Southern Ry. Co. v. ADM Mill. Co.

• Decision Date: 07 September 1982
• Docket Number: No. 8126SC992,8126SC992
• Citation: 58 N.C.App. 667,294 S.E.2d 750
• Court: North Carolina Court of Appeals
• Parties: SOUTHERN RAILWAY COMPANY, a Corporation v. ADM MILLING COMPANY, a Corporation.

Page 750

294 S.E.2d 750

58 N.C.App. 667

SOUTHERN RAILWAY COMPANY, a Corporation v. ADM MILLING COMPANY, a Corporation.

No. 8126SC992.

Court of Appeals of North Carolina.

Sept. 7, 1982.

Jones, Hewson & Woolard by Hunter M. Jones and Harry C. Hewson, Charlotte, for plaintiff-appellant.

Grier, Parker, Poe, Thompson, Bernstein, Gage & Preston by William E. Poe and Irvin W. Hankins, III, Charlotte, for defendant-appellee.

WHICHARD, Judge.

Plaintiff instituted this action to collect from defendant $52,987.53 which plaintiff had paid to its employee who was injured while working on a spur track serving defendant's Mecklenburg County plant. The basis of the action was an indemnity provision of contracts in which plaintiff and defendant's predecessor in title agreed on the terms and conditions for the location and operation of the spur track on which the employee was injured.

The trial court granted defendant's motion for summary judgment. Plaintiff appealed, raising as issues (1) whether the court correctly interpreted the indemnity agreement, and (2) whether it properly withheld from the jury the question of defendant's negligence.

We find that summary judgment was improperly entered, and accordingly reverse.

I.

Plaintiff and Interstate Milling Company (Interstate) entered a contract under which plaintiff agreed to relocate, reconstruct, and operate two industrial railroad tracks (spur tracks) to serve Interstate. Interstate agreed, among other things, to the following indemnity clause:

5. That it [Interstate] will indemnify and save harmless the Railroad [plaintiff] against any and all damage resulting from negligence of the party of the second part [Interstate], its servants and employees, in and about said industrial tracks and the right of way therefor ....

Subsequently the parties entered a second contract in which plaintiff agreed to construct and operate an extension to one of the two spur tracks. The second contract contained an indemnity clause identical to that in the first except that it related to the spur track extension.

Interstate thereafter deeded to defendant the property on which the spur tracks were located. It also transferred to defendant the business it had operated. Defendant continued operation of the business under the name Interstate Milling Company, a subsidiary of ADM Milling Company. Plaintiff alleged that defendant succeeded to the benefits of the spur track contracts; and that by contract, express or implied, or by operation of law, it assumed the obligations set forth in those contracts.

Lloyd L. Whitson, an employee of plaintiff, was injured on defendant's spur tracks while switching railroad cars. Plaintiff paid Whitson's medical and hospital expenses and made a compromise settlement of its potential liability to him under the Federal Employers' Liability Act, 45 U.S.C. § 51, et seq. While negotiating the settlement, plaintiff sought from defendant indemnification pursuant to the indemnity clauses of the two contracts. Defendant refused to extend any authority to plaintiff's agents in the negotiations and to consent to any reimbursement.

After settlement with Whitson plaintiff instituted this action against defendant for indemnification under the terms of the contracts. Defendant answered, denying its negligence; denying that its negligence, if any, was the proximate cause of Whitson's injuries; and asserting the affirmative defense of contributory negligence. After extensive discovery, defendant's motion for summary judgment was granted.

Plaintiff appealed.

II.

The purpose of summary judgment under G.S. 1A-1, Rule 56, is to bring litigation to an early decision on the merits, without the delay and expense of trial, where it can be readily shown that no material facts are in issue. Kessing v. Mortgage Corp., 278 N.C. 523, 534, 180 S.E.2d 823, 830 (1971). Judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that one of the parties is entitled to judgment as a matter of law. Id. See also Treadway v. Railroad Co., 53 N.C.App. 759, 762-63, 281 S.E.2d 707, 710 (1981). The court here determined, pursuant to this standard, that only a question of law on undisputed facts was in controversy; and that the question could be resolved without "the delay and expense of a trial." Id. at 533, 180 S.E.2d at 829.

III.

Plaintiff first argues that the intent of the parties to the contracts was that defendant would indemnify plaintiff against liabilities under the Federal Employers' Liability Act (FELA), and that the question of defendant's negligence under FELA standards thus should have been submitted to the jury. Under the FELA, a common carrier, including a railroad, is liable to its employees for injury or death resulting in whole or in part from the negligence of its officers, agents, or employees, or "by reason of any defect or insufficiency, due to its negligence, in its cars, engines ..., track, [or] roadbed." 45 U.S.C. § 51. What constitutes negligence under the FELA is a federal question. Urie v. Thompson, 337 U.S. 163, 174, 69 S.Ct. 1018, 1027, 93 L.Ed. 1282, 1295 (1949); see also Treadway, 53 N.C.App. at 760, 281 S.E.2d at 709. The United States Supreme Court has defined negligence as "the lack of due care under the circumstances; or the failure to do what a reasonable and prudent man would ordinarily have done under the circumstances of the situation; or doing what such a person under the existing circumstances would not have done." Tiller v. Atlantic Coast Line R. Co., 318 U.S. 54, 67, 63 S.Ct. 444, 451, 87 L.Ed. 610, 617 (1943). Although contributory negligence by an employee may diminish his damages in proportion to his negligence, it is not a defense to the action. 45 U.S.C. § 53. Further, the carrier-employer is barred from defending on the basis of assumption of risk. 45 U.S.C. § 54. The burden of establishing liability for negligence thus is considerably less imposing under the FELA than under the common law of North Carolina.

The sections of the parties' contracts which pertain to indemnification control whether defendant's potential liability is to be judged by FELA standards. A contract of indemnity should be construed to cover all losses, damages, or liabilities which reasonably appear to have been within the contemplation of the parties. 42 C.J.S., Indemnity, § 12(a), p. 579. The intent of the parties to the contract is to be ascertained from the language used, the subject matter, the end in view, the purpose sought, and the situation of the parties at the time. Lane v. Scarborough, 284 N.C. 407, 410, 200 S.E.2d 622, 624 (1973).

The contracts here do not specifically refer to the FELA. Such omission, however, has not been determinative in similar cases in other jurisdictions. In Chicago, R.I. & P.R. Co. v. Dobry Flour Mills, 211 F.2d 785 (10th Cir.), cert. denied, 348 U.S. 832, 75 S.Ct. 55, 99 L.Ed. 656 (1954), e.g., the relevant contract clause stated that the defendant agreed "to indemnify and hold harmless the Trustees for loss, damage or injury from any act or omission of the [defendant], its employees or agents." (Emphasis supplied.) The court construed "act or omission" to allow a determination of liability based upon the law making plaintiff liable to its injured employee, viz., the FELA, rather than upon defendant's common law liability. Similarly, in Steed v. Central of Georgia Ry. Co., 529 F.2d 833 (5th Cir.), cert. denied, 429 U.S. 966, 97 S.Ct. 396, 50 L.Ed.2d 334 (1976), the phrase "act or omission" in an indemnity clause was interpreted to mean liability for the indemnitor under the law which would make the railroad liable to its injured employee, again the FELA. Finally, in Georgia Ports Auth. v. Cent. of Georgia Ry., 135 Ga.App. 859, 219 S.E.2d 467 (1975), the court held that the phrase "negligence or other causes" in the indemnity clause of a contract included any of the indemnitor's wrongful or negligent acts which would impose liability upon the railroad under FELA standards as well as under common law negligence standards. The court noted that it was not necessary for the indemnity clause to refer expressly to the FELA because "[t]he parties to such an agreement are held to have known of the existence of the federal statute at the time they executed their agreement." Id. at 862, 219 S.E.2d at 470.

In Beachboard v. Railway Co., 16 N.C.App. 671, 193 S.E.2d 577 (1972), cert. denied, 283 N.C. 106, 194 S.E.2d 633 (1973), this Court reviewed an indemnity agreement identical to those here. Plaintiff there, an employee of Southern Railway Company, sued Southern for damages from injuries sustained while he was working on a side track owned by the third-party defendant, Champion Papers, Inc. Employees of Champion shoved five railroad cars onto the track where plaintiff was working. Those cars hit two cars on which plaintiff was opening the knuckles. Plaintiff was dragged beneath these cars, and the wheels severed his legs. The jury found Champion negligent; and Champion appealed, contending, inter alia, that the court should have submitted to the jury the issue of plaintiff's contributory negligence. In rejecting this contention, this Court, per Judge Parker, stated:

Southern's third-party action against Champion was not predicated upon Champion's liability to plaintiff under the general law of torts, under which plaintiff's contributory negligence would have been a defense, but upon the indemnity contract under which Champion became obligated to indemnify and save harmless Southern "against any and all damage resulting from the negligence" of Champion. The jury determined that plaintiff's injuries did result from Champion's negligence. As a consequence of that negligence, Southern became obligated to plaintiff under F.E.L.A. for its failure to furnish him a safe place to work, and...