Beachboard v. Southern Ry. Co., 7228SC56

• Decision Date: 20 December 1972
• Docket Number: No. 7228SC56,7228SC56
• Court: North Carolina Court of Appeals
• Parties: Forest BEACHBOARD, Plaintiff, v. SOUTHERN RAILWAY COMPANY, Defendant and Third-Party Plaintiff-Appellee, U.S. Plywood-Champion Papers, Inc., Third-Party Defendant-Appellant.

Page 577

193 S.E.2d 577

16 N.C.App. 671

Forest BEACHBOARD, Plaintiff, v. SOUTHERN RAILWAY COMPANY, Defendant and Third-Party Plaintiff-Appellee, U.S. Plywood-Champion Papers, Inc., Third-Party Defendant-Appellant.

No. 7228SC56.

Court of Appeals of North Carolina.

Dec. 20, 1972.

Certiorari Denied by Supreme Court March 6, 1973.

W. T. Joyner, Raleigh, and Bennett, Kelly & Long, by Harold K. Bennett, Asheville, for Southern Ry. Co., third-party plaintiff-appellee.

Uzzell & DuMont, by Harry DuMont, Asheville, for U.S. Plywood-Champion Papers, Inc., third-party defendant-appellant.

PARKER, Judge.

Appellant assigns error to the denial of its motions to dismiss Southern's third-party complaint for failure to state a claim upon which relief can be granted, for judgment on the pleadings, for summary judgment, and for directed verdict, all of which were predicated, at least in part, on appellant's contention that the contract of 8 November 1905 was not binding upon it and, if considered so, when correctly interpreted did not, and when lawfully enforced could not, impose upon appellant the obligation to indemnify Southern under the circumstances of this case. We first consider appellant's contention that the contract, whatever its correct interpretation and legal enforceability as an indemnity contract, was in any event not binding upon it.

The contract of 8 November 1905 was on its face expressed to be between Southern, on the one part, and Champion Fibre Company, an Ohio corporation, on the other. The name of the Fibre Company was signed to this contract by its president, Peter G. Thomson. It appears from the record and exhibits before us that at the date of this contract the Fibre Company was not yet in existence and that it was not actually incorporated until 3 January 1906, when it became incorporated under the laws of Ohio. Its corporate charter lists Peter G. Thomson as one of the original incorporators. While no formal ratification of the agreement has been shown, the record does indicate that after the Fibre Company came into corporate existence it acted under the contract and for many years accepted its benefits, and it is the general rule under such circumstances that by accepting the benefits the company becomes bound to perform the obligations incident to such a contract. 18 Am.Jur.2d, Corporations, § 122, p. 664. However that may be, the record before us further indicates that the following transactions occurred: By instrument dated 12 October 1936 the Fibre Company conveyed all of its assets to its parent corporation, The Champion Paper & Fibre Company, also an Ohio corporation, in complete cancellation or redemption of all of Fibre Company's outstanding shares. The surviving parent corporation, The Champion Paper & Fibre Company, by written agreement dated 24 September 1937 executed by it and by Southern, expressly agreed with Southern that it would be bound by the contract of 8 November 1905, to which reference was expressly made, 'to the same extent and with like effect as if the said The Champion Paper & Fibre Company . . . had originally made and executed' said agreement. By 'Supplemental Agreement' dated 28 July 1959, also executed by Southern and by The Champion Paper & Fibre Company, certain changes and extensions in the location of the industrial tracks serving Champion's plant were provided for, and by this Supplemental Agreement the contract of 8 November 1905 was again expressly recognized as continuing in effect. It also appears that The Champion Paper & Fibre Company, after changing its corporate name in 1961 to Champion Papers, Inc., merged with U.S. Plywood Corporation in 1967 to become the corporate entity which appears in the present action as the third-party defendant, and which for convenience is in this opinion referred to simply as 'Champion.' We hold that by virtue of the foregoing transactions, Champion became bound by the contract of 8 November 1905 and became obligated to perform the duties which were therein imposed on the Fibre Company.

We next consider appellant's contention that the 8 November 1905 contract, properly interpreted in accordance with appellant's views, does not obligate it to indemnify Southern for the amount for which Southern became liable to plaintiff in account of his personal injuries in this case. In this connection appellant argues that the word 'damage' as used in the covenant contained in paragraph 5 of the contract, under which appellant's predecessor, the Fibre Company, agreed '(t)hat it will indemnify and save harmless the Southern Company against any and all damage resulting from the negligence of the Fibre Company, its servants and employees,' is a word of art used solely to designate injuries to property and does not include injuries to persons. Accepted authorities, however, do not support appellant's view, and we perceive nothing in the context in which the word 'damage' was here employed why its meaning should be so narrowly confined. Black's Law Dictionary (4th Ed.) defines 'damage' as '(l)oss, injury, or deterioration, caused by the negligence, design, or accident of one person to another, in respect of the latter's Person or property,' and Webster's Third New International Dictionary defines 'damage' as 'injury or harm to Person, property, or reputation.' (Emphasis added.) We hold that the phrase 'any and all damage,' as employed in the contract now before us, was intended by the parties and did include injuries to persons and was not limited, as appellant contends, merely to property losses.

Appellant next contends that, even if it be conceded that the words 'any and all damage' includes a loss involving personal injuries, the indemnification provision here before us was intended to apply only to damage caused by the sole negligence of Champion, and that Southern having also been found guilty of negligence in this case, Champion has no obligation to indemnify it. To adopt appellant's interpretation effectively robs the indemnity clause of nearly all meaning. Three categories of 'damage resulting from the negligence' of Champion are possible: (1) damage to property of Southern; (2) damage to property of Champion; and (3) damage to person or property of a third party (including an employee of either). Assuming in a particular case that damage is caused by negligence of Champion (which must exist, else the clause by its own language does not become operative), and that Southern is not negligent, then quite apart from the indemnity contract Southern would have a right of recovery against Champion for damage in the first category and would not itself by responsible for damage in the second and third categories. In such a case there would seem little reason for the indemnity provision. Indeed, it is Only when damage results from the negligence both of Southern and Champion that the provision attains any real meaning. By inserting the provision in their contract the parties obviously contemplated that there might be claims for indemnity, and they must have been cognizant of the fact that in the ordinary case the occasion for Southern seeking indemnity would not arise unless it had itself been guilty of some fault, for otherwise no judgment could be recovered against it. In Gibbs v. Light Co., 265 N.C. 459, 144 S.E.2d 393, our Supreme Court held that an indemnity provision in the contract then before it provided indemnity against claims based on the indemnitee's negligence, pointing out that otherwise it had 'no meaning or purpose.' Consistent with that reasoning, we hold that the language employed in the indemnity provision in the contract now before us obligates Champion to indemnify Southern in a case such as this, in which it has been determined that plain...