A rule of law restricting the right of contract which rests on
principles of public policy, because of the public ends to be
achieved, extends no further than the reason for it, and does not
apply to contracts wholly outside of and not affecting those
ends.
The rule that common carriers cannot secure immunity from
liability for their own negligence has no application when a
railroad company is acting outside the performance of its duty as a
common carrier. In such a case, the ordinary rules of law relating
to contracts control.
A contract made by a railroad company for construction work is
one made outside of the performance of its duty as a common
carrier, and a stipulation that the contractor, in consideration of
lawfully reduced rates for transportation of supplies and
employees, will assume all risk of damage of any kind even if
occasioned by tho company's negligence is not void as against
public policy.
Balt. & Ohio Ry. Co. v. Voight,
176 U. S. 498,
followed;
Railroad Co. v.
Lockwood, 17 Wall. 357, distinguished.
In dealing with transportation of supplies and employees of
contractors in connection with construction and improvement of its
own road, a railroad company does not act as a common carrier;
arrangements made in good faith with such contractors for free or
reduced rates are not violations of the prohibitions of the
Interstate Commerce Act against rebates.
See Matter of
Railroad-Telegraph Contracts, 12 I.C.C. 10.
Where no rule of public policy denies effect to stipulations in
a contract, the highest public policy is found in enforcing the
contract as actually made.
Courts are not at liberty to revise contracts. They can only
determine what the parties meant by the terms and expressions as
used.
In this case,
held that expressions to effect that the
contractor assumed "all risk and damage" and the railroad company
assumed "no obligation or risk" in a contract between a railroad
company and
Page 228 U. S. 178
contractor for construction of roadbed, and not in connection
with duties as a common carrier, included damage caused by the
company's own negligence.
Quaere to what extent a
contractor can, by a stipulation, valid as to himself and in
consideration of reduced rate of transportation, exempt a railroad
company from liability to his employs for damage sustained by them
from negligence of the railroad company while transporting
them.
13 Ariz. 186 reversed.
The facts, which involve the construction of a contract between
a railway company and a construction contractor and the liability
of the former for materials belonging to the latter destroyed by
fire, are stated in the opinion.
Page 228 U. S. 181
MR. JUSTICE HUGHES delivered the opinion of the Court.
The Grant Brothers Construction Company recovered judgment in
the District Court of the Territory of Arizona for $9,061 for the
loss of its property by fire on June 6, 1907, between Bouse and
Phoenix, Arizona, while in course of transportation on the railroad
operated by the Santa Fe, Prescott & Phoenix Railway Company,
the plaintiff in error. The judgment was entered upon a verdict of
a jury, a motion for a new trial was denied, and the judgment was
affirmed by the supreme court of the territory.
The railway company had been engaged in building, westerly from
its main line, a branch railroad known as the Arizona &
California Railroad. For this purpose, it entered into a contract
with the construction company for the necessary grading. The
property in question consisted of the camp and grading outfit and
supplies, belonging to the construction company, which had been
used by it in this work and were being removed by reason of its
completion. At the time in question, the branch line was operated
regularly only as far as Bouse, and the property was loaded on cars
"at the front" or end of track, about twelve miles west of that
station, to be carried to Phoenix. The superintendent, foremen, and
about fifty workmen of the construction company were taken on the
cars at the same place for the same destination. The cars were
hauled by the railway company to Bouse (where explosives and hay
were unloaded), and were there attached to a regular train which
brought them to a point known as the A. and C. Junction, where the
Arizona & California line joined the main line of the
Page 228 U. S. 182
railway company. At this junction (which was about four miles
from Wickenburg, a station on the main line in the direction of
Phoenix), all the cars containing the outfit of the construction
company, save one, were cut out of the train and were put upon a
side track. The rest of the train, with the employees of the
construction company, went on to Wickenburg. This took place late
in the evening of June 5, 1907, and about 10 o'clock in the morning
of the next day, four of the cars left on the side track were
destroyed by fire.
The A. and C. Junction is described as being in an open desert,
without a station agent or inhabitants and without water or fire
apparatus. The cars were left without a watchman in charge. The
reason given by the conductor for leaving them at this point was
that there was no room for the cars at Wickenburg. There was no
explanation of the cause of the fire, the only suggestion as to
this being that, before the fire occurred one train passed by,
between four and five o'clock in the morning.
At the close of the evidence, the railway company requested the
trial court to direct a verdict in its favor. This request was
refused and exception taken, and the sustaining of this ruling is
assigned as error. It is contended by the railway company that,
under its contract with the construction company, it was exempt
from all liability, and further that, even assuming it to be liable
for negligence, there was a total failure of proof in that
respect.
The principal question relates to the scope and validity of the
provision of the contract between the parties as to the liability
of the railway company.
The facts are these: in November, 1904, the railway company
issued a call for proposals for the grading of the roadbed,
clearing right-of-way, making necessary canals, etc., of the
Arizona & California Railroad, for a distance of about forty
miles. The construction company made a
Page 228 U. S. 183
bid, which was accepted, and a contract was executed accordingly
on December 12, 1904.
This contract, after providing for the performance of the
described work of grading, etc., contained the following terms with
respect to the transportation of supplies, camp and grading outfit,
and employees of the construction company, which were the same as
those set forth in the call for bids:
"14. Water will be delivered in cars at the end of the track at
the rate of one dollar and fifty cents ($1.50) per 1,000 gallons,
and supplies will be hauled to end of track, both in the usual
manner of construction trains, subject to delays, etc., incident
thereto. All risk of loss or damage to be borne by the
contractor."
"15. The company will furnish a rate of one cent per ton mile
from all points on the S.F. P. & P. Road and leased roads for
the contractor, on camp and grading outfit and supplies, corral
supplies, etc., except explosives and commissary goods, and return
to original shipping points at same rates, on completion of the
work. All movements of goods at less than tariff rates to be at
consignee's risk of loss and damage."
"16. The company will also furnish the contractor's employees .
. . a rate of one cent per passenger mile, . . . and return those
who have worked until the completion of contract at the same rate.
Passengers carried at less than tariff rates will be required to
assume all risk of accident to person and baggage. The plan of
movement of these employees and freight is to be according to rules
of the general freight and passenger agent."
"17. The company will also secure for the contractor similar
rates over the Santa Fe Company's coast lines, on camp and grading
outfit, in carload lots, both to and from the work, and for workmen
going to the work in lots of five (5) or more. "
Page 228 U. S. 184
After the work covered by this contract had been finished, it
was agreed that the construction company should continue the
grading of the road further to the west, upon the same terms and
conditions as those stated in the former contract, save that the
prices for the work were increased, and it was provided that water
should be delivered at the end of track free of cost, except for
car hire, and that men and supplies should be hauled free on the
line of the Arizona & California Railroad, between the A. and
C. Junction and the end of track. This supplementary agreement,
which was evidenced by letters exchanged in November, 1905, also
contained an express provision "that the company shall assume no
obligation or risk in case of accident or damage to men and
supplies."
It was under these conditions that, in June, 1907, the railroad
company -- the grading having been done -- took up the men, outfit,
and supplies of the construction company at the end of the track
for the purpose of transporting them to Phoenix.
It is alleged in the complaint that the transportation of the
property was to be at the contract rate of one cent per ton-mile,
and it is undisputed that this was less than the tariff rates of
the railway company accorded to the general public.
It is the established doctrine of this Court that common
carriers cannot secure immunity from liability for their negligence
by any sort of stipulation.
Railroad Company v.
Lockwood, 17 Wall. 357;
Liverpool Steam Co. v.
Phenix Insurance Co., 129 U. S. 397;
Baltimore & Ohio &c. R. Co. v. Voigt, 176 U.
S. 498,
176 U. S. 507;
Knott v. Botany Worsted Mills, 179 U. S.
69,
179 U. S. 71;
The Kensington, 183 U. S. 263,
183 U. S. 268.
The rule rests on broad grounds of public policy, justifying the
restriction of liberty of contract because of the public ends to be
achieved. The great object of the law governing common carriers was
to secure the utmost care in the rendering of a service of the
highest importance to the
Page 228 U. S. 185
community. A carrier who stipulates not to be bound to the
exercise of care and diligence "seeks to put off the
essential
duties of his employment." It is recognized that the carrier
and the individual customer are not on an equal footing.
"The latter . . . cannot afford to higgle or stand out and seek
redress in the courts. . . . He prefers, rather, to accept any bill
of lading, or sign any paper the carrier presents, often, indeed,
without knowing what the one or the other contains. In most cases,
he has no alternative but to do this or abandon his business."
Railroad Company v. Lockwood, supra, pp.
84 U. S.
378-379. For these reasons, the common carrier, in the
prosecution of its business as such, is not permitted to drop its
character and transmute itself by contract into a mere bailee, with
right to stipulate against the consequences of its negligence.
Manifestly this rule has no application when a railroad company
is acting outside the performance of its duty as a common carrier.
In such case, it is dealing with matters involving ordinary
considerations of contractual relation; those who choose to enter
into engagements with it are not at a disadvantage, and its
stipulations even against liability for its own neglect are not
repugnant to the requirements of its public service. The rule
extends no further than the reason for it. It is apparent that
there may be special engagements which are not embraced within its
duty as a common carrier, although their performance may
incidentally involve the actual transportation of persons and
things, whose carriage in other circumstances might be within its
public obligation.
Baltimore &c. Railway Co. v. Voigt,
176 U. S. 498, and
cases cited;
Northern Pacific Railway Co. v. Adams,
192 U. S. 440;
Long v. Lehigh Valley R. Co., 130 F. 870.
Thus, in
Baltimore & Ohio &c. Railway Co. v. Voigt,
supra, it was held that an express messenger in charge of
Page 228 U. S. 186
express matter in pursuance of the contract between the express
company and the railroad company was not a passenger of the latter
within the meaning of the rule of
Railroad Company v. Lockwood,
supra; that he was not constrained to enter into the contract
whereby the railroad company was exonerated from liability to him
for its negligence, and that such a contract did not contravene
public policy. His position was one
"created by an agreement between the express company and the
railroad company, adjusting the terms of a joint business, the
transportation and delivery of express matter. His duties of
personal control and custody of the goods and packages, if not
performed by an express messenger, would have to be performed by
one in the immediate service of the railroad company."
It was clear that, although the messenger was actually carried
on the train, and although the railroad company received
compensation in connection with its contract for the express
business, his relation to the railroad company was "widely
different from that of ordinary passengers," and there was no
justification for extending the doctrine restricting the freedom of
contract to a case which lay entirely outside the reason which
supported it.
In constructing, improving, or repairing its road, and in
building its extensions and branches, the railroad company is
providing facilities for its service as a common carrier, but, of
course, is not acting as such. It may do the work itself, if it
chooses, or it may make it the subject of contract with another. In
the latter case, it simply employs an appropriate agency. The
haulage by the railroad company of the men, appliances, and
supplies, required by the contractor for the purpose of the
construction or improvement, to or from the point on its line where
the work is to be done is merely incidental to the work itself. The
cost of such haulage is obviously an item of expense which must be
taken into account in fixing the
Page 228 U. S. 187
terms of the construction contract, and in providing for it over
its own line, the railroad company may adjust the matter with the
contractor as it sees fit. If the railroad company did the work
directly, it would have to take its employees and the necessary
outfit to the place of work, and it may undertake to do the like
for the contractor, either free of charge or at reduced rates, as
they may agree.
Usually, necessity or proper convenience requires an undertaking
by the railroad company as to such transportation which it would be
under no obligation to assume, in any event, as a common carrier.
Men and supplies must be put down and taken up at points on the
line where there is no regular station, and where the railroad
company would not be bound to accept or to discharge freight or
passengers. In a case like the present one, of the grading of an
extension or branch line, it is convenient that the track, laid as
the roadbed is prepared for it, should be utilized for the hauling
of men and materials to a point as near as possible to the work,
although such track is not open to the public, and the railroad
company, as a common carrier, has assumed, as yet, no obligation
for general transportation over it. This was obviously contemplated
in the contract in question, and a construction of the contract so
as to make it apply only to the hauling of camp and grading outfit
to stations to which the company was regularly doing business is
wholly inadmissible. The original proposals stated that the railway
company hoped "to keep the end of the track within four miles of
the nearest grading camp." The contract itself provided that water
and supplies should "be hauled to end of track, both in the usual
manner of construction trains." And, after providing for the
reduced rates for outfit, supplies, and employees from all points
on the line of the railway company, and for the return of the same
to original shipping points at the same rates on completion of the
work, the intent is shown by the provision
Page 228 U. S. 188
immediately following, that the railway company should secure
similar rates for the contractor over its coast lines "on camp and
grading outfit, in carload lots, both to and from the work." In the
supplementary contract, it was provided that men and supplies
should be hauled "to the end of track free," with the provision
that this should only apply on the line of the Arizona &
California Railroad -- that is, "between A. and C. Junction and the
end of the track." When the work was done, the men and outfit were
actually taken up by the railway company some twelve miles beyond
the last regular station on the branch line. The parties plainly
intended that the camp and grading outfit should be transported for
the benefit of the contractor as near to the work as it reasonably
could be, and without regard to regular stations, and that it
should be removed in the same way when the grading was
completed.
It is clear that, in dealing with transportation of this
character over its own road, in connection with construction or
improvement, a railroad company is not acting in the performance of
its duty as a common carrier, and the arrangement for free or
reduced-rate carriage for the necessary materials and men used in
the work, when it is a part of the contract, entered into in good
faith and not as a subterfuge, is not obnoxious to the provisions
of law prohibiting departures from the published tariffs, for the
reason that such an agreement lies outside the policy of these
provisions.
See Matter of Railroad-Telegraph Contracts, 12
I.C.C. 10, 11.
The parties, then, were free to make their own bargain as to
this transportation and the liability which should attach to it.
There is no rule of public policy which denies effect to their
expressed intention, but, on the contrary, as the matter lies
within the range of permissible agreement, the highest public
policy is found in the enforcement of the contract which was
actually made. Undoubtedly it
Page 228 U. S. 189
is not to be lightly concluded that the railroad company has
been relieved from liability for its neglect, but, on the other
hand, if this was the agreement as fairly interpreted, it is not to
be arbitrarily overridden. The parties were on an equal footing.
The risk of loss or damage to the grading outfit or supplies from
any cause, while being transported over the line of the railway
company, could be assumed by one party or the other, as they saw
fit. This risk was an item which naturally would enter into the
calculations of the parties with respect to the rate to be charged
by the railway company. We are not at liberty to revise the
contract, and the question simply is whether the stipulation
against liability, in view of the reduced rates, covered all losses
-- those which might be due to the carrier's neglect as well as
others.
We entertain no doubt as to what the parties meant. The
limitations upon the liability of the railway company were first
fully stated in the call for proposals, and, when the bid was
accepted in accordance with the terms of the call, the same
limitations were inserted in the contract. Thus, it was provided
with respect to the supplies to be hauled to the end of track, "all
risk of loss or damage to be borne by the contractor;" again, as to
the camp and grading outfits and supplies, "all movements of goods
at less than tariff rates to be at consignee's risk of loss and
damage," and, with regard to the employees, "passengers carried at
less than tariff rates will be required to assume all risk of
accident to person and baggage." Further, in the supplemental
agreement, it was stipulated: "The company shall assume no
obligation or risk in case of accident or damage to men and
supplies." When we consider the circumstances of the parties and
the objects of the contract, we cannot escape the conclusion that
these reiterated statements evidence the intention to deal
comprehensively with all the risks incident to the transportation,
not excluding the obvious risk of loss by reason of some neglect in
the
Page 228 U. S. 190
operation of the road. The contract was between two
corporations, and dealt with the familiar transactions of their
everyday concerns. The stipulations are in the terse language of
businessmen. The supplemental contract is contained in an informal
letter. And when "all risk of loss damage" is spoken of, and it is
provided that the railway company shall assume "no obligation or
risk in case of accident or damage," it is evident that they are
looking at the matter from a business standpoint, and are
bargaining for a reduced rate to be charged by the railway company,
on the one hand, and an assumption of the entire risk of the
transportation by the construction company, on the other. It is
true that general words of exemption have often been found
insufficient to cover injuries due to negligence, and a rule
imposing such a limitation upon their effect has manifest propriety
in those jurisdictions where common carriers, acting as such, are
allowed to stipulate against the consequences of their neglect if
this is done in explicit terms. But here, to repeat, we are
entirely out of the domain governed by the rule of public policy
affecting common carriers, and the agreement must be taken
according to its actual intent.
It will be observed that the limitation from liability was to
apply to the workmen as well as to the goods. We do not need to
inquire as to the effect of such an exemption in the case of a
workman who had not assented to it. But the provisions as to the
workmen throw light upon the intent of the parties with respect to
the property. In the supplemental contract, both men and supplies
were grouped in one stipulation for immunity. The railway company,
however, would not have been liable, in any event, for injuries to
the workmen save in case of negligence, and, in bargaining for a
limitation of liability as to the workmen, they evidently had
negligence in view. The word "accident" in this connection was
manifestly used in its popular sense, and not as limited to
occurrences beyond the
Page 228 U. S. 191
carrier's control. Further, it will be remembered that, in the
supplemental contract, free haulage was given over the branch line,
and the stipulation, therein repeated, was certainly to protect the
carrier from a liability, in the case of injury to the workmen,
which otherwise would attach -- that is, a liability for
negligence.
This point was recognized by the court in
Railroad
Company v. Lockwood, 17 Wall. 357, which involved
the obligation of a common carrier. The contract for exemption from
liability was general, but it related to a drover accompanying his
cattle (who, notwithstanding that he had a pass, was held to be a
passenger for hire), as well as to the cattle themselves, and with
respect to the drover, it was assumed in the course of the opinion
that the stipulation included immunity from liability for the
company's negligence. And thus the Court was brought to the
decision of the question whether a common carrier could be
permitted to make a stipulation of that sort. The Court said:
"It is strenuously insisted, however, that, as negligence is the
only ground of liability in the carriage of passengers, and as the
contract is absolute in its terms, it must be construed to embrace
negligence as well as accident, the former in reference to
passengers, and both in reference to the cattle carried in the
train. As this argument seems plausible, and the exclusion of a
liability embraced in the terms of exemption on the ground that it
could not have been in the mind of the parties is somewhat
arbitrary, we will proceed to examined the question before
propounded -- namely, whether common carriers may excuse themselves
from liability for negligence."
Id., pp.
84 U. S.
362-363.
The question as to the fair interpretation of language such as
is used in the present case, where the railroad company is acting
outside the performance of its duty as a common carrier, was
considered by the Circuit Court of Appeals in the Second Circuit in
Long v. Lehigh Valley
Page 228 U. S. 192
R. Co., 130 F. 870. That was the case of an express
messenger who was injured while employed as such in an express car
on one of the defendant's trains owing to the negligence of the
defendant's employees. His contract with the express company
contained a provision that he assumed "all risk of accidents and
injuries" to himself "arising out of such employment," and that he
released the express company and the transportation lines on which
he was to render service from any claims "arising out of any such
accidents or injuries" that might happen to him while so employed.
Circuit Judge Wallace, in delivering the opinion of the court,
after referring to
Baltimore & Ohio &c. Ry. Co. v.
Voigt, 176 U. S. 498,
said:
"It is said that the contract in that case in terms included
among the risks assumed by the express messenger accidents and
injuries occasioned by negligence, while the contract here does
not, and it is urged that, in the absence of such a stipulation,
the contract should be construed not to extend to that class of
accidents or injuries. This contention would doubtless be sound if
the parties contracting had not been treating on terms of equality,
as is the case between a common carrier and a shipper of goods or a
passenger. But when this is not the case, and no rule of public
policy forbids a contract by which one of the parties is exonerated
from any risk arising from negligence, there is no reason why the
ordinary rules of construction should not obtain, and the contract
be given effect according to the intention of the parties. The
observations of this court in
McCormick v. Shippy, 124 F.
48, are appropriate:"
"There is no question of public policy involved in this
contract, as in the case of a common carrier. It is well settled
that the parties is such a case have the right to provide by apt
language against liability for negligence. . . . The clause must be
interpreted to include loss through negligence, because for loss
not arising from negligence he would not be liable. "
Page 228 U. S. 193
"So, in this case, the defendant, being merely a private carrier
in respect to the plaintiff, owed him merely the duty of ordinary
care, and could only have been liable to him for injuries arising
from negligence, and the release made in advance must have
contemplated accidents and injuries of that character. In
Bates
v. Railroad Company, 147 Mass. 255, the agreement between the
express messenger and the express company was that the former"
"will assume all risk and [of] accidents and injuries resulting
therefrom, and will hold said company free and discharged from all
claims and demands in any way growing out of any injuries received
by him while so riding."
"In
Hosmer v. Railroad Company, 156 Mass. 506, the
plaintiff was an expressman, and had agreed that, in consideration
of the company's allowing him to ride in baggage cars on its
trains, he would 'assume all risk of accidents and injuries
resulting therefrom.' In both cases, the language of the contract,
although not expressly including injuries or accidents by
negligence, was construed to relieve the railroad company from
liability for injuries by negligence. In
Chicago &c. R. Co.
v. Wallace, 66 F. 506, the language of the contract was as
general as it is in the present case, and the railroad company was
exonerated from liability."
130 F. 873.
We see no ground whatever for the conclusion that it was not the
intention of the parties to give the railroad company immunity from
negligence in the case of the workmen, and, in view of the
provisions and purpose of the contract, it cannot be held that they
had a different intention with respect to the camp and grading
outfit and supplies. When they agreed that all movement of this
property at less than tariff rates should be at the risk of the
construction company, and later, in the supplemental contract, that
the railway company should
Page 228 U. S. 194
assume "no obligation or risk" in the case of damage to
supplies, we think it clear that they meant to cover the entire
transportation risk, with respect to this property, and that losses
such as occurred in this case, whether or not attributable to the
negligence of the railway company, were within the stipulated
immunity.
It is therefore unnecessary to discuss the assignments of error
which are based upon the ruling of the court with respect to the
submission to the jury of the question of negligence. Our
conclusion is that, upon the facts disclosed at the trial, the
railway company was entitled to a direction of a verdict in its
favor, and the judgment sustaining the recovery of the construction
company must therefore be reversed.
The judgment is reversed, and the case remanded to the
Supreme Court of the Arizona as the successor of the Territorial
Supreme Court, for such further proceedings as may not be
inconsistent with this opinion.