Payne v. National Transit Co.
| Decision Date | 01 January 1921 |
| Citation | 300 F. 411 |
| Parties | PAYNE, Director General of Railroads, v. NATIONAL TRANSIT CO. |
| Court | U.S. District Court — Western District of Pennsylvania |
Albert L. Thomas and Geo. F. Davenport, both of Meadville, Pa., for plaintiff.
Edward C. Breene and Hugh C. Dorworth, both of Oil City, Pa., for defendant.
This is a motion on the part of the defendant for a new trial. The case is one of interest and importance, not only because of the amount, but also because of the legal questions involved. Briefly stated, the suit is by the Director General of Railroads to recover on a covenant of indemnity the amount of a certain judgment rendered against the plaintiff for damages caused by the destruction from fire of the plant of the Joseph Reid Gas Engine Company, through negligence in the operation of the railroad. The legal questions relied upon in support of defendant's motion are the same as those urged before the court on the trial of the case. These, during the course of the trial, were very fully argued by counsel, and carefully considered and passed upon by the court, as will appear in the court's charge to the jury.
The contract under which the plaintiff seeks to recover was between the Erie Railroad Company and the defendant, entered into in 1898, the same being made subject to the covenants contained in a former contract between the parties. Under the contract, for the full consideration, defendant was permitted to construct and maintain its pipe lines for the transportation of oil under the railroad tracks. In December 1918, the pipe line sprung a leak, from which the escaping oil spread over the railroad tracks and right of way, to and along the site of the buildings of the Gas Engine Company closely adjacent to the south line of the right of way. When the oil had been only partially removed, a switch engine while passing over the oil area, ignited the oil, and the spreading flames set fire to and burned the Gas Engine Company's plant. The latter brought suit against the Director General, who was operating the road at the time, alleging that the engine was defectively equipped and was driven over the oil area when dropping coals from the fire box, which resulted in the fire and plaintiff's loss. The defendant herein was given notice to appear and defend said action, which it failed to do, and a verdict was entered against the Director General for $183,527.02, which, after a motion for a new trial had been overruled, the Director General paid. To recover the amount of that payment, with interest, this suit is brought.
The covenant of the contract sued on is as follows:
'Said party of the second part does further agree to indemnify and save harmless the party of the first part from and against all claims, suits, damages, costs, losses, and expenses, in any manner resulting from or arising out of the laying, maintenance, renewal, repair, use, or existence of the said pipe (whether heretofore or hereafter laid), including the breaking of the same or the leaking of oil from the same.'
The first question raised at the trial, and urged on this motion, is: Does the indemnifying covenant extend to damages resulting from the negligence of the indemnitee? It is clear that this is an indemnifying covenant, and while it does not in express words indemnify against the negligence of the indemnitee, its agents and employees, it clearly does indemnify the party of the first part 'from and against all claims, damages, losses,' etc., 'in any manner resulting from or arising out of the laying, maintenance, renewal, repair, use, or existence of said pipe, including the breaking of the same or the leaking of oil from the same.'
The true intent of the contract must be determined in the light of the circumstances in which the parties were placed when the contract was made, and the evident purpose they had in view. The railroad was not contracting in its capacity as a common carrier. The parties stood to each other on an independent footing. The railroad was not bound to give its consent to the laying of the line under its tracks. It could grant or withhold its consent, as it chose, and hence had the right to impose in the contract any reasonable conditions upon the grant. It is reasonably clear that it was the very purpose of the covenant to leave the railroad company in the same position as to liability as it occupied before the right or easement was granted, and appropriate words were used expressive of that purpose. The parties clearly contemplated that so dangerous and inflammable a product as oil, conveyed under the tracks, might by defective piping, breaks, or leakage reach or flood the tracks, and in the operation of trains endanger the lives or property being transported thereover. It was from such a condition, not unnaturally occurring, that the railroad company was seeking indemnity from damages and loss in any manner arising. The parties must be presumed to have realized the danger naturally arising to the railroad company from the breakage or leakage of the pipe line, and the defendant by its contract took the grant with knowledge of the dangers incident to the operation of the railroad, and expressly undertook to indemnify the railroad from any loss or damage it might sustain from any cause whatsoever arising out of the laying, construction and maintenance of the line, or the leakage of oil therefrom.
It is true that the courts have said that, in order to indemnify against the indemnitee's negligence, the language must be clear and unequivocal; but I do not understand that the indemnifying contract must contain express words against negligence. If it is clear, from the language used, that it was intended to cover losses arising from the negligence of the indemnitee, this is sufficient. Both parties knew, and must be presumed to have contemplated, that the human element enters into the operation of trains. The negligence, in a greater or less degree, of the servants of a common carrier, always constitutes an element of risk. Railroad tracks flooded with oil necessarily produce a dangerous condition, which the railroad company sought by its contract to overcome. Confronted by such situation, railroad employees would have to exercise their judgment, which might be good or might be defective, with the result that they might or might not be chargeable with negligence. It was just as essential that the railroad company be protected from the dangers and damage resulting from error of judgment or negligent action of its employees, when confronted with a hazardous situation caused by the breaking of the pipe line or the leakage of oil from the line, as it was to be protected from the negligence of the oil company. The true purpose for which the indemnity covenant was executed should be determined by the general conditions likely to arise, and the hazardous loss naturally incident to the operation of the road by the railroad company. To hold that the covenant does not indemnify against the negligence of the plaintiff's servants would be practically to destroy it as a covenant of indemnity. The servants of the plaintiff did not produce the hazardous situation. That was caused by the transit company, without the default of the plaintiff, either directly or indirectly. The negligence chargeable against plaintiff is in pursuing a certain course of action when confronted with that situation.
Keeping in mind that contracts of indemnity must receive a reasonable construction, so as to carry out,...
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