Majority
Defendant appeals from a judgment for plaintiff in an action for damages for injury to property under an indemnity clause of a contract.
During the work the cover fell and injured the exposed rotor of the turbine. Plaintiff brought this action to recover $25,144.51, the amount it subsequently spent on repairs. During the trial it dismissed a count based on negligence and thereafter secured judgment on the theory that the indemnity provision covered injury to all property regardless of ownership.
Defendant offered to prove by admissions of plaintiff’s agents, by defendant’s conduct under similar contracts entered into with plaintiff, and by other proof that in the indemnity clause the parties meant to cover injury to property of third parties only and not to plaintiff’s property.[1] Although the trial court observed that the language used was “the classic language for a third party indemnity provision” and that “one could very easily conclude that ... its whole intendment is to indemnify third parties,” it nevertheless held that the “plain language” of the agreement also required defendant to indemnify plaintiff for injuries to plaintiff’s property. Having determined that the contract had a plain meaning, the court refused to admit any extrinsic evidence that would contradict its interpretation.
When the court interprets a contract on this basis, it deter
1 Although this offer o£ proof might ordinarily be regarded as too general to provide a ground for appeal (Evid. Code, § 354, subd. (a); Beneficial etc. Ins. Co. v. Kurt Hitke & Co. (1956) 46 Cal.2d 517 , 522 [ 297 P.2d 428 ]; Stickel v. San Diego Elec. Ry. Co. (1948) 32 Cal.2d 157 , 162-164 [ 195 P.2d 416 ]; Douillard v. Woodd (1942) 20 Cal.2d 665 , 670 [ 128 P.2d 6 ]), since the court repeatedly ruled that it would not admit extrinsic evidence to interpret the contract and sustained objections to all questions seeking to elicit such evidence, no formal offer of proof was required. (Evid. Code, § 354, subd. (b); Beneficial etc. Ins. Co. v. Kurt Hitke & Co., supra, 46 Cal.2d 517 , 522; Estate of Kearns (1950) 36 Cal.2d 531 , 537 [ 225 P.2d 218 ].)
The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible. (Continental Baking Co. v. Katz (1968) 68 Cal. 2d 512 , 520-521 [ 67 Cal.Rptr. 761 , 439 P.2d 889 ]; Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861 , 865 [ 44 Cal.Rptr. 767 , 402 P.2d 839 ]; Hulse v. Juillard Fancy Foods Co. (1964) 61 Cal.2d 571 , 573 [ 39 Cal.Rptr. 529 , 394 P.2d 65 ]; Nofziger v. Holman (1964) 61 Cal.2d 526 , 528 [ 39 Cal. Rptr. 384 , 393 P.2d 696 ]; Coast Bank v. Minderhout (1964) 61 Cal.2d 311 , 315 [ 38 Cal.Rptr. 505 , 392 P.2d 265 ]; Imbach v. Schultz (1962) 58 Cal.2d 858 , 860 [ 27 Cal.Rptr. 160 , 377 P.2d 272 ]; Reid v. Overland Machined Products (1961) 55 Cal.2d 203 , 210 [ 10 Cal.Rptr. 819 , 359 P.2d 251 ].)
A rule that would limit the determination of the meaning of a written instrument to its four-corners merely because it seems to the court to be clear and unambiguous, would either deny the relevance of the intention of the parties or presuppose a degree of verbal precision and stability our language has not attained.
2 E.g., “The elaborate system of taboo and verbal prohibitions in primitive groups; the ancient Egyptian myth of Khern, the apotheosis of the words, and of Thoth, the Scribe of Truth, the Giver of Words and Script, the Master of Incantations; the avoidance of the name of God in Brahmanism, Judaism and Islam; totemistie and protective names in mediaeval Turkish and Finno-Ugrian languages; the misplaced verbal scruples of the ‘ Précieuses ’; the Swedish peasant custom of curing sick cattle smitten by witchcraft, by making them swaEow a page torn out of the psalter and put in dough. . . .’ from Ullman, The Principles of Semantics (1963 ed.) 43. (See also Ogden and Richards, The Meaning of Meaning (rev. ed. 1956) pp. 24-47.)
3 “ ‘Rerum enim vocabula immutabilia sunt, homines mutabilia,’ ” (Words are unchangeable, men changeable) from Dig. XXXIII, 10, 7, § 2, de sup. leg. as quoted in 9 Wigmore on Evidence, op. cit. supra, $ 2461, p. 187.
In this state, however, the intention of the parties as expressed in the contract is the source of contractual rights and duties.[5] A court must ascertain and give effect to this intention by determining what the parties meant by the words they used. Accordingly, the exclusion of relevant, extrinsic, evidence to explain the meaning of a written instrument could be justified only if it were feasible to determine the meaning the parties gave to the words from the instrument alone.
If words had absolute and constant referents, it might be possible to discover contractual intention in the words themselves and in the manner in which they were arranged. Words, however, do not have absolute and constant referents.- “A word is a symbol of thought but has no arbitrary and fixed meaning like a symbol of algebra or chemistry, . . .” (Pearson v. State Social Welfare Board (1960) 54 Cal. 2d 184 , 195 [ 5 Cal.Rptr. 553 , 353 P.2d 33 ].) The meaning of particular words or groups of words varies with the ”... verbal context and surrounding circumstances and purposes in view of the linguistic education and experience of their users and their hearers or readers (not excluding judges). ... A word has no meaning apart from these factors; much less does it have an objective meaning, one true meaning. ’ ’ (Corbin, The Interpretation of Words and the Parol Evidence Rule (1965) 50 Cornell L.Q. 161, 187.) Accordingly, the meaning of a writing ”... can only be found by inter
4 ”A contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. ’ ’ (Hotchkiss v. National City Bank of New York (S.D.N.Y. 1911) 200 F. 287 , 293. See also C. H. Pope & Co. v. Bibb Mfg. Co. (2d Cir. 1923) 290 F. 586 , 587; see 4 Williston on Contracts (3d ed. 1961) § 612, pp. 577-578, § 613, p. 583.)
5 ”A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” (Civ. Code, § 1636; see also Code Civ. Proc., § 1859; Universal Sales Corp. v. California Press Mfg. Co. (1942) 20 Cal.2d 751 , 760 [ 128 P.2d 6651 ; Lemm v. Stillwater Land & Cattle Co. (1933) 217 Cal. 474 , 480 [ 19 P.2d 785 ].)
Although extrinsic evidence is not admissible to add to, detract from, or vary the terms of a written contract, these terms must first be determined before it can be decided whether or not extrinsic evidence is being offered for a prohibited purpose. The fact that the terms of an instrument appear clear to a judge does not preclude the possibility that the parties chose the language of the instrument to express different terms. That possibility is not limited to contracts whose terms have acquired a particular meaning by trade usage,[6] but exists whenever the parties’ understanding of the words used may have differed from the judge’s understanding.
Accordingly, rational interpretation requires at least a preliminary consideration of all credible evidence offered to
6 Extrinsic evidence of trade usage or custom has been admitted to show that the term ‘ ‘ United Kingdom ” in a motion picture distribution contract included Ireland (Ermolieff v. R.K.O. Radio Pictures, Inc. (1942) 19 Cal.2d 543 , 549-552 [ 122 P.2d 3 ]); that the word "ton” in a lease meant a long ton or 2,240 pounds and not the statutory ton of 2,000 pounds (Higgins v. California Petroleum etc. Co. (1898) 120 Cal. 629 , 630-632 [ 52 P. 1080 ]); that the word "stubble” in a lease included not only stumps left in the ground but everything "left on the ground after the harvest timo” (Callahan v. Stanley (1881) 57 Cal. 476 , 477-479); that the term "north” in a contract dividing mining claims indicated a boundary line running along the "magnetic and not the true meridian” (Jenny Lind Co. v. Bower (1858) 11 Cal. 194 , 197-199) and that a form contract for purchase and sale was actually an agency contract. (Body-Steffner Co. v. Flotill Products (1944) 63 Cal.App.2d 555 , 558-562 [ 147 P.2d 84 ]). See also Code Civ. Proc., §1861; Annot., 89 A.L.R. 1228 ; Note (1942) 30 Cal.L.Rev. 679 .)
In the present ease the court erroneously refused to consider extrinsic evidence offered to show that the indemnity clause in the contract was not intended to cover injuries to plaintiff’s property. Although that evidence was not necessary to show that the indemnity clause was reasonably susceptible of the meaning contended for by defendant, it was nevertheless relevant and admissible on that issue. Moreover, since that clause was reasonably susceptible of that meaning,
7 When objection is made to any particular item of evidence offered to prove the intention of the parties, the trial court may not yet be in a position to determine whether in the light of all of the offered evidence, the item objected to will turn out to be admissible as tending to prove a meaning of which the language of the instrument is reasonably susceptible or inadmissible as tending to prove a meaning of which the language is not reasonably susceptible. In such case the court may admit the evidence conditionally by either reserving its ruling on the objection or by admitting the evidence subject to a motion to strike. (See Evid. Code, § 403.)
8 Extrinsic evidence has often been admitted in such cases on the stated ground that the contract was ambiguous (e.g., Universal Sales Corp. v. California Press Mfg. Co., supra, 20 Cal.2d 751 , 761). This statement of the rule is harmless if it is kept in mind that the ambiguity may be exposed by extrinsic evidence that reveals more than one possible meaning.
Two questions remain that may arise on retrial. On the theory that the indemnity clause covered plaintiff’s property, the trial court instructed the jury that plaintiff was entitled to recover unless all of “. . . the following conditions [were found] to exist:
“1. That Pacific Gas and Electric Company continued to
9 The court’s exclusion of extrinsic evidence in this case would be error even under a rule that excluded such evidence when the instrument appeared to the court to be clear and unambiguous on its face. The controversy centers on the meaning of the word “indemnify” and the phrase “all loss, damage, expense and liability.’’ The trial court’s recognition of the language as typical of a third party indemnity clause and the double sense in which the word ‘ ‘ indemnify ’ ’ is used in statutes and defined in dictionaries demonstrate the existence of an ambiguity. (Compare Civ. Code, § 2772, “Indemnity is a contract by which one engages to save another from a legal consequence of the conduct of one of the parties, or of some other person, ’ ’ with Civ. Code, § 2527, “ Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability, arising from an unknown or contingent event.” Black’s Law Dictionary (4th ed. 1951) defines “indemnity” as “A collateral contract or assurance, by which one person engages to secure another against an anticipated loss or to prevent him from being damnified by the legal consequences of an act or forbearance on the part of one of the parties or of some third person.” Stroud’s Judicial Dictionary (2d ed. 1903) defines it as a “Contract ... to indemnify against a liability. ...” One of the definitions given to ‘ ‘ indemnify ’ ’ by Webster’s Third New International Diet. (1961 ed.) is “to exempt from incurred liabilities. ’ ’) Plaintiff’s assertion that the use of the word “all” to modify “loss, damage, expense and liability” dictates an all inclusive interpretation is not persuasive. If the word “indemnify” encompasses only third-party claims, the word “all” simply refers to all such claims. The use of the words “loss,” “damage,” and “expense” in addition to the word “liability” is likewise inconclusive. These words do not imply an agreement to reimburse for injury to an indemnitee’s property since they are commonly inserted in third-party indemnity clauses, to enable an indemnitee who settles a claim to recover from his indemnitor without proving his liability. (Carpenter Paper Co. v. Kellogg (1952) 114 Cal.App.2d 640 , 651 [ 251 P.2d 40 ]. Civ. Code, § 2778, provides: “1. Upon an indemnity against liability . . . the person indemnified is entitled to recover upon becoming liable; 2. Upon an indemnity against claims, or demands, or damages, or costs . . . the person indemnified is not entitled to recover without payment thereof; . . .”) The provision that defendant perform the work ‘ ‘ at Ms own risk and expense ’ ’ and the provisions relating to insurance are equally inconclusive. By agreeing to work at its own risk defendant may have released plaintiff from liability for any injuries to defendant’s property arising out of the contract’s performance, but this provision did not necessarily make defendant an insurer against injuries to plaintiff’s property. Defendant’s agreement to procure liability insurance to cover damages to plaintiff’s property does not indicate whether the insurance was to cover all injuries or only injuries caused by defendant’s" negligence.
maintain independent operation, on the premises whereon the installation of the cover was in progress;
“2. That the damage to the turbine was unrelated to the Defendant G. W. Thomas Drayage & Rigging Company, Inc. ’s performance;
“3. That the plaintiff was guilty of active, affirmative negligence ; and
“4. That such active negligence related to a matter over which the plaintiff exercised exclusive control. ”
The instruction was based on certain guidelines discussed in Goldman v. Ecco-Phoenix Elec. Corp. (1964) 62 Cal.2d 40 , 45-46 [ 41 Cal.Rptr. 73 , 396 P.2d 377 ]; Harvey Machine Co. v. Hatzel & Buehler, Inc. (1960) 54 Cal.2d 445 , 448 [ 6 Cal.Rptr. 284 , 353 P.2d 924 ]; and Safeway Stores, Inc. v. Massachusetts Bonding & Ins. Co. (1962) 202 Cal.App.2d 99 , 112-113 [ 20 Cal.Rptr. 820 ]. Those cases do not hold, however, that all four conditions specified in the instruction must exist for the indemnitor to be relieved of liability. It is sufficient if the indemnitee’s own active negligence is a cause of the harm. As stated in Markley v. Beagle (1967) 66 Cal.2d 951 , 952 [ 59 Cal.Rptr. 809 , 429 P.2d 129 ], “An indemnity clause phrased in general terms will not be interpreted ... to provide indemnity for consequences resulting from the indemnitee’s own actively negligent acts. ’ ’
To prove the amount of damages sustained, plaintiff presented invoices received from Ingersoll-Rand, the manufacturer and repairer of the turbine, the drafts by which plaintiff had remitted payment, and testimony that payment had been made. Defendant objected to the introduction of the invoices on the ground that they were hearsay. Subsequently, plaintiff called a mechanical engineer who qualified as an expert witness on the repair of turbines. On the basis of photographs of the damage after the accident, he testified that to repair the turbine it was reasonable and necessary to dismantle it completely, magnafiux all parts, replace all blades in wheels that had been damaged, reassemble the rotor, balance it, “indicate” it and centrifugate it. Similar repairs were listed in the invoices, and over objection the witness was allowed to testify that the amounts charged therefor were reasonable.
Since invoices, bills, and receipts for repairs are hearsay, they are inadmissible independently to prove that liability for the repairs was incurred, that payment was made, or
The individual items on the invoices, however, were read, not to corroborate payment or the reasonableness of the charges, but to prove that these specific repairs had actually been made. No qualified witness was called to testify that the invoices accurately recorded the work done by Tngersoll-Rand, and there was no other evidence as to what repairs were made. This use of the invoices was error. (California Steel Buildings, Inc. v. Transport Indemnity Co. (1966) 242 Cal.App.2d 749 , 759 [ 51 Cal.Rptr. 797 ]. Accord, Bushnell v. Bushnell, supra, 103 Conn. 583 [ 131 A. 432 , 436]; Ferraro v. Public Service Ry. Co. (1928) 6 N.J. Misc. 463 [ 141 A. 590 ]; Nock v. Lloyd (1911) 32 R.I. 313 [ 79 A. 832 , 833].) An invoice submitted by a third party is not admissible evidence on this issue unless it can be admitted under some recognized exception to the hearsay rule.[10]
Since plaintiff’s expert’s testimony as to the reasonableness of the charges was based on hearsay evidence inadmissible to prove that the repairs had been made, defend
10 It might come in under the business records exception (Evid. Code, §1271) if “. . . supported by the testimony of a witness qualified to testify as to its identity and the mode of its preparation.” (California Steel Buildings, Inc. v. Transport Indemnity Co., supra, 242 Cal.App.2d 749 , 759.)
The judgment is reversed.
Peters, J., Mosk, J., Burke, J., Sullivan, J., and Peek, J.,[11] concurred.
McComb, J., dissented.
* Retired Associate Justice of the Supreme Court gittÍPg Wider assign» meat by the Chairman of the Judicial Council.
Cases cited
- Continental Baking Co. v. Katz 68 Cal. 2d 512 at 520-521 p. 37
- Parsons v. Bristol Development Co. 62 Cal.2d 861 at 865 p. 37
- Hulse v. Juillard Fancy Foods Co. 61 Cal.2d 571 at 573 p. 37, p. 40
- Nofziger v. Holman 61 Cal.2d 526 at 528 p. 37, p. 40
- Coast Bank v. Minderhout 61 Cal.2d 311 at 315 p. 37
- Imbach v. Schultz 58 Cal.2d 858 at 860 p. 37
- Reid v. Overland Machined Products 55 Cal.2d 203 at 210 p. 37, p. 40
- Pearson v. State Social Welfare Board 54 Cal. 2d 184 at 195 p. 38
- Universal Sales Corp. v. California Press Manufacturing Co. 20 Cal.2d 751 at 776, at 761 p. 39, p. 40
- Lemm v. Stillwater Land & Cattle Co. 217 Cal. 474 at 480-481 p. 40
- Barham v. Barham 33 Cal.2d 416 at 422-423 p. 40
- Kenney v. Los Feliz Investment Co. 121 Cal.App. 378 at 386-387 p. 40
- Goldman v. Ecco-Phoenix Electric Corp. 62 Cal.2d 40 at 45-46 p. 42
- Harvey Machine Co. v. Hatzel 54 Cal.2d 445 at 448 p. 42
- Safeway Stores, Inc. v. Massachusetts Bonding & Insurance 202 Cal.App.2d 99 at 112-113 p. 42
- Markley v. Beagle 66 Cal.2d 951 at 952 p. 42
- Plonley v. Reser 178 Cal.App.2d Supp. 935 at 937-939 p. 43
- Menefee v. Raisch Improvement Co. 78 Cal. App. 785 at 789 p. 43
- Dewhirst v. Leopold 194 Cal. 424 at 433 p. 43
- Smith v. Hill 237 Cal.App.2d 374 at 388 p. 43
- Malinson v. Black 83 Cal.App.2d 375 at 379 p. 43
- Laubscher v. Blake 7 Cal.App.2d 376 at 383 p. 43
- Gimbel v. Laramie 181 Cal.App.2d 77 at 81 p. 43
- California Steel Buildings, Inc. v. Transport Indemnity Co. 242 Cal.App.2d 749 at 759 p. 43
- George v. Bekins Van & Storage Co. 33 Cal.2d 834 at 844 p. 44
- Kastner v. Los Angeles Metropolitan Transit Authority 63 Cal.2d 52 at 58 p. 44
- Commercial Union Assurance Co. v. Pac. Gas & Elec. Co. 220 Cal. 515 at 524 p. 44
- Behr v. County of Santa Cruz 172 Cal.App.2d 697 at 709 p. 44