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ANDERSON v. UNION PACIFIC R.R. CO.

April 13, 1990.

TOM ANDERSON, d/b/a MUSTANG CORRAL, Appellee,
v.
THE UNION PACIFIC RAILROAD COMPANY, Appellant.



In this action, The Union Pacific Railroad Company (Union Pacific) appeals a summary judgment damage award of $10,912 in favor of Tom Anderson for property damage and attorney fees arising out of a March 27, 1988, fire.

In the court below, the parties stipulated to the following facts. On March 27, 1988, a railroad engine and train owned by Union Pacific negligently caused a fire which incinerated property adjacent to the railroad tracks. On October 24, 1984, Anderson had leased a 330- by 150-foot parcel of commercial property adjacent to the railroad tracks from Union Pacific for an annual rental of $644. He stored several automobiles on the property. The fire destroyed twenty vehicles with a total value of $7,600.

Section 13 of the lease included the following provisions:
"It is understood by the parties hereto that the Premises are in dangerous proximity to the tracks of the Lessor, and that by reason thereof there will be constant danger of injury and damage by fire, and the Lessee accepts this lease subject to such danger.
  "It is therefore agreed, as one of the material considerations for this Lease and without which the same would not be granted by the Lessor, that the

[14 Kan. App. 2d 343]

      Lessee assume all risk of loss or destruction of or damage to buildings or contents on the Premises, and of or to other property thereon . . . where such loss, damage, destruction, injury, or death of persons is occasioned by fire caused by, or resulting from, the operation of the railroad of the Lessor, whether such fire be the result of defective engines, or of negligence on the part of the Lessor or of negligence or misconduct on the part of any officer, servant, or employee of the Lessor, or otherwise, and the Lessee hereby agrees to indemnify and hold harmless and defend the Lessor . . . against and from all liability . . . arising out of or by reason of any such loss, damage, destruction, injury, or death of persons. . . ."

  Although Anderson questioned some of the terms of the lease in the pre-lease negotiations, Union Pacific would not alter any of them.

  After the fire, Anderson filed suit to recover for damage to his personal property. Cross-motions for summary judgment were filed. Union Pacific moved for summary judgment on the basis of section 13 of the lease. Anderson defended that the provision was unenforceable and moved for summary judgment on the stipulated facts. The court granted Anderson's motion and denied Union Pacific's motion, holding that the lease provision violated K.S.A. 66-234 and was contrary to public policy and, thus, was unenforceable.

  Union Pacific timely appeals the entry of summary judgment.

  The trial court determined that section 13 of the lease violated K.S.A. 66-234 and Kansas public policy. Our scope of review is de novo, inasmuch as the sole issue is the legal effect of the lease contract. Adams v. John Deere Co., 13 Kan. App. 2d 489, 492, 774 P.2d 355 (1989).

  Kansas follows the general principle that "competent parties may make contracts on their own terms, provided they are neither illegal nor contrary to public policy." 13 Kan. App. 2d at 492. Anderson, of course, contends that section 13 of the lease is both illegal and contrary to public policy.

  Anderson first contends the waiver of liability provision of section 13 of the lease violates the clear language of K.S.A. 66-234.

  K.S.A. 66-234 was enacted in 1870 and provides: "Railroads in this state shall be liable for all damages done to person or property, when done in consequence of any neglect on the part of the railroad companies." Anderson argues this language, especially the legislature's use of the word "shall," indicates that the

[14 Kan. App. 2d 344]

      legislature intended railroads to be liable for their negligence without exception. However, as early as 1873, the Kansas Supreme Court indicated K.S.A. 66-234 was not a clear, unambiguous statute but instead raised "many interesting questions" concerning contributory negligence and assumption of risk. St. Joseph & D.C.R. Co. v. Grover, 11 Kan. *302, *306 (1873).

  In 1915 the Kansas Supreme Court was called upon to determine the validity of a waiver of liability provision under the statute. Grain Co. v. Railway Co., 94 Kan. 590, 146 P. 1134 (1915). In Grain Co., the court held that a hold harmless provision in a railroad lease was not "void on the ground of public policy." 94 Kan. at 593. See generally Annot., 14 A.L.R.3d 446. Anderson attempts to distinguish Grain Co. from the instant case by arguing that in Grain Co. the railroad and grain company had a business relationship, that the grain company lease was on the ...


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