The Honorable Stephen M. Reasoner, Chief United States District Judge for the 1

Eastern District of Arkansas, sitting by designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 96-3530

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Burlington Northern Railroad Company, *

*

Appellant, * Appeal From the United States

v. * District Court for the District of

* North Dakota.

Farmers Union Oil Co., of Rolla, *

a corporation. *

*

Appellee. *

*

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Submitted: March 14, 1997

Filed: May 21, 1997

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Before WOLLMAN and BEAM, Circuit Judges, and REASONER, District Judge. 1

___________

BEAM, Circuit Judge.

This diversity case requires us to interpret a portion of an indemnity clause of an

industrial railroad track lease. The district court determined that the indemnity clause

had not been triggered by an accident because the events at issue did not occur "on or

near" the leased premises. We reverse. 
There is some dispute as to the date the car was received and as to which of the 2

two cars had the defective brake. Neither of these contentions is relevant to our

determination here.

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I. BACKGROUND

Farmers Union Oil Company (Farmers Union) maintains a fertilizer plant in

Rolla, North Dakota. The plant is next to a spur line off the main track of the

Burlington Northern Railroad Company (BN) and is located between two facilities

maintained by the Rolla Grain Company ("Rolla Grain"). The two businesses share the

side track and have identical track lease agreements with BN which contain an

indemnity clause providing: 

Lessee [Farmers Union] also agrees to indemnify and hold harmless

Lessor [BN] for loss, damage, injury or death from any act or omission of

Lessee, Lessee's invitees, licensees, employees, or agents, to the person

or property of the parties hereto and their employees, and to the person

or property of any other person or corporation while on or near said

premises; and if any claim or liability, other then from fire, shall arise

from the joint or concurring negligence of both parties hereto, it shall be

borne by them equally.

Jt. App. at 194 (emphasis added).

The parties dispute whether this indemnification clause was triggered by the 1987

injury of Teddy Cahill, a Rolla Grain employee, when he fell from a moving grain car.

On April 10 of that year, Farmers Union received and unloaded two railroad cars, one

of which had a brake that was sticking. The Farmers Union employees did not report 2

the defective brake to BN, but did warn a Rolla Grain employee of the problem. That

employee pulled the empty cars to Rolla Grain and loaded them. Over the weekend, BN

delivered twenty-six additional cars for loading. The following Monday, Cahill and his

co-worker began loading these empty grain cars. To do this, Cahill stood
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on top of the cars, while his co-worker stayed on the ground. Before the empty cars

could be loaded, however, the two cars that had been filled Friday had to be moved.

When Cahill's co-worker could not release the sticky brake, he called Cahill down for

assistance. The two released the brake without incident, but as Cahill resumed his perch,

he slipped, fell under another car and was injured. 

Cahill sued BN alleging that if the brake had not been defective on the car

unloaded by Farmers Union, he would not have been required to climb down to help

release it. Thus, his theory of liability was that BN had placed him in the "zone of

danger" by supplying a defective car that required his assistance in releasing the brake.

BN tendered defense of Cahill's suit to Farmers Union on the theory that the failure of

its employees to notify BN of the defective brake and the transfer of the defective car to

Rolla Grain constituted an act and/or omission that triggered the indemnification clause

of the lease. Farmers Union refused the tender of defense. BN then moved for summary

judgment in its favor on Cahill's claim, arguing that the defective car brake was not the

proximate cause of Cahill's injuries. That motion was denied, and BN eventually settled

the Cahill case for $400,000. 

BN then sought $200,000 each from Farmers Union and Rolla Grain under their

respective leases. Farmers Union refused to pay, and BN filed this diversity action.

The district court granted Farmers Union's motion for summary judgment on the grounds

that the accident did not occur "on or near" Farmers Union's property. BN appeals.

II. DISCUSSION

We review a district court's grant of summary judgment de novo, applying the

same standard as the district court, examining the record in the light most favorable to

the nonmoving party. Lang v. Star Herald, 107 F.3d 1308, 1311 (8th Cir. 1997).

Summary judgment is appropriate when the evidence "show[s] that there is no genuine
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issue as to any material fact and that the moving party is entitled to a judgment as a

matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322

(1986). 

"[A]n industry's obligation to indemnify a railroad under an industrial track

agreement is a contractual duty and not a duty arising under the common law of tort."

Burlington N., Inc. v. Bellaire Corp., 921 F.2d 760, 763 (8th Cir. 1990) (quotation

omitted). Farmers Union's indemnity obligation is, therefore, governed by North Dakota

contract law. In North Dakota, "the interpretation of [a] contract is entirely a question

of law" and appellate courts are instructed to "independently examine and construe the

contract to determine if the district court erred in its interpretation of it." Pamida, Inc.

v. Meide, 526 N.W.2d 487, 490 (N.D. 1995). Indemnity contracts are construed in

accordance with the general rules for construction of contracts. Hoge v. Burleigh

County Water Management Dist., 311 N.W.2d 23, 27 (N.D. 1981). 

Our independent examination of the contract language in this case leads us to the

conclusion that Cahill's accident did occur "on or near" Farmers Union's leased property.

Rolla Grain's property, where Cahill was injured, surrounds the Farmers Union facility.

The accident took place about 100 feet from Farmers Union's land. Contracts should be

construed so that "every clause, sentence, or provision [is] given effect consistent with

the main purpose of [the] contract." Barsness v. General Diesel & Equip. Co., 422

N.W.2d 819, 824 (N.D. 1988). To read "on or near" to exclude events that occur in

such close proximity denies the "near" language any effect. 

There are numerous other legal and factual points of contention between the

parties. Farmers Union argues that even if the accident occurred "on or near" its

premises, no "act or omission" can be attributed to it, which is another predicate to its

indemnification obligation. Farmers Union has also unearthed evidence creating

uncertainty as to whether it even took delivery of the car with the sticky brake. Further,

the parties disagree as to whether BN's letter tendering defense of the Cahill action
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adequately notified Farmers Union of its potential liability. These and other disputes

were not reached by the district court, since it based its ruling on the "on or near"

language of the indemnity clause. We decline to pass on these issues without affording

the district court the initial opportunity to consider them. 

III. CONCLUSION

For the foregoing reasons the decision of the district court is reversed, and the

case is remanded for additional proceedings consistent with this opinion. 

A true copy.

 ATTEST:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.