Case Name: Northern Pacific Railway Company, Appellant, v. Sunnyside Valley Irrigation District, Respondent
Court: Washington Court of Appeals
Jurisdiction: Washington
Decision Date: 1974-10-29
Citations: 11 Wash. App. 948
Docket Number: No. 886-3
Parties: Northern Pacific Railway Company, Appellant, v. Sunnyside Valley Irrigation District, Respondent.
Judges: 
Reporter: Washington Appellate Reports
Volume: 11
Pages: 948–957

Head Matter:
[No. 886-3.
Division Three.
October 29, 1974.]
Northern Pacific Railway Company, Appellant, v. Sunnyside Valley Irrigation District, Respondent.
Roger J. Crosby and Delbert W. Johnson, for appellant.
Michael W. Leavitt and Robert R. Redman (of Gavin, Robinson, Kendrick, Redman & Mays), for respondent.

Opinion:
Green, C.J.
— Plaintiff, Northern Pacific Railway Company, brought this action against the defendant, Sunnyside Valley Irrigation District, to recover damages caused by the escape of water from defendant's irrigation canal. Trial to the court upon stipulated facts resulted in a judgment in favor of the defendant. Plaintiff appeals.
Two errors are addressed to the court's findings and conclusions: (1) the failure to allow a recovery under the indemnity provisions of a 1913 permit; and (2) the failure to find and hold that the damage to plaintiff's property was the result of a constitutional taking or damaging.
On June 30, 1969, from causes unknown, a break occurred in the bank of one of defendant's canals and waters contained therein flowed through the break into a drainage ditch maintained by the defendant. This water followed the drainage ditch to a culvert under plaintiff's railroad tracks. Because the amount of water was excessive, the culvert was not large enough to handle it and as a result a portion of plaintiff's roadbed was washed away to plaintiff's damage in the amount of $6,432.57. No claim was filed by plaintiff with the defendant pursuant to RCW 4.96.020 or RCW 87.03.440 because plaintiff's theory of recovery is not based upon tort.
First, plaintiff contends that it is entitled to recover under the indemnity provisions of a 1913 permit given by the plaintiff to Yakima County for the construction of the culvert in question. This permit provides, in part:
This permission is granted upon the following terms:
(3) The second party [Yakima County] agrees that the improvements shall not at any time damage the railroad or structures of the Company, or be a menace to the safety of its operations; and to indemnify and save harmless the Company from all loss and damage to its tracks, roadbed, structures, rolling stock and other property, and from injuries to persons, occasioned by the improvements.
(Italics ours.) The foregoing indemnity provision constitutes the sole consideration for the permit.
Initially we hold that the defendant irrigation district assumed the indemnity provision contained in the permit. While there is no express assumption of the underlying agreement, a consideration of all the facts compels the -inference that the defendant assumed the conditions of the permit. McGill v. Baker, 147 Wash. 394, 266 P. 138 (1928). On April 20, 1961, the defendant agreed to take over and not only maintain but operate the drainage system without cost to Yakima County, Drainage District No. 9 or the United States. Inherent in this undertaking is an implied assignment to the defendant of Yakima County's permit to use the culvert. In Central of Georgia Ry. v. Woolfolk Chem. Works, Ltd., 122 Ga. App. 789, 178 S.E.2d 710 (1970), the railroad brought suit on the indemnity agreements contained in the contracts with a dissolved corporation, the predecessor of the defendant partnership. The defendant argued that it had not assumed any of the duties of the dissolved corporation and that it was not an assignee under the contracts containing the indemnity agreements. In answer, the court stated:
A third person may, of coruse, assume the obligation expressly in writing, or he may do so by implication where his conduct manifests an intent to become bound.
. . . In the latter event all the circumstances must be considered, such as the subject matter of the contract, the third person's acts and words, whether he acquiesced in the terms of the contract, performed its obligations, or accepted its benefits.
Central of Georgia Ry. v. Woolfolk Chem. Works, Ltd., supra at 792. Here, the defendant's beneficial use of the culvert is so entwined with the indemnity provision that as to plaintiff, defendant cannot be heard to deny that it assumed the obligation. Rose v. Vulcan Materials Co., 282 N.C. 643, 194 S.E.2d 521 (1973); cf. Restatement of Contracts § 164 (1932); 3 S. Williston, Contracts § 418A (3rd ed. 1960); 4 A. Corbin, Contracts § 906 (1951). Indeed, as to plaintiff, it is estopped to deny it. It is agreed that the culvert in question was a part of the drainage system. Defendant's express assumption of the duty to operate and maintain the drainage system is inseparable from the agreement to hold the plaintiff harmless from any loss or damage occasioned by the use of that system.
We now turn to the error assigned to finding of fact No. 3:
By the terms of the indemnity agreement in the 1913 Permit, the parties to that agreement were bargaining with respect to damage or injury caused by the improvement; namely, the construction, maintenance and operation of the culvert under the railroad tracks. The parties did not intend to include damage caused by a break in a nearby irrigation canal.
and conclusion of law No. 2:
The parties to the 1913 Indemnity Agreement were not bargaining with respect to matters outside of the culvert under the railroad tracks. Therefore, defendant is not liable to plaintiff on the basis of the indemnity provision contained in the 1913 Permit.
This finding and conclusion is explained in the trial court's memorandum opinion:
It appears to the court that the indemnity language in the 1913 Permit is clear and unambiguous. The agreement relates to risks incident to construction, operation and maintenance of the pipelines under the railroad's right of way. Under the wording used it would be unreasonable to conclude that the parties intended to include damage caused by a break in a nearby irrigation canal. In the present case, the water pipes under the railroad tracks did not damage plaintiff's right of way; the damage was caused by the sudden and large amount of water originating from the break in defendant's irrigation canal. The court finds that defendant is not liable to plaintiff under the indemnity theory.
We disagree with the trial judge's interpretation.
In construing indemnity provisions, the court in Continental Cas. Co. v. Municipality of Metropolitan Seattle, 66 Wn.2d 831, 835, 405 P.2d 581 (1965), noted:
In Union Pac. R.R. Co., supra [64 Wn.2d 486, 392 P.2d 450 (1964) ], we approved the rule that:
". . . .Contracts of indemnity, therefore, must receive a reasonable construction so as to carry out, rather than defeat, the purpose for which they were executed. To this end they should neither, on the one hand, be so narrowly or technically interpreted as to frustrate their obvious design, nor, on the other hand, so loosely or inartificially as to relieve the obligor from a liability within the scope or spirit of their terms."
The indemnity provision in the instant case should be construed in the light of this rule.
Here, the permit provided that the plaintiff would be held harmless and indemnified against "all loss and damage . . . occasioned by the improvements." (Italics ours.) The trial court apparently reasoned that the only loss for which the plaintiff could make a recovery under this provision was for damage caused by the improvement itself. This construction is too limited. It bears repeating that the sole consideration passing to the plaintiff for the permit was the indemnity provision. The parties must have intended that the use of the culvert be conditioned upon the continued effectiveness of the indemnity provision. Otherwise, plaintiff would have no contractual protection against loss occasioned by the use. Under the circumstances, we believe the original parties contemplated the broadest construction should be given the terms of the indemnity provision; and the defendants are bound thereby. Gregers v. Peterson Ice Cream Co., 158 Cal. App. 2d 746, 323 P.2d 572 (1958). Furthermore, the parties agree that the loss was occasioned by defendant's water that escaped through a break in defendant's irrigation canal and found its way to the culvert through the drainage system operated and maintained by defendant.
It is clear to us that the purpose of the indemnity provision was to protect the plaintiff from all loss occasioned by the use of the improvement, i.e., the culvert. This does not mean that the loss must be occasioned from normal use. Rather, any use of the culvert that results in damage or loss to the plaintiff is covered by the indemnity agreement. To otherwise construe the provision would frustrate its purpose, namely, to hold plaintiff harmless from all loss or damage from the use of the culvert. See Northern Pac. Ry. v. National Cylinder Gas Div. of Chemetron Corp., 2 Wn. App. 338, 467 P.2d 884 (1970); Erickson Paving Co. v. Yardley Drilling Co., 7 Wn. App. 681, 502 P.2d 334 (1972); Prociw v. Baugh Constr. Co., 9 Wn. App. 750, 515 P.2d 518 (1973). We agree with the trial court's observation that the language is clear and unambiguous, but disagree with the narrow interpretation placed upon it.
In view of this holding, we do not reach the question of whether a constitutional taking or damaging occurred.
Judgment reversed with directions to enter judgment for plaintiff in accordance with this opinion.
McInturff, J., concurs.
Paragraph 8 of the contract between the defendant, Yakima County, and the United States, Department of Interior, Bureau of Reclamation (Exhibit No. 2, Stipulation of Fact) provides in part:
"The Sunnyside Valley Irrigation District shall perform all necessary operation and maintenance work during the period when the betterment and rehabilitation of the drains is under way, and upon completion of such betterment and rehabilitation work, the Sunnyside Valley Irrigation District shall operate and maintain the drains in such condition as to provide at all times the designed capacity of such drain for seepage, waste and run-off waters from lands within Drainage District No. 9, including waters that shall flow thereon from lands lying at a higher elevation. All of such operation and maintenance shall he performed without cost to the County, Drainage District No. 9, or the United States." (Italics ours.)