Zarn, Inc. v. Southern Ry. Co.

• Citation: 274 S.E.2d 251,50 N.C.App. 372
• Decision Date: 20 January 1981
• Docket Number: No. 8017SC398,8017SC398
• Parties: ZARN, INC. v. SOUTHERN RAILWAY COMPANY.
• Court: Court of Appeal of North Carolina (US)

Page 251

274 S.E.2d 251

50 N.C.App. 372

ZARN, INC. v. SOUTHERN RAILWAY COMPANY.

No. 8017SC398.

Court of Appeals of North Carolina.

Jan. 20, 1981.

Gwyn, Gwyn & Morgan by Julius J. Gwyn, Reidsville, for plaintiff-appellant.

Griffin, Post, Deaton & Horsley by Hugh P. Griffin, Jr., and William F. Horsley, Reidsville, for defendant-appellee.

WELLS, Judge.

Plaintiff assigns as error: the trial court's granting of partial summary judgment on the issue of special or consequential damages; the trial court's formulation of the measure of general damages in the jury instructions; and, the trial court's exclusion of certain evidence. We first consider the order of partial summary judgment. The trial court's order of partial summary judgment provided in pertinent part as follows:

After reviewing the Court records, the affidavits, the briefs of counsel, and after hearing the arguments of counsel, the Court finds that there is no genuine issue as to any material facts with reference to any special or consequential damages, the plaintiff has incurred by reason of extra cost incurred in locating and installing replacement equipment, loss of storage capacity and overhead expense resulting from the loss of use of the bins.

IT IS, THEREFORE, ORDERED that defendant's motion for partial summary judgment is hereby allowed as to special or consequential damages the plaintiff may have incurred by reason of extra cost incurred in locating and installing replacement equipment, loss of storage capacity and overhead expense resulting from the loss of use of the bins.

As a common carrier engaged in interstate commerce, defendant's liability for damage to cargo is governed by the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 20(11). Home Products Corp. v. Motor Freight, Inc., 46 N.C.App. 276, 278, 264 S.E.2d 774, 776, disc. rev. denied, 300 N.C. 556, 270 S.E.2d 105 (1980); see also Dublin Company v. Ryder Truck Lines, Inc., 417 F.2d 777, 778 (5th Cir. 1969); Neece v. Greyhound Lines, 246 N.C. 547, 550, 99 S.E.2d 756, 759 (1957). Under the Carmack Amendment the carrier is liable in the absence of a special contract for "the full actual loss, damage, or injury to such property." 49 U.S.C. § 20(11); see S. Sorkin, Loss or Damage to Goods in Transit § 11.02 (1979). This language has been construed as adopting the common law principles of damages. "Section 20(11) of the Interstate Commerce Act ... codifies the common law rule that a carrier is liable for all damage sustained by goods in transit unless it can prove that the loss was due entirely to an excepted cause...." Masonite Corp. v. Norfolk & Western Ry. Co., 601 F.2d 724, 728 (4th Cir. 1979); see also Tool Corp. v. Freight Carriers, Inc., 33 N.C.App. 241, 245, 234 S.E.2d 758, 761 (1977). A carrier may limit its liability for negligent loss or damage to the property entrusted to it by special contract but unless specially pleaded by the carrier such contractual limitation is ineffective. Clott v. Greyhound Lines, 278 N.C. 378, 386, 180 S.E.2d 102, 108 (1971); see Leary v. Transit Company, 22 N.C.App. 702, 706-7, 207 S.E.2d 781, 785 (1974); 13 C.J.S. Carriers § 252c, at 527-28 (1939). In the case sub judice, defendant, having alleged no special contract, and having admitted liability, is liable for the full actual damage to the silos. Plaintiff argues that its damages should not be limited, however, to the full, actual damage to the silos, but should include additional damages for loss of use of the silos. We disagree. While in the case sub judice plaintiff properly alleged and established a prima facie case of negligence by showing delivery to defendant in good condition and delivery by defendant to plaintiff in damaged condition, Home Products Corp. v. Motor Freight, Inc., supra, 46 N.C.App. at 278, 264 S.E.2d at 776; see also Clott v. Greyhound, supra, 278 N.C. at 388, 180 S.E.2d at 110, and while under general principles of law, in a tort claim, special damages are recoverable if specifically pleaded, if proximately and naturally caused by defendant's tortious conduct, and if reasonably definite and certain, Huff v. Thornton, 287 N.C. 1, 8-9, 213 S.E.2d 198, 204 (1975); Trucking Co. v. Payne, 233 N.C. 637, 639, 65 S.E.2d 132, 133 (1951), we believe that the general principles of tort law do not apply here.

Sound public policy requires, as the law provides, that when goods are damaged while in transit by common carrier, the shipper is not put to the burden of showing either specific acts of negligence or where or how the damage occurred. See S. Sorkin, supra, § 5.02; Home Products Corp. v. Motor Freight, Inc., supra. Sound public policy also requires that the liability of common carriers for such damage be limited to the loss of value of the property, as such value is determined under the general law of damages. While there is some case law to the contrary, we believe that the sounder view is that the wording of the Carmack Amendment restricts plaintiff's recovery to the damage to the property itself, and does not allow incidental, special or consequential damages, unless plaintiff shows that the contract of carriage itself imposes such liability or that actual notice of the possibility of the injury was given to the carrier. To allow special or consequential damages, in the absence of a special contract or actual notice to the carrier, would subject common carriers to unacceptable economic risk. This principle of limited liability was first enunciated in Hadley v. Baxendale, 9 Exch. 341, 156 Eng.Rep. 145 (1854). In that case, mill operators were forced to close operations in order to ship a broken shaft for repairs. The carrier was not informed of the situation at the mill and negligently delayed shipment. The court refused to award lost profits for the period of the delay holding that the damages recoverable for breach of contract were limited to those within the contemplation of the defendant at the time the contract was made.

While Hadley v. Baxendale involved a delay in shipment, hence an action grounded in breach of contract, we think the underlying public policy rationale of that decision extends to actions grounded upon the negligence of common carriers. We therefore hold that the Hadley v. Baxendale principle of limited liability applies to all actions against a common carrier for the loss of or injury to property in transit, whether such action is grounded in tort or contract. R. R. v. Houtz, 186 N.C. 46, 48, 118 S.E. 850, 851 (1923); see also 14 Am.Jur.2d, Carriers § 648, at 157-58 (1964); 13 C.J.S. Carriers § 267, at 619-20 (1939); but see Marquette Cement Mfg. Co. v. Louisville & Nashville R. Co., 281 F.Supp. 944, 947 (E.D.Tenn., S.D.1967), affirmed, 406 F.2d 731 (6th Cir. 1969). The trial court properly granted defendant's motion for partial summary judgment on the issue of special or consequential damages incurred by plaintiff.

Plaintiff next assigns error to the trial court's formulation of the measure of general damages in the jury instructions. The trial court instructed the jury in pertinent part:

(T)he measure of damages for...