Supreme Court Says 1936 Road Deal Requires State to Pay

Jim Saunders, News Service of Florida, Daily Business Review

April 11, 2016

Trucks Driving on Road

Photo: Radisa Zivkovic/iStockphoto.com

As it sought to build a road in then-rural Pasco County, the state in 1936 reached an agreement with Seaboard Air Line Railway Co.

In exchange for being able to build a road that crossed Seaboard's railroad tracks, the state agreed to compensate the company for any losses or damages stemming from the road.

Now, 80 years later, the agreement will cost the state Department of Transportation more than $500,000.

The Florida Supreme Court on April 7 ruled that the state is required to pay $502,462 to CSX Transportation Inc., Seaboard's successor company, because of a legal settlement and expenses related to a fatal traffic accident on the road in 2002.

The justices, in a unanimous decision, rejected the transportation department's arguments that the agreement, known as an "indemnity clause," was invalid. In finding that the state was bound by the 1936 deal, the Supreme Court upheld a ruling by the Second District Court of Appeal.

"In this case, the crossing agreement necessitated the expenditure of funds for the DOT to construct and maintain the road it was licensed to build," said the 14-page decision, written by Justice Peggy Quince. "The indemnity provision was merely an additional performance obligation that required the DOT to expend funds. The authorization to fulfill one's performance under a contract does not disappear merely because the performance obligation happens to implicate tort law. Accordingly, we find that the DOT is bound by the crossing agreement—including the indemnity clause."

The dispute began after an October 2002 fatal accident on State Road 52, now a heavily traveled highway cutting across Pasco County. Robert and Dorthy Schwefringhaus were in a car traveling eastbound on the road, when a westbound truck went over tracks owned by CSX. A trailer behind the truck disconnected, and a load of lumber hit the couple's car, killing Robert and injuring Dorthy, the ruling said.

Dorthy Schwefringhaus in 2004 filed a lawsuit against CSX, which later agreed to a $125,000 settlement. CSX then sought to recover from the state the $125,000 and $377,462 in expenses related to the case.

While the Second District Court of Appeal sided with CSX, it also asked the Supreme Court to take up the issue. In the 2013 appeals court opinion, then-Judge Chris Altenbernd wrote that the state in 1936 wanted to build a road on abandoned right-of-way of an old logging railway that had served the community of Fivay, which Altenbernd described as "little more than a ghost town by the mid-1930s." To build the road, however, the state had to cross an active Seaboard railroad line.

"The State Road Department built this rural road, State Road 210 [its name at the time], and the crossing agreement undoubtedly was filed away in the filing cabinets of one or both parties," Altenbernd wrote. "One imagines that on a daily basis a few cars and a few horse-drawn vehicles crossed the railroad tracks in 1939 when the population of Pasco County was less than 14,000."

The case drew attention at the Supreme Court, with the Florida Association of County Attorneys filing a friend-of-the-court brief on behalf of the transportation department, and the Florida Chamber of Commerce, Associated Industries of Florida, the Florida Justice Reform Institute and the Association of American Railroads weighing in with briefs for CSX.

William Large, president of the business-backed Florida Justice Reform Institute, pointed to a need for predictability in contract law.

"To allow FDOT to walk away from its clear and unambiguous duties under the crossing agreement would raise serious doubts concerning the fairness of our judicial system," Large argued. "It could even call into question other contracts with governmental entities."