Millers Mut. Ins. Ass'n of Illinois v. Southern Ry. Corp.
| Decision Date | 08 November 1973 |
| Docket Number | 73-1466.,No. 73-1465,73-1465 |
| Citation | 483 F.2d 1044 |
| Parties | MILLERS MUTUAL INSURANCE ASSOCIATION OF ILLINOIS, Appellee, v. SOUTHERN RAILWAY CORPORATION, Appellant. MILLERS MUTUAL INSURANCE ASSOCIATION OF ILLINOIS, Appellee, v. CENTRAL SOYA COMPANY, Appellant. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Harold K. Bennett, Asheville, N. C. (W. T. Joyner, Raleigh, N. C. and Bennett, Kelly & Long, Asheville, N. C., on brief), for appellant in No. 73-1465.
O. E. Starnes, Jr., Asheville, N. C. (Van Winkle, Buck, Wall, Starnes & Hyde, P. A., Asheville, N. C., on brief), for appellant in No. 73-1466.
Charles R. Worley, Asheville, N. C. (J. M. Baley, III, McGuire & Wood, Asheville, N. C., on brief), for appellee in Nos. 73-1465 and 73-1466.
Before BOREMAN, Senior Circuit Judge, and CRAVEN and FIELD, Circuit Judges.
Some time during the winter of 1970, the Earle-Chesterfield Mill received from Central Soya Company six railroad cars of No. 2 yellow corn shipped via Penn Central and Southern Railway. Some days later hot spots and smoldering heat or fire occurred in one of the corn storage bins, resulting in damage to 19,426 bushels of corn, considerable injury to the bin itself, and incidental expense — a net loss to Earle-Chesterfield of approximately $24,000. The plaintiff, Millers Mutual Insurance Association of Illinois, paid Earle-Chesterfield Mill under a fire insurance policy and then, as subrogee to the Earle-Chesterfield claim, sued Central Soya, Penn Central, and the Southern Railway in the United States District Court. From a judgment entered against them on a jury verdict of negligence in furnishing and transporting the corn, Central Soya and Southern Railway have appealed.1
We think the district court erred in failing to grant motions of Central Soya and Southern for judgment notwithstanding the verdict, and reverse.
The lawsuit grew out of the misadventures of Southern Railway covered hopper car 96398, designated "For Phosphate Loading Only" but diverted by Southern for a shipment of unslaked lime. It was then again used for a shipment of phosphate and came into the custody and control of Penn Central at Cincinnati. The waybill that accompanied car 96398 was plainly marked, "When empty return to Occidental Corp., Occidental, Fla. via reverse route." Instead of returning the car empty, Penn Central furnished it to Central Soya in February 1970 for a shipment of corn consigned to the Earle-Chesterfield Mill in Asheville, North Carolina. Accepting delivery of the grain-loaded car from Penn Central, Southern transported it to Asheville, where Earle-Chesterfield's employees unloaded the corn directly into their bins — so far without untoward incident. During unloading the employees noticed "little white pellets" in the corn. Several days later hot spots developed in the bin that contained the Central Soya corn. The smoldering heat and resulting damage were caused by residual quantities of unslaked lime present in car 96398 when it was loaded with corn.
The complaint alleged that all three defendants were negligent, and the case was tried on that theory,2 resulting in a verdict and judgment against all defendants.
Central Soya urges that the trial judge should have either directed a verdict in its favor or granted its motion for judgment notwithstanding the verdict. We agree, and reverse the verdict of negligence as to Central Soya.
We apply a federal standard to determine whether the plaintiff's case presented a jury question. Wratchford v. S. J. Groves & Sons Co., 405 F.2d 1061 (4th Cir. 1969). The test is whether, viewing the evidence in the light most favorable to plaintiff, we find "substantial evidence supporting the verdict." C. Wright, Law of Federal Courts § 95, at 425 (2d ed. 1970).
The case was tried under the law of North Carolina and none of the parties has formally challenged the choice of law on appeal. During oral argument, however, counsel for Central Soya expressed a belief that its conduct should be judged by Ohio law. We believe that the trial court was correct in applying North Carolina law to plaintiff's claims against the shipper. As a federal court sitting in North Carolina, we apply North Carolina's rule on conflicts. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The North Carolina Supreme Court's most recent decision on the choice of law in tort cases reveals a determination to retain the rules of lex loci delicti. Petrea v. Ryder Tank Lines, Inc., 264 N.C. 230, 141 S.E.2d 278 (1965). Under this principle, the law of the case is not drawn from the place where the alleged negligence occurred, but from "the state where the last event necessary to make an actor liable for an alleged tort takes place." Restatement of the Conflict of Laws § 377 (1934). Apparently the unslaked lime did not absorb sufficient moisture en route to get "hot"; the injury occurred in the bin at the Earle-Chesterfield Mill in North Carolina, and thus North Carolina law will govern. Cf. Brendle v. General Tire & Rubber Co., 408 F.2d 116 (4th Cir. 1969).
The North Carolina courts have decided only one case on a shipper's liability for using defective railroad cars. In Yandell v. National Fireproofing Corp., 239 N.C. 1, 79 S.E.2d 223 (1953), National Fireproofing shipped material in an obviously defective boxcar. During the unloading process, a door fell off the boxcar and injured an employee of the consignee. On demurrer, the North Carolina Supreme Court held that a shipper would be liable for loading a defective railroad car if it had actual or constructive knowledge that the car would be dangerous for unloading.
Yandell does not hold that actual or constructive knowledge is a necessary prerequisite for successful suits against shippers, but we think it so intimates, and the law of other jurisdictions supports such a rule. Under the federal common law that prevailed before Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), this circuit held that shippers may ordinarily assume that railroads have inspected the cars they furnish. The court made only one tentative exception to this broad statement, saying that a shipper might be negligent if it ignored an obvious danger. Waldron v. Director General of Railroads, 266 F. 196 (4th Cir. 1920). The Texas Supreme Court has gone to the extreme position that a shipper cannot be charged with knowledge of defects in a vehicle furnished by a carrier even if reasonable inspection would have revealed the danger. A. J. Tebbe & Sons Co. v. Brown Express, 161 Tex. 456, 341 S.W.2d 642 (1960). See also 13 Am.Jur.2d Carriers § 173 (1964). Although all these cases, including Yandell v. National Fireproofing Corp., involved personal injuries to employees of the consignee, we think a shipper's duty must be the same with respect to property damage.
As a matter of general negligence law, the Second Restatement of Torts supports our conclusion that actual or constructive knowledge is a precondition to liability for loading a defective car.
It is negligence to use an instrumentality . . . which the actor knows or should know to be so . . . inappropriate or defective, that its use involves an unreasonable risk of harm to others.
Restatement (Second) of Torts § 307 (1965), quoted in Scott v. Clark, 261 N.C. 102, 107-108, 134 S.E.2d 181, 185 (1964). A comment to that section seems to cover the shipper's duty to inspect cars furnished by the railroad:
If a third person has turned over the thing to the actor for the purpose of the particular work or similar work, the actor usually is entitled to assume that the thing is in normally fit condition unless there is some reason to suspect the contrary.
Id., comment b, at 99. See also, id. § 300, comment c.
Applying the rule that we believe the North Carolina courts would adopt, we conclude that the trial judge erred in submitting the question of Central Soya's negligence to the jury. The record contained no evidence that Central Soya had actual knowledge that car 96398 contained residual deposits of unslaked lime. Nor do we find any evidence that would support a finding of constructive knowledge, i.e., that the circumstances are such that it is fair to impute to Central Soya knowledge it did not have. Penn Central had furnished this car to Central Soya with knowledge that it would be used for a corn shipment. Central Soya was entitled, in the absence of suspicious circumstances, to assume that the car was suitable for hauling grain. There was nothing about the exterior appearance of the car to suggest that it contained a dangerously incompatible substance. Although the car bore the stenciled legend, "For Phosphate Loading Only," Gregory Minch testified for Central Soya that it was "no different" from other stenciled cars they had used. The record showed that in the course of using similarly stenciled cars, Central Soya had received only one other complaint of foreign material in the corn it shipped, and that apparently occurred after the shipment to Earle-Chesterfield.3 Moreover, the testimony of plaintiff's witnesses James M. Westall and Charles W. Parish indicated that phosphate and corn were compatible and that no harm would have resulted if the residue later discovered in the car had been phosphate instead of unslaked lime.
Even if we assume arguendo that Central Soya had a duty to inspect the car in the absence of suspicious circumstances, we believe its employees sufficiently discharged the duty. Gregory Minch testified that Central Soya's employees made a visual inspection which revealed only that the car was empty and that no remnants of previous loads were visible. We think this was all they could be expected to do without special facilities.4 The evidence established that each hopper of the car had only two openings that would permit inspection: the loading hatch on...
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