UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
December 21, 1972
Middle Atlantic Conference et al., Plaintiffs,
United States of America and Interstate Commerce Commission, Defendants.
The opinion of the court was delivered by: MACKINNON
MACKINNON, Circuit Judge:
This is an action seeking to set aside and enjoin a report and order of the Interstate Commerce Commission (Commission). Our jurisdiction is invoked under 28 U.S.C. §§ 1336, 1398, 2284, 2321 and 2325. Briefly stated, the Commission order prohibits motor common carriers from specifying in their tariffs that certain warehousemen, pier operators, brokers, steamship agencies, and others similarly situated (generally referred to hereinafter as warehousemen), who are neither consignors nor consignees, are to be liable under certain circumstances for charges for the undue detention (demurrage) of trucks being loaded or unloaded at their premises.
Various motor carrier associations
filed proposed tariffs with the Commission, seeking to establish charges for the detention of a carrier's vehicle beyond the so-called free time for loading and unloading cargo.
The material provisions of the tariff schedules which the complaint seeks to uphold are substantially as follows:
Except as otherwise specifically provided, when due to no disability, fault or negligence on the part of the carrier, the loading or unloading of freight . . . is delayed beyond the free time authorized . . . charges in Sec. 4 will be assessed against the consignor (Notes B and C) if the delay occurs at his premises, and against the consignee (Notes B and D) if the delay occurs at his premises . . .
NOTE B: Under this rule, the agent or representative of consignor or consignee, forwarding or receiving a shipment for account of consignor or consignee will be treated as a consignor or consignee.
NOTE C: "Consignor" as used in this item means the party from whom the carrier receives the shipment or any part thereof, for transportation at point of origin or any stop-off point, whether he be original consignor, or warehouseman, or connecting air, motor, rail or water carrier with which the carrier does not maintain joint through rates, or other person to whom the bill of lading is issued.
NOTE D: "Consignee" as used in this rule means the party to whom the carrier is required by the bill of lading or other instruction, to deliver the shipment, or any part thereof, at destination or any stop-off point, whether he be ultimate consignee, or warehouseman, or connecting air, motor, rail or water carrier with whom the carrier does not maintain joint through rates, or other person designated in the bill of lading.
In short, the scheme of the tariff proposal is to make warehousemen, agents, etc., liable for detention charges by a unilateral redefinition of consignors and consignees to include persons who are neither consignors nor consignees.
Under this plan of the motor carriers to use the device of a tariff which has the force of law
to impose liability for detention charges, the charges would accrue only where the overlong detention was not "due" to any "disability, fault or negligence . . . of the carrier" and if that requirement were satisfied, then under the tariff, with respect to shipments delivered to a warehouseman, agent, etc., the warehouseman would become automatically liable even though the delay was occasioned by factors outside his control.
There is no present controversy over the actual amounts of the charges. However, the proposed tariffs seek to provide not only for the amounts of the detention charges, but also for the imposition of liability for the charges against particular parties.
In general, the charges are to be imposed by virtue of the tariff provision directly on the party at whose premises the delay occurs even if that party were an agent of the consignor or consignee, such as a warehouseman, pier operator, or other agent or bailee for hire and not an actual party to the contract of transportation, i.e., a person not named in the bills of lading as consignor or consignee.
This last feature of the proposed tariffs is the one which creates the present controversy. Hereafter we will refer to warehousemen only, they being representative of the class of third parties, agents and representatives of consignors and consignees upon whom the carriers seek to impress liability for detention charges.
The Commission has rejected the proposed tariffs as being "unlawful,"
and the motor carrier associations now bring this action to set aside, annul and enjoin the report and order of the Commission. 28 U.S.C. § 1336(a) (1964).
A three-judge District Court has been convened to hear and decide the case pursuant to 28 U.S.C. § 2325 (1964).
Plaintiffs frame the issue to be:
[Only] a question of law, i.e., whether the Interstate Commerce Act and the body of case law developed before and since that Act was passed permit the imposition of liability for detention charges on others than persons named in bills of lading as consignors or consignees of shipments.
Plaintiffs' br. p. 5. To state the issue completely it is necessary to add that the carrier seeks to create this new rule of liability "by means of a tariff." This formulation of the issue by plaintiffs is a clear admission that the carriers are attempting through the tariff to impose liability upon parties who are not named in the bills of lading as consignors or consignees. In the absence of this tariff provision the warehousemen would not be liable for detention charges under such circumstances and thus what is attempted is in effect a "legislative" change in the current law determining their liability.
The right to assess detention or demurrage charges against parties to a contract of transportation because of delay in releasing transportation equipment is presently well established.
Motor carriers term such delay as detention. Railroads refer to it as demurrage. Prior to the coming of the railroad, liability for demurrage of ships was recognized in maritime law as the amount to be paid for delay in loading, unloading or sailing beyond the time specified.
In maritime transactions the time schedule for such acts was frequently fixed in the charter party
or bill of lading
but if not so agreed upon there was an implied promise by the shipper or consignee to perform such activities within a reasonable time, or, in default thereof, to become liable for demurrage.
If a specific demurrage rate was not fixed in the charter party or bill of lading a reasonable rate would be required
and the law recognized that the ship owner or master had a lien on the cargo for such demurrage even though the bill of lading did not contain a demurrage clause.
This is an outgrowth of a legal concept, peculiar to contracts of shipment at maritime law, which has been stated as follows:
And as, in the eye of the law, maritime, upon commercial reasons, the master of the ship is deemed to contract, in respect to the freight, rather with the merchandise than with the shipper, and his rights are, therefore, not made to depend upon any doctrine of agency.
275 Tons of Mineral Phosphates, 9 F. 209, 211 (D.C.E.D.N.Y. 1881).
While demurrage originated in maritime law, the legal principles applicable to ship demurrage are not completely applicable to demurrage charges by land carriers in this country.
As Judge Prettyman observed, such charges by railroads "are sui generis,"
and the same is true of detention charges by motor carriers. This makes it necessary, in applying maritime decisions to issues such as we have here, to give full consideration to the different settings in which maritime demurrage cases arise. Where the master of a ship was deemed to contract with the freight, in the transportation contracts of our rail and motor carriers the carrier is considered to contract directly with the shipper.
Thus, to make shippers and others liable to the carrier in connection with the transportation of goods requires a stronger direct contractual base between the parties than in maritime contracts which historically left more rights to be determined according to the reciprocal privileges between the master and the cargo. Land carriers in the United States must rely upon liabilities created according to common law principles.
Under section 217(a) of Part II of the Interstate Commerce Act, 49 U.S.C. § 317(a) (1964),
every motor common carrier subject to the Act must file with the Commission its "tariffs" showing all "rates, fares, and charges for transportation, and all services in connection therewith of passengers and property. . . ." Truckers file their detention charges and the rules, regulations, or practices affecting those charges in conformance with this requirement. The Commission is then vested with statutory power to pass on the lawfulness of the charges, as well as the rules, regulations, or practices affecting them. Section 216(g) of Part II of the Act, 49 U.S.C. § 316(g) (1964).
The Commission stated that "the lawfulness of the provisions in question is governed by [the] decision of the entire Commission in the first Detention case and that such provisions are unlawful to the extent that they attempt to place liability for detention charges upon a person not a party to the contract of transportation." 335 I.C.C. at 542. In the first Detention case, where the Commission denied the motor carriers' initial attempt to accomplish the same essential result as they seek here, the holding was that the "status cannot be changed by publishing tariff provisions which purport to make them consignors-consignees for the purpose of assessing charges. . . ." (318 I.C.C. at 607) and it cited for authority New York Board of Trade and Transportation v. Director General, 59 I.C.C. 205 (1920); Central R.R. of New Jersey v. Anchor Line, 219 F. 716 (2d Cir. 1914); and Smokeless Fuel Co. v. Norfolk & Western Ry., 85 I.C.C. 395 (1923).
In the instant Commission proceedings, the Division 2 findings rejecting the tariffs were upheld in the following language:
In view of the foregoing, we adopt division 2's finding in the prior report that the lawfulness of the provisions in question is governed by decision of the entire Commission in the first Detention case and that such provisions are unlawful to the extent that they attempt to place liability for detention charges upon a person not a party to the contract of transportation.
335 I.C.C. at 542. The Commission took pains to emphasize the precise grounds of its decision:
Division 2 found the provisions involved unlawful not because they purport to place liability on the party causing the delay, but on a more generic ground, to wit: "because they attempt to place liability for detention charges upon a person not a party to the contract of transportation."
Id. at 543.
We agree with the Commission's determination that the proposed tariff was unlawful insofar as it attempted to impose liability for demurrage charges upon an agent who was not a party to the contract of transportation. This finding of unlawfulness was adequately supported by the history of demurrage, the common law and ICC precedent. New York Board of Trade and Transportation v. Director General, 59 I.C.C. 205, 209 (1920); Central R.R. of New Jersey v. Anchor Line, 219 F. 716 (2d Cir. 1914); Missouri K. & T. Ry. of Texas v. Capital Compress Co., 50 Tex. Civ. App. 572, 110 S.W. 1014 (1908); Stafford v. Watson, 22 F. Cas. 1031, 1 Biss. 437 (1864). The dearth of precise precedent is attributable to the rarity of attempts by carriers to hold persons liable for demurrage who were not parties to the contract.
In New York Board of Trade, the Commission dealt with a challenge to certain demurrage rules brought by consignees who were regularly being held responsible for detention charges. The Commission found that where shipments moved by rail to dockside, thence by lighters and barges to the steamships that would ultimately deliver them to their consignees, the steamship companies acted as agents of the consignees in dealing with the railroads.
The real source of complaint seems to be the difficulty which consignees experience in enforcing their rights against their agents, the steamship companies. As already indicated, the steamship companies are usually responsible for the delays which result in demurrage, and the rail carriers attempt to collect the charges from them. But if the steamship company refuses to pay, the rail carrier has no recourse other than resort to the consignee, for the courts have decided that the steamship company is not a party to the contract of transportation over the rail lines and can not be held liable by the rail carrier for demurrage. See Central R. Co. of New Jersey v. Anchor Line, 219 F. 716.
59 I.C.C. at 209. In Central R.R. of New Jersey v. Anchor Line, supra, cited by the Commission in New York Board of Trade, the Second Circuit noted that a steamship, which was not a party to the contract, but which received cargo for foreign shipment from a railroad, could not be held liable for demurrage charges merely "by naming them in the tariff." 219 F. at 718.
In Missouri K. & T. Ry. of Texas v. Capital Compress Co., 50 Tex. Civ. App. 572, 110 S.W. 1014 (1908), a company which compressed cotton in transit and then returned the bales to the freight cars for further transportation, was held not to be liable for demurrage since it did not authorize the shippers to designate it as consignee, did not appear in any of the bills of lading as consignees and never accepted any of the shipments as consignee. Under such circumstances the court decided that the compress company was acting as agent for the owners, that there was no contractual relation between it and the railroad, and " for that reason. . . was not liable for the demurrage. . . ."
The findings of fact fail to show any contractual relation between them in reference to the shipment of the cotton, and, for that reason, appellee was not liable for the demurrage sought to be recovered. Appellee was engaged in the business of compressing cotton. The cotton in question did not belong, and was not consigned to it, but to other persons. Appellee compressed the cotton, and, acting as agent for the owners, delivered it to appellant for transportation, and collected from it the charges for compression. We think the trial court ruled correctly when it held, on the facts referred to, that appellee was not liable for demurrage, if any had accrued.
110 S.W. at 1016. Stafford v. Watson, 22 F. Cas. 1031, 1 Biss. 437 (1864) also held that an agent for a maritime shipper, whose agency was disclosed to the carrier, was not liable for a ship's demurrage charges.
In re Tidewater Coal Exch., 292 F. 225 (S.D.N.Y. 1923), aff'd 296 F. 701 (2d Cir.), cert. denied, 264 U.S. 596, 44 S. Ct. 454, 68 L. Ed. 868 (1924), also denied a railroad's claim for demurrage against an exchange acting for consignees on the ground that the fact of agency was known to the railroad and hence there was no contract with the exchange (an agent for a disclosed principal) upon which liability could be imposed.
The person liable . . . is to be ascertained by the ordinary rules of common law . . . . 292 F. at 235.
[In] case it had appeared that was only an agent, the ordinary rules of liability would apply and . . . the principal alone would have been liable. 292 F. at 234.
Before such transportation-related assessments as detention charges can be imposed on a party on a prescribed basis there must be some legal foundation for such liability outside the mere fact of handling the goods shipped.
What the carriers here attempt is not to collect demurrage on claims arising ex delicto out of the wrongful conduct of warehousemen
but instead to establish throughout a large part of the nation a regular system of demurrage charges that will make warehousemen liable for such charges as a more or less normal incidence of their everyday commercial transactions. Under such circumstances the liability, as for freight charges, must be founded either on contract, statute or prevailing custom.
Southern Ry. System v. Leyden Shipping Corp., 290 F. Supp. 742, 745 (S.D.N.Y. 1968);
Brown Transport Corp. v. United Merchants & Manufacturers, Inc., 21 A.D.2d 303, 250 N.Y.S. 2d 440 (1964). See also American Ry. Express Co. v. Mohawk Dairy Co., 250 Mass. 1, 144 N.E. 721, 35 A.L.R. 14 (1924).
The adjudicated cases do not require that there be a specific contract to pay demurrage but it must arise out of contract
and in practically every instance the obligation is only enforced upon persons who are parties to the contract of carriage.
The National Industrial Traffic League, an intervening plaintiff, in its reply brief, p. 7, cites Michie, Carriers § 976 in support of its assertion that "the right to demurrage . . . exists independent of contract or statute." The entire quotation relied upon states:
Demurrage is often a matter of contract, but not necessarily so. Independent of any express or implied contract of plaintiffs to be bound by the rules, the modern doctrine in this country is that the right to demurrage, in such circumstances, exists independent of contract or statute.
However, that reference does not reach the issue under consideration here. Michie states only that demurrage may be assessed against the parties to the transportation contract (or against the merchandise) without the necessity of there being any specific independent contract to pay demurrage. The statement cannot be interpreted, as the plaintiff-intervenor contends, to mean that demurrage charges may be assessed in the absence of contract against persons other than those named in bills of lading as consignors or consignees of shipments. The cases cited by Michie in its supporting footnote involved shippers, consignors, consignees, the carriers' lien rights against the shipment, and some involved the validity of demurrage rules and provisions therefor. None of the cited cases decide that a warehouseman or agent who is not named in a bill of lading as consignor or consignee may be held liable for the payment of detention charges.
It would have been more to the point to quote further from Michie on the question whether an agent of a party to the transportation contract is liable for demurrage. Actually, in the same paragraph that is quoted partially by the intervenors, Michie refers to a case which directly involved the question we are here considering:
A corporation was organized to compress cotton and operate a compress. It did not authorize shippers to consign cotton to it, and did not accept any cotton as consignee. As agent of the owners, it delivered cotton to a railroad for transportation and collected from the railroad the charges for compensation. The corporation was not liable to the railroad company for demurrage, there being no contractual relation between the corporation and the railroad with reference to the shipment of cotton.
That case is Missouri K. & T. Ry. of Texas v. Capital Compress Co., discussed supra, and, rather than tending to support plaintiffs' position supports that of the Commission's. With respect to the liability of a shipper's agent for demurrage Michie further states at page 712:
Agent. -- An agent who buys produce and ships it for another, having no concern with it afterwards, is not responsible for damages growing out of a failure of the owner to cause delivery within a reasonable time, in the absence of an express stipulation to that effect. . . . The owner of a vessel, having abandoned his lien on the cargo for demurrage, can not maintain an action for damages against the shippers, who were merely agents.
Since persons liable for demurrage charges are to be determined by the ordinary rules of the common law (In re Tidewater Coal Exch., supra), the parties to a contract of carriage are perfectly free among themselves to contract with respect to the payment of demurrage, as they are with respect to line-haul charges; but where they have not become contractually obligated to pay demurrage because common law principles exonerate them from liability, and they are not made liable by statute or custom,
liability cannot then be imposed upon them legislatively through the device of a tariff.
There is no claim here that any custom is applicable and the only statute that could conceivably be said to deal with these matters is section 223 of the Interstate Commerce Act (49 U.S.C. § 323). However, we agree with the Commission
that a careful reading of that section requires a conclusion that it speaks only to the " nonliability" in certain narrow situations of warehousemen, and others similarly situated, who appear as consignees on the bill of lading, but in no way can be read to impose liability on an agent not a party to the contract.
The law is well settled that an agent for a disclosed principal is not liable to a third person for acts within the scope of the agency.
Certainly warehousemen are free to assume liability for detention charges by contractual undertaking
and this is sometimes done through average demurrage agreements to promote their own business and in some instances to obtain the benefits of lower detention costs for the benefit of their customers.
However, absent any custom, statutory or contractual basis, for reasons heretofore stated, it would be unlawful to attempt unilaterally to impose such liability on a party outside the contract of transportation by means of a tariff approved by the Commission.
A tariff is an inappropriate instrument to "legislate" liability with respect to a nonconsenting party and we find that the Commission acted properly in declining to approve a tariff which purported to do so.
Even had the Commission adopted this tariff in accordance with plaintiffs' requests, it would not have effectively imposed liability on "others than persons named in the bills of lading as consignors or consignees of shipments."
A long line of cases have held under various transportation acts that attempts by carriers to engraft onto a tariff a gratuitous unilateral provision not contemplated or required by the statute authorizing the filing of tariffs is entirely ineffectual.
And we are not cited to any provision in the Interstate Commerce Act, or in the regulations promulgated by the Commission, which authorizes or requires a tariff to include any provision creating liability for detention charges upon an agent for a disclosed principal who is not a party to the contract, either as consignor or consignee. We accordingly conclude that the Commission acted properly in rejecting the tariff.
Plaintiffs suggest that section 202(a) of the Motor Carriers Act, 49 U.S.C. § 302(a), authorizes the Commission to approve the proposed detention rule. This section in its entirety provides:
(a) The provisions of this part apply to the transportation of passengers or property by motor carriers engaged in interstate or foreign commerce and to the procurement of and the provision of facilities for such transportation, and the regulation of such transportation, and of the procurement thereof, and the provision of facilities therefor, is hereby vested in the Interstate Commerce Commission.
49 U.S.C. § 302(a); 49 Stat. 543, as amended, 54 Stat. 920. The key word here is "transportation" and that word is defined by section 203 of the Act as follows:
(19) The "services" and " transportation " to which this chapter applies include all vehicles operated by, for, or in the interest of any motor carrier irrespective of ownership or of contract, express or implied, together with all facilities and property operated or controlled by any such carrier or carriers, and used in the transportation of passengers or property in interstate or foreign commerce or in the performance of any service in connection therewith.
49 U.S.C. § 303(a)(19). This definition also refers to "facilities," does not define the word, but indicates an intent to include only "facilities and property operated or controlled by any carrier or carriers. . ." With such a limitation being placed on the words "transportation facilities" in the definitional section, which has general effect throughout the entire Act, we find no reason indicating that Congress intended a more expansive interpretation to be given to the word "facilities" in section 202(a). There is nothing in the context of section 202(a) that indicates Congress intended a different meaning for the word. Sections 202(a) and 203(a)(19) must be read together and it would not be reasonable to conclude that when Congress limited "transportation" facilities in section 203(a)(19) to "facilities . . . operated or controlled by any carrier or carriers " that it intended to remove the limitation when it referred in section 202(a) to "facilities . . . for transportation." These provisions are central to the whole Act and it would be more in keeping with the principal purpose Congress stated in the title of the Act, which was to provide for the "regulation of the transportation . . . by motor carriers operating in interstate and foreign commerce," P.L. 255, Aug. 9, 1935, c. 498, 49 Stat. 593, to not use these words to extend the jurisdiction of the Commission to facilities not operated or controlled by motor carriers. We are thus unable to find any intent on the part of Congress to extend the plenary jurisdiction of the Commission to the regulation of terminal facilities owned and operated by third parties who are not motor carriers under the Act.
Moreover, even if the Commission were vested with plenary authority to the extent that plaintiffs here contend, the Commission has decided that this tariff is unlawful. It has thus not exercised the questioned authority and it is therefore not necessary for this court on this record to decide the extent of the Commission's jurisdiction over such matters.
On the basis of several cases
plaintiffs contend that the Commission has authority to approve their imposition of liability for detention charges on warehousemen and pier operators even though the latter are not "subject to the regulatory jurisdiction of the Commission and are not parties . . . to contracts of carriage." Plaintiffs' br. p. 11. The cases plaintiffs cite all involve decisions upholding Commission jurisdiction in fact situations where there was "unjust discrimination." Such decisions merely decide that common carriers subject to the provisions of the Interstate Commerce Act could be prevented by the Commission from using warehouses as the instrumentality whereby they (carriers) give undue and unreasonable preferences, advantages, rebates and concessions, pay illegal allowances for performing loading and unloading services to some warehousemen and not to others, and are thereby guilty of unlawful discrimination relating to transportation.
In those cases the authority of the Commission was extended to acts and transactions between carriers subject to the Act and parties not subject to direct regulatory jurisdiction of the Commission because of its power to prohibit the discriminatory relationship45 in which the other parties (warehouses) were directly involved. Here, however, there is no showing that motor carriers are unlawfully discriminating with respect to anyone and the cases cited by plaintiffs are therefore distinguishable on that basis. That the Commission may prevent warehouses and others from being used as the instrumentality of illegal discrimination by carriers under its jurisdiction is not equivalent to holding that it has plenary authority to regulate the rights, duties and obligations of local independent warehousemen. Under its duty to prevent unlawful discrimination, the power of the Commission would extend to any person used by any common carrier, subject to Commission jurisdiction, to implement a pattern of unlawful discrimination prohibited by the Act, but such authority would clearly not extend to authorizing the Commission to regulate persons or transactions which, as here, are not shown to involve unlawful discrimination.
Plaintiffs also argue that even if a contractual relationship must exist between a carrier and a warehouseman before demurrage may be assessed against the latter, such a relationship does exist in the form of a quasi contract. In support of this quasi contract theory plaintiffs contend that when the warehouseman causes a detention of the carrier's equipment such warehouseman has received a benefit which gives rise to a quasi contractual relationship. Quasi contracts are created by law for reasons of justice to prevent unjust enrichment of a party, regardless of the expressed intentions of the parties.
While quasi contracts have been created in a variety of situations where one party has clearly bestowed a benefit upon another,
we decline to create such a contract here where the unjust enrichment of the warehouseman or other agent is so uncertain. We have not been referred to, nor has our own research disclosed, any cases which have held that the benefits which a warehouseman or agent might receive when he detains a carrier's equipment are such that the warehouseman should be required to compensate the carriers by way of demurrage. Indeed we feel that it would be an unprecedented use of the term "demurrage" to characterize it as compensation for a benefit bestowed upon a party.
In its true sense demurrage is part compensation to the carrier and in part a penalty to secure the release of equipment,
and in many situations it may be exacted even though no person was benefited.
Plaintiffs also rely on Indiana Harbor Belt R.R. v. Jacob Stern & Sons, 37 F. Supp. 690 (N.D. Ill. 1941), to support their quasi contract theory, however, we find this reliance wholly misplaced. In that case a carrier sought to recover demurrage from a consignee for detention of the carrier's railroad cars despite the fact that the cars had been leased to the consignee and were resting on the consignee's own tracks. The court held that in such a situation there was no consideration for a contract to assess demurrage against the consignee. While that court stated that "the contractual status is that which arises under a day-by-day contract for such storage service," it was referring to a liability arising out of a contract of transportation between the shipper and the carrier, and we find nothing therein to support the judicial creation of an obligation to pay demurrage in the situation where, as here, the parties have no contractual relationship with each other.
Finally, we note it has been unnecessary to reply to plaintiffs' contention that the Commission's brief to this court relied on a post hoc rationalization
because that portion of our decision set forth in II above is alone dispositive of the case and it relies solely upon the Commission's opinion.
It is thus our opinion that plaintiffs were mistaken when they concluded they could use a tariff to impose liability upon warehousemen and others who are not designated as consignors or consignees. Clearly those cases which indicate that demurrage may be imposed by a tariff only authorize the imposition of such liability upon those who by the transportation contract in effect become consignors or consignees in their own name. We do not interpret those cases as changing fundamentals of contract or agency law and we are unwilling to attempt to make such change in the law by this opinion. In so concluding we are not unmindful of the fact that motor carriers have an adequate remedy to collect demurrage charges from consignors and consignees and may require them to guarantee the payment of such charges when delay is caused by their agents.
We therefore affirm the order of the Interstate Commerce Commission and dismiss the complaint.
It is so ordered.