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C.F. ARROWHEAD SERVICES, INC. v. AMCEC

July 3, 1985

C.F. ARROWHEAD SERVICES, INC., PLAINTIFF,
v.
AMCEC CORPORATION, DEFENDANT.



The opinion of the court was delivered by: William T. Hart, District Judge.

MEMORANDUM OPINION AND ORDER

Presently before the court are the parties' cross-motions for summary judgment. Both sides agree that the only question is purely legal — whether, on the undisputed facts of this case, a common carrier can recover its freight charges from the party which accepted the goods as consignee. Jurisdiction exists pursuant to 28 U.S.C. § 1337. Kansas City Terminal Ry. Co. v. Jordon Mfg. Co., 750 F.2d 551 (7th Cir. 1984).

Plaintiff C.F. Arrowhead Services, Inc. ("CF") is a common carrier operating pursuant to authority issued by the Interstate Commerce Commission ("ICC"). In October of 1981 CF carried various goods from Tennessee to Michigan. The consignor and seller of the goods was Mattrace Enterprises ("Mattrace") and the consignee and apparent buyer of the goods was defendant AMCEC Corporation ("AMCEC"). CF carried the goods pursuant to tariffs on file with the ICC and issued bills of lading and freight bills for each of the shipments. Each bill of lading provided that if a certain box were not checked, then the freight was prepaid. None of the boxes were checked. Each bill of lading also contained a provision that the shipment was received subject to the applicable tariffs. Section seven of the applicable tariff states

  The owner or consignee shall pay the freight and
  average, if any, and all other lawful charges
  accruing on said property, but, except in those
  instances where it may lawfully be authorized to do
  so, no carrier shall deliver or relinquish possession
  at destination of the property covered by this bill
  of lading until all tariff rates and charges thereon
  have been paid. . . . PROVIDED, that, a consignee
  shall not be liable for transportation charges
  (beyond those billed against him at the time of
  delivery for which he is otherwise liable) which may
  be found to be due after the property has been
  delivered to him subject to all of the following
  conditions:
    (a) The shipper or consignor has instructed the
    carrier to deliver the property to a consignee
    other than the shipper or consignor.
    (b) The consignee is an agent only and has no
    beneficial title in the property and
    (c) Prior to delivery the consignee has notified
    the delivering carrier in writing that he is only
    an agent and has no beneficial title in the
    property and
    (d) In cases where the shipment has been
    reconsigned or diverted to a point other than that
    specified in the bill of lading the consignee has
    also notified the delivering carrier in writing of
    the name and address of the beneficial owner of
    said property.
    Where the consignee is not liable for certain
    transportation charges in accordance with this
    provision and the preceding conditions, the shipper
    or consignor, or, in the case of a shipment so
    reconsigned or diverted as specified in condition
    (d), the beneficial owner shall be liable for such
    additional charges.
    PROVIDED FURTHER, that where the shipment is
    designated "prepaid" the shipper or consignee shall
    remain liable for undercharges which result

    from an erroneous determination of the
    transportation charges assessed.

Although the shipment was marked as prepaid, Mattrace had apparently not in fact prepaid because after making the shipment. CF billed Mattrace for the freight charges. Mattrace did not pay and cannot now be located so CF demanded payment from AMCEC, who refuses to pay.

CF cites numerous cases holding that the bill of lading has the same effect as a statute. See, e.g., City of New Orleans v. Southern Scrap Material Co., 491 F. Supp. 46, 48 (E.D.La. 1980), and cases cited therein. Usually, the tariffs are used to determine how much must be paid, but they also can govern the issue here presented; namely, who shall pay. Blanchette v. Hub City Terminals, Inc., 683 F.2d 1008 (7th Cir. 1981). Here, CF argues that the only way AMCEC could have escaped liability for the freight charges was to satisfy the four conditions (a) through (d) quoted above. Since it is undisputed that AMCEC did not comply with those conditions, CF concludes that AMCEC is liable.

AMCEC argues that the portion of section 7 of the tariff quoted above that begins "PROVIDED FURTHER . . ." means that "when a shipment is designated prepaid (meaning that actual prepayment by the shipper is not necessary), a shipper or consignee will be liable for undercharges, even though the consignee is not liable for the amount designated prepaid" (defendant's response at 3, emphasis in original). AMCEC interprets the PROVIDED FURTHER clause as based on the assumption that when a shipment is designated prepaid the consignee is not liable for the freight charges, and views the purpose of that clause as ensuring that nonetheless the consignee will be liable for undercharges that might be discovered later. AMCEC cites no authority for this interpretation, and argues only that "[t]here is no other reason for such language to be in the statute" (id.).

This court rejects both parties' interpretations of the tariff. Resolution of this case is found in the first sentence of section 7. The first part of that sentence, which is the only part CF quotes, makes the consignee liable for the freight charges; that is, the charges that are due at the time of delivery. As the rest of the sentence makes clear, however, that liability is not absolute. The carrier, unless lawfully authorized to do so (an exception not involved here), must not relinquish possession of the goods being carried until the freight charges have been paid. The obvious meaning of the sentence as a whole is that the consignee must pay the charges if the carrier so demands but the carrier must make that demand before giving up the goods. So read, the sentence makes a very practical (and traditional) compromise: the carrier can use its possession of the goods to ensure payment and the consignee can refuse delivery ...


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