Estes Co. v. Aztec Const., Inc.

Citations: 677 P.2d 939; 139 Ariz. 166Docket: 1 CA-CIV 5862

Court: Court of Appeals of Arizona; August 30, 1983; Arizona; State Appellate Court

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The case involves The Estes Company and its partners, who are appealing a judgment that denied their cross-claim for indemnity against Aztec Construction, a subcontractor, in a wrongful death action resulting from a trench collapse that killed two boys. The Estes Company, as the general contractor, sought indemnification based on an indemnity agreement with Aztec, which required the subcontractor to protect the contractor from liabilities arising from its negligence. During the trial, the court determined that the indemnity agreement did not clearly indicate that Estes would be indemnified for its own negligence related to the trenching operations. The trial judge noted that Estes was aware of the trench's dangers and failed to take necessary precautions, which constituted active negligence on its part. Following the trial, both defendants settled the claims with the plaintiffs, with each party paying half of the agreed amount while reserving their rights for indemnification. The appeal specifically contests the ruling on the indemnity claim and the denial of a new trial on that matter. The appellate court reversed the trial court's decision and remanded the case, directing that judgment be entered for Estes on its cross-claim.

The City of Phoenix has the authority to rectify unsafe conditions, and there is no evidence that the project was cited for code violations or that the excavation deviated from industry standards. The trench was excavated using a trenching machine, with plans for shoring during pipe installation. Although the open trench lacked fencing, barricading, or warning signs, there is no indication of a violation of applicable codes or construction practices. Aztec, as the subcontractor, was responsible for determining the equipment and methods for the excavation. 

The indemnity provision in the contract between Estes (the general contractor) and Aztec (the subcontractor) was under scrutiny. The trial court denied Estes' cross-claim, arguing the contract did not clearly intend for Estes to be indemnified for its own negligent actions related to the trenching operation. However, it was determined that the parties had explicitly contracted regarding indemnification, and the extent of that duty must be derived from the contract terms. The test for construing indemnity contracts involves whether the indemnitee had a reasonable expectation that the indemnitor would fulfill the duty that led to liability.

A lawful contract with clear, unambiguous terms must be enforced as written. In this case, Aztec agreed to indemnify Estes for claims resulting from Aztec's negligence. The indemnity clause does not clarify the impact of the indemnitee's negligence on the indemnitor's obligations, thus it is considered a general indemnity agreement. In Arizona, such agreements allow indemnification for losses stemming from the indemnitee's passive negligence but not active negligence. 

The terms of the indemnity provision were found to clearly indicate that Estes would be indemnified despite any passive negligence. The trial court's conclusion that Estes was actively negligent due to acquiescing to a hazardous condition was disagreed with, suggesting that Estes' negligence should be classified as passive.

Active negligence occurs when an indemnitee engages in a negligent act, is aware of or consents to negligence, or fails to fulfill a specific duty they agreed to perform. In contrast, passive negligence arises from nonfeasance, such as not identifying a dangerous condition or failing to take necessary precautions. The determination of whether conduct is active or passive negligence is case-specific. In this case, the deaths of two children resulted from a trench collapse; however, the evidence indicated that Aztec, the subcontractor, improperly used a trenching machine instead of a backhoe, which should have been utilized given the soil conditions. 

Estes, the general contractor, did not participate in the trenching nor was there evidence that it was aware of any dangers associated with Aztec's choice of equipment. Estes' responsibilities included general supervision and posting warning signs, which do not constitute active negligence. The trial court initially found Estes actively negligent for allowing a hazardous condition to persist, a conclusion the appellate court disagreed with, emphasizing that trench digging is not inherently hazardous. There was no evidence of code violations or unsafe practices by Aztec during the excavation.

Since any potential danger stemmed from Aztec's actions, and Estes' nonfeasance did not rise to active negligence, the appellate court ruled that Estes was entitled to indemnification under the contract's general indemnity provision. The trial court's denial of Estes' cross-claim for indemnification was reversed, and the case was remanded with directions to enter judgment in favor of Estes.