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READING CO. v. PENN PAPER & STOCK CO.

August 22, 1955

READING COMPANY
v.
PENN PAPER AND STOCK CO., a partnership, and Penn Paper and Stock Co., Inc., a corporation



The opinion of the court was delivered by: LORD

Plaintiff seeks to recover from defendant the sum of $ 7,273.32, which represents the balance of freight charges and transportation tax on a shipment of thirteen carloads of a paper commodity consigned by defendant to itself from points on the lines of the Louisville & Nashville Railroad Company and the Atlantic Coast Line Railroad Company to destinations on the line of the plaintiff, Reading Company. The shipment all moved interstate.

The question to be determined is whether the freight rate applicable to the shipment should be as 'waste paper' (which charges were paid by the defendant), or as 'spitting cups' claimed by the plaintiff, the difference being the amount in controversy. At the trial, the following undisputed facts were developed.

 Defendant has been solely engaged in the waste paper business for a long period of time. The material was purchased by defendant per sample from a broker dealing in waste products who in turn had purchased it from the United States as war surplus. It was bought as waste paper and the price paid was similar to waste paper of the same grade. Defendant would not have made the purchase if it had known that any rate other than that of waste paper was applicable, since the margin of profit on the transaction was very small.

 Bills of lading were prepared by defendant and forwarded to the freight agent of the Louisville & Nashville Railroad Company describing the shipment as 'machine pressed bales waste paper'. Without notifying defendant, the agent for the railroad at origin, the Weighing and Inspection Bureau, changed the description to 'cups paper spitting nested' and freight charges were assessed by the plaintiff as such.

 The material consisted of a flat waxed cardboard form, delineated for folding into a cup. It was manufactured for the United States for use in hospitals during the war as a spitting or sputum cup. An inspection at destination showed that the cups had become discolored with age and there was a deterioration of the wax coating resulting in a rancid odor. It was testified that the cups were not in proper sanitary condition to be used for anything but waste paper. Defendant was unsuccessful in an attempt to process the material and remove the wax coating. The contents of a number of the cars were consigned to a railroad dump when the freight rates charged were for waste paper. The remainder of the cars were sold to another waste paper user.

 Plaintiff commenced the present action on November 25, 1949. Defendant filed a complaint with the Interstate Commerce Commission seeking a finding against the railroads' handling the shipments that the rates as 'spitting cups' were unreasonable. The Commission dismissed the complaint.

 The first question presented is whether this Court has jurisdiction to determine if the commodity shipped should be classified as waste paper or spitting cups, or is this a matter exclusively for determination by the Commission? The Interstate Commerce Act, 49 U.S.C.A. ยง 9, provides for alternative remedies. The plaintiff, in its complaint averred this Court had jurisdiction by reason of Section 1337 of the Judicial Code, 28 U.S.C.A., which provides as follows:

 'The district courts shall have original jurisdiction of any civil action or proceeding arising under any Act of Congress regulating commerce or protecting trade and commerce against restraints and monopolies.'

 It was early held that the Commission has the exclusive power to determine that a rate contained in a lawfully filed and published tariff is reasonable. Texas & Pacific Railway Co. v. Abilene Cotton Oil Co., 1906, 204 U.S. 426, 27 S. Ct. 350, 51 L. Ed. 553. However, the real question in this case is not whether the tariff is reasonable, but rather a question of construction, there being no dispute as to the facts, as to which of two tariffs is applicable -- the one for waste or the one for spitting cups.

 In Great Northern R. Co. v. Merchants' Elevator Co., 1922, 259 U.S. 285, 42 S. Ct. 477, 66 L. Ed. 943, Mr. Justice Brandeis delineated the jurisdiction of the Commission and of the courts in the construction of tariffs. In holding that the court had jurisdiction in that case he said, 259 U.S. at page 294, 42 S. Ct. at page 480:

 '* * * Here no fact, evidential or ultimate, is in controversy, and there is no occasion for the exercise of administrative discretion. The task to be performed is to determine the meaning of words of the tariff which were used in their ordinary sense and to apply that meaning to the undisputed facts. That operation was solely one of construction; and preliminary resort to the Commission was, therefore, unnecessary.'

 This case was quoted as authority in Bernstein Bros. Pipe & Machinery Co. v. Denver & R.G.W.R. Co., 10 Cir., 1951, 193 F.2d 441, 443. In the latter case the question was whether the railroad company was entitled to recover additional charges for a shipment of portable heating units under a tariff description reading "Machinery or Machines, or Parts Named: * * * Air cleaners, coolers, heaters, humidifiers or washers and blowers or fans combined" as against a tariff description claimed by the defendant to be applicable which read: "Boilers, Furnaces, Radiators, Stoves, Related Articles or Parts Named: Gas, gasoline or oil, noibn, including gas radiators, noibn, * * * in barrels, boxes or crates." The court held that it had jurisdiction saying, at page 444:

 In accord, Murray Co. v. Gulf, C. & S.F. Ry. Co., D.C.N.D.Tex.1945, 59 F.Supp. 366, where the court determined the tariff applicable on rates for shipments of "twisted or coiled" steel bars as distinguished from 'bomb bodies' or "bomb body parts"; and Pennsylvania R. Co. v. Fox & London, Inc., 2 Cir., 1938, 93 F.2d 669, where the court determined ...


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