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Lone Star Cement Corp. v. Pennsylvania Railroad Co.

February 7, 1966

LONE STAR CEMENT CORPORATION, PLAINTIFF-APPELLEE,
v.
THE PENNSYLVANIA RAILROAD COMPANY, DEFENDANT-APPELLANT



Hastings, Chief Judge, and Schnackenberg and Knoch, Circuit Judges.

Author: Hastings

HASTINGS, Chief Judge.

This is an appeal in a diversity action by Pennsylvania Railroad Company (railroad) from a judgment of the district court entering a money judgment in the sum of $14,895.58, plus interest and costs, in favor of plaintiff, Lone Star Cement Corporation.

On June 2, 1956, Lone Star shipped from its plant in Limedale, Indiana, under a straight bill of lading, a bulk carload of cement to Cinder Block & Material Co. in Indianapolis, Indiana, over the lines of the railroad. The railroad car in which the cement was shipped had previously been used to ship dolomite, a mineral which, when contained in finished concrete products, tends to expand and fracture the product. Apparently, because of inadequate cleaning of the car, roasted dolomite fragments remained in the car and contaminated the bulk cement while it was in transit.

After delivery, this contamination was not discovered until the consignee, Cinder Block, had unloaded about two-thirds of the shipment. Not yet knowing the nature of the contaminating substance, Lone Star requested Cinder Block to discontinue unloading the cement pending a determination. Cinder Block disregarded the request, unloaded the remainder of the shipment and used the cement to make concrete products.

Some of the contaminated products were sold by Cinder Block and used in construction projects. Fractures in the utilized products required substantial repairs, and Lone Star took it upon itself to see that the necessary repairs were made.

On February 26, 1957, Lone Star filed with the railroad a written notice of claim for full recovery of all damages suffered because of the contamination of the cement. The railroad disallowed the claim.

From correspondence between Lone Star and the railroad from February 26, 1957 through August 15, 1957, it appears that at all times Lone Star was demanding that the railroad pay for the cost of repairing all damages sustained by the third parties, who were the ultimate users of the contaminated concrete products.

On August 22, 1957, the railroad wrote to Lone Star as follows:

"The matter has received our further consideration, also that of our Legal Department, with agreement reached that the claim is one for settlement on divided responsibility basis, both carrier and shipper having mutual responsibility in the selection of the claim car for loading. This basis of settlement, it is understood, was mentioned by you when the claim was conferenced with our Mr. Kent, June 28, 1957.

"Accordingly, it will be appreciated if you will extend your authority for us to conclude the item on 50% payment basis."

On September 5, 1957, Lone Star responded:

"This will acknowledge receipt of your letter of August 23, [sic] 1957, in which you advised that, after further consideration, you are willing to settle our Claim No. 7-57, your File 705-00110, on a divided responsibility basis.

"We are agreeable to above basis of settlement, providing that it is mutually understood and agreed upon that settlement is to be based on total resultant amount of damage ...


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