Aetna Ins. Co. v. Atlantic Coast Line R. Co.

• Decision Date: 08 October 1935
• Docket Number: No. 3891.,3891.
• Citation: 79 F.2d 463
• Parties: ÆTNA INS. CO. et al. v. ATLANTIC COAST LINE R. CO.
• Court: U.S. Court of Appeals — Fourth Circuit

79 F.2d 463 (1935)

ÆTNA INS. CO. et al. v. ATLANTIC COAST LINE R. CO.^*

No. 3891.

Circuit Court of Appeals, Fourth Circuit.

October 8, 1935.

J. Gordon Bohannan, of Petersburg, Va., and Alexander H. Sands, of Richmond, Va. (Alexander H. Sands, Jr., of Richmond, Va., on the brief), for appellants.

Thomas W. Davis, of Wilmington, N. C., and J. M. Townsend, of Petersburg, Va. (C. S. Valentine, of Richmond, Va., on the brief), for appellee.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

NORTHCOTT, Circuit Judge.

This is an appeal from a decree entered in the District Court of the United States for the Eastern District of Virginia, in December, 1934, in favor of the appellee, hereinafter referred to as the "Railroad." The action was originally brought at law by eight of the appellants, insurance carriers, suing for the benefit of themselves as assignees of the American Hardware Company, and for the benefit of such other insurance companies as were similarly situated, and who might be allowed to intervene and to be made parties plaintiff to the action. While the matter was pending, on the common-law side of the court, the Railroad filed a demurrer to the declaration and also filed several pleas including the general issue. Several other insurance carriers intervened and were made parties plaintiff. Upon the motion of the plaintiffs, unopposed by the Railroad, the case was transferred to the equity side of the court and pleadings were changed or adopted to conform to equity practice. Other parties intervened and were made plaintiffs, and the defendant filed its answer to the original and subsequent pleadings. An agreed stipulation of facts was filed, and the suit was heard upon the pleadings and the facts as stipulated.

In the year 1917 one Plummer, who owned a tract of land in Chesterfield county, Va., about one and one-half miles from the city of Petersburg, applied to the Railroad for the construction of a spur track for the purpose of serving a plant to be erected on said land by the Independent Trunk & Bag Company, which company was to be incorporated. The spur track was built after the execution of what is termed a "Spur Track Agreement" entered into between the Railroad and the Trunk Company in November, 1917, and recorded in the clerk's office of the circuit court of Chesterfield county, the same month. The spur track was built by the Trunk Company, which furnished all materials used except the metal, which was furnished by the Railroad Company. The spur track branched off from the main line of the Railroad and ran into and terminated upon the Trunk Company's land. It was a private siding, and the public had no rights or interest therein, and it was used only by the said Trunk Company and its successor in title, said American Hardware Company, Incorporated.

The American Hardware Company succeeded to the property of the Trunk Company, by merger, in the year 1929, and continued to make use of the spur track under the terms and conditions of the agreement with the Railroad Company. On August 28, 1932, the plant and property of the hardware company were destroyed by a fire, which fire originated from coals or sparks ejected from a locomotive of the Railroad being operated on the main line of said Railroad. The carrier insurance companies, as a result of this loss and pursuant to liability under their policies, paid the hardware company the sum of $195,044.38 and brought this suit to recover said amount from the Railroad on the theory that they were subrogated to the rights of the hardware company against the Railroad.

The spur track agreement above referred to contained the following provisions pertaining to losses by fire: "The party of the second part recognizes that the presence of the said side or spur track and the location of the property of the party of the second part increase the danger of loss by fire originating through the operation of the railroad, and as a further consideration for the location of the said side or spur track it is mutually understood and agreed that the Railroad Company shall be released and discharged and saved harmless from any and all liability for damage to property owned by or in possession of the party of the second part in the vicinity of the said side or spur track by fire communicated by the engines of the Railroad Company while upon the said side or spur track or originating within the limits of the right of way of such side or spur track, or by its engines while upon the main track of the Railroad Company or originating within the limits of the right of way of such main track in the vicinity of the said side or spur track, whether due to negligence or otherwise, and the party of the second part will save and hold the Railroad Company harmless from and against any and all liability for damages that may be sustained by third parties to property that may be attracted to said side or spur track by reason of the use of same by the party of the second part, by fire originating as aforesaid."

The companies that carried the fire insurance, plaintiffs below, had actual notice of the release from liability in the case of loss by fire, as well as constructive notice through the recordation of the spur track agreement, and their policies of insurance upon the plant and property of the hardware company contained the following provision: "Notice is hereby accepted that the assured have waived the right to recovery from the Atlantic Coast Line Railroad Company and Seaboard Air Line Railroad Company, any damage by fire occurring to the property described herein or affected thereby."

The questions involved in this appeal are: (1) Whether the spur track agreement, entered into between the Railroad and the owner of the property, was a valid one. (2) If valid, did the agreement protect the Railroad from liability for loss by fire occasioned by their engines while being operated on the main track of the railroad and not upon the spur track?

The agreement in question was entered into voluntarily by the Railroad at a time when it was under no direct legal obligation to construct the spur track. It was obvious that the construction of the spur track would result in the building of a number of buildings that would be exposed to destruction by fire caused by sparks from the Railroad engines. The Railroad had the right to protect itself from this added hazard, to be occasioned by the construction of the spur track, by a contract, unless such contract was unlawful per se or made unlawful by statute. There was nothing inherently vicious in the contract of exemption from liability, and it did not involve exemption to personal injury but only to property. The public has an interest in the life and safety of human beings, and contracts with respect to personal injuries are governed by a different rule from that governing contracts with regard to injury to property. Griswold v. Illinois Central Ry. Co., 90 Iowa, 265, 57 N. W. 843, 24 L. R. A. 647. At the time of the making of the spur track agreement the parties were free to make their own bargain as to its construction, and "the highest public policy is found in the enforcement of the contract which was actually made." Santa Fé, P. & P. R. Co. v. Grant Bros. Const. Co., 228 U. S. 177, 33 S. Ct. 474, 478, 57 L. Ed. 787. The general rule on this point is concisely stated in 51 Corpus Juris, p. 1185: "A railroad company may, when acting in its private capacity, relieve itself from an absolute liability imposed by statute for setting fire to property as well as from liability resulting from negligence * * *."

The federal courts and a majority of the state courts hold that contracts, in consideration of some privilege or concession granted by a railroad company which it would not otherwise be bound to extend, exempting it from liability for the destruction of buildings, are valid and enforceable.^* The contract may validly release from a liability imposed by statute. Sunlight Carbon Co. v. St. Louis & S. F. R. Co. (C. C. A.) 15 F.(2d) 802.

It is contended on behalf of the appellants that this general rule is not the Virginia rule and that the federal courts are compelled to follow the rule in Virginia. We first come to consider the Virginia rule. What is known as the Featherston Act (section 3992, Code Virginia) provides for recovery against a railroad upon proof that property has been destroyed as a consequence of sparks or coals emitted from engines of a railroad company, and it is admitted that under the decisions of the Virginia courts all questions of negligence are eliminated in suits to recover for such destruction of property. Virginian Ry. Co. v. London, 148 Va. 699, 139 S. E. 328.

Attorneys for the appellants rely mainly upon the case of Johnson's Adm'x v. Richmond & D. R. Co., 86 Va. 975, 11 S. E. 829, 830, decided in 1890, which was an action for the death of Johnson, who...