Masonite Corp. v. Norfolk and Western Ry. Co.

• Citation: 601 F.2d 724
• Decision Date: 12 July 1979
• Docket Number: Nos. 78-1061,78-1062,s. 78-1061
• Parties: MASONITE CORPORATION, Appellee, v. NORFOLK AND WESTERN RAILWAY COMPANY, Appellant. MASONITE CORPORATION, Appellant, v. NORFOLK AND WESTERN RAILWAY COMPANY, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 724

601 F.2d 724

MASONITE CORPORATION, Appellee, v. NORFOLK AND WESTERN RAILWAY COMPANY, Appellant.

MASONITE CORPORATION, Appellant, v. NORFOLK AND WESTERN RAILWAY COMPANY, Appellee.

Nos. 78-1061, 78-1062.

United States Court of Appeals,

Fourth Circuit.

Argued Dec. 6, 1978.

Decided July 12, 1979.

Richard S. M. Emrich, III, Chicago, Ill. (Harold E. Spencer, Belnap, McCarthy, Spencer, Sweeney & Harkaway, Chicago, Ill., Leonard D. Levine, Levine & Friedman, Virginia Beach, Va., on brief), for Masonite Corp.

Gerald P. Rowe, Norfolk, Va. (Kenneth H. Lambert, Jr., Williams, Worrell, Kelly & Greer, Norfolk, Va., on brief), for Norfolk and Western Ry. Co.

Before HAYNSWORTH, Chief Judge, and BUTZNER and HALL, Circuit Judges.

BUTZNER, Circuit Judge:

Masonite Corporation appeals a judgment that denied its claim against Norfolk & Western Railway Company for damage to a shipment of plywood and granted Norfolk & Western's counterclaim for damage to railroad equipment and the cost of clearing debris from a derailment. We affirm in part, vacate in part, and remand the case for further consideration.

The damage to each party occurred because two badly packed containers of plywood shipped by Masonite on a Norfolk & Western train shifted in transit, fell from their flatcar, and derailed another car in the train. The containers were the last in a single shipment of sixteen identical boxes packed by the shipper and transported by the railroad from Norfolk, Virginia, to Cincinnati, Ohio, over a period of sixteen days. Earlier containers received in Cincinnati before the departure of the last part of the shipment, had tilted so badly during the trip that they nearly fell from their flatcar and required extraordinary handling upon arrival. Alerted to the danger in shipping other such containers, Norfolk & Western telegraphed and telephoned Masonite's agent in Norfolk to explain the problem. The railroad told the agent that improper internal bracing was allowing the plywood to shift, and it directed Masonite to send subsequent containers in the shipment to the railroad's intermodal facility at the Portlock Ramp in Chesapeake, Virginia, for a safety inspection.

Masonite failed to comply with the railroad's request and shipped the final part of the shipment in the same way it had sent the earlier part. The last containers moved from Portsmouth Marine Terminal along the Belt Line Railroad to Norfolk & Western's interchange at Portlock Yard. There they received only a routine external inspection for patent defects in loading. Thus, the boxes never passed through the railroad's intermodal station at Portlock Ramp, where personnel alerted to the bracing problem were ready to open and examine them. The district court did not determine whether railroad employees knew or should have known that the containers had not been inspected at the Ramp.

After the destruction of its plywood in the derailment, Masonite sued Norfolk & Western under the Interstate Commerce Act, 49 U.S.C. § 20(11). Masonite argued that even though the loss was due partly to its own fault, the railroad as a common carrier was strictly liable for all damages to the plywood because it knew of the defective bracing before it accepted the goods for transportation. Norfolk & Western responded that it had no duty to detect latent deficiencies in packing done by the shipper and counterclaimed against Masonite for the cost of clearing derailment debris and the damage to its railroad equipment. The railroad also contended that Masonite had settled its entire claim by accepting in satisfaction a check for the salvage value of the plywood.

The district court found that Masonite had not compromised its claim. Concluding, however, that knowledge of inadequate bracing in some containers did not make apparent to the railroad the danger in other containers, the court held that the routine external inspection of the freight discharged the railroad's duty in this case. The court therefore held Masonite liable for the accident and awarded damages to Norfolk & Western.

I

We affirm the district court's ruling that Masonite did not compromise its claim for destruction of the plywood when it accepted Norfolk & Western's check for the proceeds of the salvage sale through which the railroad had disposed of the broken boards. Accord and satisfaction is an affirmative defense; Norfolk & Western bears the burden of proving both agreement between the parties and consideration for release of the plaintiff's claim. The district court held that the railroad failed to carry its burden on either point.

The court found that the parties agreed to settle only their dispute over the salvage value of the plywood. In its original claim, Masonite sought to recover the full value of the goods. Norfolk & Western's first settlement proposal denied responsibility for loss of the goods, but offered to remit the salvage proceeds which it acknowledged were due to Masonite. "Upon receipt of your authority amending your claim to $1500.00 for the salvage proceeds only," read the offer, "our draft will be issued." Masonite responded by amending its original claim to a salvage claim for $5000. Norfolk & Western then denied that it had mishandled the salvage and rejected Masonite's claim. In reply, Masonite finally amended its original claim "to $1500.00 for the full salvage value of the board." Although the correspondence can bear different interpretations, the only trial testimony on this issue came from a Masonite employee and supported Masonite's interpretation of the letters. Norfolk & Western presented no testimony to carry its burden of proving that the parties intended by their correspondence to compromise Masonite's claim for loss of the plywood. Furthermore, the railroad did not show that it secured a general release of the claim for damage to the goods. Therefore, we conclude that the district court's finding on the parties' intentions is not clearly erroneous.

The court also held that Norfolk & Western gave no consideration to support an accord and satisfaction on Masonite's claim for loss of the plywood. An analysis of the transaction reveals the soundness of this conclusion.

Norfolk & Western acknowledged at all times that Masonite was entitled to the full proceeds of the salvage sale. Masonite, on the other hand, presented a salvage claim greater than the amount of the sale proceeds. Thus, Norfolk & Western's payment of the conceded part of the salvage was good consideration for an accord and satisfaction on Masonite's unliquidated salvage claim. See 6 Corbin on Contracts § 1289 (1962).

Payment of salvage, however, was not consideration for release of Masonite's distinct claim for the value of the plywood. Norfolk & Western sold the broken boards for Masonite's account. The railroad asserted no right to the salvage by way of set-off or otherwise. In paying over the salvage, therefore, Norfolk & Western gave Masonite nothing that the railroad was not already obliged to pay. See Topas v. John MacGregor Grant, Inc., 18 F.2d 724, 725 (2d Cir. 1927). Stripped to its bare essentials, Norfolk & Western's argument is based on the premise that, as a matter of law, a common carrier can withhold salvage admittedly due to a shipper until the shipper surrenders its claim for damage to its goods. Norfolk & Western cites no authority for this proposition, and we decline to fashion such a rule. Consequently, we agree with the district court that the railroad gave no consideration to support a settlement of Masonite's claim for damages.

II

We cannot decide on the record now before us which party is liable. We believe, however, that Norfolk & Western was on notice that the last containers in Masonite's shipment were likely to be as badly braced as the previous ones. We hold, therefore, that Norfolk & Western is liable to Masonite unless the railroad can show that it took reasonable steps to prevent the dangerous freight from moving on its train.

The principles of common carrier liability applicable to this case are well settled. Section 20(11) of the Interstate Commerce Act,49 U.S.C. § 20(11), codifies the common law rule that a carrier is liable for all damage sustained by goods in transit unless it can prove that the loss was due entirely to an excepted cause, such as an act of the shipper. When the shipper shows that goods were damaged, the carrier has the burden of proving both that the damage was attributable to an excepted cause and that the carrier was free from negligence. Missouri Pacific Railroad Co. v. Elmore & Stahl,377 U.S. 134, 137-38, 84 S.Ct. 1142, 12 L.Ed.2d 194 (1964). Thus, in order to avoid liability, Norfolk & Western must prove more than faulty packing by Masonite; the railroad also must prove that its failure to prevent the loss of the goods was not negligent. Since the railroad has a right to refuse transportation to badly packed goods, the railroad is liable despite the shipper's fault when it negligently fails to reject goods that may suffer damage because of deficiencies in packing. See Hannibal & St. Joseph Railroad Co. v. Swift, 79 U.S. (12 Wall.) 262, 270-73, 20 L.Ed. 423 (1871). The railroad is not obliged to inspect all freight...