Dakota, Minnesota & Eastern Railroad Corporation v. Wisconsin & Southern Railroad Corporation

In the
United States Court of Appeals
For the Seventh Circuit
No. 10-3177
DAKOTA, MINNESOTA & EASTERN
RAILROAD CORPORATION,
Plaintiff-Appellant,
v.
WISCONSIN & SOUTHERN
RAILROAD CORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 3:09-cv-00516-wmc—William M. Conley, Chief Judge.
ARGUED JUNE 2, 2011—DECIDED SEPTEMBER 20, 2011
Before BAUER, POSNER, and MANION, Circuit Judges.
POSNER, Circuit Judge. The plaintiff, DM&E for short,
is a Class II Railroad (that is, a middle-sized freight-
hauling railroad) that operates in a number of mid-
western states. It owned rail lines in and near Janesville,
Wisconsin, including a 200-foot spur line connecting one
of its main lines with a plant owned by a company

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2 No. 10-3177
named Freedom Plastics, Inc. that manufactured plastic
pipe and other plastic products. The plant—the only
shipper located on the spur—shipped several carloads
of plastic products weekly over the spur, which was
the only rail line that served the plant. These shipments
made Freedom Plastics DM&E’s largest Janesville cus-
tomer.
Wisconsin & Southern, the defendant, another Class II
Railroad, operates in Northern Illinois and Southern
Wisconsin. It approached DM&E (actually a predecessor,
but we can ignore that detail, and so we substitute
“DM&E” wherever the predecessor’s name appears in
documents we quote) wanting to buy the Janesville rail
lines, including the spur leading to the Freedom Plastics
plant. DM&E, however, wanted to retain exclusive rights
to serve its existing customers, mainly Freedom Plastics
(but also Janesville Sand & Gravel, which however is not
on the spur); and, as we’ll see, the contract of sale so
provides. The contract also allows DM&E to continue to
run trains on the Janesville lines being sold to Wisconsin
& Southern and grants DM&E an exclusive easement to
use the spur to serve Freedom Plastics.
Several years after the sale, Freedom Plastics entered
receivership. The receiver sold all its assets, including
the plant served by the spur. The buyer of the plant,
North American Pipe Corporation (NAPCO) (actually
the buyer’s parent, but that’s another detail we can sup-
press), continues to manufacture plastic products in Free-
dom Plastics’ former plant. Contending that the change
in ownership had voided the exclusive easement, Wiscon-

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No. 10-3177 3
sin & Southern contracted with NAPCO to ship
products made in the plant over the spur, which is still
the only rail line that serves the plant. NAPCO’s
contract of carriage with Wisconsin & Southern is not
exclusive; DM&E continues to serve the plant, but at a
diminished rate—Wisconsin & Southern runs trains
to and from the plant seven days a week, DM&E only two.
DM&E brought this diversity suit to enjoin Wisconsin
& Southern from using the spur and to obtain damages
for the defendant’s past use of it. DM&E contends that
the reference in the contract to “Freedom Plastics” is to
the plant, not to its owner. It further contends that Wis-
consin & Southern is trespassing on its property, namely
the tracks situated on the spur, by running railcars on
it. DM&E sold the land under the tracks—that is, the
right of way—to Wisconsin & Southern, but claims
that it didn’t sell the tracks that sit atop the land.
So DM&E has two claims, one for breach of contract and
one for trespass. The district court entered summary
judgment in favor of the defendant on both. Wisconsin
law governs the substantive issues presented by the
appeal.
A letter of intent that preceded the agreement of sale
stated that DM&E would “retain trackage rights over all
track to be sold” and retain “exclusive access to [its]
existing customers (active or inactive inclusive of any
relocation or expansions they might undergo),” but that
“either Wisconsin & Southern or DM&E would have
the right to develop and/or serve new customers on the
line.” But later DM&E submitted to Wisconsin & South-

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4 No. 10-3177
ern a proposed agreement of sale which stated that the
right of exclusive access retained by DM&E would ex-
tend “to each industry, shipper, receiver, or other
facility . . . located on” the Janesville tracks it was selling.
Wisconsin & Southern returned the draft to DM&E
with the words “each industry, shipper, receiver, or
other facility” crossed out; and in another sentence in
DM&E’s draft—“Buyer shall not have the right to
provide service to any Current Industry”—it crossed out
the words “any Current Industry” and substituted “Free-
dom Plastics.” An accompanying letter to DM&E
explained that “we listed Freedom Plastics in an attempt
to specifically list out your customers. Freedom Plastics
is the only one that I am aware of that you serve on
the line. If you have others, please list them out. By
listing out the specific customer(s), we were merely
trying to avoid any confusion or misunderstandings
that may occur in the future.”
DM&E responded with a new draft, which restored
the language that Wisconsin & Southern had deleted
and added, as illustrating “Current Industry,” “Freedom
Plastics,” together with two companies (Janesville Sand
& Gravel and General Motors) located on the rail lines
(though not on the spur) that it was selling to Wisconsin
& Southern.
Wisconsin & Southern responded to the revision by
altering the proposed agreement of sale to state that
DM&E’s exclusive access would be to “its existing cus-
tomers over the Rail Lines (’Current Industry’),” implying
that “Current Industry” means existing customers.

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No. 10-3177 5
DM&E rejected this draft but eventually agreed, in the
final contract of sale, that “DM&E . . . shall have exclusive
access . . . to Freedom Plastics [and one other com-
pany—Janesville Sand & Gravel] (’Current Industry’),
including any relocation or expansion that such
Current Industry may undergo,” but that both DM&E
and Wisconsin & Southern could serve both any “ex-
isting industry” (presumably excluding any “Current
Industry”) and any “New Industry,” defined as “any
industry, shipper, receiver or facility other than Freedom
Plastics [and Janesville Sand & Gravel and GM] . . . that
constructs a new facility on a vacant site or occupies
a previously vacant facility on the Rail Lines.”
Also in the final contract of sale Wisconsin &
Southern agreed to give DM&E an exclusive easement
over the 200-foot spur to enable it to continue serving
Freedom Plastics without competition. The deed (a
quitclaim deed) that conveyed the property that DM&E
was selling to Wisconsin & Southern stated that it was
selling “the real property, estates, roadbeds, rights-of-
way . . . fixtures, and appurtenances thereto; together
with all improvements . . . specifically including . . . all
rails, ties, ballast, switches . . . [and] spurs,” except an
easement over the spur “for the sole purpose of serving
Freedom Plastics” (emphasis in original). A bill of sale
separate from the deed had DM&E selling “all the per-
sonal property . . . located on the Rail Lines . . . including
but not limited to all rail, other track materials, and all
other Assets,” apart from financial assets, rolling stock,
and other equipment unrelated to the rails located on

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6 No. 10-3177
the spur. The total sale price for the real and personal
property was approximately $2.52 million.
With respect to the breach of contract claim, the
district court ruled that the language of the contract was
plain and there was no need to look further: NAPCO is
not Freedom Plastics. Nor is it Freedom Plastics’ successor
in the corporate-law sense, as it would be had it
acquired Freedom Plastics in a merger. Columbia Propane,
L.P. v. Wisconsin Gas Co., 661 N.W.2d 776, 784 (Wis. 2003);
United States Shoe Corp. v. Hackett, 793 F.2d 161, 163-64 (7th
Cir. 1986) (Wisconsin law). Freedom Plastics was sold
in pieces, and the plant located on the spur was just one
of those pieces and happened to be bought by NAPCO,
which didn’t assume any of Freedom Plastics’ contracts.
DM&E argues that it wouldn’t make any sense for
“Freedom Plastics” to denote the company rather than
the factory. A railroad can serve only customers located
on tracks to which the railroad has access. If Freedom
Plastics moved its factory, DM&E couldn’t follow it to
its new location unless that location happened to be on a
rail line that DM&E owned or had trackage rights in.
But if Freedom Plastics’ former factory remained in
operation albeit under new ownership, DM&E would be
able to serve it and would want to do so—why would
it care who owned the factory, as long as the factory
continued to produce goods shipped by rail? Hence,
DM&E argues, the convention in the railroad industry
is that a customer’s name actually denotes the facility
that the customer (or, as in this case, after the sale of
the factory to NAPCO, any new customer) owns.

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No. 10-3177 7
DM&E is arguing that there is a “trade usage,” a termi-
nology special to a particular industry, in this case
the railroad industry, which uses “customer” or “existing
customer” in a way different from its use in ordinary
discourse. But the only evidence it presented is that a
railroad worker continues to refer to the factory as Free-
dom Plastics. That is no evidence at all. For all we know,
the worker doesn’t know the factory has a new owner.
Recently the author of this opinion noticed in a news-
paper article that the Willis Tower in Chicago had
installed a glass-bottomed observation deck on the 103rd
floor. He asked his wife in surprise, “I thought the
Sears Tower was the only building in Chicago with
more than a hundred stories.” She answered in the
pitying tone in which one answers dumb questions: “The
name of the Sears Tower was changed to ‘Willis Tower’
two years ago.”
We are not suggesting that evidence of trade
usage must take the form of expert evidence; any
management-level employee of a business engaged in
a particular trade should be familiar with the meaning of
the words used in that trade, and thus fit the definition
of a lay witness entitled to give opinion evidence. Fed. R.
Evid. 701; Western Industries, Inc. v. Newcor Canada Ltd.,
739 F.2d 1198, 1203 (7th Cir. 1984); see Ty Inc. v. Softbelly’s,
Inc., 353 F.3d 528, 534 (7th Cir. 2003). But all DM&E
offered to establish trade usage besides the railroad
worker’s affidavit was a statement by a lawyer for Wis-
consin & Southern that he considered the term “indus-
try” to be synonymous with “customer.” But that is his
client’s position, not DM&E’s: “Current Industry” means

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8 No. 10-3177
an existing customer, such as Freedom Plastics, rather
than a facility.
The district judge was content to base his decision on
the literal meaning of “Freedom Plastics”—the name of a
company, identifying the entity (“Current Industry”) that
DM&E had the exclusive right to serve. He was relying
on the common-sense presumption that words in a
contract are used in their usual sense unless evidence
that they are not (which could be evidence of a trade
usage at variance with ordinary meaning) is presented.
Maryland Arms Limited Partnership v. Connell, 786 N.W.2d
15, 20-21 (Wis. 2010); Gorton v. Hostak, Henzl & Bichler, S.C.,
577 N.W.2d 617, 622-23 (Wis. 1998). But even without
evidence that creates an ambiguity, literal meaning can
be rejected when the result would offend common sense.
Maryland Arms Limited Partnership v. Connell, supra,
786 N.W.2d at 21-22; Corbett v. Joannes, 104 N.W. 69, 75
(Wis. 1905); Outlet Embroidery Co. v. Derwent Mills, Ltd., 172
N.E. 462, 463 (N.Y. 1930) (Cardozo, C.J.); Beanstalk Group,
Inc. v. AM General Corp., 283 F.3d 856, 859-60 (7th Cir.
2002); Rhode Island Charities Trust v. Engelhard Corp., 267
F.3d 3, 7 (1st Cir. 2001).
Which might be thought the case here. DM&E wanted to
keep serving Freedom Plastics’ factory without competi-
tion from another railroad; why would it care if the
owner changed? And Wisconsin & Southern was
willing to allow DM&E exclusive access to the factory;
was it really thinking that someday it could get access
because of a change of ownership?

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No. 10-3177 9
There may thus be enough doubt about what the
parties actually meant by calling Freedom Plastics a
“Current Industry” to justify resort to extrinsic evidence
(that is, evidence other than the written contract it-
self). We summarized that evidence earlier; it consists
primarily of the parties’ exchange of preliminary contract
drafts. The parol evidence rule does not permit such
evidence to be used to contradict the terms of an unam-
biguous written contract, e.g., Olympia Hotels Corp. v.
Johnson Wax Development Corp., 908 F.2d 1363, 1373 (7th
Cir. 1990) (Wisconsin law); Fidelity & Deposit Co. of Mary-
land v. City of Sheboygan Falls, 713 F.2d 1261, 1271-72 (7th
Cir. 1983) (Wisconsin law), provided it was integrated;
and the contract does contain an integration clause and
is unambiguous once the issue of trade usage is set to
one side. But both parties have preferred to rely on the
evidence of the preliminary negotiations rather than to
invoke the parol evidence rule to exclude it.
The evidence doesn’t help DM&E. When Wisconsin
& Southern struck out, as being confusing, the term
that DM&E had inserted—“each industry, shipper, re-
ceiver, or other facility” on the Janesville lines that
DM&E was selling (including therefore the spur)—this
should have cued DM&E to propose to dispel the con-
fusion by substituting for the deleted words “the
facility now owned by Freedom Plastics.” Its failure to
do so would indicate to Wisconsin & Southern that
DM&E cared about the specific customer, that is,
Freedom Plastics, and not about the plant owned by
Freedom Plastics should ownership of the plant change.
For all Wisconsin & Southern knew, DM&E might

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10 No. 10-3177
have had some highly advantageous deal with Freedom
Plastics that made it want to retain exclusive access to
that company—for if the deal was indeed highly advanta-
geous to DM&E, Freedom Plastics would have an incen-
tive to negotiate with another railroad for carriage at a
lower price if another railroad had access to its plant, as
it would were it not for DM&E’s retention of exclusive
rights to serve Freedom Plastics. So far as Wisconsin
& Southern could know, DM&E really did intend just
to retain exclusive access to the customer, and not to
the facility.
DM&E argues that if the change in contract language
over the course of the negotiations had deprived it of
exclusive access to the plant, the parties would have
renegotiated the price, since DM&E would be getting less
than it expected. Inferring the meaning of a contract
from the contract price is a legitimate tool of interpreta-
tion. In re Kazmierczak, 24 F.3d 1020, 1022 (7th Cir. 1994)
(Wisconsin law); Sutter Ins. Co. v. Applied Systems, Inc., 393
F.3d 722, 725-26 (7th Cir. 2004); cf. S.A. Healy Co. v. Milwau-
kee Metropolitan Sewerage District, 50 F.3d 476, 479 (7th Cir.
1995) (Wisconsin law); AL Tech Specialty Steel Corp. v.
Allegheny Int’l Credit Corp., 104 F.3d 601, 606 (3d Cir.
1997). But the failure to change the price supports Wis-
consin & Southern rather than DM&E. It suggests
that the change in language was indeed, as Wisconsin
& Southern argued in the letter we quoted, a clarifica-
tion rather than a substantive change.
In referring to extrinsic evidence to resolve a contract
dispute, we may seem to be invading the jurisdiction of

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No. 10-3177 11
the trier of fact. When the only evidence in a contract
case is a written contract, its interpretation is deemed an
issue for the judge to decide; but when there is other
evidence, even evidence consisting solely of documents
of unquestioned validity, the meaning of the contract
becomes a jury issue. Cook, Inc. v. Boston Scientific Corp., 333
F.3d 737, 742 (7th Cir. 2003); Western Industries, Inc. v.
Newcor Canada Ltd., supra, 739 F.2d at 1205; Myers v.
Selznick Co., 373 F.2d 218, 222-23 (2d Cir. 1966) (Friendly, J.)
That rule may be due for reexamination. There are
reasons for wanting to keep contract disputes away
from juries wherever possible, because most jurors have
no experience with contracts, or at least commercial
ones. And if a judge is trusted to infer meaning from one
document, why not from a series of documents? But
we’ll not try to explore that question, because there
has been no objection to judicial consideration of the
extrinsic evidence, all of it documentary and of unques-
tioned authenticity.
So DM&E loses on its contract claim, and we move on
to its trespass claim. There are several preliminary puz-
zles. Why would DM&E sell the land underneath
the tracks, especially underneath the spur leading to
the Freedom Plastics factory, but retain ownership of the
tracks? DM&E was not about to go onto the right of way
on which they sit and pull them up, with the con-
sequence that Wisconsin & Southern could not use
the spur until it had replaced them. And what if
Wisconsin & Southern had replaced some of the tracks
and repaired or strengthened others, as it claims to have
done? Dividing ownership of the land and the tracks is

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12 No. 10-3177
so weird that there would have to be compelling evi-
dence, textual or otherwise, to justify the interpretation
urged by DM&E.
The contract of sale provides that the personal property
being sold, including the tracks, excludes “spur trackage
used solely to serve Freedom Plastics.” This exclusion
doesn’t appear in the quitclaim deed that conveyed
personal property to Wisconsin & Southern. In fact
the deed is explicit that the rails go with the land under-
neath them in the sale. The deed merely reserves to
DM&E an easement in the right of way, that is, reserves
a right to use the 200-foot spur to serve Freedom Plas-
tics. We have just held that the easement expired
when Freedom Plastics decamped. But even if DM&E
were correct that the easement would expire only when
Freedom Plastics’ plant ceased operating, what sense
would it make for DM&E to own the track after its ease-
ment expired, whenever it expired?
When a contract of sale precedes a deed, and there is
an inconsistency, the deed governs. Miles v. Mackle Bros.,
Division Deltona Corp., 242 N.W.2d 247, 249-50 (Wis. 1976)
(This rule is called, unhelpfully, “merger.”) For it’s the
deed that is going to be recorded and provide notice to
subsequent purchasers or lienors. DM&E argues that
the rule is inapplicable to personal property mentioned
in the contract of sale, and often this is true. If you make
a contract to sell your house and your car to the same
person, the deed for the house will not mention the
car because mention of it would provide no relevant
information to someone searching the title records of

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No. 10-3177 13
the real property. So the omission will not invalidate
the sale of the car. Miles v. Mackle Bros., Division Deltona
Corp., supra, 242 N.W.2d at 250; Ferro v. Miller, 246 N.Y.S.2d
149, 151-52 (N.Y. App. Div. 1963). “If delivery of the
deed is intended only as part performance, the doctrine
of merger does not apply.” 11 Thompson on Real Property
§ 96.11(e), p. 651 (David A. Thomas ed. 2002).
But the rails on a railroad’s right of way are fixtures,
see Premonstratensian Fathers v. Badger Mutual Ins. Co., 175
N.W.2d 237, 239-40 (Wis. 1970); Wiggins Ferry Co. v.
Ohio & Mississippi Ry., 142 U.S. 396, 415-16 (1892); Union
Pacific R.R. v. Board of Commissioners of Jefferson County,
217 P. 315, 317 (Kan. 1923), and fixtures are part of the
real property to which they are attached. Anyone con-
templating the purchase of the right of way would there-
fore justifiably assume in the absence of a contrary state-
ment in the deed that the rails were being sold along
with the right of way conveyed by the deed. See
Burlington Northern R.R. v. Scheid, 398 N.W.2d 114, 118
(N. Dak. 1986). He would have no reason to go looking
for an anterior sale agreement with variant terms.
Even the purpose of the trespass claim is obscure.
DM&E argues that Wisconsin & Southern’s use of the
spur could damage the rails, and for all we know that’s
true, but Wisconsin & Southern ripostes that it has im-
proved the trackage in various ways, including by replac-
ing some of the rails. It presented evidence to this effect in
the district court, which DM&E did not counter, thus
leaving the case barren of evidence of a net detrimental
effect to the rails caused by Wisconsin & Southern’s use
of the spur.

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14 No. 10-3177
Moreover, the principal damages that DM&E seeks for
the alleged trespass are of course the profits that the
alleged trespass is enabling Wisconsin & Southern to
divert to itself from DM&E. And this claim falls with
the contract claim; for without prevailing on the latter,
DM&E cannot establish that it has a legally protected
interest in exclusive access to the NAPCO plant.
DM&E also argues that it can maintain a trespass suit
without proof of damages. That would be true if the
suit charged trespass to real property, because such a
suit is a common device for determining property rights,
and specifically for preventing the alleged trespasser
from obtaining the plaintiff’s property by adverse posses-
sion. Wis. Stat. § 893.28; Jacque v. Steenberg Homes, Inc., 563
N.W.2d 154, 159 (Wis. 1997); Restatement (Second) of
Torts § 163 and comment d (1965); Martin v. Amerman, 133
S.W.3d 262, 267 (Tex. 2004). But a suit for trespass to
personal property is not a title-proving device, so, as
with other torts, damage must be proved. Wisconsin
Telephone Co. v. Reynolds, 87 N.W.2d 285, 287-88 (Wis. 1958);
Van Alstyne v. Electronic Scriptorium, Ltd., 560 F.3d 199, 208
(4th Cir. 2009); Restatement, supra, § 218.
The trespass claim is, in short, a red herring. If the
contract gave DM&E exclusive access to the plant that
Freedom Plastics owned when the contract was signed,
DM&E is entitled to the relief it seeks without regard to
any trespass. If the contract did not grant DM&E such
access, then Wisconsin & Southern’s use of the spur
to serve the current owner of the plant is authorized
and so can’t be a trespass.

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No. 10-3177 15
The judgment for the defendant is
AFFIRMED.
9-20-11

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