Consolidated Freightways Corp. of Del. v. Admiral Corp.

• Citation: 442 F.2d 56
• Decision Date: 14 May 1971
• Docket Number: No. 18340.,18340.
• Parties: CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, Plaintiff-Appellant, v. ADMIRAL CORPORATION, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

442 F.2d 56 (1971)

CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, Plaintiff-Appellant, v. ADMIRAL CORPORATION, Defendant-Appellee.

No. 18340.

United States Court of Appeals, Seventh Circuit.

April 27, 1971.

Rehearing Denied May 14, 1971.

Francis James Higgins, Edward H. Hickey, John P. Scotellaro, Chicago, Ill., for plaintiff-appellant; Bell, Boyd, Lloyd, Haddad & Burns, Chicago, Ill., of counsel.

George W. Hamman, Robert F. Finke, Chicago, Ill., for defendant-appellee; Mayer, Brown & Platt, Chicago, Ill., of counsel.

Before SWYGERT, Chief Judge, and CUMMINGS and STEVENS, Circuit Judges.

CUMMINGS, Circuit Judge.

Plaintiff, an interstate motor carrier, sued Admiral Corporation to recover for freight charges. According to the complaint, Admiral was the consignee of goods transported by plaintiff. It was alleged that under Part II of the Interstate Commerce Act (49 U.S.C. § 301 et seq.) Admiral owed plaintiff almost $93,000 for services for the period January 21, 1966, through April 30, 1966.

In its answer, Admiral averred that William A. Rogers was the shipper of these goods under plaintiff's prepaid bills of lading, and that Admiral did not learn that plaintiff was having difficulty in collecting freight charges from Rogers until May 1966. Prior to then, Admiral assertedly had paid Rogers for these and other charges. The answer also alleged that the shipments were under tariffs providing for the charges to be prepaid by the shipper.

According to the evidence, Admiral started to import electrical components and other products from Japan in the early 1960's. These goods were shipped from Japan to western United States ports and were then transported by truck to Admiral's plants in Illinois. In 1963, Admiral retained the services of William A. Rogers for freight and customs clearance. He agreed to advance all necessary charges for inland and ocean freight, to effect proper customs entry into Chicago, and to pay all import duties due. He would then invoice Admiral for these costs and for his services.

When the goods reached Seattle or San Francisco, Admiral would notify Rogers. He would choose the motor carrier to transport the goods to Chicago, and that carrier would advance payment for the ocean freight charges and later include them in its inland freight invoice to Rogers.

Commencing in September 1965, Rogers selected plaintiff as the motor carrier to transport Admiral's import freight. The goods moved on plaintiff's bills of lading which showed Admiral as the consignee and Rogers as the shipper and party to be billed. The bills of lading were also marked by Rogers as "prepaid" or "to be prepaid," meaning that Rogers, the shipper, was to be billed by plaintiff and pay its charges.¹

After delivery of the goods to Admiral, plaintiff billed Rogers for the inland and ocean freight charges through invoices stating that under Interstate Commerce Commission regulations payment was required within 7 days of delivery. Prior to April 1966, Rogers often failed to make payment of plaintiff's invoices within that time limit, but plaintiff did not enforce the provision.

The record contains no indication that Admiral had authorized Rogers to obtain credit from plaintiff or that Admiral was aware that Rogers was obtaining such credit beyond the permissible period. Rather, Rogers sent Admiral his own invoices which were paid in full and without question. Admiral did not learn of Rogers' delinquencies until notified by plaintiff during the first week of May 1966. At that time Admiral changed its payment practices to insure that plaintiff would be paid for such future charges. Rogers ultimately went out of business in November 1966.

Plaintiff unsuccessfully attempted to recover these freight charges from Rogers as consignor. In early 1968, plaintiff demanded that Admiral undertake payment. When it refused, plaintiff brought this suit against Admiral on the theory that it was liable for the shipping charges as consignee.

The district court granted judgment for Admiral at the close of plaintiff's case. The court concluded: (1) plaintiff had not shown Rogers' inability to pay the freight charges; (2) he was a freight forwarder under Part IV of the Interstate Commerce Act, so that Admiral's payments to him discharged any obligations to plaintiff imposed upon Admiral by the Act; and (3) plaintiff was estopped to proceed against Admiral on these shipments.

I

Admiral does not contend that the provision for prepayment by Rogers altered the contractual terms of the bills of lading and relieved it, as consignee, from any obligation of payment of the freight charges. Instead, Admiral urges that notwithstanding any such liability, plaintiff is estopped to collect the freight charges in this case.

In Missouri Pacific RR. Co. v. National Milling Co., 276 F.Supp. 367 (D.N.J. 1967), affirmed, 409 F.2d 882 (3d Cir. 1969), the principles of estoppel were applied to bar a carrier from imposing a double payment upon a consignee that accepted delivery of a shipment under a uniform straight bill of lading marked "freight prepaid" and then reimbursed the consignor for the full amount of freight charges in accordance with their separate agreement. By marking the bills of lading "prepaid," the carrier was held to have represented satisfaction of its freight charges upon which the consignee reasonably relied in paying the same amount to the consignor. See also Davis v. Akron Feed & Milling Co., 296 F. 675 (6th Cir. 1924), reaffirmed in United States v. Mason & Dixon Line, Inc., 222 F.2d 646, 647-650 (6th Cir. 1955).

We find the principles enunciated in those cases applicable to the instant controversy. Here the delivery receipts of the waybills showed William A. Rogers as the party to be billed. The delivery receipts of the "Weight and Charges Ahead Bills" indicated that the "Revenue Bill is Prepaid." The "Memorandum" for each shipment acknowledging the issuance of a bill of lading also bore a stamped statement that the freight charges were "Prepaid — Bill W. A. Rogers." Admiral accepted delivery of the shipments upon those representations and promptly paid Rogers' invoices for the freight charges. These representations thus deprived Admiral of its ability to protect itself from possible double liability by paying the freight charges itself directly to the carrier upon acceptance of the shipment. Having indicated upon delivery that payment was sought and received from Rogers, plaintiff invited Admiral to discharge its obligations under its agreement with Rogers. Equity will not ignore plaintiff's participation in securing Admiral's detrimental reliance in supposedly reimbursing Rogers for freight bills already paid.

Plaintiff objects that Admiral may not assert estoppel since it did not in fact rely upon any representation of prepayment when it accepted delivery and then satisfied Rogers' invoices. We find this contention factually unsupported in the record. There was no evidence that Admiral was actually aware of the falsity of those representations, either at the time of delivery or subsequently when it paid Rogers. Admiral's action after receiving notification of Rogers' delinquencies strongly supports the contrary inference. Nor does Admiral's apparent awareness that Rogers engaged in credit transactions with various shippers indicate that Admiral knew the true basis upon which the instant shipments were handled. Rogers dealt with other carriers and other companies. We decline to charge defendant with knowledge of falsity.

Plaintiff also urges that Admiral acted improperly in settling Rogers' invoices without demanding receipts from Rogers evidencing actual payment of the charges to the carrier. In that manner, it is claimed, Admiral could have prevented any fraud by Rogers and protected itself against possible double liability for those charges. Plaintiff ignores, however, the weight which Admiral could justifiably attach to the representations made on the shipping documents. We see no reason, however, for a double check by Admiral in the face of the representations of prepayment supplied by the carrier itself. Plaintiff could have indicated on those documents the exact nature of its credit transactions with Rogers. Its extensions of credit to Rogers neither involved nor benefited the unsuspecting consignee. Plaintiff may not now shift the risk of its own credit transactions to an innocent party acting in reliance upon plaintiff's incorrect representations of prepayment.

The present controversy offers additional grounds for intervention of the principles of equity. Plaintiff's transactions with Rogers involved credit extensions well beyond the seven-day limit imposed upon such transactions by the Interstate Commerce Commission.² Through its unlawful and lax credit extensions, plaintiff contributed substantially to its ultimate inability to recover payment from that shipper. These practices also increased the amount of loss which resulted from Rogers' financial failure. Plaintiff continued shipping goods for Rogers on credit and did not deign to notify Admiral, from whom it now seeks recompense, until well after a reasonable time had elapsed.

Plaintiff thus created the risk of loss by its credit practices. It contributed to the gravity of the loss by allowing Rogers' unsatisfied debts to accumulate beyond the lawful and reasonable time for credit. Finally, it effectively prevented Admiral from protecting itself from Rogers' conversions, first through the misrepresentations of prepayment, and then through its failure to notify Admiral until May 1966. Under these circumstances, we find no difficulty in holding plaintiff estopped to collect payment of the freight charges from Admiral.

II

In order to avoid estoppel as to its claim, plaintiff raises two additional contentions. First, it strenuously urges that Section 223 of the Motor Carrier Act (49 U.S.C. § 323) imposes absolute statutory liability upon the consignee and...