Automated Donut Systems, Inc. v. Consolidated Rail Corp.

• Decision Date: 07 August 1981
• Citation: 424 N.E.2d 265,12 Mass.App.Ct. 326
• Parties: AUTOMATED DONUT SYSTEMS, INC. v. CONSOLIDATED RAIL CORPORATION.
• Court: Appeals Court of Massachusetts

Page 265

424 N.E.2d 265

12 Mass.App.Ct. 326

AUTOMATED DONUT SYSTEMS, INC. v. CONSOLIDATED RAIL CORPORATION.

Appeals Court of Massachusetts, Suffolk.

Argued April 9, 1981.

Decided Aug. 7, 1981.

Alan R. Hoffman, Boston, for defendant.

David W. Walsh, Boston (Richard J. Ferriter, Boston, with him), for plaintiff.

Before HALE, C. J., and GRANT and DREBEN, JJ.

DREBEN, Judge.

On July 7, 1978, the plaintiff, Automated Donut Systems, Inc. (Donut), shipped a trailer containing doughnut making equipment from Massachusetts to its customer in Indiana via the defendant carrier, Consolidated Rail Corporation (Conrail). The machinery arrived in Indiana in damaged condition, and the plaintiff brought suit against Conrail under 49 U.S.C. § 20(11) (1976), the so-called Carmack Amendment. ¹ After trial to a jury which awarded separate damages of $95,000 to the consignee (customer) and $25,000 to the plaintiff under instructions from the judge that any award to the consignee would be held by the plaintiff for the former's benefit, judgment of $120,000 was entered for the plaintiff. The defendant appeals urging, among other things: (1) that the plaintiff is not entitled to maintain the action as it did not have title to, or a beneficial interest in, the equipment; (2) that the judge erred in placing on the carrier the burden of proving improper loading by Donut; (3) that the plaintiff was not entitled to recover the damages sustained by its customer and that, in any event, the damages were excessive. Although we reject Conrail's main contentions, we remand the case to the Superior Court for further proceedings consistent with this opinion because a small portion of the damages awarded were without basis.

The facts relevant to each of Conrail's claims will be set forth as required.

1. Plaintiff's right to bring suit. Conrail was both the receiving and the delivering carrier. In such event, the Carmack Amendment, as in effect at the time of the delivery of the equipment, ² provided for liability to the "lawful holder" of the receipt or bill of lading issued by the initial carrier or to "any party entitled to recover thereon."

Conrail claims that Donut was not a "lawful holder", as it was neither the owner of the machinery nor a person with a beneficial interest in the property. Moreover, Donut did not have physical possession of the bill of lading. ³ Conrail argues that only Donut's customer in Indiana, who held title to the machinery and who had paid Donut in full, was a proper plaintiff. We reject this conclusion.

Although the consignee as owner of the property could have brought an action against Conrail, it did not do so. Instead, it sued Donut, and at the time of trial the action against Donut was pending in Indiana. While there is some authority that a shipper who does not have title may not bring suit, ⁴ we consider more consonant with Massachusetts law the view, supported by the weight of authority ⁵ and adopted by the trial judge, which permits a shipper by reason of its interest in the contract of shipment to bring an action against the carrier whether or not it has title.

Long before the Carmack Amendment, the shipper's interest in its contract of carriage was recognized in Massachusetts. Blanchard v. Page, 8 Gray 281, 298-299, 301 (1857). Finn v. Western R.R., 112 Mass. 524, 533-534 (1874). In Finn, a shipper was held entitled to sue on his contract with the carrier whatever "the legal effect of the negotiations between consignor and consignee upon the title to the property." Id. at 533. The shipper had "his own interest" in the safe carriage of the goods. We think the same reasoning is applicable under the Carmack Amendment. See, e. g., Newth-Morris Box Corp. v. Pennsylvania R.R., 197 Md. 119, 127, 78 A.2d 655 (1950) (Carmack Amendment applies the privity of contract rule to interstate shipments); Robb v. American Ry. Exp. Co., 78 Pa.Super. 1, 6-7 (1921); Rogers Walla Walla, Inc. v. Willis Shaw Frozen Exp., Inc., 23 Wash.App. 540, 543-544, 596 P.2d 669 (1979).

Moreover, here, the plaintiff is being sued by its customer and has, therefore, a direct interest in a recovery. Had it settled that suit, in the absence of any reservation of rights, it would be the only one entitled to recover against Conrail. Aspen Fish Prod. Co. v. Pennsylvania-Reading Seashore Lines, 127 N.J.L. 209, 210, 21 A.2d 826 (1941). See also Produce Trading Co. v. Norfolk S. R.R., 178 N.C. 175, 181, 100 S.E. 316 (1919) (consignor's reduction of price to consignee amounts to an equitable assignment to consignor of consignee's right to recover). The plaintiff's potential liability, although uncertain, is a direct interest. We see no reason to require Donut to await the outcome of the consignee's suit and risk the running of the statute of limitations as a condition of maintaining the present action.

We hold, therefore, that Donut may, as matter of law, pursue this action. See generally, Uniform Commercial Code, G.L. c. 106, § 2-722; Mass.R.Civ.P. 17(a), 365 Mass. 763 (1974); Nolan, Civil Practice §§ 142 & 143 (1975).

2. Burden of proof as to improper packing. Conrail claimed that the damage was due to the plaintiff's improper packing of the equipment. One of the most hotly contested issues at trial was whether the machinery had been properly braced in the trailer before it was placed on Conrail's flat (piggy back) car. The judge charged the jury that Conrail had the burden of proof on this issue. Conrail claims that this was error, citing 49 U.S.C. § 101 (1976), ⁶ because Donut had loaded the trailer and because the bill of lading bore the notation "S L & C", a shorthand expression for the term "shipper's load and count". Conrail argues that the notation has the effect of placing the burden of showing proper packaging on the shipper. See Dublin Co. v. Ryder Truck Lines, Inc., 417 F.2d 777, 778 (5th Cir. 1969); Modern Tool Corp. v. Pennsylvania R.R., 100 F.Supp. 595, 596, 597 (D.N.J.1951).

Conrail's reliance on these cases is misplaced. The evidence does not warrant a finding that the notation "S L & C" on the bill of lading was placed there in circumstances binding on the shipper. The exhibits and undisputed testimony established that the plaintiff had prepared a bill of lading which in typing described the shipment and listed the consignor and the consignee. The typed portion of the bill contained no reference to "shipper's load and count". It was also undisputed that the notation in handwriting was inserted by the driver of M & S Express, the trucking firm which had hauled the trailer to Conrail. The driver had inserted "S L & C" underneath the signature he had placed on the bill on behalf of M & S, and adjacent to his insertion of the date. The president of M & S Express explained that if the shipper loaded the trailer and the count were later disputed, "there's no way my driver could tell, so he put 'S L & C'. It's a common occurrence."

Whatever may have been the effect of the notation as between the plaintiff and the trucker, the notation by the driver did not constitute a part of the contract between Conrail and the plaintiff. It was obvious from the bill of lading who had made the notation and, in fact, a representative from Conrail testified that the driver (and not the plaintiff) had inserted the notation. There was no evidence or claim made at trial that the driver had authority to change the bill of lading on behalf of the plaintiff. A representative of Conrail explained that the normal procedure is for the shipper to prepare the three-part bill of lading and that the railroad does not change the bill without permission of the shipper. In these circumstances the judge was correct in not referring to "shipper's load and count" in his instructions.

Nor did the evidence entitle Conrail to assert that the shipper took the full responsibility for loading, thereby relieving Conrail of any duties of inspection, and placing the burden of proof as to proper packing on the shipper. At trial, the plaintiff asserted that Conrail had agreed to inspect the shipment. Although Conrail denied such an agreement, its representative acknowledged that the report of the inspection made at the time of delivery of the loaded trailer to Conrail bore a notation to the effect that there was no visible damage to the top or floor of the trailer. His testimony may be interpreted to mean that Conrail's inspector had looked into the trailer before he had placed the seal on the trailer. There was also testimony of a practice of inspection by the railroad. ⁷

Thus, Conrail cannot benefit from cases which relieve the carrier of a duty of inspection because of a sealed container or otherwise, and which, as a result, place the burden of showing proper loading on a shipper. ⁸ See, e. g., Armour Research Foundation of Ill. Inst. of Technology v. Chicago, R. I. & P. R.R., 311 F.2d 493, 494 (7th Cir.), cert. denied, 372 U.S. 966, 83 S.Ct. 1091, 10 L.Ed.2d 129 (1963); Minneapolis, S. P. & S. S. M. R.R. v. Metal-Matic, Inc., 323 F.2d 903, 905 (8th Cir. 1963); Blue Bird Food Prod. Co. v. Baltimore & O. R.R., 492 F.2d 1329, 1332, 1333 (3d Cir. 1974).

The Carmack Amendment codified the common law rule that a carrier, though not an absolute insurer, is liable for damages to goods transported by it unless it can show that the damage was due to an excepted cause, such as the act of the shipper. The "burden of proof is on the carrier to show ... that the damage to the cargo was due to one of the excepted causes relieving the carrier of liability." Missouri P. R.R. v. Elmore & Stahl, 377 U.S. 134, 137-138, 84 S.Ct. 1142, 1144, 12 L.Ed.2d 194 (1964). We see no reason why that rule was not applicable here. We hold that the judge was correct in placing on Conrail the burden of showing improper packing. Masonite Corp. v. Norfolk & W. Ry., 601 F.2d 724, 728 (4th Cir. 1979). See Gulf M. & O. R.R. v. United States, 391 F.2d 545, 549 (5th Cir. 1968). See generally...