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Gulf Oil Corp. v. Acf Industries Inc.

Decided: December 4, 1987.

GULF OIL CORP., PLAINTIFF-APPELLANT,
v.
ACF INDUSTRIES, INC., DEFENDANT-RESPONDENT



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County.

Petrella, Dreier and Ashbey. The opinion of the court was delivered by Dreier, J.A.D.

Dreier

Plaintiff Gulf Oil Corp. (Gulf) has appealed from a judgment entered in favor of defendant ACF Industries, Inc. (ACF) by the Law Division. The judgment was alternatively characterized by the trial judge as a summary judgment and a judgment on the pleadings.

Gulf had leased various railroad hopper cars from ACF. In this case Gulf claimed indemnification or contribution from ACF as a result of a judgment against Gulf for injuries to independent workmen occurring when they used a metal ladder to enter one of the cars to clean debris. The ladder came into contact with an overhead electric wire and the plaintiff-workmen suffered severe personal injuries. They sued both Public Service Electric & Gas Company (PSE & G) and Gulf in another action, which was settled in 1984 by judgments against PSE & G in the amount of $4,250,000 and against Gulf in the amount of $825,000.*fn1

This complaint was filed in the summer of 1984, and the trial was scheduled to commence March 30, 1987. On March 7, 1987, ACF filed a motion and affidavit on short notice to amend its answer to include a counterclaim for contractual indemnification based upon the lease agreement. Although Gulf opposed the motion, it was granted, the court treating Gulf's opposition to the motion as a motion for summary judgment to dismiss the counterclaim. ACF thereupon filed a cross-motion for summary judgment. One week later the trial judge dismissed the complaint declaring that the operative language of the clause in

paragraph 8 (quoted infra), the surrounding circumstances, and the purpose of the clause indicated that the parties intended that ACF would be indemnified from all property damage and personal injury claims arising out of the operation of the hopper car.

On this appeal, Gulf claims that the court misconstrued the clause under New Jersey law,*fn2 and at the very least, that the clause should have been considered ambiguous and thus subject to factual proof in a plenary hearing concerning the circumstances surrounding the agreement. For a full understanding of the clause in question it must be quoted in context. We, therefore, reproduce not only the operative paragraph 8, but also paragraphs 7, 9, 13 and 15, all dealing with the lessor and lessee's allocation of responsibility for the repair and maintenance of the car.

(7) Lessee will preserve the cars in good condition and will not in any way alter the physical structure of the cars without the approval in writing of the Lessor. At the termination of this lease, Lessee will return all of the cars to the Lessor at the point specified in paragraph (2) hereof, or other points mutually agreed upon, empty, free from residue, and in the same good order and condition as the cars were in when they were delivered by the Lessor to Lessee, ordinary wear and tear excepted. Lessee shall on demand reimburse Lessor for the cost of cleaning any cars containing residue or for damage to any car, appurtenances, and/or outlets which have been affected by the commodity loaded therein.

(8) Lessee will indemnify Lessor against loss or damage caused during the term of this lease to or by any of the cars hereby leased, or to or by the contents thereof, howsoever occurring and will indemnify Lessor against any loss or damage suffered by it by reason of or arising out of any default by Lessee hereunder. Lessee will not assign, transfer, encumber, or otherwise dispose of this lease, the cars or any part thereof or sub-let or under-let the cars hereby leased, or change or permit to be changed or altered the present lettering and/or numbering on said cars or any of them without the consent of Lessor in writing first obtained. Lessee will not permit or suffer any encumbrances or liens to be entered or levied upon the cars, or any of them.

(9) Lessor agrees to furnish the cars in accordance with the present DOT requirements and in compliance with the now existing A.A.R. rules of interchange, and to conduct necessary repairs during the term of this lease. Lessee agrees to provide prompt notification of car damage or defect, and to forward the cars as may be directed by the Lessor. Lessor shall not be liable for any damage to or loss of the whole or any part of any shipment made in any of the cars. Lessee shall at its expense replace any removable parts if lost or broken. If any of the cars shall be completely destroyed, or if the physical condition of any car shall become such that such car cannot be operated in railroad service as determined by the Lessor, then Lessor may at its option cancel this lease as to such car as of the date on which such event occurred, or may substitute therefor another car within a reasonable period of time. Any car modification costs incurred by Lessor in compliance with a DOT or A.A.R. rule change shall be for the account of the Lessee. As cars are placed in a shop for maintenance and/or repair at the direction of Lessor, the rental charges on each such car shall cease on date of arrival at such shop and will be reinstated on date such car is ready to leave such shop to Lessee's specified point. If a car becomes bad order while en route and is placed in railroad shops for repair, then after the lapse of five days the rent on the car so placed shall cease until such car is returned to Lessee's service. If any repairs are required as a result of the misuse by or negligence of Lessee, its consignee, agent or sub-lessee, the rental charge shall continue during the period of repair.

(13) The application, maintenance and removal of interior protective coating on the cars are to be performed by and at the expense of the Lessee. Commodity or mechanical damage to the lining of any car shall be for the account of the Lessee.

(15) Lessee will be responsible for inspection and cleaning of the operating mechanism of the outlets, hatches and special fittings on cars leased herein. Further, any damage to the outlets, hatches and special fittings or their operating mechanism will be repaired for the account of the Lessee. [Emphasis supplied in paragraph 8].

The issues in this case are: (1) whether the term "loss or damage" includes personal injury; (2) whether the indemnification includes a responsibility to pay for injuries caused solely by the negligence of, or a design defect attributable to, the lessor-indemnitee; (3) whether the emphasized clause in paragraph 8 is sufficiently ambiguous to require a plenary hearing on the issue of the parties' intention, and (4) whether the ...


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