Northern Pacific Railway Co. v.McClure

• Decision Date: 14 November 1899
• Citation: 81 N.W. 52,9 N.D. 73
• Court: North Dakota Supreme Court

81 N.W. 52

9 N.D. 73

NORTHERN PACIFIC RAILWAY CO. v. WM. A. MCCLURE, et al

Supreme Court of North Dakota

November 14, 1899

Appeal from District Court, Cass County; Pollock, J.

Action by the Northern Pacific Railway Company against William A McClure and others to recover indemnity, under a lease, for liability for property destroyed by fire. From a judgment in favor of plaintiff, on an order overruling a demurrer to the complaint, defendants appeal.

Affirmed.

Demurrer overruled. Judgment affirmed.

Newman Spalding & Stambaugh, for appellant.

There is no privity of contract between the defendants and the Northern Pacific Railway Company, and no privity of estate which will allow the company to recover any loss which it has sustained. The covenant does not run with the land. § § 3784, 3785, 3786 and 3787, Rev. Codes; Tayor's L. & T. § 260; 1 Washb. Real Prop. Sec. 4, Subd. 10 and 11; Newman v. Wells, 17 Wend. 145; Morse v Garner, 47 Am. Dec. 565; Countryman v. Dick, 13 Abb. New Cases, 114, n; Carpenter v. Ins. Co., 15 Pet. 503; Columbia Ins. Co. v. Lawrence, 10 Pet. 572. The provision in the writing is a contract of insurance, § § 4441 and 4487, Rev. Codes, and a provision as a contract of insurance or indemnity does not run with the land, but is a strictly personal covenant. Dunlap v. Avery, 89 N.Y. 599; Reid v. McCrum, 91 N.Y. 412; Hursha v. Reid, 45 N.Y. 419; Scott v. McMillan, 76 N.Y. 141; Cromwell v. Ins. Co., 44 N.Y. 47; Hastings v. Ins. Co., 73 N.Y. 152; Sec. 4489, Rev. Codes.

Ball, Watson & Maclay, for respondent.

All the covenants and agreements which were wrapped up and involved in the use of the premises and the purposes for which they were leased and which were part of the consideration upon which the lease was based, became operative in favor of the railway company upon the attornment to it by the lessees. Abbott's Law Dict. Subj. "Attornment"; Cornish v. Searell, 8 B. & C. 471; Doe v. Smith, 8 Ad. & E. 255; Austin v. Ahern, 61 N.Y. 6 & 15. Upon the reorganization of a corporation the new corporation may succeed to the rights of its predecessor. In such case an assignment is a matter of form and not of substance. New York Bank Note Co. v. Bank Note Co., 50 N.Y.S. 1093-1099. The covenant runs with the land and is operative in favor of every owner of the railroad while the lease remains in existence. Vyuyan v. Arthur, 1 B. & C. 410; Dunbar v. Jumper, 2 Yeates, 74; Brandford v. Blair, 4 A. 218; Railway v. Fisher, 24 N.E. 756; Bronson v. Coffin, 108 Mass. 175; Railway v. Bosworth, 14 N.E. 533; State v. McPherson, 40 A. 630; Williams v. Earle, L. R. 3 Q. B. 200; Tatem v. Chaplin, 2 H. Bl. 133; Torrey v. Wallace, 3 Cush. 442; Savage v. Mason, 3 Cush. 500; Aiken v. Railway, 26 Barb. 289; Tiedeman on Real Property, § 190; Van Renssalaer v. Smith, 27 Barb. 146-174. Whether the covenant is such as would run with the land or not it vested in the plaintiff as the assignee of the railroad company by virtue of sections 3366 and 3367, Revised Codes. Under this statute these covenants will be construed as running with the land. Winterfield v. Stauss, 24 Wis. 394-403; State v. McPherson, 40 A. 630; State v. Idler, 24 A. 554; Barnes v. Trust Co. 48 N.E. 31.

OPINION

YOUNG, J.

In this case a demurrer to the complaint was interposed by defendants' counsel upon the ground that it does not state facts sufficient to constitute a cause of action. The demurrer was overruled by the trial court, and, defendants having elected to stand upon their demurrer, judgment was ordered and entered for the plaintiff for the relief demanded. The defendants appeal from the judgment, and submit for review the correctness of the court's order overruling the demurrer, and that question only. If that ruling is sustained, the judgment must be affirmed. If not, it will be reversed. By interposing the demurrer, the defendants admit the truth of all facts alleged in the complaint which are well pleaded, but challenge their sufficiency in law to create a cause of action against them in favor of the plaintiff. The material facts so admitted by the demurrer are concisely stated in the brief of respondent's counsel, from which we will quote. They are these: "On October 1, 1892, the defendants leased from the Northern Pacific Railroad Company part of its right of way at Richardton, North Dakota, adjacent to its tracks, for a term of five years. Such leasing was for the benefit and advantage of both parties, through the facilities furnished to defendants for carrying on their business of storing and shipping merchandise; and to the railroad company, by reason of the increased traffic acquired thereby for its road. Said lease was given in consideration of a nominal rent, and in further consideration of the covenant, among others, on the part of the lessees, that they would and did assume all risks of loss or damage to any property upon the leased premises, and that they would save harmless the lessor from all damages or claims for losses or injury suffered to said property, by whomsoever claimed. Afterwards, and during the continuance of the lease, said Northern Pacific Railroad Company was reorganized under the name of the plaintiff, Northern Pacific Railway Company; and all the property of the railroad company, including the land and lease in question, was on the 18th day of August, 1896, conveyed and transferred to the Northern Pacific Railway Company. Thereupon said plaintiff railway company operated said line of railroad, and the control and management of said road thereafter was in the same hands, substantially, as before the reorganization; and the personnel of the operating and engineering departments, and the method of its operation and management, were thereafter substantially the same as they had been while the road was operated under the name of the Northern Pacific Railroad Company. The lessees consented to the transfer and conveyance from the railroad company to the railway company, and attorned to the plaintiff railway company as their landlord; and after such transfer they accepted and retained all the rights, benefits, and privileges conferred upon them by the lease, as lessees thereunder; and the lease was, by its express terms, binding upon the railway company, as the successor and assign of the railroad company. * * * The lessees permitted the McCormick Harvesting Machine Company to store their property upon the leased premises, and on April 26, 1897, during the continuance of the lease, such property was accidently destroyed by fire. The machine company sued the plaintiff to recover damages for the destruction of said property, and the plaintiff duly notified and requested the defendant lessees to defend the action, but they failed to do so. The plaintiff thereupon defended the action, and did all in its power to protect its own rights and those of the defendants; but judgment was duly recovered against it, and paid by it to the machine company."

This action is brought, upon the indemnity covenant in the lease from the Northern Pacific Railroad Company to the defendants, to recover the amount disbursed by plaintiff in paying the judgment referred to; also, the costs incurred in defending the action wherein the judgment was rendered. In the lease in question the Northern Pacific Railroad Company is named as the first party, and the defendants as second parties. The portion of said lease upon which plaintiff relies is in the following language: "The said parties of the second part shall, and do hereby, assume all risks of loss, damage, or destruction of any property, building or contents, coal, lumber, or material, that may be upon, or in proximity to, the grounds included in this lease, by the parties of the second part or by any other party, occasioned by fire or sparks from locomotive engines, or other cause, or by neglect, carelessness, or misconduct of any person in the employment or service of the said party of the first part; it being the intent hereof that the said parties of the second part shall and do release, forever discharge, save and hold harmless, the said party of the first part from all damages and claims for losses or injury suffered or sustained, or that may be suffered or sustained, to said property, or to any other property on or near said demised premises." No question is raised as to the validity of the contract of lease as a whole, or as to the foregoing covenant. On the contrary, counsel for defendants expressly concede in their brief that the agreement of defendants to save and hold the lessor harmless is a binding agreement, and that the lessor might have successfully maintained an action against them for recovery thereon for a breach of the same. But it is contended that this covenant did not pass to the plaintiff, as the assign and grantee of the lessor, and that it cannot, therefore, recover thereon. Defendant's whole contention is based upon the last proposition. Did the covenant to save the lessor harmless against claims for damages for losses of property upon the demised premises pass to the new corporation, the Northern Pacific Railway Company, the plaintiff in this action? If this covenant of the lessees did pass to the plaintiff by the transfer of the lease to it by the lessor, or by the grant to it of the right of way which is the subject of the lease, then it is patent that plaintiff has stated a cause of action entitling it to the relief demanded; for it is sufficiently alleged that it has suffered such a loss as entitles it to a recovery under the covenant referred to. The loss by fire occurred about eight months after the transfer of the land and lease by the old corporation to the plaintiff.

At early common law a lease was considered like any other agreement or chose in action, and was not...