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Atchison, Topeka and Santa Fe Railway Co. v. Union Tank Car Co.

decided: October 12, 1979.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 76-C-2372 and 78-C-911 -- Thomas R. McMillen, Judge.

Before Swygert, Tone and Bauer, Circuit Judges.

Author: Tone

Union Tank Car Company leased 148 of its tank cars for use in Mexico. On termination of the leases the cars were transported, pursuant to Union Tank's directions, from points in Mexico to repair and maintenance facilities in the United States. The issue in this case is whether Union Tank must pay freight charges for the movement of the cars from the Mexican border to the repair and maintenance facilities. The answer depends upon the interpretation of two tariff provisions and provisions of the Interstate Commerce Act. The Interstate Commerce Commission held Union Tank liable in Union Tank Car Co. Declaratory Order Empty Tank Cars, No. 36473 (I.C.C. Dec. 13, 1977). The district court sustained the Commission. We affirm.

Union Tank leased the cars to Mexican shippers sometime before August 16, 1973 for periods varying in length from a few months to several years. The cars were used exclusively in Mexico during the lease periods.*fn1 When each lease expired, the Mexican lessee, acting pursuant to Union Tank's instructions, caused the empty cars to be transported to the Mexican-American border at El Paso, Texas, and turned over to the Atchison, Topeka and Santa Fe Railway Company. The Santa Fe then transported the cars to Union Tank's repair and maintenance facilities in Kansas, Louisiana, and Illinois, as directed by Union Tank,*fn2 and billed it at the rate prescribed in the Uniform Freight Classification.*fn3

Union Tank refused to pay, arguing that the following tariff provision, which we shall call simply Paragraph B.3, was applicable and made any charge impermissible:

An empty tank car, after having been loaded in commercial service on which the railroads derived line haul revenue, will be moved without charge to and from facilities for cleaning, lining, relining, maintenance, modification, or repair upon receipt of instructions, confirmed in writing, showing facility, destination and full routing and reason for such movement.*fn4

The Santa Fe rejected Union Tank's excuse for nonpayment, asserting that because the cars had been withdrawn from service in the United States, the provision relied on by Union Tank was inapplicable and the tank cars were "newly acquired" within the meaning of the following tariff provision, which we shall call Paragraph B.5:

A new car or a newly acquired car moving prior to its first loaded move in commercial service . . . will be moved subject to applicable rates named in Consolidated Freight Classification and/or Uniform Freight Classification, . . ., or other applicable tariffs.*fn5

Nevertheless, Union Tank persisted in its refusal to pay.

In June, 1976, the Santa Fe filed suit in the United States District Court for the Northern District of Illinois against Union Tank to recover the unpaid transportation charges.*fn6 Union Tank moved to stay the action on the ground that its defense to the Santa Fe's claim raised issues within the ICC's primary jurisdiction. See generally United States v. Western Pacific Railroad, 352 U.S. 59, 62-70, 77 S. Ct. 161, 1 L. Ed. 2d 126 (1956); 3 K. Davis, Administrative Law Treatise ยง 19.01 (1958). After the district court granted the motion Union Tank filed a petition with the Commission for a declaration that Paragraph B.5 was either inapplicable or unjust and unreasonable as applied.*fn7 The Administrative Law Judge concluded that Paragraph B.3 applied and no charges could be made. He reasoned that the cars were subject to that provision because, before being leased for use in Mexico, they had been used in the United States by railroads that were parties to the tariff, and because nothing in the language of the tariff prevented the application of Paragraph B.3 following a "temporary" removal of a car from the fleet, however long the removal and whatever its purpose. On appeal, Division Two of the Commission rejected this reasoning. Finding that the maintenance undertaken after the empty mileage in question had resulted from the commercial loaded movements made in Mexico, the Division concluded that Union Tank had removed the cars from the domestic commercial fleet, and that the cars were "newly acquired" by Union Tank under Paragraph B.5 and thus not entitled to free transportation to repair facilities without first making a commercial loaded movement within the United States.*fn8

Dissatisfied with this result, Union Tank filed an action in the district court to set aside the order. The case was assigned to the judge before whom the Santa Fe's earlier filed collection action was pending. The court, recognizing the limited scope of its review, E. g., Indiana Harbor Belt Railroad v. United States., 510 F.2d 644, 649 (7th Cir.), Cert. denied, 422 U.S. 1042, 95 S. Ct. 2656, 45 L. Ed. 2d 694 (1975), noted that the Commission's interpretation of the tariff provisions was not the only one possible, but found it to be a reasonable one. The court also agreed with the Commission that Union Tank had failed to show that the tariffs were unlawful under ยง 1*fn9 of the Act, and therefore sustained the Commission's decision. This decision effectively disposed of both Mexican lease cases.*fn10 Although Union Tank seeks "reversal . . . not only of the District Court's decision on judicial review, but also of the ICC's report and order which it reviewed," only the former is before us.*fn11


Union Tank asserts that the phrase "newly acquired" is clear and unambiguous and can refer only to changes in ownership and that the ICC's reading of the phrase is "strained and unnatural" and therefore impermissible. See, e. g., Berman and Spector v. Atchison, Topeka & Santa Fe Railway, 308 I.C.C. 254, 256 (1959). We find the tariffs, considered together, sufficiently ambiguous to justify resort to administrative expertise. Union Tank's request for a stay on the ground that the doctrine of primary jurisdiction required submission of the tariff construction issue to the ICC indicates that it initially was of the same view. The district court's grant of the request as well as its final decision in the case show its agreement on this matter.*fn12 We shall examine the relevant tariff provisions in the context of the whole tariff as interpreted by prior Commission decisions.*fn13

The tariff provisions under which Union Tank makes its claim rest in large part on a distinction between "property" and "instrumentality of transportation."*fn14 Although the railroads have traditionally supplemented their own rolling stock by using privately-owned cars supplied by shippers,*fn15 the duty to furnish cars is the railroads', not the shippers'.*fn16 Thus when railroads use cars other than their own to transport property or passengers, the cars are being used for the revenue purposes of the railroads and not for the private benefit of the owner. See Use of Private Passenger Train Cars, 155 I.C.C. 775, 786-87 (1929), Aff'd sub nom. Louisville & Nashville Railroad v. United States, 282 U.S. 740, 51 S. Ct. 297, 75 L. Ed. 672 (1931). The cars, albeit "property" in the ordinary sense of that term, are "instrumentalities of transportation" and therefore not ...

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