Court Opinion

ID: 3018515
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:19:18.346732+00
Date Added: 2024-06-11T11:47:10.364905
License: Public Domain

United States Court of Appeals
                             FOR THE EIGHTH CIRCUIT
                                     ___________

                                     No. 96-3530
                                     ___________

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.                 *
                                       *
                                 ___________

                                  Submitted: March 14, 1997
                                      Filed: May 21, 1997
                                    ___________

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

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.

      1
       The Honorable Stephen M. Reasoner, Chief United States District Judge for the
Eastern District of Arkansas, sitting by designation.
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.2 The Farmers Union employees did not report
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

      2
      There is some dispute as to the date the car was received and as to which of the
two cars had the defective brake. Neither of these contentions is relevant to our
determination here.

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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

                                          -3-
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

                                           -4-
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.

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