Pacific Gas and Electric v. G.W. Thomas Drayage and R. Co. Case Brief

Summary of Pacific Gas & Electric vs G.W. Thomas Drayage & R. Co.
S. Ct. CA [1968]

Relevant Facts: Pl-P. G & E, entered into a contract with Df Drayage, Df would furnish the labor and equipment to remove and replace the upper metal cover of the plaintiff’s steam turbine. During the work the cover fell and injured the exposed rotor of the turbine. The cost of repair was $25,144.51. Df agreed to perform the work at its own risk and expense AND to indemnify(reimburse) PL against all loss, damage resulting from injury to property arising out of or connected with the performance. The trial ct found that the language used was “classic language for a 3rd party indemnity provision AND one could very easily conclude its intent is to indemnify 3rd parties, it nevertheless held the plain language of the agreement also required df to indemnify pl for injuries to pl property.

Legal Issue(s): Whether extrinsic evidence may be used to explain the meaning of the written instrument’s language?

Court’s Holding: Yes

Procedure: Trial ct ruled in favor of pl and did not allow evidence to prove df’s case, reversed.

Law or Rule(s): If a court decides, after considering extrinsic evidence, that the language of a contract, in the light of the circumstances, is fairly susceptible of either one of the two interpretations contended for, then extrinsic evidence relevant to prove either of such meanings is admissible.

Court Rationale: Offered extrinsic evidence is relevant to prove a meaning to which the language is reasonably susceptible. Limiting the determination of the meaning of a written instrument to its four corners b/c it seems to the court to be clear and unambiguous, would either deny the relevance of the intentions of the parties or presuppose a degree of verbal precision and stability our language has not attained. Exclusion of parol evidence b/c the words do not appear ambiguous to the reader can easily lead to the attribution to a written instrument of a meaning that was never intended. Rational interpretation requires at least a preliminary consideration of all credible evidence offered to prove the intention of the parties. Refusing to consider evidence offered to show that the indemnity clause in the contract was not intended to cover injuries to plaintiff’s property was erroneous. The evidence was admissible to prove that the clause was reasonably susceptible of the meaning contended by the df and did not cover pl’s property.

Plaintiff’s Argument: The language of the contract plainly included a third party indemnity provision and through the cross liability clause extended coverage to the pl’s property.

Defendant’s Argument: Pl’s agents, and df’s conduct under similar contracts entered into with Pl prove that the indemnity clause was meant to cover injury to property of third parties only, and not PL’s property.

Extrinsic evidence includes evidence of usage of a trade, course of dealing, or a course of performance.

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