Opinion ID: 1969186
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Heading Rank: 3

Heading: Applicability of Iowa Code section 327D.186.

Text: The district court also ruled as a matter of law that the indemnity clause violated Iowa Code section 327D.186 and was, therefore, void and unenforceable. CNW argues on appeal that section 327D.186 has no application to an indemnification provision negotiated by a railroad in connection with the lease of its private property. Iowa Code section 327D.186 states: Every corporation operating a railway shall be liable for all damages sustained by any person, including employees of such corporation, in consequence of the neglect of the agents, or by any mismanagement of the engineers, or other employees thereof... when such wrongs are in any manner connected with the use and operation of any railway on or about which they shall be employed, and no contract which restricts such liability shall be legal or binding. This section, like all of chapter 327D, applies only to intrastate transportation by for-hire common carriers of persons and property. Iowa Code § 327D.1. A common carrier is one who undertakes to transport, indiscriminately, persons and property from one place to another. Kvalheim v. Horace Mann Life Ins. Co., 219 N.W.2d 533, 535 (Iowa 1974). CNW, arguing that it was not acting as a common carrier when it entered into the lease agreement for the overhead conveyor, contends it was free to limit liability for its own negligence. We agree. Three factors underlie the long-standing public policy prohibiting common carriers from exempting themselves from liability for their own negligence. First, the law imposes on railroads an absolute duty to transport passengers and freight with care, as well as a duty to provide reasonably safe machinery and appliances for railroad employees. Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry., 70 F. 201, 205 (8th Cir.1895), aff'd. 175 U.S. 91, 20 S.Ct. 33, 44 L.Ed. 84 (1899). Second, parties to a transportation contract are not on equal footing because of the monopoly railroad companies enjoy over rail transportation facilities. Id. Third, any attempt by railroads to exempt themselves from their absolute duty to transport passengers and freight with care would unreasonably endanger the lives of passengers and employees. Id.; see also Griswold v. Illinois Cent. R.R., 90 Iowa 265, 270, 57 N.W. 843, 846 (1894); 14 Am.Jur.2d Carriers § 554 (1964). The reasons prohibiting such exemption clauses, however, do not apply when the railroad is not acting in its public capacity. 14 Am.Jur.2d Carriers § 554 (1964); see Hartford, 70 F. at 205; Griswold, 90 Iowa at 270, 57 N.W. at 846; see also R.M. Perkins, Judicial Relaxation of the Carrier's LiabilityLegislative Restoration of the Liability, 4 Iowa L.Bull. 86, 92 (1918) (hereinafter Perkins). Unlike a railroad's absolute duty as a common carrier to transport persons and property safely upon payment, a railroad is under no duty to lease or permit others to use its rail property. Chicago & N.W. Ry. v. Kramme, 244 Iowa at 951, 59 N.W.2d at 208; see generally Annotation, Validity, Construction, and Effect of Agreement, in Connection with Real-Estate Lease or License by Railroad, for Exemption from Liability or for Indemnification by Lessee or Licensee, for Consequences of Railroad's own Negligence, 14 A.L.R.3d 446 (1967). In volunteering to do so, therefore, a railroad acts in a private capacity and is as free as any other property owner to impose any condition it wishes and the licensee is willing to accept. Kramme, 244 Iowa at 951, 59 N.W.2d at 208; see also Farmers Elev. Co. v. Chicago, R.I. & P. R.R., 260 Iowa 478, 149 N.W.2d 867, 870 (1967); 14 Am.Jur.2d Carriers §§ 537, 544 (1964). Here the contract between CNW and Iowa Limestone was not for the carriage of persons or property, but for Iowa Limestone's lease of CNW's property to build a conveyor over CNW tracks. CNW was under no duty to lease its property to Iowa Limestone. CNW's obligations as a common carrier were therefore not implicated when it entered the lease. Seymour, 255 Iowa at 784, 124 N.W.2d at 160. It was free to contract as it did, the provisions of section 327D.186 notwithstanding. See id., 124 N.W.2d at 160; Griswold, 90 Iowa at 273, 57 N.W. at 846. See also Perkins at 92-93 (statute restricting railroad's ability to exempt itself from all liability inapplicable to lease by railroad of its right-of-way). Employers nevertheless argues that section 327D.186 applies because, at the time of the collision, CNW was acting as a common carrier. Nothing in our prior cases, however, suggests that a railroad's common carrier status is fixed at the time damage occurs. In general, a contract is entitled to enforcement unless its terms are in contravention of law or public policy. Baker v. Stewart's Inc., 433 N.W.2d 706, 707 (Iowa 1988); Tschirgi v. Merchants Nat'l Bank, 253 Iowa 682, 690, 113 N.W.2d 226, 230-31 (1962). CNW lawfully entered the lease agreement and its terms are not contrary to statute or public policy. We therefore hold that the district court erred when it found the indemnity clause void under section 327D.186.