Thomas Beaver v. Figgie International Corporation, and Third Party The Detroit Board of Education, Third Party, 849 F.2d 1472, 3rd Cir. (1988)
Thomas Beaver v. Figgie International Corporation, and Third Party The Detroit Board of Education, Third Party, 849 F.2d 1472, 3rd Cir. (1988)
Thomas Beaver v. Figgie International Corporation, and Third Party The Detroit Board of Education, Third Party, 849 F.2d 1472, 3rd Cir. (1988)
2d 1472
Unpublished Disposition
NOTICE: Sixth Circuit Rule 24(c) states that citation of
unpublished dispositions is disfavored except for establishing
res judicata, estoppel, or the law of the case and requires
service of copies of cited unpublished dispositions of the Sixth
Circuit.
Thomas BEAVER, et al., Plaintiffs,
v.
FIGGIE INTERNATIONAL CORPORATION, Defendant and
Third Party
Plaintiff-Appellee,
the Detroit Board of Education, Third Party DefendantAppellant.
No. 87-1362.
This case--which has been here before (Opinion, Nos. 83-1829/84-1441 (6th
Cir. Sept. 15, 1986))--began as a personal injury action brought against Figgie
International Corporation by a carpenter who was injured when a defective
scaffolding plank on which he was standing broke beneath him. Figgie had
supplied the plank to the carpenter's employer, the Detroit Board of Education,
under a rental agreement that required the Board of Education to hold Figgie
harmless from any personal injury claims growing out of the use of the rented
plank, including claims based on Figgie's own negligence.
We reversed the summary judgment on the strength of Pritts v. J.I. Case Co.,
108 Mich.App. 22, 310 N.W.2d 261 (1981), and remanded the case "for further
proceedings as to Figgie's third-party claim against the Board." Opinion at 7.
Figgie then moved in the district court for summary judgment in the amount
the original plaintiff had recovered in the trial of his case, plus Figgie's costs of
defense, including attorney fees. Although there was no occasion for our
opinion in the initial appeal to go beyond the question whether enforcement of
the rental agreement's indemnification provision was barred by M.C.L. Sec.
691.991, our opinion nonetheless said, at one point, that "the indemnification
provision must be enforced in accordance with its terms." Opinion at 2. In its
subsequent motion for summary judgment, Figgie cited that language in urging
the district court to dispose of the case summarily.
On February 2, 1987, the district court heard oral argument on both summary
judgment motions. Explaining that "the basis of my motion ... is the ruling of
the appellate tribunal," counsel for Figgie submitted that it was "too late" for
the district court to address the merits of the unconscionability question.
Counsel for the Board responded that "this issue had never been addressed, nor
was it addressed before the Court of Appeals," and counsel asked for "the
opportunity to argue the unconscionability issue." The district court invited
counsel to proceed--briefly--with such an argument. Counsel did so, suggesting
that the indemnity clause was both "procedurally" and "substantively"
unconscionable within the meaning of Johnson v. Mobil Oil Corp., 415 F.Supp.
264 (E.D.Mich.1976). In this connection counsel referred to various factual
representations contained in an affidavit of Mr. Warren Nunlee-Bey, the Board
of Education carpenter who had signed Figgie's rental agreement.
"[T]he Court of Appeals in its opinion found that the Third Party Plaintiff
Figgie was not a business entity which fell within the class of businesses
covered by [M.C.L. Sec. 691.991].
9* * *
***
10
11
"The issue whether or not the contract at issue was an unconscionable contract
based on common law principles was not appealed or argued at the Sixth
Circuit.
***
12
***
13
14
15
On March 12, 1987, the district court entered an order disposing of the Board's
motion for reconsideration on the following ground:
16
The Board's motion for reconsideration was denied, and this appeal followed.
***
18
***
19
20
But for the district court's ruling on the motion for reconsideration, we would
be constrained to vacate the judgment and to remand the case with instructions
to decide the unconscionability issue on its merits. The Board of Education did
not waive its other affirmative defenses when it moved for summary judgment
on the basis of M.C.L. Sec. 691.991, the unconscionability issue was not
resolved by the district court when it granted summary judgment on the ground
that the statute was applicable, and the issue was not presented to us for
decision when the case was heard on Figgie's appeal. The question before us at
that time was whether enforcement of the indemnity provision was barred by
M.C.L. Sec. 691.991, and we ought to have expressed the holding in those
terms. By saying we had concluded that the indemnity provision must be
enforced, we may have given the district court and counsel to understand that
our ruling was broader than would have been appropriate. And the transcript of
the hearing held by the district court on the subsequent cross-motions for
summary judgment cannot be said to leave the reader with a clear conviction
that the district court's grant of Figgie's motion for summary judgment was
based on anything other than our statement that the indemnity provision must
be enforced in accordance with its terms.
21
The question of whether the Board of Education was ever truly given its day in
court on the unconscionability issue was resolved, however, by the district
court's ruling on the motion for reconsideration. Whether or not Figgie ever
addressed the unconscionability issue head-on, the Board of Education clearly
did so. The Board affirmatively asked, in its summary judgment motion, for a
ruling on the merits of its unconscionability defense. The Board put into the
record all the facts it wished to present on the issue of unconscionability, it
briefed the issue, and it presented oral argument thereon. Whatever doubt may
have existed as to whether the district court actually ruled on the merits of the
unconscionability defense was resolved by the order denying reconsideration;
the Court told us in that order that the issue "was ruled upon by the Court by
reasonable implication." We must now decide, therefore, whether the district
court's ruling was wrong. We are not persuaded it was, and we shall affirm the
judgment.
***
22
***
23
24
Although the agreement with which we are concerned here is not covered by
Michigan's version of the Uniform Commercial Code, the provisions of the
code may be consulted in determining the content of the common law of
Michigan with respect to unconscionability. "The equitable doctrine of
unconscionability has a long history in Michigan ... The doctrine was adopted
by [the Michigan] Legislature in the Uniform Commercial Code, M.C.L.A.
Sec. 440.2302, M.S.A. Sec. 19.2302, and continues to apply to contracts
outside the scope of the Uniform Commercial Code as well." Stenke v.
Masland Development Co., Inc., 152 Mich.App. 562, 572; 394 N.W.2d 418,
423 (1986); cf. Northwest Acceptance Corporation v. Almont Gravel, Inc., 162
Mich.App. 294, 305, 412 N.W.2d 719, 724 (1987), Johnson, supra, 415 F.Supp.
at 266-8.
25
26
"(1) If the court as a matter of law finds the contract or any clause of the
contract to have been unconscionable at the time it was made the court may
refuse to enforce the contract, or it may enforce the remainder of the contract
without the unconscionable clause, or it may so limit the application of any
unconscionable clause as to avoid any unconscionable result.
27
"(2) When it is claimed or appears to the court that the contract or any clause
thereof may be unconscionable the parties shall be afforded a reasonable
opportunity to present evidence as to its commercial setting, purpose and effect
to aid the court in making the determination." M.C.L.A. Sec. 440.2302.
28
29
31
32
Although Mr. Nunlee-Bey swore "[t]hat at the time he signed the document it
was his intent to sign only for the delivery of the scaffolding and materials" and
"[t]hat the fact that he was signing for the actual 'Lease' of the scaffolding was
not explained to him by any representative of Safway/Figgie," deposition
testimony of the injured carpenter indicated that the Board of Education had
been renting scaffolding planks from Figgie for fifteen years. There was no
showing that Figgie ever changed the terms of its rental agreements, there was
no showing that Figgie prevented Mr. Nunlee-Bey or anyone else from reading
the agreements, and there was no showing that it was commercially
unreasonable for a lessor to ask a lessee to sign a rental agreement before
turning over possession of rental property. Mr. Nunlee-Bey stated that he
signed "as a matter of routine." A principal whose agent is allowed routinely to
***
34
***
35
36
The Board contends, finally, that it has three valid affirmative defenses in
addition to unconscionability. The Board argues first that it is not bound by the
indemnity provision because the rental agreement was not endorsed by the
Board's secretary as required by M.C.L.A. Sec. 380.434(1). That statute reads
as follows:
37
"Before a contract entered into by the first class school district board for the
purchase of real estate or the erection, remodeling, or repairing of a building is
binding on the board, the secretary shall endorse on the contract that the money
proposed to be expended under the contract is actually in the treasury or that
the money has been appropriated. A contract submitted shall not be certified by
the secretary until all contracts for the completed work covered by the
appropriation are submitted, and a warrant shall not be drawn on the account of
a contract not containing the certificate." M.C.L.A. Sec. 380.434(1).
38
The rental agreement did not constitute a contract for the purchase of real estate
or the erection, remodeling or repairing of a building, and the statute therefore
has no application here.
39
Secondly, the Board argues that "as a public body corporate [it] may not
unknowingly be bound by a contract by which it surrenders its privileges and
immunities. If the contract at issue is not unconscionable then by the act of its
workman, the Board of Education lost its right to maintain its immunity from
tort liability conferred by MSA 3.996 (107) et seq. M.C.L.A. 691.1407." Under
Michigan law, however, "governmental immunity is not a defense to a claim
against the State for contractual liability." Zynda v. Michigan Aeronautics
Commission, 372 Mich. 285, 287, 125 N.W.2d 858, 860 (1964). The claim on
which Figgie prevailed sounds in contract, not in tort, and if the Board chose to
rent scaffolding planks over a period of years without reading its rental
agreements, that is hardly Figgie's fault.
40
Thirdly, the Board argues that as a matter of public policy an indemnitor may
not be held liable to a negligent indemnitee unless the indemnitor was also
negligent. That may be the policy in the case of the construction and repair
contracts that are subject to M.C.L.A. Sec. 691.991, but "this policy does not
preclude clauses providing for indemnification for one's sole negligence in
other areas, such as in a lease or bailment situation." Peeples v. City of Detroit,
99 Mich.App. 285, 295, 297 N.W.2d 839, 843 (1980). As the court stated in
Pritts, M.C.L.A. Sec. 691.991 "is an exception to the general rule that
indemnity contracts purporting to absolve the indemnitee from liability for his
own negligence are not against public policy." 108 Mich.App. at 35, 310
N.W.2d at 267.
41
James D. Todd, United States District Court for the Western District of
Tennessee, sitting by designation