Cermetek, Inc. v. Butler Avpak, Inc.

• Citation: 573 F.2d 1370
• Decision Date: 03 May 1978
• Docket Number: No. 76-1632,76-1632
• Parties: CERMETEK, INC., a corporation, Appellee, v. BUTLER AVPAK, INC., a corporation, et al., Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1370

573 F.2d 1370

CERMETEK, INC., a corporation, Appellee, v. BUTLER AVPAK, INC., a corporation, et al., Appellants.

No. 76-1632.

United States Court of Appeals,

Ninth Circuit.

May 3, 1978.

Jerry K. Cimmet (argued), of Miland & Cimmet, San Francisco, Cal., for appellants.

Arthur J. Shartsis, of Shartsis, Friese & Niesar, Gary A. Greenfield (argued), San Francisco, Cal., for appellee.

Appeal from the United States District Court for the Central District of California.

Before BROWNING and TRASK, Circuit Judges, and FREY, ^* District Judge.

FREY, District Judge.

Cermetek, Inc. entered into a series of eight C.O.D. (collect on delivery) contracts with Butler Avpak, Inc., a freight forwarder, to ship electronic parts from Cermetek in California to Digital Time Products, Inc. in New York. Butler Avpak, Inc. (hereinafter Avpak) breached the contracts by delivering the goods to Digital in return for company checks instead of demanding cash, certified check or money order. When these checks were dishonored, Avpak stopped payment on its outstanding checks to Cermetek. As a result, Cermetek has not been paid for six shipments, totalling $23,163.

This appeal is brought by Avpak from a summary judgment awarding Cermetek damages measured by the price or sum to be collected. Avpak contends that there are two contractual limitations of liability, that even without such limitations the proper amount of damages depends on genuine factual issues as to the collectibility of the price and value of the goods, and that it should be allowed to assert a prior debt owed by Cermetek to Digital as a setoff. Avpak also appeals from the denial of its motion for change of venue to the Eastern District of New York. Liability is not contested in this Court. We affirm.

BACKGROUND, FACTS AND PROCEDURE

All eight shipment contracts were entered into between December 11, 1974 and December 26, 1974. The airbills covering them contain this language:

"It is agreed and understood that the liability of Avpak is limited to $50 or the declared value on which insurance was paid, whichever is higher."

The box for "declared value" is blank on all of the airbills, as is the box for insurance charges, and the transportation charge is the same for each shipment, $57.40. However, the "shippers C.O.D." varies from $1,107.00 to $5,880.00, and the "C.O.D. fee" varies from $20.00 to $60.00.

The affidavit of Edward Buschman, an agent for Avpak who assisted in preparing the airbills, contains the following:

"11. I specifically asked Connie Wilcox (a Cermetek employee) at this time what the declared value for insurance purposes would be and what amount of insurance, if any, Cermetek wanted to secure. I asked for the declared value because the charge for insurance is computed on the basis of the declared value of the shipment.

17. I never had any additional conversations with any Cermetek representatives about their reasons for declining insurance and declining to declare a value for insurance purposes on the shipments to Joe Gordon."

During this time Avpak operated under a tariff which is binding on the parties to this suit. ¹ Rules 70 and 115 thereof provide that in consideration of the transportation charge, which is in part dependent on the declared value of the shipment, the total liability of forwarded shall not exceed $50.00 unless the declared value is higher and an additional transportation charge is paid. ² Rule 135(A)(3) makes the declared The tariff further provides that the charges for collecting and remitting the C.O.D. amount shall be $10 per $1000 or fraction thereof, ⁴ but that C.O.D. service will not be provided on shipments on which the amount to be collected on delivery exceeds $5,000.00. ⁵

value of C.O.D. shipment also equal to $50.00. ³

Avpak's obligation on C.O.D. shipments as set out by the tariff was to collect the full amount from the consignee in cash, certified check or money order without allowing any examination or trial of the goods. If the shipment was unclaimed or refused, it was to notify Cermetek and to hold the shipment awaiting Cermetek's disposal instructions. If no instructions were sent, Avpak could have reshipped to Cermetek at Cermetek's expense. ⁶

Instead of following this contractual procedure, Avpak accepted company checks of Digital for all the shipments and sent its own company check to Cermetek for the shipper's C.O.D. for the shipments. Cermetek received and cashed one check for two shipments; thus payment for two shipments is not at issue.

On or about December 30, 1974, Avpak received notice that Digital's first check, which Avpak had accepted for two shipments, had been dishonored for insufficient funds and payment on the third through eighth checks received by Avpak from Digital, had been stopped. Avpak then stopped payment on its check to Cermetek dated December 27, 1974.

There is evidence that previous to this time Digital had complained about the quality of the electronic parts and that Cermetek had immediately notified Digital to return defective parts for replacement or refund. No parts were ever returned to Cermetek and no other action with respect to alleged defective parts has been taken by Digital.

In New York, Avpak brought suit against Digital and on September 16, 1975, obtained default judgment for the entire amount of the dishonored checks. Before Digital's failure to file a responsive pleading, Joseph Gordon, Digital's General Manager, submitted an affidavit alleging that Cermetek owed Digital $10,000 for previous work but offered no additional facts. Avpak has not obtained any payment on the judgment against Digital.

Cermetek brought this action on July 14, 1975, in California Superior Court; Avpak removed it to District Court on the basis of diversity of citizenship.

When Cermetek moved for summary judgment, Avpak opposed on the same grounds it asserts on appeal and submitted affidavits in an attempt to create factual issues as to the collectibility of the C.O.D. amount and as to the value of the goods. The Gordon affidavit filed in the New York case was attached to the affidavit of Arthur Norden, the president of Avpak. Relative to uncollectibility, Norden's affidavit of October 14, 1975 adds nothing to that of Gordon except,

"19. The suit filed by AVPAK against Digital in New York has been of little or no aid to AVPAK since, although a default against Digital has been taken, the Internal Revenue Service has seized all of Digital's assets. I understand that such assets only amount to approximately $2,600.00."

Gordon, the General Manager of Digital, averred on February 10, 1975:

". . . Last year our volume increased to more than THREE HUNDRED TWENTY THOUSAND ($320,000.00) DOLLARS and we were able to maintain a higher level of production with fourteen full-time employees (including three graduate engineers) and five part-time engineering consultants. Orders for the coming year already exceed ONE MILLION TWO HUNDRED THOUSAND ($1,200,000.00) DOLLARS and we are billing at a weekly rate of FIFTEEN THOUSAND ($15,000.00) DOLLARS. We are a growing, healthy business that is just beginning to realize its potential in an expanding market.

We are not insolvent and meet our obligations when due. We have never before been accused of fraudulent or deceitful practices and have an excellent reputation in the digital watch field.

To be fully candid, we do owe some past Federal taxes, which resulted from inefficient management, however, we have been working out these problems while continuing to fulfill all contractual obligations."

Avpak also moved in the District Court for change of venue to New York in order to fully adjudicate the issues sought to be raised and the rights of all parties including Digital with respect thereto.

The District Court granted summary judgment to Cermetek for the unpaid C.O.D. and denied the motion for change of venue.

$50.00 LIMITATION

It is beyond dispute that a carrier or freight forwarder may limit its liability so long as a choice of rates is offered which varies with the value of the property shipped. George N. Pierce Co. v. Wells Fargo & Co., 236 U.S. 278, 35 S.Ct. 351, 59 L.Ed. 576 (1915). The same is true when the C.O.D. amount is stated but no excess value is stated and no excess charges are paid. Eddie Dassin, Inc. v. Eastern Airlines, Inc., 501 F.2d 74 (9th Cir. 1974).

The District Court held that the declared value and, therefore, the limitation of liability was inextricably tied to insurance and to the risks protected by insurance such as loss or damage, and did not cover or limit the risk of failure to abide by the contractual C.O.D. obligation. Avpak argues against this reasoning and points to Eddie Dassin, supra, in which the breach was a two-month delay in delivery, not a loss or a damage. In support of the District Court's holding, it should also be noted that excess declared An examination of the nature of a C.O.D. contract explains the independence of the C.O.D. fees from insurance and transportation charges. A carrier who enters into a C.O.D. contract is acting in two separate capacities. ⁷ The first is that of a common carrier and bailee. As such, he has all of the common law duties: to receive, transport, care for and deliver goods. These are the duties in all carriage contracts. The second capacity is either that of an agent of the shipper to collect or that of an agent to sell. By such C.O.D. contract, the carrier assumes a duty he would not have under the common law. Breaches of the two different sets of duties call for different measures of damages. ⁸

value causes an increase not only in insurance, but in the transportation charge as well. The charge which does not depend on declared value in any way is the C.O.D. fee.

In this case it is clear that Avpak charged separately for the separate duties it undertook. The transportation charges and the insurance charges were paid in consideration for the carriage contracts, and...