Michigan Millers Mut. Fire Ins. Co. v. CANADIAN NORTH. RY. CO.

Decision Date23 January 1946
Docket NumberNo. 13089.,13089.
PartiesMICHIGAN MILLERS MUT. FIRE INS. CO. et al. v. CANADIAN NORTHERN RY. CO.
CourtU.S. Court of Appeals — Eighth Circuit

LeRoy Bowen, of Minneapolis, Minn. (Bowen & Bowen, of Minneapolis, Minn., on the brief), for appellants.

W. O. Bissonett, of Duluth, Minn., for appellee.

Before GARDNER, THOMAS, and RIDDICK, Circuit Judges.

GARDNER, Circuit Judge.

This was an action brought by Michigan Millers Mutual Fire Insurance Company and three other fire insurance companies against Canadian Northern Railway Company, to recover damages caused by the destruction by fire of a warehouse or grain elevator located on the right of way of the Railway Company, it being alleged that the fire was caused to be set by the defendant and negligently permitted to get beyond its control so that it consumed the warehouse or elevator, with its contents, on which the insurance companies had issued fire insurance policies, insuring the warehouse or elevator against loss or damage by fire in the aggregate amount of $16,964.91. It was alleged that the plaintiffs, following the destruction of the elevator, pursuant to their obligation, paid the Northern Farmers Cooperative Exchange, the owner of the elevator, on account of the loss and damage, the sum of $16,964.91, and that by reason of such payment it became subrogated to the rights of the insured. The Railway Company answered, denying negligence, and set up as an affirmative defense that the lease under which the insured held the property contained provision that if during the term of the lease any buildings placed on the leased premises should be damaged, injured or destroyed by any act or thing done or omitted by the Railway Company, negligently or otherwise, the lessee should not by reason thereof have any claim or demand against the company, nor be entitled to any compensation or indemnity. The parties will be referred to as they appeared in the trial court.

Defendant, after answer, moved for summary judgment, which motion was based upon the pleadings, supplemented by stipulations and affidavits. The facts may be stated as follows:

Defendant is a Canadian corporation, engaged in business as a common carrier by railroad, and operates lines in Minnesota and elsewhere. It is a part of the system known as National Railway System and also as Canadian National Railway, extending over various lines in Canada and into the United States. Pitt is a village located in Minnesota on a branch line of the defendant which extends from Duluth, Minnesota, to the Canadian border and thence beyond. In September, 1941, defendant leased to John P. O'Neil, a private warehouseman, part of its right of way at Pitt as a site for a warehouse or elevator. As originally written the lease was for a term of one year, with a right of extension thereafter from year to year, at an annual rental of $10. On October 24, 1942, O'Neil assigned the lease to Northern Farmers Cooperative Exchange. This assignment was accepted and approved by the defendant on October 29, 1942. On October 24, 1942, the Northern Farmers Cooperative Exchange signed an agreement by which it undertook to perform the terms of the lease as O'Neil had agreed to perform them, and from October 29, 1942, until the fire, the Northern Farmers Cooperative Exchange operated an elevator for the purpose of purchasing, storing and shipping grain. At the time of the fire the Exchange not only owned the building but the entire contents thereof, including all grain and the elevator machinery. In addition to the paragraph or clause exempting the Railway Company from damages because of any matter or thing done or omitted to be done by it, negligently or otherwise, the lease contained provision that:

"During the continuation of this lease, so far as the Lessee can legally control the same, all freight shipped to or from the premises hereby demised, coming from or destined to any point reached by the Lessor's railway, or its connections, shall be routed for the greatest possible distance over the National Railway System."

After assignment of the lease, the Exchange remodeled the building and constructed a chute or spout through which grain could be passed from the warehouse to a railroad car. When in use the chute extended from the warehouse to the railroad car on the adjacent track. On April 8, 1943, defendant placed a freight car alongside the elevator so that it might be loaded by the Exchange with grain from the elevator for transportation. Defendant caused a fire to be set out on its right of way near the elevator and negligently failed to keep it under control so that it spread to the car spotted near the elevator and then into the elevator, causing damage to the elevator and the grain stored in it in excess of $16,964.91. As before noted, plaintiffs had issued a joint policy of fire insurance covering the building and its contents, and having paid the loss sued defendant as subrogees of the insured. The trial court held that plaintiffs could not recover because of the provision in the lease exempting defendant from liability for it own negligence, and entered judgment dismissing plaintiffs' complaint on its merits. On appeal plaintiffs contend that the provision in the lease exempting defendant from liability for its own negligence is void as against public policy, and that the loss was caused by acts of the defendant in its capacity as a common carrier and not as a lessor.

It is generally held that a railroad company may by contract exempt itself from liability for damages to buildings or structures upon its right of way due to fires, even though such fires are attributable to its own negligence. James Quirk Milling Co. v. Minneapolis & St. L. R. Co., 98 Minn. 22, 107 N.W. 742, 116 Am.St.Rep. 336; Millers' Nat. Ins. Co. v. Minneapolis, St. P. & S. S. M. R. Co., 132 Minn. 151, 156 N.W. 117; Commercial Union Assur. Co. v. Foley Bros., 141 Minn. 258, 169 N. W. 793. Conceding this general rule, plaintiffs assert that it is not here applicable because defendant as a common carrier could not validly contract to exempt it from liability for its own negligent acts. Ordinarily a common carrier is an insurer against loss as to all property committed to it for transportation. An apparent modification of this general rule may be said to exist where a shipper is offered a choice of rates, the lower rate being conditioned upon his agreeing to a stipulated valuation of his property in case of loss even by the carrier's negligence. If, under such circumstances, he chooses the lower valuation intelligently and freely, he can not thereafter recover more than the value which he has placed upon his property. Ansaldo San Giorgio I v. Rheinstrom Bros. Co., 294 U. S. 494, 55 S.Ct. 483, 79 L.Ed. 1016; Union Pac. R. Co. v. Burke, 255 U.S. 317, 41 S.Ct. 283, 65 L.Ed. 656.

In making contracts, not in its capacity as a common carrier, but as an owner of property, a railroad company leasing such property to others is not subject to any different rule of law than that applicable to other property owners. James Quirk Milling Co. v. Minneapolis & St. L. R. Co., supra; Commercial Union Assur. Co. v. Foley Bros., supra; Northern Pac. R. Co. v. Thornton Bros. Co., 206 Minn. 193, 288 N.W. 226; Hartford Fire Ins. Co. v. Chicago, M. & St. P. R. Co., 175 U.S. 91, 20 S.Ct. 33, 44 L.Ed. 84; Santa Fe P. & P. R. Co. v. Grant Bros. Construction Co., 228 U.S. 177, 33 S.Ct. 474, 57 L.Ed. 787; New York Cent. R. Co. v. Lockwood, 84 U.S. 357, 21 L.Ed. 627; Checkley v. Illinois Cent. R. Co., 257 Ill. 491, 100 N.E. 942, 44 L.R.A.,N.S., 1127, Ann.Cas.1914A, 1202.

While a railroad is a common carrier, the strict rule with reference to its liability for the loss or damage of property entrusted to it for transportation is not applicable to all its acts or activities. In fact, text writers who treat the subject of railroads rarely include in that subject the law applicable to common carriers. The subjects are recognized by the courts and all text writers as being separate and distinct from each other. Thus, in Santa Fe P. & P. R. Co. v. Construction Co., supra 228 U.S. 177, 33 S.Ct. 477, the Supreme Court, speaking through Chief Justice Hughes, among other things, said:

"In constructing, improving, or repairing its road, and in building its extensions and branches, the railroad company is providing facilities for its service as a common carrier, but, of course, is not acting as such."

As pointed out by the trial court in the instant case, defendant's employees when they "burned over" the defendant's right of way, were engaged in maintenance work as much as if they were engaged in repairing or improving the roadbed. There was no claim for any alleged loss of grain which may have been in defendant's car, nor is there any claim that any person or concern other than the lessee had any ownership in the property destroyed.

In Checkley v. Illinois Cent. R. Co., supra, the Supreme Court of Illinois in upholding the validity of a lease quite similar in principle to the one in the instant case said 257 Ill. 491, 100 N.E. 944:

"The lease by appellee of a portion of its right of way for a warehouse does not relate to any of the duties imposed by the law upon appellee as a common carrier. The public is in no way concerned in this transaction; nor is it a matter of public interest whether the loss of the property destroyed by fire shall fall on one party, rather than on the other. The situation is entirely different between the loss of this warehouse and its contents and the loss of goods entrusted to a carrier for transportation."

It is stated in appellants' brief in effect that defendant was engaged as a common carrier in loading the grain into its car at...

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