The Colorado Milling & Elevator Co., a Corporation v. Chicago, Rock Island & Pacific Railroad Co., a Corporation

382 F.2d 834

• Court: Court of Appeals for the Tenth Circuit
• Decided: November 8, 1967
• Docket: 9407_1
• Status: Published

Opinions

MURRAH, Chief Judge.

In this indemnification suit Chicago, Rock Island and Pacific Railroad Company seeks to recover from its lessee, Colorado Milling & Elevator Company, an amount paid by the railroad as settlement to an injured employee. Judge Bohanon held that the lease contract, and particularly its indemnity provisions, clearly and unambiguously bound the milling company-appellant to indemnify the railroad-appellee. We affirm.

The stipulated facts show that in 1964, the milling company leased from the railroad certain adjacent property, including trackage and scales. For many years antedating the lease contract, a box-like structure called a “beam box” had stood on the leased premises in such proximity to the track that the grab irons on a passing box car cleared it by only 7.2 inches, a distance insufficient to clear a man standing on the foot rest and holding to the grab rail. Both parties were well aware of this condition.¹ In 1965, a railroad employee was crushed between the box car on which he was riding and the beam box. Rock Island settled with the employee for an amount stipulated as reasonable.

The railroad’s claim for indemnification is based upon the provisions of the lease which pertinently provide:

Ҥ 3. USE. The Lessee shall not erect or allow to be erected, any building, structure, or fixture, or place material or obstruction of any kind * * * without giving a clearance of at least eight (8) feet six (6) inches from the center line of said track * * *. All windows, doors, or gates shall be of the sliding type, or shall open toward the inside of the building or enclosure * * *. The Lessee further agrees that it shall not store * * * on or within the premises * * * any article of any kind which is of an extra hazardous or of an explosive * * * nature, without the express written consent of Lessor. The Lessee assumes all responsibility for and agrees to protect, indemnify and save harmless the Lessor, its agents and employees, from and against all loss, damage and expense caused by, or arising out of, or contributed to by the erection or presence of any building, structure or fixture, or placing, or storing or presence of material or obstruction of any kind or making * * * at any place prohibited by this section.

“§ 14. LIABILITY. The Lessee agrees to indemnify and hold harmless the Lessor * * * against any and all claims, demands, expenses, liabilities, or causes of action arising out of injury * * * or death * * * or loss of or damage to property * * when such injury, death, loss or damage arises from or is connected with (1) any act or omission on the part of the Lessee, its agents, servants or employees; or (2) any condition whatsoever in the premises.” (Emphasis added.)

The trial judge was of the opinion that the contract “is susceptible to only one construction”, and that “it covers the loss sustained by [Rock Island] to its employee, even assuming that the loss was caused in part by [Rock Island’s] own negligence.” The milling company argues that in basing its judgment upon Sections 3 and 14 of the lease, the court failed to observe accepted canons of construction under which a contract is to be interpreted in the light of the surrounding circumstances,² and by the whole of its parts —not by isolated portions. It is specifically denied that the language of Section 3 is appropriate to impose liability on the milling company, since it imposes liability only for losses caused by hazards “prohibited by this section”; and “this section”, it is urged, should be read prospectively to prohibit only those hazards erected or placed on the premises after the execution of the lease — not those such as the beam box which were present when the lease was made. In support of this prospective interpretation, special attention is called to the use of the words “shall” and “shall not” in the first and succeeding sentences to denote the intent of the parties to give prospective effect to the section. It is suggested that as the owner of the leased premises, the railroad had the right and power to control and condition the placement and presence of all structures on the premises, and if, in the circumstances of the case, the railroad had intended to require the milling company to change the known dangerous location of the beam box or suffer the penalty of indemnifying the railroad against loss from any resulting injury, appropriate language to that effect could and should have been included in the lease.

This argument is, to be sure, ingeniously plausible since the language in Section 3 is susceptible of prospective construction and application, and indeed, the railroad could have included in the lease contract a spécific clause or provision making the milling company responsible for any losses occasioned by the presence of the beam box. But, we think the fallacy of this argument lies in the failure of the milling company to observe the very rule of construction it invokes, i. e., that a contract should be interpreted as a harmonious whole to effectuate the intention of the parties, and every word, phrase or part of a contract should be given a meaning and significance according to its importance in the context of the contract. See Utex Exploration Co. v. Garwood, 10 Cir., 246 F.2d 547, 550; Phillips Petroleum Co. v. McCormick, 10 Cir., 211 F.2d 361, 364; Frankfort Oil Co. v. Snakard, 10 Cir., 279 F.2d 436, 441. Making application of this rule, we are drawn to the all-inclusive language of Section 14, which significantly is entitled “Liability”. In clear and unambiguous words it obligates the lessee to indemnify the lessor against any loss “connected with (1) any act or omission on the part of the Lessee, its agents, servants or employees; or (2) any condition whatsoever in the premises.” Certainly the beam box is a “condition * * * in the premises” and falls within the ambit of (2).

The milling company insists, however, that the two above quoted phrases must be interpreted in light of the rule of ejusdem generis, i. e., that general words following particular or specific terms are restricted in meaning to those things or matters which are of the same kind as those first mentioned. In other words, Colorado Milling contends that “any condition whatsoever in the premises” has no definite connotation or meaning, but following the reference to acts and omissions of the agents, servants or employees of the lessee, it has reference to conditions created by such acts or omissions. We cannot agree. The rule of ejusdem generis is subject to the limitation that where both the general and special provisions may be given reasonable effect, both are to be retained. See Bruce v. Lumbermens Mutual Casualty Co., 4 Cir., 222 F.2d 642, 645. Here, no conflict exists between the two clauses. Rather, they are complementary — one deals with acts of the parties, the other with conditions on the premises. By consecutively numbering and separating the clauses by a semicolon, the parties signified their intent that the two clauses be given equal force and dignity.

No contention is made that indemnification clauses of this type are unenforceable because violative of the public policy of the State of Oklahoma. While such clauses are not favorites of the law, they are generally enforceable when made “at arm’s length without disparity of bargaining power, and the intent of the parties is manifestly plain and unequivocal.” Titan Steel Corp. v. Walton, 10 Cir., 365 F.2d 542, 548. But see Mohawk Drilling Co. v. McCullough Tool Co., 10 Cir., 271 F.2d 627. When Sections 3 and 14 are read together in the context in which they were cast, we agree with the trial court that they clearly and unambiguously impose liability upon the milling company for the asserted loss.

The judgment is affirmed.

1 . Rock Island had used tbe track to spot cars since 1920, and Colorado Milling had moved cars along the track in conjunction with its loading operations under a prior lease.

2 . The circumstances of the parties at the time the transaction was entered into may be looked to in construing an unambiguous contract notwithstanding the parol evidence rule. See DeTar Distributing Co., Inc. v. Tri-State Motor Transit Co., 379 F.2d 244, 250. (10 CA, June 8, 1967).