Perini-North River Associates v. Chesapeake & O. Ry. Co.

• Decision Date: 08 September 1977
• Docket Number: No. 76-2394,PERINI-NORTH,76-2394
• Citation: 562 F.2d 269
• Parties: RIVER ASSOCIATES, a corporation, Plaintiff-Appellant, v. CHESAPEAKE & OHIO RAILWAY COMPANY and Penn Central Transportation Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Third Circuit

Page 269

562 F.2d 269

PERINI-NORTH RIVER ASSOCIATES, a corporation, Plaintiff-Appellant, v. CHESAPEAKE & OHIO RAILWAY COMPANY and Penn Central Transportation Company, Defendants-Appellees.

No. 76-2394.

United States Court of Appeals Third Circuit.

Argued June 9, 1977.

Decided Sept. 8, 1977.

Budd, Larner, Kent, Gross, Picillo & Rosenbaum, Newark, N. J., for plaintiff-appellant; John J. Budd, of counsel.

Schumann, Hession, Kennelly & Dorment, Jersey City, N. J., for defendants-appellees; John M. Walsh, of counsel.

Before WEIS, STALEY and GARTH, Circuit Judges.

OPINION OF THE COURT

STALEY, Circuit Judge.

This case concerns the circumstances under which a carrier may not avoid liability under the Carmack Amendment, 49 U.S.C. § 20(11), despite the consignee's failure to timely file a written claim for damages as required by the bill of lading.

Appellant Perini-North River Associates (Perini) brought an action under a straight bill of lading to recover the repair costs of a crane damaged during shipment by defendant carriers on August 14, 1972. ¹ The carriers' defense was that Perini had failed to give proper notice of loss or claim within nine months, as specified in the bill of lading:

As a condition precedent to recovery, claims must be filed in writing with the receiving or delivering carrier . . . within nine months after delivery. . . . Where claims are not filed or suits are not instituted thereon in accordance with the foregoing provisions, no carrier hereunder shall be liable, and such claims will not be paid.

(Appendix to Appellant's Brief at 54a).

Perini's yard superintendent discovered the damage on August 29, 1972, and requested a meeting with a Penn Central representative at which the crane could be examined and repair procedures discussed. (53a) Penn Central sent Luke O'Donnell, an "Over short and damage" clerk who examined damaged cars and sent verification reports to the railroad's claim agents in Buffalo, New York. (23a) Normally, upon receipt of this written report, the Buffalo office would dispatch an investigator. (24a) O'Donnell would also forward two copies of his damage report to the consignee for use in preparing its notice of claim. (33a, 35a) Meanwhile the claimant could proceed with repairs, since O'Donnell's report would confirm the fact and repair cost of the damage. (82a)

On August 30, 1972, O'Donnell met with three Perini superintendents, Perini's master mechanic in charge of equipment maintenance, Perini's executive and safety engineer, and a representative of the manufacturer of the crane. (54a, 81a) The district court found that O'Donnell told them Perini need not file a claim, since one had already been filed when the crane was reloaded after the accident. He was referring to a Freight Inspection Report prepared on August 15, 1972 by Penn Central employee E. R. Monto and mailed to the Freight Claims Office in Buffalo. ² (26a, 57a) A copy of this report had also been sent to O'Donnell's office in Weehawken prior to his inspection of the crane. (39a) When he returned from the Perini meeting, his superior told him he would not have to file his own report, but could verify Monto's report with the Buffalo office by telephone. (28a, 83a)

This was not the only deviation from usual practice. After the various inspection reports were filed, Penn Central would on its own initiative send claim forms to the consignee of damaged goods. No forms were sent to Perini nor was any mention made of the claim during subsequent unrelated transactions until June 19, 1973, when Perini's marine superintendent contacted the Buffalo office. In a memo accompanying the forms, Penn Central's freight claims supervisor wrote that Perini's case had previously been assigned a file number which should be used when Perini filed its claim. (58a) When Perini returned the completed form on June 27, 1973, slightly more than ten months after the date of delivery, Penn Central disallowed the claim because it had been filed out of time.

Perini concedes that, absent special circumstances, a carrier's liability for freight damage is conditioned on compliance with the filing deadline in the bill of lading. However, Perini argues that Penn Central's actual knowledge of the damage, its departure from normal claims procedure, and O'Donnell's waiver of the filing requirement preclude the defense of untimeliness under the doctrine of estoppel. The trial court found that Perini knew a written claim was necessary, but neglected to file within nine months due to reliance on O'Donnell's dispensation. (83a) The trial court also held that O'Donnell had neither actual nor apparent authority to waive the requirement, and Perini's unquestioning reliance on his word was unjustified. (85a) Accordingly the district court concluded that since defendants were not estopped to raise Perini's untimeliness, it furnished a complete defense. After a bench trial, the district court entered judgment for the defendants. Due to the peculiar facts in this case, we disagree.

The Supreme Court early held that the Carmack Amendment required some written claim, although the particular form was dictated by "practical exigency." St. Louis, Iron Mountain & Southern Railway v. Starbird, 243 U.S. 592, 605, 37 S.Ct. 462, 61 L.Ed. 917 (1917); Georgia, Florida & Alabama Railway v. Blish Milling Co., 241 U.S. 190, 198, 36 S.Ct. 541, 60 L.Ed. 948 (1916). The Court stated that

the parties could not waive the terms of the contract under which the shipment was made pursuant to the Federal Act; nor could the carrier by its conduct give the shipper the right to ignore these terms which were applicable to that conduct and hold the carrier to a different responsibility from that fixed by the agreement made under the published tariffs and regulations. A different view would antagonize the plain policy of the Act and open the door to the very abuses at which the Act was aimed.

Blish Milling Co., 241 U.S. at 197, 36 S.Ct. at 544.

This language has been interpreted as a flat rejection of estoppel in the context of a Carmack Amendment claim. E. g., B. A. Walterman Co. v. Pennsylvania Railroad, 295 F.2d 627 (6th Cir. 1961); Henry Pratt Co. v. Stor Dor Freight Systems, Inc., 416 F.Supp. 714 (N.D.Ill.1975); Lucas Machine Division, New Britain Machine Co. v. New York Central Railroad, 236 F.Supp. 281 (N.D.Ohio 1964). The Court made that statement, however, in response to a consignee's attempt to circumvent the writing requirement by bringing the action in trover, under the theory that the carrier's misdelivery converted the goods and was an abandonment of the contract. The Court would not let the consignee escape the provisions of the bill of lading simply by changing the form of the complaint against the carrier. In a subsequent case holding that misdelivery alone was not grounds for estoppel, the question "(w)hether under any circumstances the shipper may rely upon that doctrine in avoidance of the time limitation clause of the bill of lading" was expressly left open. Chesapeake & Ohio Railway v. Martin, 283 U.S. 209, 222, 51 S.Ct. 453, 458, 75 L.Ed. 983 (1931).

Courts followed the reasoning in C & O Railway by demanding compliance with the writing requirement unless the carrier's conduct in some way induced the claimant's failure to file. In Lehigh Valley Railroad v. State of Russia, 21 F.2d 396, 404 (2d Cir.), cert. denied, 275 U.S. 571, 48 S.Ct. 159, 72 L.Ed. 432 (1927), the carrier argued that the claimant had not filed with the freight claim agent specified in the bill of lading. A railroad agent had written the claimant, instructing him where to send the claim; since the letters misled the claimant, the railroad was estopped from raising the filing error as a defense. Similarly, in Insurance Co. of North America v. Newtowne Manufacturing Co., 187 F.2d 675, 680 (1st Cir. 1951), the district court correctly gave the jury a special interrogatory as to whether a carrier's claims agent had by words or actions induced the plaintiff not to file. When the jury answered in the negative, the court found the estoppel inquiry was closed and held the claimant to the writing requirement in the bill of lading. See also Northern Pacific Railway v. Mackie, 195 F.2d 641 (9th Cir. 1952); Penn State Laundry Co. v. Pennsylvania Railroad, 134 F.Supp. 955 (W.D.Pa.1955).

In most cases dealing with an estoppel issue the claimant gave the carrier oral notice or legitimately assumed the carrier already had actual knowledge of the problem. Often, plaintiffs did not plead inducement by the carrier, but argued unsuccessfully that oral notice or actual knowledge should suffice. Baltimore & Ohio Railroad v. Leach, 249 U.S. 217, 39 S.Ct. 254, 63 L.Ed. 570 (1919); St. Louis, Iron Mountain & Southern Railway v. Starbird, 243 U.S. 592, 37 S.Ct. 462, 61 L.Ed. 917 (1917); East Texas Motor Freight Lines v. United States, 239 F.2d 417 (5th Cir. 1946).

It appears that the distinction between the two lines of attack on the writing requirement estoppel and actual knowledge eventually blurred. See American Synthetic Rubber Corp. v. Louisville & Nashville Railroad, 422 F.2d 462, 468 (6th Cir. 1970) (claimant satisfied the writing requirement by showing documents to railroad officials rather than by filing); Thompson v. James G. McCarrick Co., 205 F.2d 897 (5th Cir. 1953) ("protest letter" satisfied requirement). The confusion came to a head in Hopper Paper Co. v. Baltimore & Ohio Railroad, 178 F.2d 179 (7th Cir. 1949), cert. denied, 339 U.S. 943, 70 S.Ct. 797, 94 L.Ed. 1359 (1950). The railroad's conduct in Hopper Paper raised a potential estoppel issue: after the plaintiff's property was negligently destroyed in a railway wreck, the carrier notified plaintiff of the disaster, then sold the salvage without plaintiff's knowledge and pocketed the proceeds. The court was obviously concerned with the equities of the situation, but articulated its holding in terms of actual knowledge rather than...