Rutter v. Arlington Park Jockey Club

• Decision Date: 04 February 1975
• Docket Number: No. 74--1022,74--1022
• Parties: Eugene J. RUTTER et al., Plaintiffs, Counter-Defendants, Appellees v. ARLINGTON PARK JOCKEY CLUB et al., Defendant, Counter-Plaintiff, Appellant. ARLINGTON PARK JOCKEY CLUB, Third-Party Plaintiff, Appellant, v. Tracey BOUGAN, Third-Party Defendant, Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1065

510 F.2d 1065

Eugene J. RUTTER et al., Plaintiffs, Counter-Defendants, Appellees v. ARLINGTON PARK JOCKEY CLUB et al., Defendant,

Counter-Plaintiff, Appellant.

ARLINGTON PARK JOCKEY CLUB, Third-Party Plaintiff, Appellant, v. Tracey BOUGAN, Third-Party Defendant, Appellee.

No. 74--1022.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 20, 1974.

Decided Feb. 4, 1975.

Gary M. Elden, Chicago, Ill., for appellant.

Daniel Karlin, Joseph B. Lederleitner, Chicago, Ill., for appellees.

Before HASTINGS, Senior Circuit Judge, and STEVENS and SPRECHER, Circuit Judges.

HASTINGS, Senior Circuit Judge.

This is an appeal from a judgment of the district court, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, 28 U.S.C., ¹ dismissing defendants' counterclaim Plaintiffs were the owners of five racing horses which were brought to the Arlington Park Race Track owned by the Arlington Park Jockey Club (Club), by plaintiffs' horse trainer, Tracey Bougan, in connection with a race. In order to secure stables for the horses, Bougan signed, as the applicant, a '1971 Stall Application,' which is included as an appendix to this opinion. A note under the signature stated that a trainer signing the application represented that his signature was authorized by and was on behalf of the horse owners. The application stated that in consideration for the Club's provision of certain facilities and services to the applicant without charge, including 'fire and police protection,' the applicant agreed that the Club would assume 'no responsibility for loss or damage by fire . . . to . . . animals . . . located on the Premises.' The application further stated that the Club was free from liability 'whether or not such injury, loss or damage is caused by the negligent acts or omissions' of the Club, its employees or agents. The applicant also agreed to indemnify the Club from any liability for damage to the applicant's animals in connection with the use of the Club's property. On June 3, 1971, the five horses were killed in a barn fire.

and third-party complaint. We reverse and remand to the district court with directions to reinstate the counterclaim and third-party complaint.

Plaintiffs brought an action against the Club for damages in the amount of $310,500 for the loss of the horses, alleging that the Club had been negligent in maintaining a fire hazard and in failing to provide adequate fire alarms and fire fighting equipment. Jurisdiction is based on diversity of citizenship and the law of Illinois is controlling.

The Club filed a third-party complaint against Bougan, alleging that if he did not have authority to sign the application as agent for the plaintiffs then he was personally liable for whatever the plaintiffs might recover from the Club. The Club also filed a counterclaim against the plaintiffs alleging that they were bound by Bougan's actions and therefore required to indemnify the Club from any judgment awarded to the plaintiffs.

Plaintiffs and the Club each moved for summary judgment on the Club's affirmative defense that the stall application exculpated it from liability for the loss of the horses. The district court granted the plaintiffs' motion for summary judgment and denied the Club's motion. The court reasoned that since the Club had undertaken to provide fire protection, it was not clear that the intent of the agreement was to put the entire risk of fire loss on the plaintiffs. The court dismissed the Club's third-party complaint and counterclaim, sua sponte, on the grounds that they were dependent upon the validity of the exculpation and indemnification provisions. The court granted the Club's motion for a finding under Rule 54(b) of the Federal Rules of Civil Procedure that the two dismissals were immediately appealable. Thus, this is an appeal only from the dismissals of the third-party claim and counterclaim. However, because those dismissals were based on the same question of law as the partial summary judgment, the issue here is the same.

The question is whether, under Illinois law, a contract which provides for fire protection, but which also provides for indemnification and exculpation of the promisor from liability for fire losses, even if due to its negligence, is effective to free the promisor from liability for damages caused by fire.

Under Illinois law, courts will enforce contractual clauses exampting a party from liability for its own negligence, if it is clear from the contract that the parties' intent was to shift the risk of loss, 'unless (1) it would be against the settled public policy of the State to do so, or (2) there is something in the social relationship of the parties (I)n Illinois, at least when contracts between parties of relatively equal bargaining strength are being construed, the risk that a party will be guilty of negligence is treated like any other commercial risk that may cause harm to the other party to a commercial transaction. In the evaluation of foreseeable commercial risks, Illinois seems to attach greater importance to the commercial interest in certainty than to the policy of deterring negligence. Gates Rubber Co. v. USM Corp., 7 Cir. 508 F.2d 603, 614 (1975) (Footnote omitted). ²

militating against upholding the agreement.' Jackson v. First National Bank, 415 Ill. 453, 460, 114 N.E.2d 721, 725 (1953). Our court recently reviewed the state law on this question and said:

Although there are a number of Illinois cases construing exculpatory clauses, a recent decision on the subject by the Illinois Supreme Court suggests that reference to those cases will not be useful in determining the parties' intent in a particular case. The court said:

We have examined the authorities cited by the parties . . . and conclude that the contractual provisions involved are so varied that each must stand on its own language and little is to be gained by an attempt to analyze, distinguish or reconcile the decisions. The only guidance afforded is found in the accepted rule of interpretation which requires that the agreement be given a fair and reasonable interpretation based upon a consideration of all of its language and provisions. Tatar v. Maxon Construction Co., 54 Ill.2d 64, 67, 294 N.E.2d 272, 273--274 (1973).

In the instant case, the language is explicit that the Club is not to be liable for fire losses due to its negligence. The question is whether, as the district court suggested, the fact that the Club agreed to provide fire protection somehow makes this otherwise explicit clause ambiguous or inconsistent.

On this question the Illinois law is also clear. The courts have repeatedly upheld exculpatory clauses relieving a party from liability for negligence in performing a contractual obligation. For example, in Morrow v. Auto Championship Racing Association, Inc., 8 Ill.App.3d 682, 291 N.Ed.2d 30 (1972), the defendant contracted to permit the plaintiff to participate in the defendant's stock car race. The plaintiff signed an agreement releasing the defendant from all liability for any injury sustained at the race track. While the plaintiff was in the pits working on his car, another car in a race went out of control and careened into the pit and seriously injured him. Plaintiff sued the defendant for damages claiming negligence in conducting races at an unsafe track. The appellate court reversed a judgment for the plaintiff and held that the release was a bar to the plaintiff's suit.

Similarly, in Owen v. Vic Tanny's Enterprises, 48 Ill.App.2d 344, 199 N.E.2d 280 (1964), an exculpatory clause relieving defendant from liability for personal injuries contained in a gymnasium membership contract was held to bar a suit by a member who had been injured in a fall, allegedly due to the negligent maintenance of the floor adjacent to the swimming pool. See also Bers v. Chicago Health Clubs, Inc., 11 Ill.App.3d 590, 297 N.E.2d 360 (1973) (abstract only).

Further, in Halperin v. Darling & Co., 80 IllApp.2d 353, 225 N.E.2d 92 (1967), the Illinois court said, in dicta, that if a contract clearly so stated, a party could indemnify itself for damages arising out of its own negligence in performing a service it was contractually obligated to provide. In that case a lessor of a truck In the instant case the broad exculpatory language of the stall application expressly included loss or damage by fire to animals whether or not caused by the Club's negligent acts or omissions to act. When there is such clear contractual language expressing the intent of the parties Illinois courts will not abrogate it. This was a contract between businessmen and it reflected good business judgment to place the risk of loss upon the party who could least expensively insure against it. It is unlikely that the Club would provide stable facilities free of charge if by doing so it incurred liability for damage to horses of substantial but unknown value. The cost of insurance would be greater for the Club than for the horse owners because the Club could not accurately predict the number and value of the horses that would be housed in its facilities from time to time.

agreed to maintain the truck and the lessee agreed to hold the lessor harmless from any liability arising from operation of the truck. The truck was involved in a collision when its brakes, allegedly negligently maintained, failed. The court held that the lessor was only free from damages arising from operation of the truck and not from maintenance. The court further stated that if the lessor had included damages arising from maintenance in the exculpatory clause it would have succeeded in being free from liability for the collision.

The district court and plaintiffs cited Shelby Mutual Insurance Co. v. City of Grand Rapids, 6 Mich.App. 95, 148 N.W.2d 260 (1967), which held that a fire protection clause vitiated an exculpatory clause. This case is not, of course, an expression of Illinois law and, in our judgment,...