Louisville & N.R. Co. v. Conasauga River Lumber Co.

• Decision Date: 11 March 1941
• Citation: 153 S.W.2d 143,25 Tenn.App. 157
• Parties: LOUISVILLE & N. R. CO. v. CONASAUGA RIVER LUMBER CO.
• Court: Tennessee Court of Appeals

153 S.W.2d 143

25 Tenn.App. 157

LOUISVILLE & N. R. CO. v. CONASAUGA RIVER LUMBER CO.

Court of Appeals of Tennessee, Eastern Section.

March 11, 1941

Certiorari Denied by Supreme Court June 14, 1941.

Appeal from Chancery Court, Polk County; T. L. Stewart, Chancellor.

Action by the Louisville & Nashville Railroad Company against the Conasauga River Lumber Company, to recover compensation for the use of rails and splices used by the defendant to build 35 miles of railroad into its timber lands. From a decree in favor of defendant, the complainant appeals.

Reversed and decree rendered in favor of complainant.

Where assignment of error was not supported by brief, Supreme Court would assume that it had been abandoned.

James B. Wright, of Knoxville, and Jones & Davis, of Athens, for the Railroad Company.

Phil B Whitaker, of Chattanooga, for Conasauga River Lumber Co.

MCAMIS Judge.

The L. & N. Railroad Company instituted this action to recover compensation for the use of approximately three thousand tons of rails and splices used by the defendant Conasauga River Lumber Company to build thirty-five miles of railroad into its timber lands located in Polk County, Tennessee, and in the State of Georgia.

Practically all of the rails and splices were delivered to defendant's predecessors. They were in place in 1922 when defendant by contract with the Railroad Company assumed the obligation of its predecessor, Tennga Lumber Company, and agreed to pay for the use of said material the sum of $1.50 per ton per annum. This contract expired on March 20, 1932. Other contracts, providing for an annual rental of $1.50 per ton, were entered into both before and after the contract just mentioned but, as we understand, all of these contracts except one covering a small consignment of rails expired on the same date as the contract of 1926. All of these contracts provide for an annual rental of $1.50 per ton per annum, all of which was paid by defendant during the contractual period. Defendant, however, continued to use the material after the expiration of the contract period on March 20, 1932 until sometime during the year 1938. The Chancellor sustained defendant's insistence that during this period of approximately six years it is bound only for a reasonable compensation and not the rate of compensation as fixed by the contracts.

The Chancellor adopted as the actual value of the rails and splices on March 20, 1932, the value of $15 per ton at which they were carried on the books of the Railroad Company and allowed a recovery of 5% per annum on the value thus fixed or 75¢ per ton per annum. From this finding and the decree based thereon, the Railroad Company appealed and insists that the Chancellor erred in not holding the Lumber Company liable for the compensation fixed by the contracts of $1.50 per ton per annum or, if based upon the reasonable value of the use of said material, in not fixing as a reasonable compensation $1.50 per ton per annum.

The Chancellor appears to have recognized the doctrine of an implied continuation or renewal, subject to the same terms and conditions as contained in the original contract, where the bailed continued in the possession of the subject of the bailment after the expiration of the agreed term, but held that whether or not in a given case the doctrine is to be applied depends upon the circumstances and equities of the case. It was found that the circumstances under which the bailed continued to hold over pending negotiations for a new contract at a lower rate rendered inequitable the imposition of the agreed rate of compensation of $1.50 per ton per annum after the expiration of the contract.

In reviewing this holding of the learned Chancellor, the provisions of the contract with respect to the disposition of the property bailed at the expiration of the term must be kept in mind. Looking to the contract, it is noted that while the bailor had the right to enter upon the premises of the bailed and remove the property at the expiration of the term, charging the expense of such removal to the bailed, this right was to be exercised only in event the bailed failed to discharge its primary obligation to load the materials on cars ready for delivery to the bailor.

The proof shows that before the expiration of the contract period the Lumber Company requested a reduction in the payments due under the contract. This request was refused and the Lumber Company continued to pay the agreed rate, threatening, however, to return the rails and splices and abandon its operations. This occurred in the summer of 1931 before the expiration of the contract on March 20, 1932.

Correspondence ensued by which the Lumber Company sought a reduction and the Railroad Company declined to make a reduction insisting upon payment of the account at the contract rate. This was declined and the present suit was instituted on March 6, 1938.

There is some proof that officials of the Lumber Company expected to receive a deduction as a result principally of an agreement of an agent of the Railroad Company to recommend to officials of the Railroad Company that the charges for the use of the materials be reduced but, as shown by the correspondence, the Lumber Company was repeatedly advised both before and after the expiration of the contracts that if it kept the material it would have to be upon condition that it pay $1.50 per ton per annum. One of the letters referred to shows clearly that the Lumber Company was fully conscious of the refusal of the Railroad Company to accept less than this amount and, with this knowledge, agreed to make payments "upon account" in lumber.

In this State the rule is well settled that where the relationship of landlord and tenant exists by contract for a fixed term and subject to fixed conditions and an agreed rental and the tenant holds beyond the term, the tenant continues to occupy the relation of tenant toward his former landlord on the same terms as existed under the contract of lease. Wilson v. Alexander, 115 Tenn. 125, 88 S.W. 935 and see earlier cases holding to the same effect including Brinkley v. Walcott, 10 Heisk. 22, to be hereinafter discussed.

In Lewis et al. v. Bringhurst Reid Co., 155 Tenn. 177, 290 S.W. 972, this rule, there referred to as the United States rule, was reaffirmed and extended to hold that the length of time for which the tenant holds over and his reasons for doing so are immaterial and will not be held to defeat the right of election on the part of the landlord to hold the tenant for another like term. These cases, however, all deal with the rights of the parties growing out of a contract of lease of real estate and we do not appear to have a case dealing with the precise subject here under consideration where the relationship is that of bailor and bailed and the subject-matter of the contract personal property.

We agree with the Chancellor that the relationship between the parties in this case was that of bailor and bailed rather than landlord and tenant and the question to be determined is whether or not the retention of possession by the bailed operates as a renewal or continuation of the original contract of bailment subject to the same terms and conditions fixed by the contract.

One authority states the rule as follows:

"Termination of Relations. If the contract of bailment is limited as to time, the bailment is ended at the expiration of the time, and the bailed must either redeliver the property or dispose of it as the owner directs or excuse his failure, and if he does not the owner may hold him for conversion, or as having renewed the bailment on the same terms." (Italics ours) Elliott on Contracts, Section 3005.

A more recent statement of the rule is as follows:

"In a bailment for a definite term, while it is the general rule that termination takes place by lapse of time, and unquestionably the bailment ends absolutely if the bailed returns the property or accounts for it as is his duty, nevertheless, if at the expiration of the appointed time he does not redeliver the property or excuse his failure to

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