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WARREN CITY LINES v. UNITED REFINING COMPANY (12/13/71)

decided: December 13, 1971.

WARREN CITY LINES, INC., APPELLANT,
v.
UNITED REFINING COMPANY



Appeal from order of Court of Common Pleas of Warren County, Feb. T., 1970, No. 91, in case of Warren City Lines, Inc. v. United Refining Company.

COUNSEL

Frank L. Kroto, Jr., with him Doyle & Kroto, for appellant.

R. T. Mutzabaugh, with him Mutzabaugh & Mutzabaugh, for appellee.

Wright, P. J., Watkins, Montgomery, Jacobs, Hoffman, and Cercone, JJ. (Spaulding, J., absent). Opinion by Hoffman, J. Dissenting Opinion by Cercone, J.

Author: Hoffman

[ 220 Pa. Super. Page 310]

This is an appeal from an order of the lower court granting defendant-appellee's motion for summary judgment.

In 1957 appellant and appellee's predecessor, Emblem Oil Company, executed an equipment loan agreement covering an oil and gasoline dispensing system previously installed at appellant's bus garage by Emblem in 1950. As consideration for Emblem's loan of the dispensing system, appellant promised to use the equipment only to sell or deliver petroleum products purchased from Emblem.

On May 29, 1969, while the equipment loan agreement was still in effect, two of appellee's repairmen were sent to service the dispensing system at appellant's bus garage. While at the garage, appellee's employees were requested to change the hose on the gasoline dispensing pump covered by the equipment loan agreement. Approximately ten minutes after this was accomplished, a gasoline explosion occurred where defendant's employees had been working, resulting in extensive damage to appellant's property.

Appellant instituted this action in trespass against appellee seeking recovery for the property damage which it sustained. Appellee filed an answer containing new matter pleading an indemnity clause in the

[ 220 Pa. Super. Page 311]

    equipment loan agreement.*fn1 The clause provides that appellant "shall indemnify and save harmless the Emblem Oil Company of and from any and all liability for loss, damage, injury or other casualty to persons or property, caused or occasioned by any leakage, fire or explosion of petroleum products stored in or dispensed from said equipment, or in any way growing out of or resulting from the installation and operation of said equipment, whether the same results from negligence or otherwise."

The lower court held that this indemnity clause exonerated appellee from all liability, and having so held, the court granted appellee's motion for summary judgment. Appellant argues that appellee's negligence is not excused by the indemnity clause for three reasons. We will consider each of these arguments separately.

I. The Validity of the Indemnity Clause

Appellant's first argument is that the indemnity clause cannot exculpate appellee for a violation of a governmental regulation promulgated pursuant to statutory authority. Our Supreme Court recently reviewed the general validity of exculpatory clauses. In Employers Liability Assurance Corporation, Ltd. v. Greenville Business Men's Association, 423 Pa. 288, 224 A.2d 620 (1966), the Court said "[a]n exculpatory clause is valid if: (a) 'it does not contravene any policy of the law, that is, if it is not a matter of interest to the

[ 220 Pa. Super. Page 312]

    public or State. . . .' (Dilks v. Flohr Chevrolet, 411 Pa. 425, 434, 192 A.2d 682 (1963) and authorities therein cited); (b) 'the contract is between persons relating entirely to their own private affairs' (Dilks v. Flohr Chevrolet, supra, page 433); (c) 'each party is a free bargaining agent' and the clause is not in effect 'a mere contract of adhesion, whereby [one party] simply adheres to a document which he is powerless to alter, having no alternative other than to reject the transaction entirely.' (Gallagan v. Arovitch, 421 Pa. 301, 304, 219 A.2d 463 (1966)). [Footnote omitted.]" Employers Liability Assurance Corporation, Ltd. v. Greenville Business Men's Association, 423 Pa. at 291-292, 224 A.2d at 622-623.

Appellant contends that the indemnity clause in the equipment loan agreement contravenes public policy insofar as it was intended to exculpate appellee for its negligent installation and maintenance of a gasoline dispensing system in violation of the State Fire Marshal's regulations. These regulations require that an automatic control must be provided on gasoline dispensing systems which stops the pump when all nozzles have been returned to their brackets, and that electrical equipment used in connection with such systems must conform to the applicable provisions of the National Electrical Code. Pa. State Police Reg. for the Storage, Handling and Use of Flammable and Combustible Liquids, ยงยง 9-234-1 and 9-51 (1965) (promulgated pursuant to Section 1 of the Act of April 27, 1927, P. L. 450, as amended, 35 P.S. 1181).

Appellant alleges that the nozzle hook-up and electrical switch installed by appellee did not conform to these standards. Assuming that appellant can prove these alleged violations and can show that they were the proximate cause of the explosion and fire, the question is whether the negligent ...


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