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Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co.

Supreme Court of California

July 11, 1968

S. F. No. 22580


 [*35]  [**643]  [***563]    Defendant appeals from a judgment for plaintiff in an action for damages for injury to property under an indemnity clause of a contract.

 [*36]  In 1960 defendant entered into a contract with plaintiff to furnish the labor and equipment necessary to remove and replace the upper metal cover of plaintiff's steam turbine. Defendant agreed to perform the work "at [its] own risk and expense" and to "indemnify" plaintiff "against all [****2]  loss, damage, expense and liability resulting from . . . injury to property, arising out of or in any way connected with the performance of this contract." Defendant also agreed to procure not less than $ 50,000 insurance to cover liability for injury to property. Plaintiff was to be an additional named insured, but the policy was to contain a cross-liability clause extending the coverage to plaintiff's property.

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. 2 Although the trial court observed that the language used was "the classic language for a third party indemnity provision"  [****3]  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.

 [****4]  When the court interprets a contract on this basis, it determines  [*37]  the meaning of the instrument in accordance with the ". . . extrinsic evidence of the judge's own linguistic education and experience." (3 Corbin on Contracts (1960 ed.) [1964 Supp. § 579, p. 225, fn. 56].) The exclusion of testimony that might contradict the linguistic background of the judge reflects a judicial belief in the possibility of perfect verbal expression. (9 Wigmore on Evidence (3d ed. 1940) § 2461, p. 187.) This belief is a remnant of a primitive faith in the inherent potency 3 [****5]  and inherent  [**644]   [***564]  meaning of words. 4

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69 Cal. 2d 33 *; 442 P.2d 641 **; 69 Cal. Rptr. 561 ***; 1968 Cal. LEXIS 225 ****; 40 A.L.R.3d 1373

PACIFIC GAS AND ELECTRIC COMPANY, Plaintiff and Respondent, v. G. W. THOMAS DRAYAGE & RIGGING COMPANY, INC., Defendant and Appellant

Prior History:  [****1]  APPEAL from a judgment of the Superior Court of the City and County of San Francisco. William A. O'Brien, Judge.

Action for damages for injury to property under an indemnity clause of a contract.

Disposition: Reversed. Judgment for plaintiff reversed.


words, extrinsic evidence, indemnify, repairs, indemnity, invoices, parties, indemnity clause, Contracts, injuries, intent of a party, turbine, reasonably susceptible, third party, circumstances, charges, verbal

Contracts Law, Contract Interpretation, Parol Evidence, General Overview, Evidence, Admissibility, Statements as Evidence, Parol Evidence, Intent, Types of Evidence, Documentary Evidence, Procedural Matters, Objections & Offers of Proof, Objections, Business & Corporate Compliance, Contracts Law, Contract Conditions & Provisions, Indemnity Clauses, Torts, Multiple Defendants, Indemnity, Defenses, Exculpatory Clauses, Interpretation, Exceptions, Business Records, Expert Witnesses, Testimony, Expert Witnesses