Cau v. Texas & Pacific Ry. Co., 194 U.
S. 427, followed as to binding effect of agreements in
bills of lading exempting carrier from fire loss and claimed to
have been forced on the shipper under duress and without
consideration.
Where a railway company has no other place for delivery of
cotton than the stores and platform of a compress company, where
all cotton transported by it is compressed at its expense and by
its order, its acceptance of, and exchange of its own bills of
lading for, receipts of the compress company passes to it the
constructive possession and absolute control of the cotton
represented thereby, and constitutes a complete delivery to it
thereof, nor can the railway company thereafter divest itself of
responsibility for due care by leaving the cotton in the hands of
the compress company as that company becomes its agent.
Page 204 U. S. 506
On the evidence in this case, the question of whether the
custodians of the cotton were guilty of negligence should have been
submitted to the jury.
139 F. 127 reversed.
The plaintiffs in error, who were plaintiffs below, filed their
complaint against the railway company in the Circuit Court of the
United States for the Western District of Arkansas, Texarkana
Division. The case arose under the laws of the United States, as
the defendant was incorporated under an act of Congress passed
March 3, 1871, which act was amended by one passed May 2, 1872,
among other things, changing the name of the corporation to that,
under which it was sued in this case. Upon the trial, the court
directed a verdict for the defendant, which was affirmed by the
circuit court of appeals, 139 F. 127, and the plaintiffs have come
here by writ of error.
The action was to recover damages against the defendant for loss
by fire of 50 bales of cotton, which were burned at Texarkana,
Texas, September 19, 1900, and which the plaintiffs allege had been
duly delivered to the defendant at that place, under a through bill
of lading for transportation to Utica, New York. In the third
clause of the conditions stated in the bill of lading was a
provision
"that neither the Texas & Pacific Railway Company nor any
connecting carrier handling said cotton shall be liable for damages
to or destruction of said cotton by fire."
In the fifth clause of the bill of lading, it was provided
that
"each carrier over whose road the cotton is to be carried
hereunder shall have the privilege, at its own cost, to compress
the same for greater convenience in handling and forwarding, and
shall not be responsible for deviation or unavoidable delays in
procuring such compression."
Although the cotton was destroyed by fire, plaintiffs alleged
that they were not concluded by the fire clause, which they allege
was void
"because (1) said bill of lading was executed by said plaintiffs
under duress; (2) said provision is unreasonable,
Page 204 U. S. 507
and (3) was without a consideration."
The freight rates charged in the bill were the regular rates for
the shipment of cotton over all lines of railway between Texarkana
and Utica, New York, and no option was given to said plaintiffs, as
they allege in their complaint, to receive any other form of bill
of lading than that exempting the defendant from liability for loss
of the cotton by fire, and plaintiffs allege they did not assent
thereto.
It was also alleged that the place where the cotton was stored
after its delivery to the railway company by the plaintiffs was not
a safe place, being on the platform of the Union Compress Company,
that the platform was not enclosed, and that there was no proper
provision made to prevent the destruction of the cotton by fire,
and that the cotton was at such place exposed to the sparks of
passing engines, and that the employees of the Union Compress
Company, which was the agent of the defendant, neglected to care
for the cotton, which caught fire from sparks from a passing engine
and was destroyed September 19, 1900, whereby defendant became
liable to the plaintiffs in the sum of $2,605, the value of the
cotton. The defendant, by answer, put in issue all the allegations
as to negligence by its own servants or by the servants or agents
of the compress company, and also denied that the plaintiffs had
ever delivered the cotton to the railway company, and alleged that
at the time it was destroyed, it was in the possession and control
of the compress company, which was not its agent and over which it
had no control.
Upon the trial, evidence was given tending to prove the
following facts: the plaintiffs, with offices at Texarkana, were
extensive buyers of cotton, which they purchased in the surrounding
country and had it transported to that place as a place of
concentration, where it might be classified and subsequently
transported to the East and other parts of the country by the
railroads.
The Union Compress Company was an independent corporation, doing
business at Texarkana as a compressor of cotton,
Page 204 U. S. 508
which it compressed for the various railroads having tracks at
that place. The compress company had a platform on its own land of
about 400 x 600 feet, upon which cotton was delivered from wagons
and from railroad cars, and the receipt of the cotton was
acknowledged by the compress company. From this platform cotton was
loaded on the respective cars of the different railroads, the
tracks of which surrounded the platform on three of its sides. This
platform was within the State of Texas. Substantially all the
cotton received at Texarkana was received at this platform. The
local platform of the defendant company was not calculated to
receive cotton for shipment by the company, on account of its small
size, and the defendant's agent testified that he would not know
what to do with cotton if offered at this platform except to send
it to the platform of the compress company. When cotton was placed
on the platform of the compress company, it did not then compress
it, but it remained there until further orders were given, as
herein stated. After delivery on the platform, and after the
shipper had procured the written acknowledgment of the receipt of
the cotton by the compress company, the practice was for the
shipper, when he was ready to have it shipped, to go to the railway
company, and, upon the surrender of the receipts of the compress
company to the agent of the railway company, the shipper would
receive from such agent a bill of lading for the cotton, which
acknowledged its receipt by the company and the place and person it
was consigned to, and the shipper had nothing further to do in
regard to the cotton. He issued no orders for compressing it, and
was not allowed to route it by any particular route. He would
identify the cotton covered by the bill and give the destination
point of the cotton and the name of the consignee, and there his
right ended. The railroad company, when it received from the
shipper the compress company's receipt and gave its bill of lading
to the shipper, took the receipts of the compress company and gave
them up, and directed the company to
Page 204 U. S. 509
compress the cotton and obtain insurance upon it covering the
responsibility of the railroad company, and load it into cars to be
designated by the railroad company's agent. It was a general
understanding between the railroad company and the compress company
that, when the former delivered the cotton receipts to the compress
company, it was to compress the cotton, obtain the insurance, and
give the policies to the agent of the railway company, and ship the
cotton on the cars pointed out by the railway company's agent.
There is no evidence that the compress company ever compressed
cotton at the orders of the shipper, or charged him for the storage
of the cotton on the platform. The compressing was in fact done by
the compress company for the railway company, for its convenience,
by its direction, and at its cost. While the cotton was being
compressed, the compress company was not under the control of the
railway company in matters relating to the mode and manner of
compressing, nor were the employees of the compress company under
any control by the railway company, but the compress company
followed the orders of the railway company when to compress and
where to load the cotton after compressing.
This customary way of doing business was followed with regard to
the cotton in question. It was received on the platform of the
compress company from plaintiffs, and receipts given for it to
them. These receipts were taken on September 17, 1900, to the agent
of the railway company, who thereupon signed and delivered a bill
of lading to plaintiffs, acknowledging the receipt of the cotton to
be transported to Utica, New York at named rates. The agent of the
railway company then took these receipts which plaintiffs had
handed to him and delivered them to the compress company, and gave
written instructions, signed by such agent, to the compress company
on a form customarily used, and which ran thus:
"I have this day issued on your compress receipts bill of lading
to W. A. Arthur & Company for 50 bales of cotton (marks, number
of bales, and total weight given). Domestic.
Page 204 U. S. 510
Compress and ship the above cotton,"
as stated in directions. The compress company, when its own
receipts were delivered to it by the railway company's agent, in
accordance with its general custom, caused this cotton to be
insured for the benefit of the defendant company and in the name of
that company, and delivered the policies to the agent of the
railway company, who forwarded them to division headquarters at
Dallas, Texas. The compress company paid for the insurance under
the direction of the railway company.
It was while the cotton was still on the platform, and not yet
compressed, that it was burned.
The order adopted by the Texas State Railroad Commission, which
was put in evidence, reads as follows:
"Thirteenth. When cotton is tendered to railroad companies upon
compress platform, which is situated on the track of such railroad
companies, it shall be the duty of the railroad companies to take
charge of and receipt for such cotton in the same manner and on the
same terms as they would receive and receipt for cotton when taken
at its own depot or platform erected for such transactions;
provided, however, that the shipper or the compress company shall,
in such cases, assume the additional risk of insurance involved by
such act of the railroad company."
The rule of the defendant was also put in evidence, and reads as
follows:
"Rule Eleven. When cotton is tendered this company upon a
compress platform which is situated on the track of this company,
agent shall take charge of and receipt for such cotton in the same
manner and on the same terms as he would receive and receipt for
the cotton if tendered him at this company's depot platform or
other places assigned by it for such transactions; provided,
however, that the shipper or the compress company shall, in such
cases, assume the additional risk of insurance involved by such act
of this company. "
Page 204 U. S. 514
MR. JUSTICE PECKHAM, after making the foregoing statement,
delivered the opinion of the Court.
The plaintiffs, in order to avoid the obstacle in the agreement
in the third clause of the bill of lading, providing that defendant
was not to be liable for damages to the cotton by fire, contend, as
set up in the complaint, that the clause in the bill of lading was
received under duress, and that it was unreasonable and without
consideration. These contentions have been answered and overruled,
upon much the same evidence, in the case of
Cau v. Texas &
Pacific Ry. Co., 194 U. S. 427, and
need not be further discussed.
With the fire clause in force, it became necessary for the
plaintiffs, in maintaining their action, to show that defendant had
received the cotton, and that it was destroyed through the
negligence of the defendant or its agents, as the exemption would
not apply to a case of damage occurring through such negligence.
Bank of Kentucky v. Adams Express Company, 93 U. S.
174. We are of opinion, after carefully reading the
record, that there was evidence enough to be submitted to the jury
upon the question of negligence in the care of the cotton while on
the platform.
This leaves the questions whether there was a delivery of the
cotton to the railway company, and whether the compress
Page 204 U. S. 515
company, at the time of the fire, was the agent of the railway
company as to that cotton.
Upon the evidence in this case, was there a delivery? The
evidence showed that the cotton was not delivered on the platform
by the plaintiffs for the purpose of being compressed for them by
the compress company. The order to compress was subsequently given
by the railway company. That company had no other place of the
delivery of the cotton to it than at this platform, but, as there
were three companies with tracks at the platform, with either one
of which the shipper might contract for the transportation of the
cotton, it cannot be held that there was at the time of the
delivery of the cotton at the platform, a delivery to the
defendant, especially as the compress company itself acknowledged
the receipt of the cotton. But when these receipts were handed by
the plaintiffs to the defendant's agent, who took them and issued a
bill of lading to the plaintiffs, the constructive possession and
the entire control of the cotton passed to the defendant. It could
then, if so minded, have taken the cotton and loaded it on cars and
taken it away without having had it compressed. It was, however,
compressed by its own order, given in writing to the compress
company, and for its own convenience, and at its own cost, and the
insurance was obtained by its direction by the compress company, in
the name of the defendant and for its benefit, and such policies
were delivered to the defendant and sent by its agent to Dallas.
Most probably, the cost of compression and insurance was paid by
the plaintiffs in the rate paid by them for the transportation of
the cotton, as that cost was one of the factors which may be
supposed to have entered into the rate of freight charged by the
defendant; but the total sum paid for transportation by plaintiffs
left the matter with defendant to compress and insure if it saw
fit, which it probably would think fit to do in all cases as an
ordinary business precaution. The fact that, in getting the cotton
compressed, the railway chose to have it done by an independent
contractor,
Page 204 U. S. 516
over whose acts it had no control while the cotton was being
compressed, and the fact that it would order the compress company,
after compressing, to load the cotton on cars selected by
defendant's agent did not in any way affect the fact that the
cotton had been received by the railway company and that it was
thereafter subject to its full control. The defendant could not
divest itself of the responsibility of due care by leaving the
cotton to be compressed and loaded by the compress company. The
latter company was, while so acting, the agent of the defendant,
chosen by it, and, as such, the defendant was responsible for any
lack of proper care of the cotton by the compress company.
Bank
of Kentucky v. Adams Express Co. supra.
It is urged that the case cited does not cover the facts herein,
because in the reported case the attempt was to secure the immunity
of the defendant express company from the consequences of the
negligence of the railroad in doing the very thing that the express
company had agreed to do,
viz., transport the money, while
in the case before us, the negligence of the compress company
(assuming there was such) was not in transporting the cotton, which
the railway company had agreed to do, but in caring for it while
awaiting compression. We see no difference in fact which would lead
to a different result.
The compression was done for the convenience of the railroad
company, after the company had received the cotton, and before the
actual transportation had commenced. In order to enable it the more
conveniently to do the work of transportation, it cannot divest
itself of its obligation to exercise due care while the cotton is
in the control of the compress company, although the latter is an
independent contractor, and not under the immediate control of the
railway company while doing the work of compression in its behalf.
There would be no justice in such holding, and we are clear it
would violate the general rule that the carrier, after the freight
has been received by it, must be regarded as liable
Page 204 U. S. 517
at least for the negligence of its own servants, and also for
that of the servants of an independent contractor employed by it to
do work upon the freight for its own convenience and at its own
cost.
In
California Insurance Co. v. Union Compress Co.,
133 U. S. 387, the
question was simply as to the liability of the insurance company on
a policy of insurance against fire, issued by it to the Union
Compress Company upon cotton in the possession of the compress
company for compression, and which belonged to divers other
parties. The policy insured the cotton for the plaintiff while "in
bales, their own or held by them in trust or on commission." The
defense was that, as the compress company did not own the cotton,
and the beneficiaries under the policy were its owners, that no
interest of any carrier was covered by the policy. The Court held
that the railway companies were beneficiaries under the policy,
because they had an insurable interest in the cotton, and to that
extent were its owners, and that it was held in trust for them by
the plaintiff. The railway company had issued bills of lading upon
the surrender of the receipts of the compress company. It was held
that, where the original depositors of the cotton had surrendered
to the railroad companies the receipts which they had taken from
the compress company, that those companies became substituted in
the relation to the compress company which before had been held by
the depositors of the cotton; that the railroad companies thus
became the beneficiaries of the trust so far as the compress
company was concerned, because they thus became the persons to whom
that company owed the duty of bailment, and the persons entitled to
demand possession of the property from the plaintiff. The policy
also contained a provision that it should be void if there were any
change in the possession of the insured property, and the
defendants insisted that there was such a change, caused by the
signing of the bill of lading by the railway companies in return
for the receipts given by the compress company upon the deposit
Page 204 U. S. 518
of the cotton with the latter company, although no actual change
had taken place, and the cotton still remained in the custody of
the compress company. It was, however, held that the railway
companies, in acquiring the receipts of the compress company and
issuing bills of lading for the cotton, took only constructive
possession of it, and the plaintiff retained actual physical
possession of it, and did not lose any element of possession
necessary to give it the right to effect the insurance for its own
benefit and as bailee or agent for the protection of the railway
companies, although the railroad companies' was the right to
ultimate possession, which passed to them by the original deposit
of the cotton receipts given by the plaintiff.
The question of whether there had been a change of possession
within the meaning of that expression as used in the insurance
policy is entirely different from that of whether immediate control
of the cotton passed to the railway company by virtue of the
delivery of the bill of lading in this case, so as to render the
company liable for any neglect by it or its agent in regard to the
subsequent care of the cotton. In the case at bar, not only was
there a constructive possession by the railway company, but that
company assumed full control of the cotton, and gave directions to
the compress company what to do with it.
In
St. Louis &c. Railway Company v. Commercial Union
Insurance Co., 139 U. S. 223, the
question was also in regard to insurance, the insurance company
endeavoring to collect from the defendant what it had paid to the
owners of the cotton. In that case, the cotton, which had been
destroyed by fire, was in the possession of the compress company,
and the railway company had never given any bill of lading for it.
The insurance companies had issued policies upon and delivered them
to the owners of the cotton, and when the cotton had been destroyed
by fire, the companies paid the losses and claimed that the railway
company was liable under the contract which the company had made
with the compress
Page 204 U. S. 519
company to receive the cotton and transport it over its railroad
across the Arkansas River to the press of the compress company in
Argenta, a distance of a mile and a half. The insurance companies
insisted that, by the failure of the railway company, under its
contract with the compress company, to transport this cotton as
fast as it came in, the amount of the cotton became so great as to
constitute a public nuisance, as it was piled up in the compress
company's warehouse and overflowed into the adjoining streets. This
Court held that, as there had been no bills of lading issued by the
railway company for the cotton which had been destroyed, the
failure of the railway company to furnish sufficient transportation
for the cotton to the compress company, while it may have been a
breach of the contract between the railway company and the compress
company, yet such breach created no liability in contract or tort
to the owners or insurers of the cotton or to any other person. The
Court, at page
139 U. S. 237,
said:
"This cotton certainly was in the exclusive possession and
control of the compress company. The railway company had not
assumed the liability of a common carrier, or even of a
warehouseman, with regard to it; had given no bills of lading for
it; had no custody or control of it and no possession of it, actual
or constructive, and had no hand in placing or keeping it where it
was."
In speaking of the issuing of bills of lading by the railway
company for certain other cotton and what effect it had upon the
rights of the parties, in the case then under consideration, the
court said, page
139 U. S.
238:
"There is nothing else in the case which has any tendency to
show that the railway company had or exercised any control or
custody of the cotton, or of the place where it was kept by the
compress company, before it was put upon the cars by that company.
The railway company evidently neither considered itself, nor was
considered by the compress company, as having assumed any
responsibility for the care or custody of the cotton until it had
been insured in its behalf and loaded
Page 204 U. S. 520
upon its cars. The evidence warranted, if it did not require,
the inference that the bills of lading were issued merely for the
convenience of all parties, and with no intention of making any
change in the actual or the legal custody of the cotton until it
was so loaded."
Such is not the case here.
In
Missouri Pacific Railway v. McFadden, 154 U.
S. 155, the case was decided upon the facts therein
stated, which were that it was understood both by the carrier and
the shipper that the cotton was not to be delivered at the time the
bills of lading were issued, the cotton at that time being in the
hands of the compress company, which compress company was the agent
of the shipper, it being the intention of the parties at the time
the bills of lading were issued that the cotton should remain in
the hands of the compress company, the agent of the shipper, for
the purpose of being compressed. These allegations were made in the
answer of the company, which was excepted to, and their truth was
therefore admitted. The trial court had, nevertheless, held the
company liable for the loss of the cotton. This Court said (page
154 U. S.
160):
"The case presents the simple question of whether a carrier is
liable on a bill of lading for property which at the time of the
signing of the bill, remained in the hands of the shipper for the
purpose of being compressed for the shipper's account, and was
destroyed by fire before the delivery to the carrier had been
consummated."
The court held that, under such circumstances, there was no
liability on the part of the common carrier, because it had never
had the cotton delivered to it, the issuing of the bill of lading
being subject to the intention of the parties, and the cotton
remaining in the hands of the compress company as agent of the
shipper.
The facts in the case at bar are totally different.
Stress was laid in the argument before us upon the fact that,
under the thirteenth rule of the Texas Railroad Commission, the
defendant was bound to sign the bill of lading when the receipts of
the compress company were presented
Page 204 U. S. 521
to the railway company, and that therefore the defendant cannot
be held to have become liable by virtue of the delivery of the bill
of lading in question upon such a purely arbitrary order. It is
also urged that the eleventh rule of the defendant, which is set up
in the foregoing statement and which is to the same effect as the
order of the railroad commission, was adopted simply pursuant to
that order, and therefore no liability attaches from the bill of
lading issued under the circumstances of this case. We think the
argument is not sound. The rule of the Texas commission applies to
a case when the cotton is tendered to the railway company, although
at the time it is upon the compress company's platform. Now if the
railway company did not regard the presentation of these receipts
as in fact a tender to the railway company of the cotton in
question, or if it were not a valid tender of the cotton, it could
have refused to sign the bill of lading. The same may be said of
Rule 11 of the company itself. The company evidently regarded the
cotton as tendered them, and issued the bill in acknowledgment of
the fact of such tender.
We think the evidence in this case made out a delivery to and
acceptance by the railway company of the cotton in question, and
that the compress company had the actual custody of the cotton as
the agent of the railway company, and the question of whether the
persons in whose custody it was at the time of the fire were guilty
of negligence was a question which should have been submitted to
the jury.
The judgment of the circuit court of appeals and that of the
circuit court should be reversed, and the case remanded to the
circuit court with directions to set aside the verdict and to grant
a new trial.
Reversed.
