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New York, C. & St. L.r. Co. v. Erie R. Co.

OPINION FILED MARCH 18, 1952

NEW YORK, CHICAGO AND ST. LOUIS RAILROAD COMPANY, APPELLANT,

v.

ERIE RAILROAD COMPANY, AND CHICAGO AND WESTERN INDIANA RAILROAD COMPANY, APPELLEES.



Appeal by plaintiff from the Superior Court of Cook county; the Hon. JAMES M. CORCORAN, Judge, presiding. Heard in the second division of this court for the first district at the October term, 1951. MR. JUSTICE ROBSON DELIVERED THE OPINION OF THE COURT.

Rehearing denied April 6, 1952

This is an appeal by plaintiff, the New York, Chicago & St. Louis Railroad (appellant, hereinafter referred to as "Nickel Plate") from a judgment entered by the trial court which ordered: (1) That the plaintiff take nothing by its complaint as amended; (2) that defendant-counterclaimant, Erie Railroad Company (appellee, hereinafter referred to as "Erie") should recover from plaintiff $41,555.49 and costs; and (3) that defendant, Chicago & Western Indiana Railroad Company (appellee, hereinafter referred to as "Western Indiana") should recover its costs from Nickel Plate.

The action arose out of a grade-crossing collision which occurred on December 9, 1945, between an Erie train traveling on a Western Indiana track, and a passenger bus operated by the Schappi Bus Lines, Inc., at Burnham avenue in the village of Burnham, which resulted in death, personal injuries and property damage. The collision occurred because a gateman operating the crossing gates negligently raised them while a westbound Erie train was approaching, after an eastbound train of the Chesapeake & Ohio Railroad Company (hereinafter referred to as "Chesapeake"), traveling on a parallel track of the Nickel Plate, had passed over. Erie used Western Indiana's track under a lease from it while Chesapeake was a lessee of Nickel Plate.

The installation and maintenance of the crossing protection, and payment of the gateman's wages, were pursuant to an agreement entered into in 1934 (hereinafter referred to as the "agreement"), between Nickel Plate, Western Indiana, the Kensington and Eastern Railroad Company (hereinafter referred to as "Kensington"), and the Chicago South Shore & South Bend Railroad Company (hereinafter referred to as "South Shore"). Kensington owned tracks paralleling Western Indiana's and Nickel Plate's, and South Shore was its lessee. The railroads had agreed that Western Indiana should install and maintain the gates, tower and a stop sign with a prorata right of reimbursement from Nickel Plate and South Shore, while Nickel Plate should pay the gateman's wages with a prorata right of reimbursement from Western Indiana and South Shore. All three parties, together with Kensington, had the right to discharge the gateman.

Article 7 of the agreement provided how liability for accidents at the crossing should be borne as between the parties. The agreement was entered into pursuant to orders of the Illinois Commerce Commission, which had authorized the construction of the Burnham-avenue crossing, had ordered the installation and maintenance of gates, tower and a gateman and had ordered that the expenses of maintenance and operation should be divided among the four railroads named.

Erie settled all claims arising from the collision of its train and the bus for $75,698.79, and then demanded that Nickel Plate reimburse it for one-half of this amount, asserting that it was obligated so to do under the second paragraph of Article 7 of the agreement. Nickel Plate declined and then instituted the present declaratory judgment action and sought recovery of $855.95 it paid for fees and expenses incurred in defending the causes of the actions growing out of the collision, to which Erie filed its answer and counterclaim, and Western Indiana filed its answer.

The case was tried by the trial court without a jury on the allegations and admissions in the pleadings, a stipulation of facts and certain written exhibits, and resulted in the judgment hereinbefore described. The judgment in favor of Erie on its counterclaim against Nickel Plate is one-half the sum that Erie paid in settlement of all claims, plus five per cent interest from time of demand.

Nickel Plate contends that under the terms of the agreement it is responsible to indemnify only the other parties to the agreement pursuant to its terms, and that no interpretation could be placed upon the agreement by which it would be responsible to Erie, a lessee of Western Indiana and not a party to the agreement.

Erie contends that Nickel Plate is obligated to indemnify Erie for one-half of the sums paid in settlement because: (1) Western Indiana executed the agreement for and on behalf of it as third-party beneficiary, and (2) Western Indiana was the agent for it as an undisclosed principal.

The decision of the respective contentions resolves itself in the interpretation of the first two paragraphs of Article 7 of the agreement, which read as follows:

"Seventh: Each of the parties hereto assumes all responsibility for, and agrees, at its own expense, to defend any action for damages, injury or death resulting either directly or indirectly out of the operation of its train, trains or other equipment or the train, trains or equipment of its lessees over said crossing, whether such damages, injury, or death shall be to the persons or property of any of the parties hereto, to its or their employees, or to the persons or property of third persons; and each of the parties hereto does also assume all responsibility for, and agrees at its own expense to defend any action for damages, injury or death arising out of the operation of said gates or signs, or either of them, or their failure to operate while the train, trains or other equipment of such party, or of its lessees, is moving over or approaching said crossing and while said watchman is in its employ as herein set forth, whether such damages, injury or death shall be to the persons or property of any of the parties hereto, to its or their employees, or to the persons or property of third persons; and each of the parties hereto does further agree to protect, indemnify and save harmless the others, from and against all such damages, injury or death and expenses incident thereto.

"If the trains or equipment of two or more of the parties hereto or of their lessees should at any time or times be using or approaching said crossing simultaneously, then and in that event, said watchman shall at such time or times be considered the joint employee of the parties whose trains or other equipment or whose lessees are so using or approaching said crossing, and if any loss, damages or injury shall arise out of the joint use of said crossing, then, except as hereinabove provided, the parties so jointly using said crossing shall bear the liability therefor equally and shall jointly indemnify and save harmless the other party from any expense incident thereto."

There is no dispute that it is the rule under Erie's first contention that if the agreement was entered into for the benefit of a third person not a party thereto, such third person may sue for the breach thereof. The argument turns rather on the application of the rule to the construction of the agreement. Carson Pirie Scott & Co. v. Parrett, 346 Ill. 252, 258.

In the preparation of the agreement the Nickel Plate, Western Indiana and Kensington, as owners, and South Shore, as lessee, were represented by able counsel. They knew the facts, the background and the reason for the agreement. They knew that Nickel Plate and Western Indiana leased its services to other railroads; that ...


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