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New York Cent. R. Co. v. Transamerican Petroleum Corporation.

December 20, 1939


Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; John P. Barnes, Judge.

Author: Major

Before SPARKS, MAJOR, and KERNER, Circuit Judges.

MAJOR, Circuit Judge.

This is an appeal from a judgment entered April 4, 1939, in the sum of $1,059.20 in favor of the plaintiff.

The case was tried by the court upon a stipulation of facts as follows: Between September 17th and September 22nd, 1936, the Hurricane Petroleum Corp., at Overton, Texas (also referred to as the "shipper" or "consignor"), ordered the shipment of five cars of gasoline consigned to the defendant (also referred to as the "consignee" or "reconsignor") at Chicago, Illinois. The plaintiff was the delivering carrier. The shipments were made by Uniform Domestic Bill of Lading*fn1 in which the defendant was named as consignee.

Prior to the arrival of these shipments at Chicago, the defendant reconsigned each of them to the Independents Petroleum Association Distributing Company (also referred to as the Independents Company) directing the plaintiff to deliver the shipments to said company in Chicago, and to collect the freight from it.*fn2 Without knowledge on the part of the defendant, the plaintiff delivered the shipments to the Independents Company on forty-eight hours credit, (that being the limit of time for extension of credit permitted by the Interstate Commerce Commission) thereby voluntarily releasing its lien on said shipments. At the same time the Independents Company owed the plaintiff for other shipments (not involved in this case) made prior and during the period that the deliveries involved in this case were made. Said shipments were not delivered to the defendant or to any agent or employee of the defendant, nor were they delivered in defendant's behalf.

At the time of the delivery, the Independents Company was the owner of said shipments.

The defendant's business is that of buying and selling gasoline, but it never takes physical possession of the same, but reconsigns such shipments before they arrive in Chicago. It maintains no storage place for gasoline or oil and the plaintiff had knowledge of these facts before and at the time the involved transactions occurred.

The plaintiff billed the Independents Company for the freight charges on each car at the time of delivery of said cars and, thereafter made an effort to collect the same. Upon the failure of the Independents Company to make payment, plaintiff brought this suit against the defendant.

Since the facts were stipulated, the only contested issues relate to the conclusions of law adopted by the court, as follows: (1) Where a consignee directs the carrier to deliver the shipment to a third person, such consignee accepts the shipment and becomes liable for all transportation charges regardless of the fact that the written reconsignment order upon which the carrier acts directs the carrier to collect the freight charges from the one to whom the shipment is delivered; (2) such act of reconsignment, even though delivery is made to the ultimate consignee without collection by the carrier of its charges and upon an extension of credit without the knowledge of, and contrary to the direction of the original consignee, does not relieve such consignee from liability for the freight charges; (3) under such circumstances, the doctrine of estoppel can not be invoked against the carrier in an action to recover such freight charges from the original consignee.With reference to this conclusion, the court states: "The rule of estoppel is not applicable to this case because of the fact that Sec. 6, par. 7 of the Interstate Commerce Act (U.S.C.A., Title 49, Sec. 6, Par. 7) forbids a carrier from granting a rebate or from discriminating."

The contention of the plaintiff is that the defendant, by its act of reconsignment, accepted the shipments; that such an acceptance constituted delivery within the terms of the Bill of Lading and, that it therefore became liable for freight charges and, further, that it could not and did not relieve itself of liability by its directions*fn3 to collect its charges upon delivery to the Independents Company. On the other hand, it is argued by the defendant that delivery was not made to it and it never became liable. Further, that even if it became liable, a new contract or agreement was made with the carrier by which it was relieved of liability.

The question presented is a difficult one. It has often been discussed by text writers and courts, with many divergent views and conflicting results. We think it may be said that the earlier authorities are to the effect generally that the consignee who reconsigns under the same circumstances as in this case is not liable for the carrier's charge.*fn4 The leading authority and perhaps the first, holding to the contrary is that of New York Central R. Co. v. Warren Ross Lumber Co., 234 N.Y. 261Z, 137 N.E. 324, 24 A.L.R. 1160. This decision has frequently been followed,*fn5 but there are at least two decisions repudiating the rule.*fn6

Notwithstanding that the weight of authority seems to be against the defendant, we are urged that reason and logic so plainly support its position as to require a holding in its favor. After a careful study of the situation and the authorities, we agree with defendant's contention.

Previous to our discussion, it seems appropriate to ascertain to what extent, if any, the contractual rights of the consignor, consignee and carrier are limited or affected by the Interstate Commerce Act, 49 U.S.C.A ยง 1 et seq. In doing so, we must keep in mind the distinction between the cases dealng with unlawful and lawful charges. In the former it is held that contracts, exprss or implied, are of no effect because in conflict with public policy,*fn7 while in the latter, no such impairment exists. Without referring to the varius provisions of the act, it is sufficient to state, so far as now pertinent, the law concerns itself only with the requirement that the carrier collect the rate fixed, without discrimination. As was said by the court in Louisville & N.R. Co. v. Central Iron Co., supra, 265 U.S. page 66, 44 S. Ct. page 442, 68 L. Ed. 900: " * * * 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. The carrier was at liberty to require prepayment of freight charges, or to permit that payment to be deferred until the goods ...

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