Transcon Lines v. Lipo Chemical, Inc.

• Decision Date: 28 December 1983
• Citation: 474 A.2d 1108,193 N.J.Super. 456
• Parties: TRANSCON LINES, a corporate body, Plaintiff, v. LIPO CHEMICAL, INC., a corporate body, Defendant, Third-Party Plaintiff, v. E. PIZANTE, LTD., Third-Party Defendant.
• Court: New Jersey District Court

Page 456

193 N.J.Super. 456

474 A.2d 1108

TRANSCON LINES, a corporate body, Plaintiff, v. LIPO CHEMICAL, INC., a corporate body, Defendant, Third-Party Plaintiff, v. E. PIZANTE, LTD., Third-Party Defendant.

District Court, Passaic County,

New Jersey.

Dec. 28, 1983.

Stephen O'Malley, Clinton, for plaintiff (Weinstock & O'Malley, Clinton, attorneys).

Douglas H. Burg, Elmwood Park, for defendant (Gelman & Gelman, Elmwood Park, attorneys).

MANDAK, J.S.C. (Temporarily assigned).

Plaintiff Transcon Lines (Transcon) brought this action to recover freight charges from defendant Lipo Chemical, Inc. (Lipo). Lipo served a third-party complaint on E. Pizante, Ltd. (Pizante) alleging an unauthorized shipping arrangement. Third-party defendant, Pizante, did not defend and default has been entered.

This case was tried in part upon the following stipulation of facts:

Defendant, Lipo, ordered from third-party defendant, Pizante, five 55-gallon drums of jojoba oil. The terms of the shipment were F.O.B. point of origin. Lipo received the property from Transcon, as carrier, and no claim for loss or damage was filed by Lipo with regard to the property. There was no dispute regarding authenticity of the exhibits presented, namely the bill of lading, the freight bill for the shipment in question and the freight bill for a prior shipment not in question. Lipo has stipulated that if the court should find that the shipments were correctly made with a release value ¹ of $10,000 a drum, that the principal amount demanded in Transcon's complaint, the published lawful rate, is the correct measure of damages. Transcon has stipulated that in the event the court finds Transcon improperly shipped the goods with a release value of $10,000 a drum, that the correct tariff rate is 19.71 a hundred-weight, that the total rate charges for the shipment in question would have been $422.77 and that defendant had paid the sum of $379.55 prior to the institution of suit.

In addition to stipulations of the parties, this court made the following findings of fact: According to the purchase agreement between Pizante and Lipo, Pizante was to arrange to have the goods shipped to Lipo. Lipo insured its property in transit for any loss in excess of the minimum release value of 50 cents a pound. It had been customary for Pizante to arrange a low release value because Lipo had excess insurance through a third party.

On December 21, 1981 at its Arizona terminal, Transcon received five 55-gallon drums of jojoba oil for carriage pursuant to a uniform domestic straight bill of lading. Pizante's supplier, Desert Whale Jojoba, the consignor, consigned the drums to Pizante, the consignee, at Brooklyn, New York. After receipt of the property for shipment, Transcon received a telephone call from Pizante instructing Transcon to change the bill of lading to reflect Pizante as consignor and Lipo as consignee.

Transcon diverted the shipment and tendered delivery to Lipo in Paterson. The property arrived accompanied by the original bill of lading, unchanged by Pizante's instructions to divert, indicating the original consignor and consignee, a $10,000 a drum release value and marked "collect." Lipo's representative accepted the drums and endorsed the bill of lading.

Transcon subsequently billed Lipo at a tariff rate of $97.92 a hundred-weight, which represents the correct tariff for such goods carrying a $10,000 release value. Lipo objected to the excess release value and has stipulated that its liability is limited to a tariff rate of $19.71 a hundred-weight, which represents the correct tariff for such goods carrying the minimum release value of 50 cents.

The issue to be resolved therefore is whether Lipo, a reconsignee, is liable to Transcon, the carrier, for the full amount of the published tariff rate on goods delivered to it. The court concludes that Lipo is not liable for the published tariff rate.

The Interstate Commerce Act controls questions of liability for payment of freight rates arising from interstate shipment of goods. 49 U.S.C.A. § 10701 et seq. In interpreting and applying the Interstate Commerce Act, our courts are bound by federal case law. Checker Van Lines v. Siltek International, Ltd., 169 N.J.Super. 102, 105, 404 A.2d 333 (App.Div.1979). The section governing the question in the case at bar is 49 U.S.C.A. § 10744 which provides in relevant part:

(a)(1) Liability for payment of rates for transportation for a shipment of property by a shipper or consignor to a consignee other than the shipper or consignor, is determined under this subsection when the transportation is provided by a rail, motor, or water common carrier under this subtitle. When the shipper or consignor instructs the carrier transporting the property to deliver it to a consignee that is an agent only, not having beneficial title to the property, the consignee is liable for rates billed at the time of delivery for which the consignee is otherwise liable, but not for additional rates that may be found to be due after delivery if the consignee gives written notice to the deliverying carrier before delivery of the property--

(A) of the agency and absence of beneficial title; and (B) of the name and address of the beneficial owner of the property if it is reconsigned or diverted to a place other than the place specified in the original bill of lading.

(2) When the consignee is liable only for rates billed at the time of delivery under paragraph (1) of this subsection, the shipper or consignor, or, if the property is reconsigned or diverted, the beneficial owner, is liable for those additional rates regardless of the bill of lading or contract under which the property was transported. The beneficial owner is liable for all rates when the property is reconsigned or diverted by an agent but is refused or abandoned at its ultimate destination if the agent gave the carrier in the reconsignment or diversion order a notice of agency and the name and address of the beneficial owner. A consignee giving the carrier and a reconsignor or diverter giving a rail carrier, erroneous information about the identity of the beneficial owner of the property is liable for the additional rates.

(b) Liability for payment of rates for transportation for a shipment of property by a shipper or consignor, named in the bill of lading as consignee, is determined under this subsection when the transportation is provided by a rail or express carrier under this subtitle. When the shipper or consignor gives written notice, before delivery of the property, to the line-haul carrier that is to make ultimate delivery--

(1) to deliver the property to another party identified by the shipper or consignor as the beneficial owner of the property; and

(2) that delivery is to be made to that party on payment of all applicable transportation rates;

that party is liable for the rates billed at the time of delivery and for additional rates that may be found to be due after delivery if that party does not pay the rates required to be paid under clause (2) of this subsection on delivery. However, if the party gives written notice to the delivering carrier before delivery that the party is not the beneficial owner of the property and gives the carrier the name and address of the beneficial owner, then the party is not liable for those additional rates. A shipper, consignor, or party to whom delivery is made that gives the delivering carrier erroneous information about the identity of the beneficial owner, is liable for the additional rates regardless of the bill of lading or contract under which the property was transported. This subsection does not apply to a prepaid shipment of property. [Emphasis supplied]

This section addresses situations of liability with some particularity but no mention is made of any liability on the part of a reconsignee where, as here, a named consignee orally redirects shipment and violates the notice provisions of the section. It has been held, where the reconsignment is not made in writing, § 10744 is not effective to make the ultimate reconsignee liable for the freight charges. Pennsylvania R. Co. v. Greene, 173 F.Supp. 657, 659 (S.D.Ala.1959); See, 13 Am.Jur.2d, Carriers § 476 at 946. However, other judicial decisions interpreting the Interstate Commerce Act have found the reconsignee liable upon principles of common law.

The instructive cases addressing the question of freight rate liability after redirection of shipments in interstate commerce were decided prior to the 1978 revision of the Interstate Commerce Act. Section 10744 on liability for payment of rates finds its source in § 3(2) and 3(3) of the old Interstate Commerce Act. The 1978 revision was not intended to cause any substantive change in the law. In House Report No. 95-1395, the Committee on the Judiciary addressed itself specifically to preservation of the precedent value of earlier judicial decisions after revision and codification. ² Satisfied that the reconsignment cases under the pre-1978 Interstate Commerce Act constitute good law today, I turn to a discussion of those cases.

It is well settled that the shipper rather than the consignee is primarily liable to the carrier for freight charges. The court will look beyond the shipper's primary responsibility only when there is some binding obligation on the part of the consignee to pay freight charges. Louisville & N.R. Co. v. Central Iron & Coal Co., 265 U.S. 59, 44 S.Ct. 441, 68 L.Ed. 900 (1924).

The liability of the named, diverting consignee for transportation charges may arise expressly under federal statute or by an express contract or an implied obligation arising from the consignee's ownership, presumptive ownership, acceptance of the goods or receipt of the benefits conferred by the carrier. States Marine International, Inc. v. Seattle-First National Bank, 524 F.2d 245, 248 (9 Cir.1975); Northwestern Pacific Railroad v. Burchwell Co., 349 F.2d 497, 498-99 (5...