Source: https://supreme.justia.com/cases/federal/us/175/91/
Timestamp: 2019-04-24 12:54:24+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 175 › Hartford Fire Ins. Co. v. Chicago, M. & St.P. Ry. Co.
Hartford Fire Insurance Company v.
Questions of public policy, as affecting the liability for acts done, or upon contracts made and to be performed, within one of the states of the Union -- when not controlled by the Constitution, laws or treaties of the United States, or by the principles of the commercial or mercantile law or of general jurisprudence, of national or universal application -- are governed by the law of the state, as expressed in its own constitution and statutes, or declared by its highest court.
its opinion, and entered final judgment affirming the validity of the agreement, and it also appeared that its final decision was not inconsistent with its decision or opinion in any other case. Held that the question of the validity of the agreement was one of statutory and local law, and not of the commercial law, or of general jurisprudence, and that the final decision of the state court thereon was rightly followed by the circuit court of the United States.
This was an action brought May 10, 1893, in the District Court of Jones county, in the State of Iowa, against the Chicago, Milwaukee & St. Paul Railway Company, a railroad corporation of Wisconsin, by seven fire insurance companies, corporations of other states, to recover for the loss by fire, owing to the defendant's negligence, of a warehouse and goods, belonging to the partnership of Simpson, McIntire & Company, and insured by the plaintiffs, who had paid the loss.
became, to that extent, subrogated to the partnership's right against the defendant, and were entitled to judgment against it for the sum so paid, with interest.
The defendant, on May 23, 1893, removed the case into the Circuit Court of the United States for the District of Iowa, and in that court, on September 12, 1893, filed an answer admitting that the parties to the action were corporations, and that the partnership was doing business at Monticello, as alleged, but denying all the other allegations of the petition.
and further, that the said parties of the second part will in no way obstruct or interfere with the track of said railway company in using said premises."
"And the parties of the second part agree to keep said premises in as good repair and condition as the same are in at the commencement of said term; to pay, as the same become due and payable, all taxes and assessments, general and special, that may be levied or assessed thereon during the time they remain in possession thereof, and to quit and surrender said premises at the expiration of said term, on demand of said railway company, and in case such demand shall not be made at the expiration of said term, to pay said rent at the rate and in the installments aforesaid, as long as they remain in possession thereof, and that they will not underlease said premises without the written consent of said railway company."
"And said parties of the second part further agree to quit and surrender said premises at any time before the expiration of said first-mentioned term, or at any time when default shall be made in the payment of said rent or taxes as aforesaid, within thirty days after demand of said railway company, and that, upon the expiration of said thirty days, it shall be lawful for said railway company to expel them therefrom."
"The parties of the second part may (and hereby agree that they will, if said railway company shall so require) remove from said premises, within thirty days after any termination of this lease, all structures owned or placed thereon by them."
express conditions of said lease and occupancy, and plaintiffs cannot now recover therefor. Wherefore the defendant prays judgment herein."
The plaintiffs demurred to the amended answer on the ground that the stipulation in the lease, by which it was sought to exonerate the defendant from loss by fire caused by the negligence of itself or its servants, was void as against public policy.
At the argument of the demurrer in the circuit court of the United States at April term, 1894, before Judge Shiras (as is shown by his opinion copied in the record, and printed in 62 F. 904), it appeared that a case between other parties, involving the question at issue in this case, was then pending before the Supreme Court of the State of Iowa, under the following circumstances: in that case, entitled Griswold v. Illinois Central Railroad, that court, on October 19, 1892 (by an opinion reported only in 53 N.W. 295), had held a similar stipulation to be void as against public policy, but on February 3, 1894, upon a rehearing, had held to the contrary, and had sustained the validity of the stipulation, two judges dissenting. 90 Ia. 265. A second petition for rehearing was then filed, and was still pending in that court. Under those circumstances, Judge Shiras suspended action on the demurrer, awaiting the final decision of the supreme court of the state. That court afterwards denied the second petition for rehearing, thereby finally affirming the validity of the stipulation, and thereupon Judge Shiras at September term, 1894, overruled the demurrer, and, the plaintiffs declining to plead further, rendered judgment for the defendant.
That judgment was unanimously affirmed by the circuit court of appeals upon the ground that the stipulation was valid, and was not against public policy, Judges Sanborn and Thayer, however, expressing the opinion (Judge Caldwell nonconcurring in this respect) that the decision of the state court was not conclusive upon this question. 70 F. 201. The plaintiffs thereupon applied for and obtained this writ of certiorari.
This action against a railroad corporation for the loss by fire, owing to its negligence in running its engines and trains, of a cold-storage warehouse and the goods therein, owned by a commercial partnership, is brought by insurers of the property, who had paid to the partnership the greater part of the loss and whose right, thereby acquired by way of subrogation, to recover against the railroad company to the extent of the amount so paid, is but the same right that the partnership had. Phoenix Ins. Co. v. Erie Transportation Co., 117 U. S. 312.
It is important, therefore, in the first place, to ascertain exactly what were the relations between the railroad company and the partnership.
"by fire occasioned or originated by sparks or burning coal from the locomotives, or from any damage done by trains or cars running off the track, or from the carelessness or negligence of employees or agents of said railway company,"
within thirty days after demand, and not to underlease without the lessor's consent, with a further agreement that the lessees might, and, if required by the lessor, would, remove from the premises, within thirty days after any termination of the lease, all structures owned or placed thereon by them.
The indenture, in short, is a lease by the railroad company of a strip of its land by the side of its track to the partnership for the purpose of erecting and maintaining a cold-storage warehouse thereon, for one year and for such longer time as the lessee may be permitted by the lessor to remain in possession, and contains no further agreements, other than those usual between lessor and lessee, except a covenant of the lessee not to obstruct or interfere with the railroad track of the lessor and an express condition of the lease and covenant of the lessee that the lessor shall not be liable to the lessee for any damage to the building or to personal property in or about it by fire from the lessor's locomotive engines or by trains or cars running off the railroad track, although owing to the negligence of the lessor or its servants.
The indenture contains no stipulation concerning, or even any mention of, any transportation of goods over the railroad, or any relation of the railroad company as a common carrier to the lessee or to the public, and there is nothing in the record to show that such a relation existed between the railroad company and the lessee, or that the warehouse was built or maintained for the benefit of the public, or of the railroad corporation, or of anyone but the partnership.
The decision of the case turns upon the question whether the provision of this indenture by which the railroad company is not to be liable for damage to the property by fire from its locomotive engines owing to the negligence of itself or its servants is void as against public policy.
The plaintiffs' counsel at the argument much relied on the cases in which similar provisions in the contracts of common carriers or of telegraph companies have been held to be void.
of goods received by it as a common carrier that it shall not be liable to him for any loss or injury of the goods by the negligence of itself or its servants is contrary to public policy, and must be held to be void in the courts of the United States without regard to the decisions of the courts of the state in which the question arises. But the reasons on which those decisions are founded are that such a question is one of general mercantile law; that the liability of a common carrier is created by the common law, and not by contract; that to use due care and diligence in carrying goods entrusted to him is an essential duty of his employment which he cannot throw off; that a common carrier is under an obligation to the public to carry all goods offered to be carried, within the scope and capacity of the business which he has held himself out to the public as doing, and that, in making special contracts for the carriage of such goods, the carrier and the customer do not stand on equal terms. Railroad Co. v. Lockwood, 17 Wall. 357; Liverpool Steam Co. v. Phenix Ins. Co., 129 U. S. 397, 129 U. S. 439-442, and other cases there cited. Although a telegraph company is not a common carrier, yet its relation with senders of messages over its lines is of a commercial nature, and contracts that the company shall not be liable for the negligence of its servants are affected, in some degree, by similar considerations. Express Co. v. Caldwell, 21 Wall. 264, 88 U. S. 269; Western Union Tel. Co. v. Texas, 105 U. S. 460, 105 U. S. 464; Primrose v. Western Union Tel. Co., 154 U. S. 1; Western Union Tel. Co. v. Cook, 61 F. 624; Harkness v. Western Union Tel. Co., 73 Ia. 190.
his servants, or may, by stipulation with the owner of goods carried, have the benefit of such insurance procured thereon by such owner. Phoenix Ins. Co. v. Erie Transportation Co., 117 U. S. 312; California Ins. Co. v. Union Compress Co., 133 U. S. 387, 133 U. S. 414; Wager v. Providence Ins. Co., 150 U. S. 99.
A railroad corporation holds its station grounds, railroad tracks, and right of way for the public use for which it is incorporated, yet as its private property, and to be occupied by itself or by others in the manner which it may consider best fitted to promote, or not to interfere with, the public use. It may, in its discretion, permit them to be occupied by others with structures convenient for the receiving and delivering of freight upon its railroad, so long as a free and safe passage is left for the carriage of freight and passengers. Grand Trunk Railroad v. Richardson, 91 U. S. 454. And it must provide reasonable means and facilities for receiving goods offered by the public to be transported over its road. Covington Stockyards Co. v. Keith, 139 U. S. 128. But it is not obliged, and cannot even be compelled by statute, against its will, to permit private persons or partnerships to erect and maintain elevators, warehouses, or similar structures for their own benefit, upon the land of the railroad company. Missouri Pacific Railway v. Nebraska, 164 U. S. 403.
of land, was the stipulation exempting the railroad company from liability to the licensee for any such damages. And the public had no interest in the question which of the parties to the contract should be ultimately responsible for such damages to property placed on the land of the corporation by its consent only.
The case is wholly different from those cited by the plaintiffs, in which a lease by a railroad corporation, transferring its entire property and franchises to another corporation, and thus undertaking to disable itself from performing all the duties to the public imposed upon it by its charter, has been held to be ultra vires, and therefore void -- as in Thomas v. Railroad Co., 101 U. S. 71, and in Central Transportation Co. v. Pullman's Car Co., 139 U. S. 24, and 171 U. S. 171 U.S. 138.
Questions of public policy as affecting the liability for acts done, or upon contracts made and to be performed, within one of the states of the Union -- when not controlled by the Constitution, laws, or treaties of the United States, or by the principles of the commercial or mercantile law or of general jurisprudence, of national or universal application -- are governed by the law of the state as expressed in its own Constitution and statutes, or declared by its highest court. Elmendorf v. Taylor, 10 Wheat. 152, 23 U. S. 159; Bank of Augusta v. Earle, 13 Pet. 519, 38 U. S. 594; Vidal v. Philadelphia, 2 How. 127, 43 U. S. 197; Bucher v. Cheshire R. Co., 125 U. S. 555, 125 U. S. 581, 125 U. S. 584; Detroit v. Osborne, 135 U. S. 492, 135 U. S. 498-499; Union Bank v. Kansas City Bank, 136 U. S. 223, 136 U. S. 235; Etheridge v. Sperry, 139 U. S. 266, 139 U. S. 276-277; Gardner v Michigan Central Railroad, 150 U. S. 349, 150 U. S. 357; Bamberger v. Schoolfield, 160 U. S. 149, 160 U. S. 159; Missouri &c. Trust Co. v. Krumseig, 172 U. S. 351; Sioux City Terminal Railroad v. Trust Co. of North America, 173 U. S. 99.
The validity of the agreement now in controversy does not depend upon the Constitution, laws, or treaties of the United States, or upon any principle of the commercial or mercantile law, or of general jurisprudence.
the state, and it is within the undisputed powers of that legislature to prescribe the precautions that the corporation shall take to guard against injuries to the property of others by the running of its trains, as well as the measure of its liability in case such injuries happen. Among the most familiar instances of the exercise of this power are statutes requiring a railroad corporation to erect fences between its road and adjoining lands and subjecting it to either single or double damages for any injury to cattle or other animals caused by its neglect to do so. Missouri Pacific Railway v. Humes, 115 U. S. 512; Minneapolis & St. Louis Railway v. Beckwith, 129 U. S. 26; Same v. Emmons, 149 U. S. 364, and statutes making a railroad corporation liable for damages to property of others from fire set by sparks from its locomotive engines, either independently of negligence on its part, or in case of such negligence only. St. Louis & San Francisco Railway v. Mathews, 165 U. S. 1; Atchison &c. Railroad v. Matthews, 174 U. S. 96.
"The right to use the agencies of fire and steam in the movement of railway trains in Iowa is derived from the legislation of the state, and it certainly cannot be denied that it is for the state to determine what safeguards must be used to prevent the escape of fire, and to define the extent of the liability for fires resulting from the operation of trains by means of steam locomotives. This is a matter within state control. The legislation of the state determines the width of the right of way used by the companies. The state may require the companies to keep the right of way free from combustible material. It may require the depot and other buildings used by the company to be of stone, brick, or other like material, when built in cities, or in close proximity to other buildings. The state, by legislation, may establish the extent of the liability of railway companies for damages resulting from fires caused in the operation of the roads. 62 F. 907."
165 U. S. 165 U.S. 17.
"The elevator is mainly a means or instrumentality for loading and unloading grain into and out of cars, boats, barges, or other vehicles, and, incidentally, for storing the same; it is in no just sense a connecting line of transit or connecting common carrier to the defendants' lines."
"The power of courts to declare a contract void for being in contravention of sound public policy is a very delicate and undefined power, and, like the power to declare a statute unconstitutional, should be exercised only in cases free from doubt."
that, "in order to recover, it shall only be necessary for the owner of the property to prove the injury or destruction complained of;" and that, if the company should neglect to pay for thirty days after notice and affidavit, the owner might recover double damages. Under that statute it was held to be no defense that the stock was unlawfully running at large, if not by the willful act of the owner or his agent. Spence v. Chicago & Northwestern Railway (1868), 25 Ia. 139. But where the owner of land had agreed to maintain a fence between it and the railroad, the court, while holding that persons not in privity of estate with him might still recover, said that it could not be doubted that he and his privies were estopped by his agreement to maintain an action against the company under that statute. Warren v. Keokuk & Des Moines Railroad (1875), 41 Ia. 484, 486.
"any corporation operating a railway shall be liable for all damages by fire that is set out or caused by operating of any such railway, and such damage may be recovered by the party damaged, in the same manner as set forth in this section in regard to stock, except to double damages."
for damages by fire; that the fact that the fire was set out or caused by operating the railway was only prima facie evidence of negligence on the part of the company, and that such negligence need not be alleged. Small v. Chicago, Rock Island & Pacific Railroad (1879), 50 Ia. 338; Babcock v. Chicago & Northwestern Railroad (1883), 62 Ia. 593; Seska v. Chicago, Milwaukee & St. Paul Railway (1889), 77 Ia. 137; Engle v. Chicago, Milwaukee & St. Paul Railway (1889), 77 Ia. 661. It was also held that, by virtue of the statute, contributory negligence on the part of the plaintiff was no defense to such an action. West v. Chicago & Northwestern Railroad (1889), 77 Ia. 654; Engle's Case, just cited.
"no contract, receipt, rule, or regulation shall exempt any corporation engaged in transporting persons or property by railway from liability of a common carrier, or carrier of passengers, which would exist had no contract, receipt, rule, or regulation been made or entered into."
That statute was rigidly enforced by the Supreme Court of Iowa in suits against railroad corporations as carriers. Brush v. Sabula &c. Railroad (1876), 43 Ia. 554; McCoy v. Keokuk & Des Moines Railroad (1876), 44 Ia. 424. But no intimation that it applied to them in any other relation was ever made by that court before the execution or the agreement in question in the case at bar.
the want of such fencing, could not be maintained by an owner of adjoining land who had agreed with the railroad company to maintain the fence at the place in question. And that court had never expressed any opinion upon the effect of such an agreement as is now pleaded upon an action against a railroad company, under the latter part of that section, for damages by fire caused by the negligence of its servants in operating its railway.
"transact the business for which said buildings are erected and designed at fair and reasonable rates, and in a prompt and careful manner, so that neither the company nor the public will be prejudiced by reason of the said lessee dealing unfairly or negligently in their behalf, or in the transaction of the business connected with the grain, coal, and lumber buildings so erected as aforesaid."
A district court of the state having upheld the validity of the contract, and rendered judgment for the defendant, the plaintiff appealed to the supreme court of the state.
would have been but for those covenants, no equivalent for which is to be found in the lease now before us.
But that court granted a rehearing, and on February 3, 1894, after further arguments, and, by a majority of the judges, reversed its former opinion, affirmed the judgment of the district court, and held the stipulation in question to be valid. 90 Ia. 265. Its course of reasoning may be shown by quoting some passages of the opinion.
"Public policy is variable; the very reverse of that which is the policy of the public at one time may become public policy at another; hence no fixed rule can be given by which to determine what is public policy. The authorities all agree that a contract is not void as against public policy, unless it is injurious to the interests of the public, or contravenes some established interest of society."
"It must not be forgotten that you are not to extent arbitrarily those rules which say that a given contract is void as being against public policy, because, if there is one thing more than another which public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts, when entered into fairly and voluntarily, shall be held sacred, and shall be enforced by courts of justice. Therefore you have this paramount public policy to consider -- that you are not lightly to interfere with this freedom of contract."
absolutely liable for all damages by fire that is negligently set out or caused by the operation of the railway. As to such property, the railway company owes to the public the duty of care, and the public has an interest in the performance of that duty. Therefore a contract that exempts from that duty to the public would be injurious to the public interests, and against public policy. The plaintiff Griswold's buildings were not upon his own premises, nor where he had a right to have them, independent of the defendant; they were upon the right of way, where they could only be by its permission. In granting the permission and in placing the buildings there, both parties knew of the increased hazard of the location from fire communicated either through accident or negligence in the operation of the road. They knew that the defendant corporation could only act through its "
officers, agents, and employees, and that these might be negligent in the performance of their duties. . . . This is not a question whether, under section 1289, the defendant would be liable to Griswold for negligently communicating fire to this property in the absence of a contract to the contrary; but it is whether the public has any interest that this contract contravenes. It seems to us now quite clear that, as these buildings could only be placed upon the defendant's right of way by its consent, and were so placed upon the premises, and on the conditions expressed in the lease, the public had no interest therein, under said section 1289 or otherwise, that would be injured by giving effect to the agreement in question. Much as the public may have been interested in the convenience of such a place of business, it had no interest as to who should carry the hazard incident to that property being located as it was. . . . Upon further consideration, we are of the opinion that this contract was not made by the defendant in its capacity as a common carrier, and that the provision of § 1308 is not applicable. . . . After a careful review of the case, we reach the conclusion that the public had no interest in the clause of the contract in question, that its enforcement works no injury to any interest of the public, and that the judgment of the district court should be affirmed.
A second petition for rehearing was then filed, and that case had not been finally decided by the Supreme Court of Iowa when the present case came before the circuit court of the United States at April term, 1894. The circuit court thereupon suspended judgment in this case, and at September term, 1894 -- the state court having meanwhile denied the second petition for a rehearing, and thereby finally affirmed the validity of the stipulation -- followed the final decision of that court, and gave judgment for the defendant. 62 F. 904.
The first opinion of the Supreme Court of the State of Iowa in the case of Griswold v. Illinois Central Railroad was delivered after the agreement now in question was made. The final decision in that case, reversing the former opinion, was made after repeated arguments and full consideration; was nowise inconsistent, to say the least, with the decision or the opinion of that court in any other case, and was rendered before the case at bar was decided in the circuit court of the United States. Under such circumstances, that decision, being upon a question of statutory and local law, was rightly followed by the circuit court. Rowan v. Runnels, 5 How. 134, 46 U. S. 139; Morgan v. Curtenius, 20 How. 1; Fairfield v. Gallatin County, 100 U. S. 47, 100 U. S. 52; Burgess v. Seligman, 107 U. S. 20, 107 U. S. 35; Bauserman v. Blunt, 147 U. S. 647, 147 U. S. 653-656, and cases there cited; Williams v. Eggleston, 170 U. S. 304, 170 U. S. 311; Sioux City Railroad v. Trust Company of North America, 173 U. S. 99; Wade v. Travis County, 174 U. S. 499.

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