U.S. Supreme Court Louisville & Nashville R. Co. v. Central Iron Co., 265 U.S. 59 (1924)
Louisville & Nashville Railroad Company v.
Central Iron & Coal Company
Argued February 19, 1924
Decided May 5, 1924
265 U.S. 59
ERROR TO THE CIRCUIT COURT OF APPEALS
FOR THE FIFTH CIRCUIT
1. No contract of a carrier can reduce the amount of charges legally payable to it under its tariff for an interstate shipment, or release from liability a shipper who has assumed their payment, nor can any act or omission of the carrier (except the running of the statute of limitations) estop or preclude it from enforcing payment of the full amount by the person liable. P. 265 U. S. 65 .
2. But, in the absence of a governing tariff provision, delivery of the goods for shipment does not necessarily import an obligation of the shipper to pay the freight charges, and the carrier and shipper are free to contract as to when and by whom payment shall be made, subject to the rule against discrimination. P. 265 U. S. 66 .
3. Where bills of lading acknowledged receipt of goods from the shipper, but provided for delivery to the order of another as consignee, were not signed by the shipper, and contained no express agreement on his part to pay or guarantee payment of the freight charges, and there was evidence that the goods were sold and shipped by the shipper to the consignee upon agreement between them that the latter should pay those charges, and were transferred by the consignee with the bills of lading to a third party who received delivery from the carrier, held that a finding that the
shipper did not assume the primary obligation to pay the freight charges was justified. P. 265 U. S. 67 .
4. To enforce payment of freight charge by a shipper only secondarily liable, the carrier must first make effort to collect from those primarily liable. P. 265 U. S. 69 .
5. A consignee, by accepting the shipment, becomes liable as a matter of law for the full amount of the tariff charges, whether they are demanded at the time of delivery or later. Pittsburgh, etc. Ry. Co. v. Fink, 250 U. S. 577 . P. 265 U. S. 70 .
284 F. 250 affirmed.
Error to a judgment of the circuit court of appeals affirming a judgment by the district court for the defendant coal company in an action by the railroad to recover the difference between the amount chargeable under its tariff for an interstate shipment and a less amount collected.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
In January, 1917, the Central Iron & Coal Company sold Tutwiler & Brooks ten carloads of coke to be delivered
f.o.b. cars at the seller's plant in Holt, Alabama. Before delivery by the seller, the purchasers sold the coke to the Great Western Smelters Corporation of Mayer, Arizona. Thereafter, under instructions from Tutwiler & Brooks, and upon their agreement to pay the freight, the Central company delivered at its plant the cars of coke to the Louisville & Nashville Railroad, directed shipment thereof to Mayer over that railroad and connecting lines, and took bills of lading which it delivered immediately to Tutwiler & Brooks. That firm made a draft for the purchase price on the Smelters corporation, with bills of lading attached. The corporation paid the draft, received the bills of lading, and, upon surrendering them to the delivering carrier and payment to it of the freight demanded, obtained possession of the coke. The amount of the freight then demanded and paid was $5,082.15. The freight legally payable according to the tariff was $8,545.61.
The undercharge as apparently not discovered until January, 1920. The Louisville & Nashville then made demand upon the Central company for the amount ($3,463.46). Payment being refused, this action to recover it was brought in the Federal Court for the Northern District of Alabama, Western Division. Each party requested a directed verdict. It was directed for the defendant, judgment entered thereon was affirmed by the circuit court of appeals, 284 F. 250, and the case is here on writ of error under § 241 of the Judicial Code. Most of the facts were agreed. The bills of lading acknowledged receipt of the coke from the Central company, stated that the coke was "consigned to order of Tutwiler & Brooks, destination Mayer, Arizona, . . . notify Great Western Smelters Corporation," and provided, among other so-called conditions, that "the owner or consignee shall pay the freight, and average, if any, . . . and, if required, shall pay the same before
delivery." [ Footnote 1 ] There was no suggestion that Tutwiler & Brooks were insolvent. Whether collection could then have been made from the Smelters corporation is a matter as to which there was conflicting evidence. [ Footnote 2 ]
The shipment being an interstate one, the freight rate was that stated in the tariff filed with the Interstate Commerce Commission. The amount of the freight charges legally payable was determined by applying this tariff rate to the actual weight. Thus, they were fixed by law. No contract of the carrier could reduce the amount legally payable, or release from liability a shipper who had assumed an obligation to pay the charges. Nor could any act or omission of the carrier (except the running of the statute of limitations) estop or preclude it from enforcing payment of the full amount by a person liable therefor. Pittsburgh, Cincinnati, Chicago & St. Louis Ry. Co. v. Fink, 250 U. S. 577 ; New York Central, etc., R. Co. v. York & Whitney Co., 256 U. S. 406 . Compare St. Louis Southwestern Ry. Co. v. Spring River Stone Co., 236 U. S. 718 . But delivery of goods to a carrier for shipment does not, under the Interstate Commerce
Act, impose upon a shipper an absolute obligation to pay the freight charges. [ Footnote 3 ] The tariff did not provide when or by whom the payment should be made. As to these matters, carrier and shipper were left free to contract, subject to the rule which prohibits discrimination. [ Footnote 4 ] The carrier was at liberty to require prepayment of freight charges, or to permit that payment to be deferred until the goods reached the end of the transportation. Wadley Southern Ry. Co. v. Georgia, 235 U. S. 651 , 235 U. S. 656 . Where payment is so deferred, the carrier may require that it be made before delivery of the goods, or concurrently with the delivery, or may permit it to be made later. Where the payment is deferred, the contract may provide that the shipper agrees absolutely to pay the charges, or it may provide merely that he shall pay if the
consignee does not pay the charges demanded upon delivery of the goods, or the carrier may accept the goods for shipment solely on account of the consignee, and, knowing that the shipper is acting merely as agent for the consignee, may contract that only the latter shall be liable for the freight charges, or both the shipper and the consignee may be made liable. Nor does delivery of goods to a carrier necessarily import, under the general law, an absolute promise by the shipper to pay the freight charges. We must therefore determine what promise, if any, to pay freight charges was in fact made by the Central company.
To ascertain what contract was entered into, we look primarily to the bills of lading, bearing in mind that the instrument serves both as a receipt and as a contract. [ Footnote 5 ] Ordinarily, the person from whom the goods are received for shipment assumes the obligation to pay the freight charges, and his obligation is ordinarily a primary one. This is true even where the bill of lading contains, as here, a provision imposing liability upon the consignee; for the shipper is presumably the consignor, the transportation ordered by him is presumably on his own behalf, and a promise by him to pay therefor is inferred (that is, implied in fact), as a promise to pay for goods is implied, when one orders them from a dealer. But this inference may be rebutted, as in the case of other contracts. It may be shown by the bill of lading or otherwise that the shipper of the goods was not acting on his own behalf; that this fact was known by the carrier; that the parties intended not only that the consignee should assume an obligation to pay the freight charges, but that the shipper should not assume any liability whatsoever
therefor, [ Footnote 6 ] or that he should assume only a secondary liability. In this case, the bills of lading acknowledge receipt of the coke from the Central company. But it did not sign them. Nor was it described therein as the consignor. There was no clause by which the shipper agrees expressly either to pay the freight charges or to guarantee their payment. The goods received were not declared to be deliverable to the Central company's order. On the contrary, the form of the bills of lading indicated that it was neither the owner nor the person on whose behalf the shipment was being made, and that Tutwiler & Brooks were either the owners or the persons in whose behalf the shipment was being made. On these facts, the trial court was justified in finding that the Central company did not assume the primary obligation to pay the freight charges. [ Footnote 7 ]
It is urged that, if the Central company was not under a primary obligation to pay the freight charges, it was secondarily liable, because collection from the Smelters corporation of the balance remaining due had become impossible before the undercharge was discovered. But the trial judge was not compelled so to find. There was evidence that such collection had not become impossible. Confessedly no effort was made to collect from it. Nor was any effort made to collect from Tutwiler & Brooks. Moreover, if a secondary obligation of the Central company was to be implied from the fact of its causing the
coke to be received for transportation, the promise was not necessarily one to pay at any time any freight charges which the carrier might find it impossible to collect from the consignee or his assign. The court might have concluded that it guaranteed merely that the consignee or his assign would accept the shipment . For, under the rule of the Fink case, if a shipment is accepted, the consignee becomes liable, as a matter of law, for the full amount of the freight charges, whether they are demanded at the time of delivery or not until later. His liability satisfies the requirements of the Interstate Commerce Act
[ Footnote 1 ]
The bills of lading also contained these clauses: "If charges are to be prepaid, write or stamp here. Received $ ___ to apply in prepayment of ___. To be prepaid, ___." The blanks were not filled by writing or stamp. The form of bills of lading used was what is known as the standard form order bill of lading. But the goods shipped were made deliverable to the order of a named consignee. Compare Pere Marquette Ry. Co. v. French & Co., 254 U. S. 538 , 254 U. S. 539 -540.
[ Footnote 2 ]
The corporation was not then technically insolvent; that is, no proceeding in bankruptcy had been instituted by or against it, there was no outstanding unsatisfied execution, and the corporation was still in possession of some unencumbered property. If the error had been discovered within a few months after delivery of the coke, the delivering carrier might easily have obtained payment of the amount of the undercharge by applying to that purpose funds of the Smelters corporation then on deposit with it.
[ Footnote 3 ]
See Interstate Commerce Commission Conference Ruling No. 314, Bulletin No. 7, issued August 1, 1917:
"The law requires the carrier to collect and the party legally responsible to pay the lawfully established rates without deviation therefrom. It follows that it is the duty of carriers to exhaust their legal remedies in order to collect undercharges from the party or parties legally responsible therefor. It is not for the Commission, however, to determine in any case which party, consignor or consignee, is legally liable for the undercharge, that being a question determinable only by a court having jurisdiction and upon the facts of each case."
This ruling, which was adopted May 1, 1911, and "interpreted" May 4, 1918, was amended, on March 6, 1922, by calling attention to the provision inserted in the Uniform Domestic Bill of Lading prescribed October 21, 1921. By that provision, the consignor may ( see § 7 of conditions and clause on face of bill) relieve himself of all liability for freight charges. In the Matter of Bills of Lading, 52 I.C.C. 671, 721; 64 I.C.C. 347; id., 357; 66 I.C.C. 63.
[ Footnote 4 ]
Compare Hocking Valley Ry. Co. v. United States, 210 F. 735, 741; Boise Commercial Club v. Adams Express Co., 17 I.C.C. 115, 121.
[ Footnote 5 ]
Pollard v. Vinton, 105 U. S. 7 , 105 U. S. 8 ; St. Louis, Iron Mountain & Southern Ry. Co. v. Knight, 122 U. S. 79 , 122 U. S. 87 ; In the Matter of Bills of Lading, 52 I.C.C. 671, 681. Compare Mobile & Montgomery Ry. Co. v. Jurey, 111 U. S. 584 .
[ Footnote 6 ]
Union Freight R. Co. v. Winkley, 159 Mass. 133; Thomas v. Snyder, 39 Pa. 317, 322; Wayland's Adm'r v. Mosely, 5 Ala. 430; Chicago, Rock Island & Gulf Ry. Co. v. Floyd, 161 S.W. 954. See Barker v. Havens, 17 Johns. 234, 237; Grant v. Wood, 21 N.J.Law, 292, 300. Compare Cincinnati, N. O. & T. P. Ry. Co. v. Vredenburgh Sawmill Co., 13 Ala.App. 442.
[ Footnote 7 ]
In most of the cases in the state courts and the lower federal courts relied upon by the carrier, either the facts on which the shipper was held liable differed materially from those of the case at bar or, because of the manner in which it was presented, the question of law was different.
Chicago, Indianapolis & Louisville Ry. Co. v. Peterson,
168 Wis.193, the bill of lading contained an express agreement that the charges were guaranteed by the shipper.
See also Chicago & Northwestern Ry. Co. v. Queenan,
102 Neb. 391, 393, 398. In
New York Central R. Co. v. Federal Sugar Refining Co.,
235 N.Y. 182,
New York Central R. Co. v. Philadelphia & Reading Coal & Iron Co.,
286 Ill. 267, and
Portland Flouring Mills Co. v. British & Foreign Marine Ins. Co.,
130 F. 860, the goods were deliverable to the shipper's order. In
New York, New Haven & Hartford R. Co. v. Tonella,
79 N.H. 464, the goods were deliverable to a named consignee, but the shipper was described as consignor and owner. In
Coal & Coke Ry. Co. v. Buckhannon River Coal & Coke Co.,
77 W.Va. 309,
Northern Pacific Ry. Co. v. Pleasant River Granite Co.,
116 Me. 496, 498, and
Montpelier & W. R. Co. v. Bianchi & Sons,
95 Vt. 81, the goods were deliverable to a named consignee, but the bill of lading was signed by the shipper in his own name. In
Boston & Maine R. Co. v. National Orange Co.,
232 Mass. 351, the goods were deliverable to a named consignee, but he was the agent of the shipper, who was also the owner.
Atlas S.S. Co. v. Colombian Land Co.,
102 F. 358. In
Wooster v. Tarr,
8 Allen 270, and
Great Northern Ry. Co. v. Hocking Valley Fire Clay Co.,
166 Wis. 465, the consignee was named, but there was not in the bill of lading (or otherwise) any indication to the carrier that the shipper was not acting on his own behalf. In
Jelks v. Philadelphia & Reading Ry. Co.,
14 Ga.App. 96; the consignee was named, but refused to accept the shipment. In
New York Central R. Co. v. Warren Ross Lumber Co.,
234 N.Y. 261,
Chicago, Milwaukee & St. Paul Ry. Co. v. Greenberg,
139 Minn. 428, and
Waters v. Pfister & Vogel Leather Co.,
176 Wis. 16, it was the consignee who was held liable. In
Georgia R. Co. v. Creety,
5 Ga.App. 424, the shipper appears to have been also owner and consignee.
In Cleveland, C., C. & St.L. Ry. Co. v. Southern Coal & Coke Co.,
147 Tenn. 433, 442, 452,
Atchison, Topeka & Santa Fe Ry. Co. v. Stannard & Co.,
99 Kan. 720, 725,
Yazoo & M. v. R. Co. v. Picher Lead Co.,
190 S.W. 387,
Baltimore & Ohio Southwestern Ry. Co. v. New Albany Box & Basket Co.,
48 Ind.App. 647, and
Wells Fargo & Co. v. Cuneo,
241 F. 727, 729, it is erroneously assumed that the mere fact of delivery of goods for shipment imports, under the Interstate Commerce Act, as matter of law, an absolute promise to pay the freight charges, and/or that an agreement to the contrary is void.