Continental Group, Inc. v. Lincoln Land Moving and Storage, Inc.

• Citation: 710 F.2d 368
• Decision Date: 21 June 1983
• Docket Number: No. 81-2450,81-2450
• Parties: 36 UCC Rep.Serv. 611 The CONTINENTAL GROUP, INC., Plaintiff-Appellee, v. LINCOLN LAND MOVING AND STORAGE, INC., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 368

710 F.2d 368

36 UCC Rep.Serv. 611

The CONTINENTAL GROUP, INC., Plaintiff-Appellee, v. LINCOLN LAND MOVING AND STORAGE, INC., Defendant-Appellant.

No. 81-2450.

United States Court of Appeals,

Seventh Circuit.

Argued Oct. 29, 1983.

Decided June 21, 1983.

Paul G. Foran, Doggett & Foran, Danville, Ill., for defendant-appellant.

Michael R. Feagley, Mayer, Brown & Platt, Chicago, Ill., for plaintiff-appellee.

Before ESCHBACH and COFFEY, Circuit Judges, and WISDOM, Senior Circuit Judge. ^*

COFFEY, Circuit Judge.

This diversity action was brought by Continental Group, Inc. against Lincoln Land Moving and Storage, Inc., alleging that the defendant warehouse operator violated the duty of reasonable care owed to the plaintiff in contaminating the property (cans) of Continental Group that had been stored in the warehouse. The defendant denied violating its duty, and in addition asserted that Continental Group was responsible for all of the damages because it had: (1) been contributorily negligent; (2) assumed the risk of contamination; and (3) failed to mitigate its damages. The case was tried to the court and a $88,003.49 judgment in favor of the plaintiff was entered. The identical assertions made by the defendant at trial are repeated on appeal. We affirm the judgment of the trial court.

The Continental Group, Inc., ("Continental"), the plaintiff, is a New York corporation engaged in the manufacture of cans. The defendant, Lincoln Land Moving and Storage, Inc., ("Lincoln Land"), is an Illinois corporation licensed as a warehouse operator and publicly engaged in warehousing goods for a tariff. This lawsuit involves millions of cans stored by the plaintiff in a warehouse owned and operated by the defendant.

In 1968, Continental Group began storing large quantities of its empty aerosol cans at Lincoln Land's warehouse in Danville, Illinois. During the early 1970's, various customers of Continental Group complained from time-to-time about the dirty condition of some of the cans they received, more particularly that some cans were contaminated and coated with a grease, a lubricant or other foreign substance. All of these contamination complaints turned out to be the result of manufacturing-related problems. During 1973 and early 1974, Mr. Philip Spletzer, then manager of Continental's Danville, Illinois can manufacturing plant routinely visited Lincoln Land's Danville warehouse every two or three weeks to inventory the cans and to check the general condition of the warehouse but did not specifically inspect the stored cans for cleanliness.

In April of 1974, a Continental customer, Peterson/Puritan, Inc., complained about the condition of 7,475 cans from an earlier shipment of 207,000. Records of the customer and Continental described the problem as "dirty domes--grease on sides of cans" and "excessive dirt on domes and can bodies on a slug basis." ¹ On April 29, 1974, Spletzer inspected the Lincoln Land warehouse in connection with the customer complaint. Spletzer noted in a report that the purpose of this inspection was to check out the order and cleanliness of the warehouse and its contents due to a high incidence of poor quality of the cans coming from the Lincoln Land warehouse. He further reported that the warehouse was in a "deplorable condition" and that there was a "black film on [the] white domes of cans" and "a light showing of black oily film." At the time of his inspection, Spletzer informed Lincoln Land representatives that Continental employees would be doing further checking of the warehouse conditions. Approximately one week after his inspection on April 29, 1974, Spletzer again inspected the Lincoln Land warehouse and found that its cleanliness had improved. The plaintiff continued to store cans in the defendant's warehouse and ship them to customers during the summer and fall months of 1974 without complaint.

But on November 14, 1974, Peterson/Puritan, Inc. again complained about the dirty condition of the cans and rejected more than 800,000 of the plaintiff's aerosol cans, including two entire shipments from Lincoln Land. The customer's records described the problem with the cans from Lincoln Land as "very dirty domes--caused line to be shut down--when the can was filled with propellant the dirt formed a ring on the top of the can" and "dirt and dust inside shrink wrap and greasy film on domes."

Some five days later, on November 19, 1974, several representatives of Continental went to the warehouse to inspect the rejected cans. During the inspection, one of the representatives was almost injured by a forklift operating in the area. At this time the forklift was observed spewing forth grimy, black exhaust clouds directly onto nearby pallets of cans. After observing the forklift exhaust problem, the representatives decided to expand their inspections to include samples of the other cans in the warehouse. The plaintiff's inspection revealed that cans that had been at Lincoln Land for as short a time as only 11 days were contaminated by a dark oily film. The Continental representatives concluded that the cans should be removed from Lincoln Land to prevent additional damage and they recommended that all of the cans that had been in the warehouse for four months or more be cleaned before being sent to customers.

Continental began removing its cans from the warehouse within a week after the November 19, 1974 inspection. The cans were either sent directly to customers without being cleaned or were sent to Continental manufacturing plants for cleaning. Those cans sent to the customers without cleaning were sent in the hope that the customers might not reject them, thus saving Continental sales and the expense of cleaning or scrapping them. If the customers rejected the cans, Continental tried to clean them but the effort was both expensive and unsuccessful.

In late December of 1974, at Continental's request, Lincoln Land removed the diesel forklift truck apparently causing the contamination problem and replaced it with one with a gasoline engine. In December of 1974 and January of 1975, Continental attempted to find other warehouse space in Danville to store its cans. The last of the contaminated cans were removed in March of 1975 and Continental was ultimately forced to scrap most of the cans which had been stored at the Lincoln Land warehouse.

Continental filed this action, following the removal of the contaminated cans from the defendant's warehouse and the unsuccessful attempts at salvaging them, alleging that during the period that the contaminated cans were stored in the defendant's warehouse the defendant was negligent in failing to exercise proper care of the goods. The defendant countered by contending that the plaintiff was contributorily negligent, assumed the risk of contamination of the cans and failed to avoid its damages by subjecting the cans to the known dangers of storage at the defendant's warehouse. The district court found the assertions of the defendant to be without merit and entered judgment for the plaintiff:

"Under the provisions of Ch. 26, Section 7-204, Ill.Rev.Stat., and the theory upon which the parties tried the case, the plaintiff was required to prove the following propositions:

1. bailment of its cans to the defendant;

2. delivery of the cans in good condition;

3. receipt of the cans in a damaged condition;

4. in the normal course of events the damage would not have occurred if the defendant had used reasonable care;

5. damages.

"Proof of those propositions raises a presumption of negligence on the part of the defendant which the defendant had to rebut ... the plaintiff went beyond the propositions it was required to prove and offered evidence tending to prove the proximate cause of the damages. The defendant not only failed to rebut the presumption of its negligence but it failed to offer sufficient evidence to rebut the cause of the damage and to show the exercise of due care on the part of the defendant. In fact, as commented above, the preponderance of the evidence shows that the defendant knew or should have known the result would occur. The preponderance of evidence adduced was that warehousemen handling goods like the plaintiff's cans did not use diesel or gasoline powered forklifts, but used electric or propane lifts.

"I conclude the defendant failed to exercise the care a reasonably careful man would exercise under like circumstances and that failure was a proximate cause of the plaintiff's damages."

The district court did not accept Lincoln Land's contentions that the plaintiff should have been aware of the contamination problem, holding:

"Phillip [sic] Spletzer, the Continental manager who visited the Lincoln Land warehouses, did not do so with the sufficient frequency to make him realize that the diesel forklifts were contaminating the stored cans. He did know that diesel forklifts were being used but I find under all these circumstances that is not sufficient to have put him on notice that the cans were likely to be contaminated.... It was only after Continental customers began to complain that Continental came to the realization that their stored cans were being contaminated by the diesel smoke from defendant's forklift trucks. It was [the Continental representative's] experience with the diesel forklift on November 19, 1974 that first made him think that the diesel engines might be causing the contamination.

"Continental was aware that dust settles on cans stored in warehouses and that it is an expected condition. Continental customers realize that as well. The testimony shows that when cans are filled by a Continental customer the cans are first put through a hot soap bath to wash off the dust which accumulates on the cans in storage. The combination of the dust and the oily exhaust forming a film on the cans, only came to Continental's attention when its customers began to complain."

The trial court found that Continental Group...