Acme Fast Freight v. CHICAGO, M., ST. P. & PR CO.

• Decision Date: 01 March 1948
• Docket Number: No. 81,Docket 20756.,81
• Parties: ACME FAST FREIGHT, Inc. v. CHICAGO, M., ST. P. & P. R. CO. et al.
• Court: U.S. Court of Appeals — Second Circuit

166 F.2d 778 (1948)

ACME FAST FREIGHT, Inc. v. CHICAGO, M., ST. P. & P. R. CO. et al.

No. 81, Docket 20756.

Circuit Court of Appeals, Second Circuit.

March 1, 1948.

COPYRIGHT MATERIAL OMITTED

Clark, Carr & Ellis, of New York City (Paul A. Crouch, of New York City, of counsel), for plaintiff.

Bleakley, Platt, Gilchrist & Walker, of White Plains, N. Y. (Joseph Walker, Roswell P. C. May and Dennis P. Donovan, all of New York City, of counsel), for Pennsylvania R. Co. and Loftin and Martin.

Thomas L. Ennis, of New York City, for Delaware & H. R. Co.

Rowland L. Davis, Jr., of New York City, for Chicago, M., St. P. & P. R. Co. and Delaware, La. & W. R. Co.

Pierce & Greer, of New York City (H. Brua Campbell, of New York City, of counsel), for Wabash R. Co.

Before SWAN, CHASE and FRANK, Circuit Judges.

FRANK, Circuit Judge.

1. This decision must turn on whether or not freight forwarders are to be considered receiving carriers under the conditions in this case for the purposes of Section 1013, 49 U.S.C.A.² and the Carmack Amendment, 49 U.S.C.A. § 20(11)³ and 20(12).⁴ Prior to the enactment in 1942 of Part IV of the Interstate Commerce Act regulating freight forwarders, they were for most purposes considered shippers, not carriers,⁵ although their liability to their customers was the same as that of a carrier.⁶ We agree with appellees that the general effect of that legislation was not to make carriers of such forwarders. The Act defines a freight forwarder as one who "holds itself out to the general public to transport or provide transportation of property," and "utilizes, for the whole or any part of the transportation of such shipments, the services of a carrier or carriers."⁷ Forwarders are nowhere referred to in the Act as carriers. The purpose of the legislation was obviously to subject freight forwarders to regulation, from which they had previously been exempt, particularly with regard to their rates, in order to prevent their discrimination among individual shippers and among railroads, and to establish more reasonable competition as between railroads, forwarders, motor-carriers and other transportation agencies.⁸ To subject forwarders to the control of the Interstate Commerce Commission it was not necessary to make them into carriers, and indeed, in view of their operations, it would have been a strange linguistic feat for Congress to have done so.

Nevertheless, we think that when Congress said in Section 1013 that, for the purposes of Section 20(11) and (12), a "freight forwarder shall be deemed both the receiving and delivering transportation company," it meant that for the limited purposes of that section a forwarder is to be treated as a carrier. From the language of the Act, such construction strikes us as both obvious and reasonable. While it would not square with reality to consider a freight forwarder a carrier for all purposes, neither would it be reasonable, in an Act which itself distinguishes forwarders from individual shippers, to treat a forwarder in all respects like any other shipper. Moreover, as forwarders already had a common-law liability similar to the common-law liability of a carrier, it would appear reasonable for Congress to treat them as carriers for the purposes of statutory subrogation provisions which modify that carrier liability.

2. Appellees argue that, even if appellant has the status of a carrier under Section 1013, they are not "connecting carriers" liable to the forwarders as initial carriers under section 20(12), because appellees are not carrying the same property as that on which the initial carrier issued its bill of lading, and because transportation to come under that section must be on a through bill of lading. The factual basis of their argument is that the forwarder issues one bill of lading to the shipper, while the railroad issues a second bill of lading to the forwarder, and that, in the two bills of lading, the named shipments, rates, routes, origins, destinations, consignors and consignees are different.

Carriers at common law were liable for all loss or injury not due to the act of God or public enemy, the inherent nature of the goods, or the act or fault of the shipper.⁹ Their strict liability, as insurer, rather than resting on any special contract,¹⁰ grew out of the liability of bailees generally, and is imposed "by operation of law" because of a public policy to protect shippers. This liability could validly be limited by contract or bill of lading, where there was consideration for the limitation, as by a stipulation of value for lower rates.¹¹ But such contracts, even when supported by consideration, were void and ineffective to relieve a carrier of liability when they were against public policy, as when they attempted to relieve a carrier from the consequences of its own negligence.¹² In most American jurisdictions, however, a carrier was liable only for a loss occurring upon his own lines, and, absent a special contract or statute, a shipper by connecting carriers could recover at common law only from that one on whose lines the loss occurred (although a carrier could contract for through carriage and thus extend its liability over the entire route).¹³ In order to correct the burdensome situation of the shipping public in recovering for losses in interstate shipments over connecting carriers,¹⁴ Congress passed the Carmack Amendment, 49 U.S. C.A. § 20(11) and (12). The Act required a common carrier engaged in interstate commerce to issue a receipt or bill of lading for property received, and made the initial carrier liable to the lawful holder of a bill of lading for any loss, damage or injury to the property caused either by it or by any connecting carrier over whose lines such property might be carried. But the Amendment was not intended to saddle upon the initial carrier the responsibility for any loss which might occur. Therefore it also reserved to the initial carrier the right to recover from the defaulting connecting carrier any sum which it might be required to pay the shipper.

The effect of the Amendment was therefore not to change the liability of carriers, but to provide a new remedy for shippers. It denied the initial carrier the right to limit its own liability to carriage over its own lines, and it made connecting carriers the agents of the initial carrier.¹⁵ But, as between initial and connecting carriers, it expressly left the loss to fall on the carrier primarily responsible, by subrogating the initial carrier, forced to pay a shipper's claim, to whatever right that shipper had against the defaulting carrier at common law, and by leaving untouched the shipper's common-law rights against the defaulting carrier.¹⁶

If it is borne in mind that the purpose of the Carmack Amendment was to protect shippers, and that for the purposes of Section 1013 which extended its provisions to freight forwarders, the latter are to be considered initial carriers and not shippers, we think the appellees' objection that they are not connecting carriers cannot be sustained. It seems apparent that nothing in the legislative history of either Act was intended to deprive the individual shippers of their common-law right of recovery against railroads as intermediate carriers.¹⁷ Before the enactment of section 1013, where goods were shipped through a forwarder, the courts allowed the shippers to recover directly from the carrier.¹⁸ It is true that the courts based recovery on the undisclosed principal theory of agency, and that when a forwarder is considered an initial carrier under section 1013, the agency relationship of shipper and forwarder no longer exists. Nevertheless, we do not think that section was designed to abrogate that right. Since the right did exist for the individual shipper, we think the effect of the Carmack Amendment was to subrogate the freight forwarder, as for this purpose the initial carrier, to that right.

The fact that the shipments given to the forwarder are consolidated by it and sent on by a railroad under another bill of lading would not be sufficient, we believe, to relieve the carrier of liability to the shipper. For the shipper, the goods are the same, whether transported under the same bill or another.

If the shipper by freight forwarder lost his rights against the actual carrier, and the forwarder were thus deprived of his rights of subrogation, it would put the forwarder in a position of an insurer for the entire transportation of the goods. We would require a clearer showing to hold that, because of the circumstance of the use of two bills of lading by freight forwarders, Congress intended, by incorporating the Carmack Amendment into the legislation regulating freight forwarders, to impose an absolute liability on them for through carriage, when no such liability was imposed on other initial carriers by the original amendment. We think the purpose of Section 1013, viewed in the light of the history of the Carmack Amendment itself, was simply to protect shippers through forwarders by giving them the same remedy against the person to whom they delivered their goods that they would have had if they had originally delivered to a railroad. We think that Section 1013 was not intended to change the other policy of the Carmack Amendment, i. e., that the loss, as between carriers, should fall on the one responsible. We think that, despite the issuance of a new bill of lading, appellant was subrogated to a right which the original shipper had against the railroads.

3. Appellees argue that, even if appellant is an initial carrier with subrogation rights under section 1013, that right has been limited, with respect to the time within which claims must be filed, by contract under Section 2(b) of the bill of lading issued by them to the forwarder.¹⁹ We think that argument ignores the terms of the bill of lading on which it rests. Assuming, without deciding the point, that the railroad's bill of lading could control...