Opinion
Case No. 2:02 CV 496 PPS.
February 9, 2005
ORDER
Before the Court is Third Party Defendant Rexam Beverage Can Company's Motion for Summary Judgment as to the Third Party Complaint of Indiana Harbor Belt Railroad Company ("IHB"). Because Rexam has not demonstrated that Indiana Harbor consented to the delegation of Rexam's duty to indemnify them, and thus did not discharge Rexam's duty, that motion is denied.
I. BACKGROUND
On September 3, 1999, Plaintiff Ann Weaver fell and was injured as she attempted to climb down from a boxcar. At the time of the accident, the boxcar was inside a facility known as International Paper in Hammond, Indiana. Weaver alleges that IHB, who operated a railroad on the property, was negligent and at fault for causing her injuries, and she filed suit against IHB.
IHB answered Weaver's Complaint and filed a Third Party Complaint against Rexam and S.L. Hammond. IHB alleges that there was a Private Sidetrack Agreement, dated November 1, 1986, covering the use, maintenance, and operation of the track and loading area where Plaintiff alleges she was injured. IHB claims that that Agreement requires Rexam to indemnify IHB under certain circumstances, and that Weaver's accident is just such a circumstance. Rexam countered this Third Party Complaint with the present motion for summary judgment. Rexam claims that they entered into a Purchase and Sale Agreement with S.L. Hammond before the accident and that their duty to indemnify IHB was delegated to S.L. Hammond through that sale. Even assuming that there was a delegation, Rexam's dismissal would not be proper here.
Both parties refer to the transfer of the duty to indemnify as an assignment, but we think it is clearer to call it a delegation. Parties assign rights, but delegate duties, and different law applies to each situation. See, e.g., Brown v. Indiana Nat. Bank, 476 N.E.2d 888, 895 n. 4 (Ind.Ct.App. 1985).
II. DISCUSSION
A. Summary Judgment Standard
Summary judgment is proper where the "pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine 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). See also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Williams v. Waste Mgmt. of Illinois, 361 F.3d 1021, 1028 (7th Cir. 2004). The Court construes all facts and draws all reasonable inferences in the light most favorable to the nonmoving party. Butera v. Cottey, 285 F.3d 601, 605 (7th Cir. 2002).
B. Delegation of Rexam's Duty to Indemnify
In order to understand Rexam's argument, some history of the Private Sidetrack Agreement (the "Agreement") is necessary, as it has changed hands a number of times. The Agreement was originally between IHB and American Can Packaging, Inc., but it was later subject to an "Assignment of Agreement," under which American Can Packaging, IHB and American National Can Company all agreed to transfer American Can Packaging Company's rights and liabilities under the original Agreement to American National Can Company. IHB represents to the Court that Rexam is a successor to American National Can Company. Thus, Rexam appears to be bound by the contract. However, Rexam claims that they in turn assigned their interest in the Agreement and the property at issue here to S.L. Hammond prior to Weaver's accident, and, as a result, that they are no longer bound to indemnify IHB.
While Rexam has shown that this final transfer to S.L. Hammond occurred, they are incorrect that it absolves them of liability. This is because even when a party properly delegates a duty, it does not extinguish the original obligee's (in this case, IHB's) right to recover from the original obligor (Rexam) if the delegee (S.L. Hammond) does not perform. As one commentator noted, "The performance required by a duty can often be delegated; but by such a delegation the duty itself is not escaped." 5-48 Arthur Linton Corbin, Corbin on Contracts § 866 at 401 (interim ed. 2002), cited by Boswell v. Lyon, 401 N.E.2d 735 (Ind.Ct.App. 1980). In other words, just because S.L. Hammond is now required to indemnify IHB, it does not mean that IHB cannot seek recovery from Rexam if S.L. Hammond fails to pay. To allow otherwise would strip IHB of their power to choose the party who indemnifies them. Under Rexam's view of the law, theoretically, Rexam could unilaterally transfer the responsibility to indemnify IHB to a completely insolvent party at any time, making the indemnity worthless to IHB. In fact, this does not seem to be far from what actually occurred here, as S.L. Hammond has defaulted, and it is unclear if IHB will be able to recover anything from them.
The situation would be different if IHB had signed off on the delegation, which could give rise to a novation, absolving Rexam of liability. See, e.g., Boswell, 401 N.E.2d at 741 ("A novation simply means the substitution of one debtor for another by mutual agreement of the parties"); see also Utica Mut. Ins. Co. v. Vigo Coal, 393 F.3d 707, 709 (7th Cir. 2004) (stating that a novation is the replacement of a first agreement by a second agreement). "A novation may not be achieved unilaterally." Winkler v. V.G. Reed Sons, 638 N.E.2d 1228, 1233 (Ind. 1994). In other words, a novation requires all parties to agree to it, including the original obligee. Boswell, 401 N.E.2d at 741. There is no evidence that that occurred in this case. In fact, IHB asserts that they did not even knew about Rexam's sale of the property to S.L. Hammond until after the accident. Contrast this with the April 7, 1987, agreement to assign the Sidetrack Agreement from American Can Packaging, Inc., to American National Can Company. (IHB's Exhibit C). In that agreement, all three parties consented to the transaction in a signed writing: American Can Packaging, American National Can Company, and IHB. No such writing exists for the transfer from Rexam to S.L. Hammond. Thus, a proper novation clearly did not occur in this case.
III. CONCLUSIONS
For the foregoing reasons, Rexam Beverage Can Company's Motion for Summary Judgment [Docket No. 55] is DENIED.
SO ORDERED.