212 F2d 712 Chicago Co v. Connor Lumber & Land Co

212 F.2d 712




No. 11010.

United States Court of Appeals Seventh Circuit.

May 7, 1954.

R. B. Graves, L. L. Chambers, Wisconsin Rapids, Wis., for appellant.

James R. Walker, Norman C. Skogstad, Edward H. Borgelt, Milwaukee, Wis., for appellee.

Before DUFFY, LINDLEY and SCHNACKENBERG, Circuit Judges.


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Summary judgment was entered against the defendant, a shipper, upon plaintiff's motion, for freight undercharges in the sum of $5463.18, plus interest and costs. This appeal by the defendant followed.


Defendant, prior to December 31, 1947, shipped logs over plaintiff's line to its mill at Laona, Wisconsin, from points within and without the state, for the purpose of manufacture and reshipment. Under the freight tariff then in effect defendant was privileged to claim the benefit of what are known as transit rates if it agreed to ship the manufactured product over plaintiff's line. It did so agree. Generally speaking, a shipper entitled to a transit rate pays a through rate from the point of original shipment to the final destination, which is less than the total of the local rate from point of original shipment to an intermediate point and the local rate from the intermediate point to the point of final destination. A stoppage of the shipment at an intermediate point will not preclude the application of the through rate where such stoppage is in accordance with a transit privilege granted by the applicable tariff. The privilege of thus stopping a commodity in transit for the purpose of subjecting it to processing and then to further transportation in its altered state, without losing the benefit of the through rate, is termed "milling in transit". However, a transit privilege is not a matter of right; and all conditions and limitations prescribed with reference to it must be observed. 13 C.J.S. Carriers, § 314, p. 732.


At the times hereinafter referred to, the parties hereto were governed by Western Trunk Lines Tariff No. 304-O, as modified by Supplement No. 16, both of which will be hereinafter referred to as the "tariff". The phrase "manufacturing, reshipping, or concentration rates", as used in the tariff, means the same as the phrase "transit rates" as hereinafter used. Pertinent parts of the tariff are:


  Item 2.       The manufacturing, reshipping
              or concentration rates
              referred to herein apply only
              when the equivalent outbound
              tonnage is reshipped in carloads
              or less (sic) carloads via
              the line of the inbound carrier,
              at the tariff rates (not
              switching rates) applying
              from the station to which the
              rates subject to these rules,
              are applied.

                In the application of these
              rules the C. & N. W. and the
              C. S. P. M. & O. will be considered
              as a single line.

                The tariff rates referred to
              are those lawfully on file with
              the Interstate Commerce
              Commission as to interstate
              traffic and with the State
              Commissions as to intrastate

  Item 3-A.     Party or parties desiring to
              avail themselves of manufacturing,
              reshipping or concentration
              rates which are subject
              to this tariff will be required
              to: (See Note.)

                (a) Notify the carrier or
              its representative in writing
              of their intention to avail
              themselves of same.

                (b) Keep a complete and
              accurate record acceptable to
              the carrier.

                (c) Furnish at the close of
              each month a complete and
              accurate record of all receipts
              and dispositions, whether by
              rail, truck, boat or otherwise.
              Tonnage received on basis of
              manufacturing and reshipping
              rates to be reported separately
              from that received by
              truck, boat or otherwise.
              * * *

                (d) When requested, make
              statements, and if required,
              affidavits as to the accuracy
              of such statements or records.

                (e) Permit an authorized
              representative of the carrier
              at any time to have access to
              records and otherwise conform
              to the carriers requirements
              as herein provided.

                (f) Manufacturing, reshiping,
              or concentration rates
              will be denied any shipper
              who fails or declines to comply
              with all of these rules.

                Note. — Manufacturing, reshipping,
              or concentration
              rates will only apply on shipments
              leaving point of origin
              on and after date of notification.

  Item 4.       (a) Shipments must be
              waybilled at the rates applicable
              when not for storage,
              drying, concentration, reworking
              or manufacture, and
              charges collected on that basis,
              except as provided in paragraph

                (b) When shippers avail
              themselves of the manufacturing,
              reshipping or concentration
              rates thereby agreeing
              to reship via the inbound
              carrier commodities as provided
              in Item 7 manufactured
              from the equivalent inbound
              tonnage at rates provided
              in Item 2 and support
              this agreement with a bond
              satisfactory to the inbound
              carrier, the charges on the
              inbound shipments will be
              computed on the basis of the
              manufacturing, reshipping or
              concentration rates named in
              tariffs making reference to
              this tariff.

  Item 6-C.     Outbound shipments as
              provided in Item 2 must be
              made within two years from
              date of freight bill covering
              inbound shipment.

                If outbound shipments are
              not made within the time limit
              prescribed charges will be
              readjusted as provided in
              Item 10.

  Item 7.       Credit as provided in Item
              10 will be given on the actual
              weight of outbound commodities
              consisting of lumber, saw
              logs, bolts, posts and poles,
              and on articles manufactured
              wholly or in part from these
              commodities, based on percentages
              of the inbound tonnage
              determined as provided
              in Item 9.

                Credit will be given in tonnage
              for material sold to the
              inbound carrier.

  Item 9.       Shippers shall determine
              and certify to the Carrier
              (under oath, if required),
              subject to verification by the
              Western Weighing and Inspection
              Bureau, the actual
              percentage in weight of articles
              which they manufacture
              from their inbound shipment
              subject to these rules, exclusive
              of Edgings, Fuelwood
              (including Cores when used
              as fuel wood at transit station),
              Hog Fuel (saw Mill
              refuse), Sanderdust, Sawdust,
              Shavings, Slabs, Turnings
              and Wood-Dust, which
              shall be considered as waste

  Item 10-A.    (a) Carrier's Agents at receiving
              stations shall furnish
              the Western Weighing and
              Inspection Bureau, statement
              or copies of all freight bills
              covering inbound shipments
              of lumber, logs, and other forest
              products consigned to party
              or parties availing themselves
              of these rules, and
              shall also furnish statement
              or copies of billing covering
              all outbound commodities.

                (b) The Western Weighing
              and Inspection Bureau will
              keep a debit and credit account
              based on actual weights
              of inbound and outbound
              shipments with each party or
              parties availing themselves of
              these rules cancelling the oldest

              inbound tonnage matched
              against the outbound tonnage
              according to percentages determined
              under Item 9, and
              shall render bills to such party
              or parties for any undercharges
              due to Carriers on
              account of failure to comply
              with these rules.

                (c) Carriers will require,
              annually, as of June 30th or
              December 31st and at such
              other times as they may deem
              it necessary, an accounting of
              tonnage (on hand at yard or
              mill of transit operators,
              from which reshipment of inbound
              tonnage received on
              basis of manufacture and reshipment
              rates is made) and
              cancellation of excess inbound
              billings as may appear
              necessary to properly apply
              lawful rates. If at any time
              during the time limit period
              the transit operator does not
              have sufficient tonnage (on
              hand at yard or mill of transit
              operator from which reshipment
              of inbound tonnage
              received on basis of manufacture
              and reshipment rates
              is made) to cover tonnage
              due inbound carrier, adjustment
              will be required and undercharges
              collected as provided
              in paragraph (b).

                (d) When inbound shipments
              are handled in accordance
              with paragraph (a) of
              Item 4, charges on inbound
              shipments will be re-adjusted
              by the Western Weighing and
              Inspection Bureau to a basis
              of manufacturing, reshipping
              or concentration rate in effect
              on date of shipment from
              point of origin when matched
              against the outbound billing
              on basis of the percentages
              determined under Item 9.

The Western Weighing and Inspection Bureau will be hereinafter referred to as the "bureau", and the percentage referred to in item 9 will be referred to as the "product equivalent".

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It appears that defendant failed to make outbound shipments over plaintiff's line of sufficient tonnage, after applying the proper product equivalent, to equal at all times, when added to the material on hand, the tonnage of in-bound shipments. All logs in in-bound shipments were waybilled at and originally paid for on the basis of transit as distinguished from higher non-transit rates. All logs so transported were treated as fungible goods, in that they were not segregated during the process of manufacture and reshipment. On May 24, 1948, the bureau commenced its audit of the defendant's books, pursuant to the tariff, for the accounting period ending December 31, 1947. The defendant having failed to determine and certify to the carrier its product equivalent as required under item 9, the bureau itself ascertained that factor on August 15, 1949, the accuracy of which has not been challenged by defendant. Prior to the commencement of said audit the defendant never asserted that any of the shipments involved herein should move, or had been moved, at non-transit, rather than transit, rates. Such assertion was first made as to some shipments on December 28, 1948, and as to the balance thereof in January, 1949, at which times the bureau's preliminary accounting work indicated that a substantial tonnage deficit would appear in the defendant's account upon completion thereof.


Defendant rendered statements on December 28, 1948, and in January, 1949, of various in-bound shipments which it purported to elect to pay on the basis of non-transit rates, and then paid to the plaintiff the difference between the transit rates on such shipments, paid at the time of delivery, and the applicable non-transit rates. This payment was $6848.64, including federal tax. It was accepted and retained by plaintiff.


The bureau, having determined the product equivalent to be 26.1% on August 15, 1949, did make an audit of defendant's tonnage deficit based thereon, a copy of which appears in the record. The date of completion of the entire audit, showing the amount due from defendant for undercharges, and the date when bills, if any, were rendered to defendant therefor, do not appear in the record. The completion of the audit and the sending of the bills could not have occurred before August 15, 1949, when the product equivalent was determined. They may have occurred later.


The audit of defendant's tonnage deficit, as developed by the bureau, showed a tonnage deficit as of December 12, 1947, after adjustment by application of the product equivalent, of 29,976,073 lbs. To make up for this deficit, the bureau canceled the oldest in-bound tonnage by matching it against equivalent out-bound tonnage, and then applied non-transit rates to the uncanceled in-bound shipments amounting to 29,976,073 lbs. This resulted in a deficit in freight rate payments of $12,152.70. Crediting this with the aforesaid payment of $6848.64, a balance remained of $5304.06, which, with a federal tax thereon of $159.12, resulted in a total amount due of $5463.18.


1. It appears that, as to all in-bound shipments involved herein, defendant originally desired to and did avail itself of the transit rates plan set up by the aforesaid tariff. It thereby became obligated, in order to obtain the concession of such lower through rates, to comply with every pertinent provision of the tariff imposing duties upon it as a shipper. It could not accept the benefits of the program without discharging the burdens thereof. Defendant is prevented by the inherent as well as the expressed purposes of the tariff from ignoring its provision requiring the extinguishment of freight liability on in-bound shipments only in their chronological order.


Admittedly defendant's selection of certain in-bound shipments for payment of non-transit rates thereon without regard to the chronological order of such shipments would be to its financial benefit. It contends that it had the right to make that selection, urging that there is no provision in the tariff forbidding a shipper electing, at any time before claim is made by the carrier for undercharges, to pay the applicable local rates on any or all of the in-bound shipments. While there is no express language in the tariff to that effect, the principle upon which the transit rate tariff is based does not permit of such selection by a shipper of any in-bound shipments already transported under the transit tariff. Having elected to operate under that tariff as to particular in-bound shipments, he is required to comply with that tariff until all of his obligations thereunder as to such in-bound shipments have been fully satisfied. Even if he makes payment of non-transit rates on selected in-bound shipments, thus attempting to free them from the tariff provisions, and the carrier actually accepts the payments under those circumstances, there is no effectual waiver. To the extent that the shipper gains a financial advantage by his attempted action, an unlawful preference results, injurious not only to the carrier but to other shippers. The carrier cannot waive the rights of other shippers. The determination as to what in-bound shipments were to be subject to the transit tariff was to be made by defendant when such shipments were made. Under item 4(a) of the tariff the defendant could have had the shipments waybilled at non-transit rates, but it elected at the time of said shipments to avail itself of the provisions of item 4(b) and thereby irrevocably impressed the in-bound shipments with the transit rate provisions of the tariff.


The bureau properly applied the outbound shipments and tonnage on hand against the in-bound shipments in chronological order of the latter, as required by item 10-A(b) and (c).


We, therefore, conclude that the defendant became liable to the plaintiff in the amount of $5304.06, plus a federal tax thereon of $159.12, or a total of $5463.18, plus interest.


2. Defendant strongly contends, however, that when this suit was filed by plaintiff the claim of the plaintiff was barred by the statute of limitations.


The applicable limitation is prescribed by the Interstate Commerce Act, U.S.C. A., Title 49, § 16(3). So far as material, it reads as follows:


"Limitation of actions


"(3) (a) All actions at law by carriers subject to this chapter for recovery of their charges, or any part thereof, shall be begun within two years from the time the cause of action accrues, and not after.


* * * * * *


"(e) The cause of action in respect of a shipment of property shall, for the purposes of this section, be deemed to accrue upon delivery or tender of delivery thereof by the carrier, and not after".


From the face of the statute it would seem that claims for freight charges for shipments which were delivered during the year 1947 are automatically barred since suit was not commenced until May 1, 1950. It is fairly well established, however, that such is not the case where a transit operation is involved. Neither do we understand that the defendant now contends that the statute commenced to run as of the date of delivery of each individual in-bound shipment; rather, it asserts that under the terms of the tariff its liability became fixed and the statute commenced to run when it first had on hand an insufficient quantity of raw material and finished products to permit it to manufacture and thereafter reship a sufficient quantity of out-bound tonnage to equal the in-bound tonnage.


Plaintiff contends that the statute of limitations commenced to run only when a determination could be made as to which rates were applicable to each of the shipments involved; and that the limitations issue is thus essentially a matter of deciding when defendant's liability for additional freight charges first became determinable under the terms of the tariff.


Under item 9 of the tariff it was the duty of the defendant to determine and certify to the plaintiff the product equivalent. This it failed to do. That factor was not determined until August 15, 1949, when it was ascertained by the bureau. Thereupon for the first time the bureau was in a position to make an adjustment as required by item 10-A, upon which the amount owing by the defendant could be ascertained and payment required. Assuming that the adjustment, the computation of amount due from defendant, and a demand for payment could have all been made on August 15, 1949, it was then for the first time that defendant could have been sued for the collection of the amount found due. Defendant cannot be heard to say that the cause of action accrued when it failed to have in inventory logs or products manufactured therefrom sufficient to equal the difference in tonnage of logs shipped in and the product therefrom shipped out. Regardless of when this deficit actually occurred, the fact thereof and its extent could not be ascertained until the product equivalent was first determined. It was primarily the duty of the defendant to determine and certify that factor to the carrier under item 9. If the determination of that factor was delayed through the fault of the defendant to make and certify that factor under item 9, the defendant cannot be heard to say that the statute of limitations was running during the period of that delay. Certainly the plaintiff could not have sued the defendant before the adjustment was made by the bureau showing whether or not there was a deficit imposing upon defendant an obligation to pay non-transit rates, and, if so, the amount thereof.


While we are not concerned with the wisdom of the tariff provisions on this subject, it is apparent that the reason for the imposition upon a shipper of the duty to determine and certify to the carrier the actual percentage in weight of the waste materials resulting from the manufacture of raw material is reasonable in view of the fact that that is a matter peculiarly within the knowledge of the shipper who conducts the manufacturing operation.


The cause of action referred to in Sec. 16(3) (e), supra, does not apply to a case arising under a transit tariff. Arkansas Oak Flooring Co. v. Louisiana and Arkansas Ry. Co., 5 Cir., 166 F.2d 98. In the cited case it appeared that the tariff provided that there was to be a reshipment of the finished lumber within one year after its in-bound delivery to the shipper, and it was held that the statute of limitations of two years did not bar a suit for the local rate on rough lumber received by the shipper and not reshipped within one year, where the suit was brought within two years after the expiration of the one-year period. The expiration of the year in that case was the event which caused the statute of limitations to commence running.


Viewing the facts in the case at bar in the light most favorable to defendant, the date upon which the product equivalent was ascertained was the earliest possible date upon which the statute of limitations could have started running. That event took place on August 15, 1949, and the instant case was started on May 1, 1950.


The defense of the statute of limitations is not sustainable.


The District Court properly allowed interest on the claim from August 15, 1949.


The judgment of the District Court is affirmed.