El Dorado Terminal Co. v. GENERAL AMERICAN TC CORP.
| Decision Date | 19 May 1939 |
| Docket Number | No. 8799.,8799. |
| Citation | 104 F.2d 903 |
| Parties | EL DORADO TERMINAL CO. v. GENERAL AMERICAN TANK CAR CORPORATION. |
| Court | U.S. Court of Appeals — Ninth Circuit |
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W. F. Williamson, Richard P. Norton, and W. R. Wallace, Jr., all of San Francisco, Cal. (Williamson & Wallace, of San Francisco, Cal., of counsel), for appellant.
Allan P. Matthew, John O. Moran, F. W. Mielke, and McCutchen, Olney, Mannon & Greene, all of San Francisco, Cal., for appellee.
Before DENMAN, MATHEWS, and HEALY, Circuit Judges.
This is an appeal from a judgment denying to appellant, plaintiff below, recovery of moneys collected by the appellee, defendant below, as agent for appellant, from several interstate railways.
The case is at law, the jury was waived and the court based its judgment against appellant El Dorado Terminal Company, hereinafter referred to as the El Dorado Company on special findings and its conclusions of law.
The El Dorado Oil Works, a corporation owning and operating a vegetable oil refining plant at Berkeley, California, entered into a leasing contract with the appellee General American Tank Car Corporation, hereinafter referred to as the Car Corporation. The Car Corporation leased to the El Dorado Oil Works for three years, from January 1, 1934, 50 specialized coiled tank cars for the carriage of the Oil Works' vegetable oil. The rental for the cars was payable monthly. In the neighborhood of 99 percent of the Oil Works' product is so carried over one or another of three transcontinental railways, into interstate commerce from its Berkeley plant.
The lease was assigned by the Oil Works to the appellant El Dorado Company, the former's wholly owned subsidiary, which brought this suit.
The suit concerns the claimed obligation of the Car Corporation under the car leasing contract to pay over to the El Dorado Company moneys the Car Corporation, the El Dorado's collecting agent, collected from the railways. The moneys were paid by the railways pursuant to a mileage tariff rate, duly filed with the Interstate Commerce Commission, as compensation for supplying them with the specialized coiled tank cars for the carriage by them of the Oil Works' and appellant's vegetable oil. The carriers were not equipped with such cars and the supplying of them by the shipper for the tariff rate had been a practice recognized by the Interstate Commerce Commission for over a quarter of a century.
There is no question concerning the right of the El Dorado Company to sue for breach of the assigned contract and to recover if its view prevail as to the law and facts relative to the collection and payment of the tariff rates.
Under the terms of the contract the Car Corporation was to collect from the several interstate carriers serving the El Dorado Company the 1½ cents per car mile of the filed tariff rate for supplying to them the tank cars and credit the collections to the El Dorado Company. For 5 months after January 1, 1934, the beginning of the term, the Car Corporation performed this collecting agency contract crediting the El Dorado Company with the collections and making monthly payment to the El Dorado Company of the balance thereof, after deducting the monthly rental of the car lease and certain repair charges.
After July 1, 1934, the Car Corporation declined to pay over any balance to the El Dorado Company. It continued to collect in full from the carriers the tariff mileage, but claimed that all the balance over its monthly rentals and charges, it could keep to its own use. It based its refusal on three contentions:
(1) That the Car Corporation and not the El Dorado Company was the supplier of the cars to the railways; (2) that the monthly rental charge constituted the sole cost to the El Dorado Company in supplying the cars to the railways; and (3) that any amount paid by the railways to the shipper supplying them cars to carry its own oil, above this claimed actual cost to the supplier, reduced the shipper's transportation cost under the freight tariffs and, hence, that the payment by the Car Corporation to the El Dorado Company of the excess of car mileage tariff collections over rentals would constitute a rebate under the Elkins Act.1 We hold that the Car Corporation has sustained none of these contentions. The case is of novel impression and because of this and of a dictum of the Interstate Commerce Commission, we have given it extended consideration.
(1) The lease deprived the Car Corporation of the possession and control of the 50 cars for the three year term and the Car Corporation could not supply them to the railways. This is apparent from the terms of the lease. It required the El Dorado Company to take the cars into its possession and pay the rental for the full three year term whether or not they were used. The purpose of the lease is clear. It is to give to the El Dorado Company a supply of cars devoted solely to meeting its own business requirements. They thus became instantly available for the delivery of its oil to its customers on one or another of the three railways' lines or their connecting carriers. They could be distributed for the service of its future orders.
The Car Corporation had no choice in the railway to be served by any of the cars nor, if they were not used by the El Dorado Company, could the Car Corporation require them to be supplied to any railway for the service of any other shipper. There is no basis for the Car Corporation's claim that it can retain the excess of the mileage collections over rentals because it and not the El Dorado Company supplied the cars to the three railways.
(2) The monthly rentals did not establish the cost of the El Dorado Company in supplying the cars to the carriers, and the Car Corporation has not proved that that cost is less than the mileage earnings of the cars.
The Car Corporation assumes in its pleading of its affirmative defense that it would be a rebate to pay over to the El Dorado Company any balance above the car rentals and repair charges, and hence a crime which permits it to retain such balance; and the court assumes in its decision sustaining the claimed defense, that the monthly rentals constituted the total cost of the El Dorado Company in supplying the cars to the carriers.
The Car Corporation has not established that the cost of supplying the cars is less than the mileage earnings. The lease pleaded in the defense not only shows the contrary likelihood but that the rental cost itself is not determined by the monthly payments of $27.50 for each car. In addition to the monthly rentals, the lease provided for a possible further rental to be paid the Car Corporation at the end of the three years. This additional amount was the excess of tariff rates collected by the Car Corporation from the carriers for the mileage of the empty cars over the mileage for the loaded cars while carrying the El Dorado Company's oil. The El Dorado's cost can be determined only by considering this future added rental.
In determining what constitutes a supplier's cost, the Interstate Commerce Commission has considered its experience with the supplied facilities for a period as long as 18 years. Mileage Allowances on Refrigerator Cars, 218 I. C. C. 359, and cases cited infra. With such a lease it would require a consideration of the El Dorado Company's rationally expected three year supply experience with the cars to ascertain its cost of supplying them to the railways, before it could be determined whether the supplying was profitable. This cost calculation would involve much more than the per car monthly rentals plus the additional rental at the end of the three years.
Since the El Dorado Company has possession of the cars, it must provide trackage facilities for their storage and switching. It has the current cost of their administration. It has the cost of cleaning the cars, not a simple task when it is considered that any rust or foreign substance on the coils which wind through the oil or on the sides of the cars may spoil the sensitive vegetable product.
During the three years there exist possible liabilities under the lease which easily could wipe out any excess of mileage over rentals. The El Dorado Company must pay the Car Corporation for any damage or destruction to the cars while on its own or its customers' private tracks. The oil is both inflammable and explosive and the contents may destroy the cars; so also may a conflagration or a collision or other happenings on the private tracks. So also the lease places on the El Dorado Company the liability for injury to persons or property caused by the use of the cars. It is a matter of business judgment whether to insure against such risks, if insurance be obtainable.
Also before it can be determined whether the three year lease will create a cost less than the mileage earned by the leased cars, it must be considered whether the plant will remain in operation. The monthly rentals go on though a fire or earthquake or a strike makes it impossible to manufacture the oil for shipment in the cars. The supply of copra from the Philippines may cease or become so costly that it does not pay to operate. Tariffs on copra may stop profitable manufacture. The rental costs for supplying the cars for 18 months may be the total 36 month obligation under the lease.
The Car Corporation has not sustained its burden of proof that the payment of the balances of mileage collections would be more than the added cost and liabilities we have described and the judgment may be reversed on this ground alone. Whether under the new district court rules the complaint could be amended and a new trial had, we leave to the lower court, if the Supreme Court should not agree with our decision on the Car Corporation's third contention, which otherwise disposes of the case.
(3) The Elkins Act makes it a criminal offense for the railways to pay less than...
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General American Tank Car Corporation v. El Dorado Terminal Co 12 8212 13, 1939
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