Florida Department of Transportation v. Dorthy Schwefringhaus , 188 So. 3d 840 ( 2016 )

Supreme Court of Florida
____________
No. SC14-69
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FLORIDA DEPARTMENT OF TRANSPORTATION,
Petitioner,
vs.
DORTHY SCHWEFRINGHAUS, et al.,
Respondents.
[April 7, 2016]
QUINCE, J.
This case is before the Court for review of the decision of the Second
District Court of Appeal in Department of Transportation v. CSX Transportation,
Inc., 128 So. 3d 209 (Fla. 2d DCA 2013). In its decision, the district court ruled
upon the following questions, which the court certified to be of great public
importance:
IS DOT BOUND BY A RAILROAD CROSSING AGREEMENT
UNDER WHICH IT RECEIVED A REVOCABLE LICENSE TO
USE LAND AS RIGHT–OF–WAY IF THE SOLE
CONSIDERATION FOR THE LICENSE WAS AN AGREEMENT
TO INDEMNIFY THE RAILROAD FOR LOSSES ARISING OUT
OF DOT’S ACTIVITY ON THE LAND?
IF SO, IS DOT’S LIABILITY UNDER THE CROSSING
AGREEMENT LIMITED BY SECTION 768.28(5), FLORIDA
STATUTES (2002)?
Id. at 215. We have jurisdiction. See art. V, § 3(b)(4), Fla. Const. For the reasons
that follow, we approve the decision of the Second District, answer the first
certified question in the affirmative, and answer the second in the negative.
FACTS
The Florida Department of Transportation (DOT) appealed a judgment
awarding $502,462.22 to CSX Transportation, Inc. (CSX) as indemnity for the
amount of a settlement and related attorneys’ fees paid by CSX to resolve a
negligence action arising from an accident at a railroad crossing. CSX Transp.,
Inc., 128 So. 3d at 210. CSX requested indemnification under a 1936 crossing
agreement between Seaboard Air Line Railway Company (Seaboard)—
predecessor to CSX—and the State Road Department—the DOT’s predecessor.
Id. at 211. The agreement allowed the State Road Department, as a licensee, to
construct and maintain a road that crossed over railroad tracks owned at the time
by Seaboard. Id. However, the agreement also contained an indemnity clause,
which read, “The [State Road Department] will indemnify and save harmless
[Seaboard Air Line Railway Company] from and against all loss, damage or
expense arising or growing out of the construction, condition, maintenance,
alteration or removal of the highway hereinabove described.” Id. at 216-17.
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The facts that prompted the filing of suit are as follows:
On October, 29, 2002, [Robert and Dorthy Schwefringhaus1]
were riding eastbound in their car on State Road 52 near Giddens
Road. A truck, heading westbound, went over some railroad tracks
owned by CSX. The crossing was allegedly in poor maintenance, and
a trailer behind the truck disconnected. The trailer and its load of
lumber struck the couple’s car, killing [Mr. Schwefringhaus] and
badly injuring [his] wife. State Road 52 is the successor number for
State Road 210 [the subject of the 1936 crossing agreement]. . . . By
2002, this road was a major highway, connecting I-75 on the east to
the newly constructed Suncoast Parkway on the west.
[Ms. Schwefringhaus], on her own behalf and as personal
representative of the estate of her husband, filed suit against CSX in
2004. The truck driver who dropped the trailer was apparently never
identified and was not a party to the lawsuit. CSX brought DOT into
this action as a third-party defendant in 2008.[2] Ultimately, following
a settlement with the plaintiffs, the trial court entered this judgment
requiring DOT to indemnify CSX in the amount of $125,000 for the
settlement of this lawsuit and $377,462.22 for the expenses arising
from its failure to defend the suit.
Id. at 211-12 (footnotes added). On appeal to the Second District, the DOT argued
the indemnity clause was invalid because the State Road Department had no legal
authority to enter into the agreement. Id. at 210-11. In the alternative, the DOT
argued that pursuant to section 768.28(5), Florida Statutes (2002), its liability for
1. There is some confusion in the record as to the proper spelling of Ms.
Schwefringhaus’ first name. Her deposition reveals that the correct spelling is
“Dorthy.”
2. The trial court granted CSX’s motion to bifurcate the liability and
damages phases of the third-party suit and granted, in part, CSX’s Motion for
Partial Summary Judgment against the DOT.
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breach of the crossing agreement must be limited to $200,000, with CSX seeking
payment of any additional amount from the Florida Legislature. Id. at 211.
The Second District rejected the DOT’s argument that the State Road
Department had no authority to agree to indemnification, finding this case similar
enough to two cases3 in which this Court enforced the indemnity agreements to
warrant the same result. Id. at 212. The district court also found that the
indemnity clause was the only consideration the State provided to CSX for the
agreement. Id. Accordingly, the court observed that finding the indemnity
agreement unenforceable would void the entire crossing agreement, entitling CSX
“to prevent any vehicles from crossing its tracks, effectively closing State Road
52” and potentially many other roads where similar, standardized crossing
agreements containing this same language were used. Id. at 212-13.
The Second District also relied on estoppel principles to find the indemnity
clause enforceable, id. at 214 n.5, and suggested that because CSX did not require
a lump sum payment at the inception of the contract or annual payments during its
term, the indemnity payment was simply the DOT’s payment for a license “that
3. Am. Home Assurance Co. v. Nat’l R.R. Passenger Corp., 908 So. 2d 459,
463, 473-74 (Fla. 2005) (enforcing crossing agreement between railroad company
and a municipal agency, although emphasizing that this Court was not resolving
the issue as to a state subdivision or agency); Russell v. Martin, 88 So. 2d 315 (Fla.
1956) (enforcing private crossing agreement between railroad company and a
private property owner).
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apparently was free of charge for its first sixty-five years.” Id. at 213. While the
Second District recognized “that Florida’s Constitution states that ‘[n]o money
shall be drawn from the treasury except in pursuance of appropriation made by
law,’ ” it did not read this provision as prohibiting the trial court from entering a
monetary judgment requiring the DOT to indemnify CSX. Id. at 214.
Regarding the DOT’s argument that the judgment must be limited to
$200,000, the district court found that statutes, such as section 768.28, that limit
liability as part of the Legislature’s partial waiver of sovereign immunity apply
“only to judgments recovering damages for tort, not to judgments recovering
damages under legal theories that may be analogous to torts.” Id. This case
involved the latter because the district court found the DOT liable based on an
express written contract. Id. Recognizing that its decision could broadly impact
similar long-standing agreements throughout the state and affect commerce, the
Second District certified the following two questions of great public importance:
IS DOT BOUND BY A RAILROAD CROSSING AGREEMENT
UNDER WHICH IT RECEIVED A REVOCABLE LICENSE TO
USE LAND AS RIGHT–OF–WAY IF THE SOLE
CONSIDERATION FOR THE LICENSE WAS AN AGREEMENT
TO INDEMNIFY THE RAILROAD FOR LOSSES ARISING OUT
OF DOT’S ACTIVITY ON THE LAND?
IF SO, IS DOT’S LIABILITY UNDER THE CROSSING
AGREEMENT LIMITED BY SECTION 768.28(5), FLORIDA
STATUTES (2002)?
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Id. at 215. The DOT appealed, and the Florida Association of County Attorneys
filed an amicus brief in support of the DOT’s position. The Association of
American Railroads filed an amicus brief in support of Respondent CSX, and the
Florida Justice Reform Institute, the Florida Chamber of Commerce, Inc., and
Associated Industries of Florida, Inc. jointly filed an amicus brief, also supporting
Respondent CSX.
ANALYSIS
We have previously held that the defense of sovereign immunity will not
protect the State from a cause of action arising from its breach of an express,
written contract into which it had statutory authority to enter. Pan-Am Tobacco
Corp. v. Dep’t of Corr., 471 So. 2d 4, 5-6 (Fla. 1984). Both parties agree that this
principle applies here, but they disagree as to how it applies. Respondent CSX
argues that because the State Road Department had statutory authority to enter into
the crossing agreement, Pan-Am prohibits the DOT from relying on sovereign
immunity to bar suit for its breach of the indemnity provision within that
agreement. The DOT asserts that Pan-Am’s requirement of statutory authority is
not met in this case because although the State Road Department had authority to
enter into the crossing agreement, it did not have authority to agree to the
indemnity clause. Therefore, according to the DOT, the indemnity provision is
unenforceable, and Pan-Am’s waiver of sovereign immunity does not apply. We
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agree with Respondent CSX and find that under Pan-Am, the DOT cannot use
sovereign immunity where the DOT breached a provision of a statutorily
authorized crossing agreement.4
In Pan-Am, the Florida Department of Corrections breached its contract with
Pan-Am Tobacco Corporation by terminating the agreement early and without
using the required termination procedures within the contract. Id. at 4-5. We
noted that the Legislature, in section 768.28, Florida Statutes, waived sovereign
immunity in tort law, but not in contracts. Id. at 5. However, we found that the
Legislature’s grant of power to the State to enter into contracts indicates the
Legislature’s intent that those contracts be binding and mutually enforceable. Id.Thus, we held that “where the state has entered into a contract fairly authorized by
the powers granted by general law, the defense of sovereign immunity will not
protect the state from action arising from the state’s breach of that contract.” Id.The question here is whether Pan-Am requires the State Road Department to have
had statutory authority to enter into the indemnity clause itself or whether statutory
authority to enter into the crossing agreement is sufficient.
4. This case involves a pure question of law and a trial court’s ruling on a
motion for summary judgment—both of which are subject to de novo review.
Maronda Homes, Inc. of Fla. v. Lakeview Reserve Homeowners Ass’n, Inc., 127
So. 3d 1258, 1268 (Fla. 2013).
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The DOT argues that the indemnity clause requires separate statutory
authorization because it is essentially a waiver of sovereign immunity, which only
the Legislature has the power to waive. See Am. Home Assurance Co. v. Nat’l
R.R. Passenger Corp., 908 So. 2d 459, 471-72 (Fla. 2005) (“Only the Legislature
has authority to enact a general law that waives the state’s sovereign immunity.”);
Art. X, § 13, Fla. Const. (“Provision may be made by general law for bringing suit
against the state as to all liabilities now existing or hereafter originating.”).
However, we addressed this argument in Pan-Am, wherein we found an implied
waiver of sovereign immunity for contract claims, despite the nonexistence of an
express legislative waiver in that context. See Cty. of Brevard v. Miorelli Eng’g,
Inc., 703 So. 2d 1049, 1050 (Fla. 1997); State v. Family Bank of Hallandale, 623
So. 2d 474, 479 (Fla. 1993). We stated, “Where the legislature has, by general
law, authorized entities of the state to enter into contract or to undertake those
activities which, as a matter of practicality, require entering into contract, the
legislature has clearly intended that such contracts be valid and binding on both
parties.” Pan-Am, 471 So. 2d at 5. Otherwise, the legislative authorization to
undertake such activities would be void and meaningless. Id. Thus, when the
State is statutorily authorized to enter into a contract, that authority includes the
obligations necessary to fulfill the terms of that contract.
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Our decision in American Home also reinforces this conclusion. 908 So. 2d
at 463. In that case, a municipal agency (KUA) entered into a crossing agreement
with CSX, in which KUA agreed to indemnify CSX and others against certain
losses. Id. at 462-63. We found that the indemnification provision was not
controlled by the breach-of-contract principles in Pan-Am “because that case
addressed the contractual liabilities of the state, while municipalities historically
have possessed liability for their contracts.” Id. at 474.5 We determined that KUA
had authority to enter into contracts for municipal services—including the crossing
agreement—and that as consideration for the license to use CSX’s property and in
recognition of the increased risks associated with such use, KUA agreed to
indemnify CSX against any loss. Id. at 476. Because the indemnification clause
was part and parcel of the “fairly authorized” crossing agreement in that case, we
found the clause to be binding and enforceable. Id. Accordingly, we concluded
that a municipal agency like KUA has inherent authority to “enter into an
indemnification agreement as part of a contract with a private party and may not
invoke sovereign immunity to defeat its obligations under the contract.” Id.
5. The DOT argues that American Home is distinguishable from the instant
case because that case involved a municipality, not a state agency. However, that
distinction was only relevant to determine whether Pan-Am applied, not the issue
here—which is whether the application of Pan-Am requires the crossing
agreement, generally, or the indemnity clause, specifically, to be statutorily
authorized.
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Although we determined that Pan-Am did not apply, our decision in
American Home still required that we discuss KUA’s “statutory authority”—the
same element under Pan-Am that is relevant to the instant case. Our finding that
KUA had authority to enter into the indemnity clause was based on that clause
being “part and parcel” of the “fairly authorized” crossing agreement, not based on
the clause itself being fairly authorized. Just as in American Home, the crossing
agreement here was statutorily authorized, and the indemnity provision therein was
“part and parcel” of that statutorily authorized crossing agreement. As such, under
Pan-Am, the DOT may not invoke sovereign immunity to defeat its performance
obligations under the crossing agreement.
The DOT also asserts that the indemnity provision is unenforceable because
it improperly authorizes expenditures from the state treasury, which only the
Legislature can do. Am. Home, 908 So. 2d at 474 (“The state may not employ
state funds unless such use of funds is made pursuant to an appropriation by the
Legislature.”); Art. VII, § 1(c), Fla. Const. (“No money shall be drawn from the
treasury except in pursuance of appropriation made by law.”). However, our
holding in Pan-Am addresses this argument as well because the State is authorized
to expend funds necessary to perform its obligations under the contract. See Pan-
Am, 471 So. 2d at 5. In this case, the crossing agreement necessitated the
expenditure of funds for the DOT to construct and maintain the road it was
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licensed to build. 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—
and answer the first certified question in the affirmative.6
The second certified question asks if the DOT’s liability under the crossing
agreement is limited by section 768.28(5), Florida Statutes (2002). CSX Transp.,
Inc., 128 So. 3d at 215. However, we have previously held that the liability limits
of section 768.28 do not apply to non-tort claims. See Am. Home, 908 So. 2d at
474 (concluding that section 768.28 was not applicable where the indemnity
provision was based on a contract); Provident Mgmt. Corp. v. City of Treasure
Island, 796 So. 2d 481, 486 (Fla. 2001) (refusing to apply section 768.28 to restrict
the award of damages against the State for the erroneous issuance of a temporary
injunction because “that statute applies only when the governmental entity is being
sued in tort”). This holding is supported by the principle that “statutes purporting
6. In the Second District’s opinion below, the majority and the dissent
phrase this certified question differently based on characterizing the indemnity
provision as either the sole consideration or instead as partial consideration for the
crossing agreement. We note that neither characterization affects our holding as to
this certified question.
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to waive sovereign immunity must be clear and unequivocal.” Spangler v. Fla.
State Tpk. Auth., 106 So. 2d 421, 424 (Fla. 1958). Waiver cannot be found by
inference or implication, and statutes waiving sovereign immunity must be strictly
construed. Id. Here, the plain language of this subsection indicates that it applies
only to tort claims. § 768.28(5), Fla. Stat. (explaining that state agencies and
subdivisions “shall be liable for tort claims in the same manner and to the same
extent as a private individual,” but placing limits on that liability) (emphasis
added). Even section 768.28(1), which establishes the limited waiver of sovereign
immunity, states that it only applies to causes of action seeking “to recover
damages in tort.” Am. Home, 908 So. 2d at 474. We hereby reaffirm that section
768.28(5) applies only to tort actions, and we answer the second certified question
in the negative.
CONCLUSION
Based on the foregoing, we find that the breach-of-contract principles in
Pan-Am prohibit the DOT from using sovereign immunity to avoid suit for its
breach of the crossing agreement. We also find that DOT is bound by the
indemnity provision as a part of the statutorily authorized crossing agreement, and
that the limits of liability in section 768.28(5) do not apply. We affirm the Second
District’s opinion in Department of Transportation v. CSX Transportation, Inc.,
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128 So. 3d 209 (Fla. 2d DCA 2013), and remand for disposition in accordance with
this opinion.
It is so ordered.
LABARGA, C.J., and PARIENTE, LEWIS, CANADY, POLSTON, and PERRY,
JJ., concur.
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND
IF FILED, DETERMINED.
Application for Review of the Decision of the District Court of Appeal - Certified
Great Public Importance
Second District - Case No. 2D12-1097
(Pasco County)
Gerald B. Curington, General Counsel, and Marc Allen Peoples, Assistant General
Counsel, Florida Department of Transportation, Tallahassee, Florida,
for Petitioner
Daniel John Fleming of Melkus, Fleming & Gutierrez, P.L., Tampa, Florida; and
Dan Himmelfarb of Mayer Brown LLP, Washington, District of Columbia,
for Respondent CSX Transportation, Inc.
Stephen Michael Durden, Jacksonville, Florida,
for Amicus Curiae Florida Association of County Attorneys
Peter D. Webster of Carlton Fields Jorden Burt, P.A., Tallahassee, Florida; Wendy
Frank Lumish of Carlton Fields Jorden Burt, P.A., Miami, Florida; and Daniel
Saphire, Assistant General Counsel, Association of American Railroads,
Washington, District of Columbia,
for Amicus Curiae Association of American Railroads
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Stephen H. Grimes and Matthew Harrison Mears of Holland & Knight LLP,
Tallahassee, Florida; and William Wells Large, Florida Justice Reform Institute,
Tallahassee, Florida,
for Amici Curiae Florida Justice Reform Institute, Florida Chamber of
Commerce, and Associated Industries of Florida
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