document which makes up the construction contract in this case includes the Specifications
and the agreement signed by Ball and Rentenbach. The following statement is set forth on a page
of the Specifications:
The form of agreement between contractor and Owner shall take precedence over
any other terms and conditions of these specifications.
As stated, the indemnity provision at Section 14.1 provides that Ball will be indemnified for Ball's
sole negligence. The indemnity provision at Section 3.18.1 provides that Ball not be indemnified
for Ball's sole negligence , but will only be indemnified to the extent that the loss secured against is
caused ' in whole or in part by negligent acts or omissions of the Contractor, a Subcontractor, [or]
anyone directly or indirectly employed by them or anyone for whose acts they may be liable...'
Ball cannot be allowed indemnification for it's sole negligence and, at the same time be denied
indemnification for it's sole negligence. Accordingly, we agree with the Chancellor's holding that
Section 3.18.1 is in conflict with Section 14.1 and Section 3.18.1 is, therefore, invalidated, Section
14.1 taking precedence under the contract.
-5-
For the foregoing reasons, we reverse the judgment of the Chancellor with respect to the validity
and enforceability of the indemnity provision at Section 14.1 of the contract between Ball and
Rentenbach. We further reverse the Chancellor's judgment with respect to Rentenbach's obligation
to indemnify Mathews and Ball for their defense of the Circuit Court lawsuits filed against them and
with respect to Rentenbach's obligation to indemnify Mathews for any judgment rendered in those
lawsuits. We remand for such further proceedings, if any, as may be necessary consistent with this
opinion and collection of costs below. We adjudge costs of appeal against Appellees, Mathews
Corporation and Ball Corporation.
_________________________________________
HOUSTON M. GODDARD, PRESIDING JUDGE
-6-