Stephens v. Southern Pacific Co.

Full title: R. K. STEPHENS et al., Respondents, v. SOUTHERN PACIFIC COMPANY, Appellant

Court: Supreme Court of California

Date published: Sep 7, 1895

109 Cal. 86 (Cal. 1895)

41 P. 783

Opinion

         Department One

         Hearing In Bank Denied.

         Appeal from a judgment of the Superior Court of Tulare County, and from an order denying a new trial. W. A. Gray, Judge.

         COUNSEL:

         The exemption clause in the lease was no more void, as against public policy, than a policy of insurance to protect the railroad company against damage from the negligence of its employees, which is everywhere held to be valid, and to violate no rule of public policy. ( Civ. Code, secs. 2629, 2755; Patapsco Ins. Co. v. Coulter, 3 Pet. 222; Columbia Ins. Co. v. Lawrence, 10 Pet. 507; Waters v. Merchants' etc. Ins. Co ., 11 Pet. 213; Orient Ins. Co. v. Adams , 123 U.S. 67; Liverpool etc. Co. v. Phenix Ins. Co ., 129 U.S. 438; California Ins. Co. v. Union Compress Co ., 133 U.S. 414; Perrin v. Protection Ins. Co ., 11 Ohio, 147; 38 Am. Dec. 728; St. Louis Ins. Co. v. Glasgow , 8 Mo. 713; 41 Am. Dec. 661; Henderson v. Western etc. Ins. Co ., 10 Rob. (La.) 164; 43 Am. Dec. 176; Gates v. Madison etc. Ins. Co ., 5 N.Y. 469; Mathews v. Insurance Co ., 13 Barb. 234; Hynds v. Schenectady etc. Ins. Co ., 16 Barb. 119; Enterprise Ins. Co. v. Parisot, 35 Ohio St. 35; 35 Am. Rep. 589; Gove v. Farmers' etc. Ins. Co ., 48 N.H. 41; 2 Am. Rep. 168; Johnson v. Berkshire etc. Ins. Co ., 4 Allen, 388; Hale v. Washington Ins. Co ., 2 Story, 176.) The court erred in arbitrarily requiring the jury to add interest from the date of the fire to the amount of damage caused thereby, such interest being in the discretion of the jury. ( Civ. Code, sec. 3288.)

         Foshay Walker, for Appellant.

          Van Ness & Redman, for Respondents.

         The exemption clause is void. ( Civ. Code, sec. 2629; Chandler v. Worcester etc. Ins. Co ., 3 Cush. 328; Roesner v. Hermann , 8 F. 782; Johnson v. Richmond etc. R. R. Co ., 86 Va. 975; Act of March 31, 1891.) Defendant not having objected to the computation of interest in the court below, cannot object to it upon appeal. (Bullard v. Stone , 67 Cal. 482; Burnett v. Lyford , 93 Cal. 114.)

         JUDGES: Garoutte, J. Van Fleet, J., and Harrison, J., concurred.

         OPINION

          GAROUTTE, Judge

         The plaintiff, Stephens, was the owner of a certain warehouse, situated upon land adjoining the defendant's depot grounds, in the town of Hanford, California. The said land was held by Stephens under a lease from the defendant. One of the covenants of said lease was as follows: "And it is further agreed that the said party of the first part [defendant] shall not be responsible for any damage caused by fire, whether from railroad engines, or from the buildings of the said party of the first part, or by fires caused from any other means, but the risk and damage from whatever source shall be alone sustained by the said party of the second part [Stephens]." Upon August 8, 1891, and while said lease was in force, the said warehouse was destroyed by fire which had been kindled by defendant's employees upon adjoining land for the purpose of burning the dry grass, rubbish, etc., thereon. At the time of said fire the plaintiff, Stephens, was carrying insurance on said warehouse in the two [41 P. 784] insurance companies, plaintiffs, in the sum of nine thousand dollars. The insurance was paid, and this action was brought by the insurers and insured jointly to recover from the defendant the value of the premises so destroyed. The verdict and judgment were for the plaintiffs, from which judgment, and from a subsequent order denying its motion for a new trial, the defendant has appealed.

         The trial court held the foregoing provision of the contract of lease void, as against public policy, and our attention shall be addressed to the consideration of that question, for, as we view the case, a solution of it is determinative of the litigation. The fact that the defendant is a common carrier has no place in the case. The rights of parties dealing with common carriers, and the duties of common carriers toward parties with whom they deal, and toward the public in general, are elements foreign to any question here involved. At that time it was not dealing with plaintiff Stephens as a common carrier, nor was Stephens contracting with it upon any such understanding or hypothesis. As far as this transaction was concerned, the parties when contracting stood upon common ground, and dealt with each other as A and B might deal with each other with reference to any private business undertaking. It follows that all those principles of law denying or restricting the right of common carriers to limit their legal liabilities for damages arising from injury to person or property stand upon a different plane, and are not controlling here.

         Is this provision of the contract void as against public policy? That the principle of law involved is an original one, as applied to the present state of facts, is apparent, when we consider that but a single case has been found directly in point, although it is evident from the argument that counsel upon both sides have industriously sought for precedent. This provision of the contract is declared by respondents to be opposed to public policy in this, that it has a tendency to lessen the amount of care that defendant would exercise, both in the selection and operation of its machinery, and in the general conduct of its business, through its employees, in respect to the control of fire, the element here involved; that the undoubted effect of a contract exempting a party from damages flowing from his negligent use of fire is to increase the chances of conflagration; that is, one who is protected by an agreement against the results of his carelessness in this respect will not take the same care as he otherwise would; and, therefore, carelessness occasioned and caused by the agreement, increasing the probabilities of conflagrations, injuriously operates upon the interests of the public at large.

         The foregoing line of reasoning is ingenious, but we cannot indorse it as sound in law. It has been well said that public policy is an unruly horse, astride of which you are carried into unknown and uncertain paths, and here that horse would be carrying us beyond all limits ever reached before, if respondent's position should meet with our approval. While contracts opposed to morality or law should not be allowed to show themselves in courts of justice, yet public policy requires and encourages the making of contracts by competent parties upon all valid and lawful considerations, and courts so recognizing have allowed parties the widest latitude in this regard; and, unless it is entirely plain that a contract is violative of sound public policy, a court will never so declare. "The power of the courts to declare a contract void for being in contravention of sound public policy is a very delicate and undefined power, and, like the power to declare a statute unconstitutional, should be exercised only in cases free from doubt." (Richmond v. Dubuque etc. R. R. Co ., 26 Iowa 191.) "Before a court should determine a transaction which has been entered into in good faith, stipulating for nothing that is malum in se, to be void as contravening the policy of the statute, it should be satisfied that the advantage to accrue to the public for so holding is certain and substantial, not theoretical or problematical." (Kellogg v. Larkin, 3 Pinn. 125; 56 Am. Dec. 164.) "No court ought to refuse its aid to enforce a contract on doubtful and uncertain grounds. The burden is on the defendant to show that its enforcement would be in violation of the settled public policy of this state, or injurious to the morals of its people." (Swann v. Swann , 21 F. 299.)

         Turning our attention to this provision of the lease, let us concede, for present purposes only, this covenant to be opposed to the policy of the law, if its results are fairly and truly stated by respondents. But we deny that such results would follow. Respondent's argument is that the inevitable and necessary tendency of the covenant is to reduce in some appreciable degree the quantum of care exercised by the defendant in guarding against the destruction of the property of the public by fire; not the warehouse of the plaintiff, Stephens, for, as between him and the defendant considered alone, there can be no question as to the validity of the contract under consideration. It is the rights and interests of the public which it is claimed are infringed upon, and a trespass upon their interests and rights must be shown, or a case of the present character is a total stranger to any question of public policy.

         Were the dangers and risks to the public as to the destruction of plaintiff's property by fire in any degree increased by the aforesaid covenant? Answering respondent's argument by a like argument, we say, no. It may be conceded that the covenant had the effect as to plaintiff's warehouse to lessen defendant's care in guarding against fire, but, as defendant's care lessened, the owner's care proportionately increased. Knowing that th e defendant was absolutely absolved from any [41 P. 785] legal responsibility for its destruction by fire, we must assume that plaintiff Stephens, the owner, in the protection of his building from the negligence of the defendant's acts, exercised a degree of care commensurate with the dangers that surrounded it; for it cannot be gainsaid that a man of ordinary business understanding, having bartered away any right of action for damages for destruction of his property by fire which might thereafter accrue from defendant, would increase his care and watchfulness in preserving his property from such destruction. We think it must be assumed that, in proportion as the amount of care exercised by defendant in the protection of this property from fire decreased, the amount of care exercised by plaintiff in its protection increased. Having sold his remedy for damages in case of fire, it behooved him to be ever on the alert in the protection of his property. Under any aspect of the case, this question is only material in view of the contingency of a spreading of the conflagration from the warehouse of plaintiff to the property of the public in general, for the whole argument concedes that, if the danger and risk by fire to the property of the public are not increased, then there is nothing whatever in the contention. And thus it is again made apparent to what distant and untrodden paths that unruly horse, public policy, will carry you, unless he be guided by a steady hand and a strong rein.

         The remaining question presents itself: Is the result of this covenant necessarily to lessen the degree of care formerly exercised by the defendant toward the property of the public, and which the law ever enjoins upon it to exercise? In other words, are the probabilities of the destruction of the property of the public by fire communicated by defendant, not via the warehouse of plaintiff, but directly communicated, increased by reason of this covenant in the lease? It is argued that defendant's losses by fire arising from its negligence, being materially reduced if a large number of these contracts were outstanding, it would necessarily become careless in the selection of its servants, and neglectful and overeconomical in the selection of modern machinery, and thus the dangers to the public from conflagration would be multiplied. We do not see that such result would follow. It must be borne in mind that the lessees of defendant under these contracts are no part of the public. Each one of them has sold his right as one of the public, and is not in a position to complain as to the burdens cast upon him as an individual. The public here are the people holding no leases. The defendant in this case not only owes the public the same duty after the execution of the lease that it did before, but there is no reason in the world why it would not perform that duty in the same way as it had done in the past, however careful or neglectful that performance might be. Why would not this be so, for the public had the same rights and the same remedies against the defendant after as before the execution of the lease, and likewise the defendant was liable for damages in the same amount, upon the same property, and upon the same facts? It thus appears that the contract in no way changed the relations and conditions existing between the defendant and the public, and, such being the fact, no reason exists for a change upon its part in the manner of the conduct of its business. While it is true that the making of this contract withdrew plaintiff as one of the public, and, it may be said, thereby reduced the proportions of the public to that extent, still it would seem the refinement of absurdity to hold for such reason that, the public being reduced, the care exercised by defendant toward the public would be reduced pro tanto .

         The late case of Griswold v. Illinois Cent. Ry. Co. (Iowa), 57 N.W. 843, in its facts is fully analogous to the case at bar, and, upon a rehearing and reargument, a similar covenant in a lease was sustained as in no manner contravening public policy. Especially is this case valuable as precedent when we pause to consider the stringent provisions of the code of that state in dealing with the liability of common carriers for damages to property arising from fire and other causes. And doubly so in view of the further salient fact that the lease in that case upon its face appears to indicate that benefits to the lessor, in its capacity as a common carrier, would accrue by reason of the making thereof. These matters are not found in the case at bar, and to that extent the case occupies much broader ground than we are required here to take. The dissenting opinion of the learned chief justice is based, to some extent at least, upon these provisions of the Iowa code, and the further claim that the railroad company was acting in its capacity as a common carrier in making the lease, conditions which, we have already suggested, do not surround us here. The remaining objection of the learned chief justice to the validity of the judgment ordered by the majority of that court is in line with these respondents' contention, and we think unsound.

         Farmer A is in the habit of burning his stubble field in the fall of the year. B leases from him a small portion of his farm for storage or residence purposes, there being a clause in the contract similar to the one here involved. Farmer A in burning his stubble allows the fire to escape from his control, and B's property is destroyed; or A is the owner of a powder factory, and leases to B an adjoining tract of land. This exemption damage covenant is placed in the lease; the powder plant explodes, and B's property is destroyed. These illustrations in principle are parallel with the case at bar. Both the farmer and the factory owner owed the duty to the public of exercising [41 P. 786] a certain degree of care, one in burning his stubble field, the other in carrying on his factory. If this covenant in the present case had the effect to lessen the degree of care exercised by defendant, it had the same effect in the lease of the farmer and the powder man. If the risks and dangers to the property of the public from fire were increased in this case by reason of the covenant, they were likewise increased in those cases. Yet it would seem a gross trespass upon the rights of parties to make contracts, to hold the covenant void as against the policy of the law in the hypothetical cases cited. To hold that the interests of the public were of such gravity, and were so interwoven into such a contract, as to vitiate the contract, would carry us far beyond any principle of law yet recognized by courts or law-writers.

         If the doctrine enunciated by respondent be sound, then a multitude of contracts covering many and diverse subjects, and which are being entered into every day of the world, and recognized and acted upon both by parties and courts, must fall to the ground. As a striking example, the ordinary contract of fire insurance cannot stand the test, for it cannot be gainsaid that such a contract necessarily has the tendency to lessen the care which the owner would otherwise exercise in the protection of his property from fire. Upon respondents' line of argument, such owner owes a duty to the public, possibly in the protection of his own property from fire, certainly in the protection of the property of the public, and, if his care is lessened in the performance of that duty by reason of the contract of insurance, then surely the dangers and risks to the property of the public are increased. Yet, notwithstanding this reasoning, courts everywhere have upheld this class of contracts, and repelled all assaults upon them as being opposed to the policy of the law. While it may not be found in the contract itself that the negligence of the owner in causing the fire shall be no bar to a recovery, it has been held always and everywhere that such is the law, even in the absence of express stipulation to that end; and an express stipulation inserted in the contract in accordance with the general principle would certainly in nowise weaken the doctrine. As sustaining this general principle, see Patapsco Ins. Co. v. Coulter, 3 Pet. 222; Columbia Ins. Co. v. Lawrence, 10 Pet. 507; Waters v. Merchants' etc. Ins. Co ., 11 Pet. 213; Liverpool Steam etc. Co. v. Phenix Ins. Co ., 129 U.S. 438.

         Let us look at another class of contracts which have been sustained by the courts, but sustained wrongfully, if the soundness of the argument advanced by respondents can be maintained. Courts have sustained contracts made by common carriers with insurance companies, whereby property under their control, and in transit, has been insured against negligence of their employees. (California Ins. Co. v. Union Compress Co ., 133 U.S. 387; Phoenix Ins. Co. v. Erie etc. Transportation Co ., 117 U.S. 312.) Following respondents' line of argument, surely such contracts would have a tendency to lessen the care otherwise exercised by common carriers in the transportation of goods, and would thereby trespass upon the rights of the public, and, so trespassing, would render void all contracts of that character. But the courts, after careful investigation, have arrived at a contrary conclusion.

         To support the invalidity of this contract, counsel rely upon an act of the legislature found in the statutes of 1891, page 473, which declares a party guilty of a misdemeanor who starts fires in certain localities (without first taking certain precautions), whereby the property of an adjoining or contiguous owner is injured, damaged, or destroyed. If for no other reason, this act of the legislature cannot be relied upon to assist respondents' case, for it was passed subsequent to the making of the contract, and, if the contract was valid when made, no subsequent act of the legislature can render it invalid. It is laid down as an elementary principle in Greenhood on Public Policy, that, if a contract conform to the public policy of the state when made, a change in public policy will not avoid it.

         We conclude that the line of reasoning indulged in by respondents to support the invalidity of this contract is more specious than sound; that the interests of the public in the contract are more sentimental than real; and that such a contract violates no statute, conflicts with no principle of law, and in no way infringes upon public policy.          For the foregoing reasons the judgment and order are reversed and the cause remanded.