Roberts v. Consolidated Rail Corp.
| Decision Date | 26 December 1989 |
| Docket Number | No. 176,D,176 |
| Citation | 893 F.2d 21 |
| Parties | Wallace N. ROBERTS, Alfred L. Terrille, and Costa A. Michalakis, Plaintiffs-Appellees, v. CONSOLIDATED RAIL CORPORATION, Defendant and Third-Party Plaintiff-Appellee, Kurt and Susan Nusbaum, individually and d/b/a Nusbaum Excavating Co. and/or Nusbaum Contracting Co., and Hamilton Industrial Corporation, Third-Party Defendants, Kurt and Susan Nusbaum, individually and d/b/a Nusbaum Excavating Co. and/or Nusbaum Contracting Co., Third-Party Defendants-Appellees, Hamilton Industrial Corporation, Third-Party Defendant-Appellant. ocket 89-7296. |
| Court | U.S. Court of Appeals — Second Circuit |
Robert M. Cohen, Ballston Lake, N.Y., for third-party defendant-appellant, Hamilton Indus. Corp.
Scott H. Barbour, McNamee, Lochner, Titus & Williams, P.C., Albany, N.Y., for third-party plaintiff-appellee, Consol. Rail Corp.
Richard C. Roxin (Michael J. Smith, Roemer and Featherstonhaugh, P.C., Albany Collins, Collins & DiNardo, Buffalo, N.Y., for appellee, Wallace N. Roberts.
N.Y., of counsel), for third-party defendants-appellees, Kurt and Susan Nusbaum.
McClung, Peters & Simon, Albany, N.Y., for appellee, Alfred L. Terrille.
Graham, Campaign & McCarthy, New York City, for appellee, Costa A. Michalakis.
Before OAKES, Chief Judge, and MINER and MAHONEY, Circuit Judges.
Hamilton Industrial Corporation ("Hamilton") appeals judgments of the United States District Court for the Northern District of New York, Lee P. Gagliardi, Judge, ordering Hamilton to indemnify the Consolidated Rail Corporation ("Conrail") for all sums paid by Conrail to its employees as a result of a collision between a Conrail train and a road grader operated by an independent contractor performing work at Hamilton's plant, and adjudging Hamilton 10% liable to Conrail's employees for the accident, pursuant to a jury verdict. We affirm the judgments below.
On December 13, 1984, a Conrail train collided with a road grader operated by Kurt Nusbaum near Castleton, New York, at a private railroad crossing which provided the exclusive means of access to Hamilton's plant. Nusbaum was an independent contractor on his way to perform construction work at the plant when his road grader stalled on the railroad tracks. Three of Conrail's employees suffered injuries from the collision and filed separate suits in January 1985 against Conrail under the Federal Employers' Liability Act, 45 U.S.C. Sec. 51 et seq. (1982). In each action, Conrail filed third-party claims against Nusbaum and Hamilton, alleging that their negligence proximately caused the injuries. The injured employees thereafter added claims against Nusbaum and Hamilton in their complaints, and the three suits were consolidated for trial. The jury returned verdicts totaling $3,050,000 in favor of the three plaintiffs, and apportioned liability in the amount of 50% to Conrail, 40% to Nusbaum, and 10% to Hamilton.
After trial, Conrail moved for an order requiring Hamilton to indemnify Conrail for all damages, costs, and sums paid by Conrail as a result of the accident. 1 Conrail based its claim for indemnification on an agreement executed in 1945 by Hamilton's and Conrail's predecessors which allowed Hamilton's predecessor ("the plant owner") to use an existing driveway leading from the main road to its plant via the crossing of the railroad tracks at grade. According to that agreement, the plant owner paid to Conrail's predecessor ("the Railroad") an annual fee of $10 for use of the crossing and agreed to "indemnify and save harmless" the Railroad "of and from all damages and claims for damages, demands, suits, recoveries, judgments or executions" made, brought, or recovered on account of injury or damage to the Railroad's "agents, servants or passengers" resulting from the plant owner's use of the crossing. In a 1981 letter, Hamilton and Conrail declared themselves the successors to the parties who executed the 1945 agreement, assumed the obligations of their predecessors memorialized in that agreement, and increased to $200 the annual rental fee for use of the crossing.
The district court granted Conrail's post-trial motion for indemnification based on the 1945 agreement. Hamilton appeals this holding, arguing that the district court wrongfully looked to the parties' obligations under the 1945 agreement rather than under a revised crossing agreement executed in 1986. In the alternative, Hamilton claims that indemnifying Conrail for Conrail's own partial negligence was not within the terms of the 1945 agreement, and that any agreement for indemnification in this case is void for public policy reasons.
Hamilton furthermore appeals its 10% share of liability for the accident apportioned by the jury.
Hamilton alleges that the district court erred in applying the terms of the 1945 agreement. Acknowledging that the parties in 1981 assumed the obligations of their predecessors with respect to that agreement, Hamilton nevertheless claims that the district court should have looked to the provisions of the revised crossing agreement executed on October 13, 1986, by Hamilton, the Village of Castleton-on-Hudson ("Village"), and Conrail subsequent to initiation of this action but nearly two years before trial. 2
In the 1986 agreement, Hamilton and the Village (collectively "the Licensee") agreed to indemnify the Railroad for any losses and claims made in connection with their use of the crossing, including claims for damages to the Railroad's "employees, patrons, or licensees, ... whether attributable in whole or in part to the fault, failure or negligence of the Railroad, or otherwise." The new agreement was not to become effective until the Licensee either purchased public liability insurance and contractual liability insurance in limits of not less than $3 million, which were to cover all liabilities assumed by the Licensee pursuant to the agreement, or else paid Conrail an additional $1,000 a year so as to enable Conrail to purchase such insurance. The agreement provided that should the Licensee exercise the latter option, its "obligation to indemnify the Railroad from damages resulting from or arising out of the Railroad's fault, failure or negligence shall be obviated and set aside up to an amount of Three Million Dollars." Having chosen to pay the additional fee to Conrail rather than purchasing the insurance itself, Hamilton argues on appeal that its duty to indemnify Conrail, if any, for the prior accident must be set aside up to an amount of $3 million.
By its terms, the 1986 agreement superseded and cancelled the 1945 agreement as extended by the 1981 letter "except as to any payments, obligations or liabilities already accrued and due by the Licensee to the Railroad thereunder." The determination of which agreement governs the 1984 accident, therefore, hinges upon whether we construe the obligations or liabilities for the 1984 accident as having accrued prior to the effective date of the 1986 agreement.
Absent an ambiguity in a written contract, courts will not look to the underlying intent of the parties in executing the contract. See American Home Prods. Corp. v. Liberty Mut. Ins. Co., 748 F.2d 760, 765 (2d Cir.1984) (applying New York law). A provision is ambiguous where a natural and reasonable reading of its language allows for two or more possible meanings. See Kemelhor v. Penthouse Int'l, Ltd., 689 F.Supp. 205, 212 (S.D.N.Y.1988), aff'd, 873 F.2d 1435 (2d Cir.1989). In such cases, courts look to the acts and circumstances surrounding execution of the ambiguous term to ascertain the parties' intent. See Bray Terminals, Inc. v. Grand Union Co., 74 A.D.2d 965, 966, 425 N.Y.S.2d 886, 888 (3d Dep't 1980).
Here, we hold that the relevant clause of the 1986 agreement is reasonably susceptible to at least two different readings. We can construe the clause as stating that the 1986 agreement does not apply to accidents that had already occurred and from which "obligations or liabilities" had accrued, or that the 1986 agreement excepts from coverage only past adjudications of liability against Conrail. Under the former reading, the 1986 agreement would not govern this case, since the accident in 1984 had already occurred and "obligations" to indemnify had thereby accrued under the latter reading, the 1986 agreement would apply, since there was no adjudication of liability for which indemnification was due until December 1988, and since the conventional wisdom is that a cause of action for indemnity does not arise until at least judgment is rendered against the indemnitee, if not until actual payment of the judgment. See Bay Ridge Air Rights, Inc. v. State, 44 N.Y.2d 49, 54-56, 404 N.Y.S.2d 73, 75-76, 375 N.E.2d 29, 31-32 (1978).
To choose between the possible interpretations, we must look to the intent of the parties, as evidenced by the circumstances surrounding execution of the contract. Here, in reducing Hamilton's...
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