Missouri Pacific Railroad Co. v. Arkansas Oak Flooring Co.

• Decision Date: 12 November 1970
• Docket Number: No. 19932,19943.,19932
• Citation: 434 F.2d 575
• Parties: MISSOURI PACIFIC RAILROAD COMPANY, Appellee, v. ARKANSAS OAK FLOORING COMPANY, Appellant. MISSOURI PACIFIC RAILROAD COMPANY, Appellant, v. ARKANSAS OAK FLOORING COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

434 F.2d 575 (1970)

MISSOURI PACIFIC RAILROAD COMPANY, Appellee, v. ARKANSAS OAK FLOORING COMPANY, Appellant.

MISSOURI PACIFIC RAILROAD COMPANY, Appellant, v. ARKANSAS OAK FLOORING COMPANY, Appellee.

Nos. 19932, 19943.

United States Court of Appeals, Eighth Circuit.

November 12, 1970.

W. A. Eldredge, Jr., Little Rock, Ark., for Missouri Pacific R. Co.

Robert S. Linsey, Little Rock, Ark., for Arkansas Oak Flooring Co.

Before VOGEL, GIBSON and BRIGHT, Circuit Judges.

BRIGHT, Circuit Judge.

In this diversity case governed by Arkansas law, we are called upon to revisit circumstances similar to those before this court in Anthony v. Louisiana & Arkansas Railway Company, 316 F.2d 858 (8th Cir.), cert. denied 375 U.S. 830, 84 S.Ct. 74, 11 L.Ed.2d 61 (1963). As in Anthony, a railroad brakeman riding outside a freight car on a spur track struck his head against a loading dock constructed and maintained by an Arkansas lumber company. In both cases, the brakeman sustained severe personal injuries, here loss of an arm when he fell to the ground and rolled under a moving railroad car. In both cases, an agreement between the railroad and the lumber company required a clearance between the track and the dock greater than actually existed. In each case, the brakeman asserted a claim for damages against the railroad under the Federal Employees' Liability Act (FELA) and the railroad avoided litigation by settling out-of-court.

As in Anthony, here the railroad-appellee (Missouri Pacific) sought full indemnity from the lumber company-appellant (Oak Flooring) for the amount of the settlement. Basing its decision on Anthony, the federal district court, upon receiving a special verdict,¹ granted the railroad full indemnity. Oak Flooring appeals from the judgment, contending that the district court failed to consider certain issues, the resolution of which could have barred or reduced the amount of Missouri Pacific's indemnity claim.

We first consider appellant's principal claim that the district court erred in rejecting as immaterial evidence which tended to show acquiescence by the railroad in the continuation of the obstructed clearance between the track and the loading dock. Since in Anthony this court rejected the defense of acquiescence urged by the lumber company as a bar to indemnity, we examine and compare the pertinent provisions of the agreement in Anthony with those present here.

In Anthony, the lumber company agreed to refrain from placing or keeping any obstruction within eight and one-half feet of the center-line of the track adjacent to its premises. 316 F.2d at 862. Similarly, here Oak Flooring, incident to a lease of railroad property located adjacent to a spur track, agreed to refrain from "the erection or maintenance of any obstruction * * * at a distance less than eight and one-half feet from the center-line, of any track located on or adjacent to Premises * * *."

In Anthony, the railroad obtained a covenant from the lumber company, as shipper, to indemnify and hold harmless the carrier "from loss, damage or injury from any act or omission of Shipper * * * to the person or property of the parties hereto and their employees and to the persons or property of any other person or corporation, while on or about Switch. * * *" 316 F.2d at 863. Here, Oak Flooring, as "Lessee", undertook "to indemnify and hold harmless the Carrier against any sums which Carrier may be required to pay in the way of damages * * * and other expenses by reason of Lessee's failure to observe the clearances as herein provided." In a second indemnity clause, Oak Flooring agreed "to save and keep harmless the Carrier from all claims growing out of any default of Lessee", and in a third, "to indemnify and hold harmless Carrier against all claims * * * arising out of injury to * * * any person, * * * while on or about Premises, when such injury * * * results from any act or omission of Lessee * * *."

One substantial difference exists between the two agreements under comparison. In Anthony, the lumber company specifically agreed, as part of its obligation to keep the track area clear of obstruction that:

Carrier\'s knowledge of such obstructions and its continued operation on Switch shall not be a waiver of this covenant, nor of Carrier\'s right to recover for such damages to persons or property as may result therefrom. 316 F.2d at 862-863.

No similar non-waiver provision was agreed to by Oak Flooring in this case.

In view of this difference, we now consider Oak Flooring's offer to prove at trial, through an exchange of letters between the parties,² that the railroad had acquiesced in the encroachment of the loading dock upon the area near the track which, according to the agreement, was to be left unobstructed. The district court ruled this evidence inadmissible. We disagree with this ruling.

The doctrine of acquiescence as a defense to a claim for indemnity deserves our brief comment. The Restatement of Restitution provides:

§ 76. General Rule.

A person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity from the other, unless the payor is barred by the wrongful nature of his conduct.

§ 95. Person Responsible for a Dangerous Condition.

Where a person has become liable with another for harm caused to a third person because of his negligent failure to make safe a dangerous condition of land or chattels, which was created by the misconduct of the other or which, as between the two, it was the other\'s duty to make safe, he is entitled to restitution from the other for expenditures properly made in the discharge of such liability, unless after discovery of the danger, he acquiesced in the continuation of the condition.

In Anthony, we recognized these rules as governing the obligations of parties to an Arkansas indemnity contract, but we held the rule of acquiescence to be inapplicable in that case because the parties had evidenced an agreement by the above-quoted non-waiver clause that "such indemnity be operative despite the fact that the railroad continued to use the tracks with knowledge of the obstruction." 316 F.2d at 865.

Here, Missouri Pacific relies on two clauses in the agreement to establish a non-waiver intent as in Anthony, referring specifically to paragraph 3(b), which provides that Oak Flooring agrees "to waive all right to question the validity of this lease or any of the terms or provisions hereof, or the right or power of the Carrier to execute and enforce the same", and paragraph 4, which provides in part that: "Carrier or Lessee may waive any default at any time of the other without affecting, or impairing any right arising from any subsequent default."

The district court construed paragraph 3(b) as equivalent in operative effect to the specific non-waiver provision present in Anthony. We reject such broad construction as unjustified. Read literally, paragraph 3(b) refers only to the legality of the agreement and the powers of Missouri Pacific to execute and enforce its provisions. The defense of acquiescence, on the other hand, rests for its vitality on misconduct by the party seeking indemnification.

The generally recognized rule is that an indemnity agreement should not be construed to permit the indemnitee to recover for its own negligence "unless the court is firmly convinced that such an interpretation reflects the intention of the parties." United States v. Seckinger, 397 U.S. 203, 211, 90 S.Ct. 880, 885, 25 L.Ed.2d 224 (1970). The Supreme Court of Arkansas recently stated:

The intention of * * * the indemnitor to so obligate itself must be expressed in clear and unequivocal terms and to the extent that no other meaning can be ascribed. Paul Hardeman, Inc. v. J. I. Hass Company, 439 S.W.2d 281, 285 (Ark.1969).

We cannot conclude that paragraph 3(b) expresses with any degree of clarity an intent by Oak Flooring to indemnify Missouri Pacific for the latter's negligent conduct amounting to acquiescence. We feel this construction is in accord with the general policy, followed in Arkansas, that in case of doubt or ambiguity, a contract is to be construed against the party who prepared it, in this case Missouri Pacific. Arkansas Power & Light Co. v. Murry, 331 S.W.2d 98, 100 (Ark.1960).

The language of paragraph 4 likewise affords Missouri Pacific no comfort. In Anthony, this court characterized a nearly identical provision as affording "little additional aid in the construction problem." 316 F.2d at 866.

In Anthony, the railroad and the lumber company contracted against the doctrine of acquiescence as a defense to indemnity. In this case, they did not. This difference in the terms of the agreement dictates a difference in results. We therefore hold that acquiescence, if established by the evidence, will constitute a defense to Missouri Pacific's claim for full idemnity. In Anthony, we warned that the provisions of this type of contract vary considerably and that "the phraseology used has an important bearing upon the construction of the contract including the indemnity provisions." 316 F.2d at 864. The rationale of Anthony, although not its precise holding supports our determination.

The Third Circuit, in Pennsylvania Railroad v. Erie Avenue Warehouse Co., 302 F.2d 843 (3d Cir. 1962), a case involving circumstances including contract clauses very similar to those present here, applied the defense of acquiescence to bar the railroad's claim for full indemnity. The court said:

We think the conclusion is required by the present record that the railroad had been adequately altered to the dangerous condition which caused this accident long before the mishap occurred. Yet, it is not disputed that the railroad neither took any corrective action itself nor called upon Erie to do so.

* * * * * *

In these circumstances, we think the evidence compels the conclusion that the conduct of the

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