CASES

IN THE

SUPREME COURT

CALIFORNIA.

STEPHENS v. SOUTHERN PACIFIC RAILROAD COMPANY.

[109 CALIFORNIA, 86.]

LANDLORD AND TENANT-COVENANT AGAINST LOSS BY FIRE.-Under a covenant in a lease between a railroad company and its lessee of land adjoining its depot grounds, providing that the lessor shall not be liable for damage by fire arising from any cause, the lessee cannot recover for the loss of a warehouse erected by him on the leased premises, caused by fire negligently set on adjoining lands of the lessor for the purpose of burning grass and rubbish.

VALIDITY OF COVENANT-PUBLIC POLICY.-A covenant in a lease, providing that the lessor shall not be liable for damage caused by fire, is valid and not opposed to public policy as increasing the risks and dangers to the public as to the destruction of its property by fire.

CONTRACTS-EFFECT OF SUBSEQUENT STATUTE.— A contract cannot be rendered invalid by a statute subsequently, passed.

PUBLIC POLICY.-If a contract when made conforms to the public policy of the state, a change in public policy cannot avoid it. F. Walker, for the appellant.

Van Ness & Redman, for the respondents.

87 GAROUTTE, J. 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 88 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 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 80 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 car 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 90 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 Fed. Rep. 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 the defendant was absolutely absolved from any legal responsibility for its destruction by fire, we must assume 91 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.