Case ID: us-ct-cl_137/html/0750-01.html
Source: Caselaw Access Project
Author: {"author": "MaddeN, Judge, \n      Laramore, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

PHILIP MORRIS & CO., LTD., INCORPORATED, TO THE USE OF AETNA INSURANCE COMPANY v. THE UNITED STATES P. LORILLARD COMPANY, INCORPORATED, TO THE USE OF AETNA INSURANCE COMPANY v. THE UNITED STATES
    No. 683-53
    No. 684-53
    [Decided March 6, 1957]
    
      
      Mr. J. A. Marshall for the plaintiffs in Nos. 688-58 and 684-53. Messrs. Hugh H. Obear, and Sands, Marks & Sands, Douglas, Otear & Campbell were on the briefs.
    
      Mr. Benjamin H. Pester, with whom was Mr. Assistant Attorney General Charles K. Rice, for defendant. Mr. James P. Garland was on the briefs.
   MaddeN, Judge,

delivered the opinion of the court:

The plaintiffs sue to recover the price which they paid to the Government for revenue stamps which they affixed to packages of cigarettes, cigars, and smoking tobacco, which tobacco products and stamps were destroyed by fire while being transported by truck to customers of the plaintiffs. We have held in prior cases that the Act of March 3, 1931, c. 441, 46 Stat. 1510, Sec. 2198 of the Internal Revenue Code of 1939 is applicable to such situations and authorizes the redemption of stamps so destroyed. Philip Morris & Co., Ltd., Incorporated, etc. v. United States, 120 C. Cls. 703; Stephano Brothers, etc. v. United States, 116 C. Cls. 503.

The Government urges that the instant plaintiffs cannot recover because they did not own the tobacco products and stamps at the time of their destruction. Under the applicable statute, only the manufacturer or importer of tobacco products has the right to redeem stamps. If then, the ownership has passed to a purchaser from the manufacturer, the redemption statute would not seem to apply. Also, if the plaintiffs were not the owners of the destroyed articles, they would not have a property interest on which to base their suit.

The plaintiffs shipped the goods by truck, freight prepaid, to their customers. That would indicate that title would not pass until the carriage was completed and the goods were delivered to the customers. But in billing the purchasers, the freight charge was added as a separate item. Since the purchaser was to pay the freight, that would indicate that the goods were to be his during carriage. And the invoices stated that transportation was to be at the purchaser’s risk, which would be a strong indication that the goods belonged to the purchaser while they were at his risk. While this was the way the contract was worded, it did not express the real agreement of the parties. When the goods were destroyed by fire, the plaintiffs immediately replaced the goods, and cancelled the charges for the destroyed goods. They did this without waiting for reimbursement by the carrier. They thus showed by their actions that the goods were at their risk during transportation, and that is, of course, strong evidence of their ownership. The Government, not a party to the contract of sale, is not in a position to contradict the interpretation which the parties, by their actions, put upon their contract, even though that interpretation is not consistent with the words of their contract. We conclude that the plaintiffs were the owners of the destroyed goods.

The Government says that the plaintiffs “sold” the destroyed goods to the trucking company, after they had been destroyed by fire, and were paid in full by the trucking company, so that they have been compensated for the tobacco and the stamps. They have been so compensated, but not as a result of a sale. Invoices of the goods were sent to the trucking company by plaintiffs but only as evidence of what goods they had shipped, and of their value. The carrier, as an insurer of the goods against all risks except certain ones not here relevant, paid the plaintiffs the value of the goods. The carrier was, in turn, insured by the Aetna Insurance Company, which paid it the same amounts which it had paid the plaintiffs.

We consider first the effect which the carrier’s payments to the plaintiffs may have had upon the plaintiffs’ rights to redemption of the stamps. If one sues a wrongdoer who has damaged him or his property, the wrongdoer cannot defeat his suit by showing that he has been paid by an insurance company which had insured him against such risks. And unless the insurance company had contracted for a right of subrogation to his claim against the wrongdoer, he may keep both the insurance money and the damages recovered from the wrongdoer.

The Government is, of course, not in the position of a wrongdoer in these cases. But if the plaintiffs had the statutory right, as we have held in prior cases that they had, to redeem the destroyed stamps, we think the Government cannot deny that right on the ground that other arrangements which the plaintiffs may have had with another person required that other person to pay the plaintiffs the value of the stamps, in the circumstances in which they were destroyed. See United States v. American Tobacco Company, 166 U. S. 468.

The plaintiffs sue here to the use of Aetna Insurance Company. There was no contract of insurance or of sub-rogation between the plaintiffs and Aetna Insurance Company, and hence there is no basis for making that company the beneficiary of our judgments.

In Philip Morris & Co., Ltd. v. United States, 128 C. Cls. 153, the petition alleged that the insurance company, to whose use the plaintiff was suing, paid the plaintiff for the destroyed tobacco products and stamps. That may have indicated a third party beneficiary relation between the insurance company and the plaintiff, although the insurance policy there, as here, was issued to the transportation company. In the instant case, our findings show that the insurance company paid the transportation company. The latter company indorsed the checks over to the plaintiffs, but that was only its way of paying its obligation to the plaintiffs, and did not indicate any contractual relation between the insurance company and the plaintiff.

The court, in Philip Morris last cited supra entered judgment, as requested, to the use of the insurance company. On the facts of the instant case, we think no basis exists for doing that. We will, therefore, enter judgments for the plaintiffs. What they may feel legally or morally bound to do with the money when they get it is not our concern.

The plaintiffs in Nos. 683-53 and 684-53 may have judgments in the amounts of $5,864.26 and $330, respectively, each with interest as provided by law.

It is so ordered.

Whitaker, Judge; Littleton, Judge; and Jones, Chief Judge, concur.

Laramore, Judge,

dissenting:

I respectfully dissent for the following reasons: Plaintiff sues for the benefit of the Aetna Insurance Company, the insurer of the Overnite Transportation Company. I do not believe plaintiff can maintain this suit because there is no privity of interest or contractual relationship between the plaintiff and the insurer. The only subrogation is between the insurance company and the carrier.

The Aetna’s liability to the carrier was merely to pay the carrier for the liability which the carrier incurred to the shipper or consignee on account of the loss of the goods. Having paid the carrier, the insurance company became subrogated to the right of action the carrier might have had against any one whose negligence caused or contributed to the loss. No action of the Government or plaintiff caused or contributed to the loss of the goods, and the insurance company could not by right of subrogation maintain a suit against the United States.

The insurer is dependent for the maintenance of this suit upon the rights of the assured. Plaintiff in this case was not the assured and cannot maintain this suit. Phoenix Insurance Company v. Erie and Western Transportation Company, 117 U. S. 312.

The liability of the Aetna Insurance Company was only to the Overnite Transportation Company, and merely because the Overnite Transportation Company endorsed the Aetna check over to the plaintiff would not create a contract between plaintiff and Aetna such as to give rise this suit.

The tobacco products were delivered to the Overnite Transportation Company upon a bill of lading under which the plaintiff shipper retained no right in the products. Therefore, I believe plaintiff cannot maintain this suit either for itself or for the benefit of the insurer.

Furthermore, the majority opinion gives judgment to the plaintiff to do with what it may. Plaintiff is not out one cent by reason of the loss, and I can think of no reason why it should receive this “windfall.”

I would dismiss the petition.

FINDINGS OF FACT

The court, having considered the evidence, the report of Commissioner Richard H. Akers, and the briefs and argument of counsel, makes findings of fact as follows:

1. The plaintiff in case No. 683-58 is a Virginia corporation. At all times hereinafter mentioned, it was a manufacturer of tobacco products, including cigarettes and smoking tobacco, having a factory at Richmond, Virginia, which it operated for that purpose.

2. On December 3, 1951, pursuant, in most instances, to standing orders placed with it by twenty-one customers in North Carolina and Tennessee, the plaintiff withdrew from its warehouse in Richmond for consumption or sale 73,000 original, full and unbroken statutory packages of cigarettes manufactured by it, and 894 original, full and unbroken statutory packages of smoking tobacco manufactured by it, and delivered these packages of cigarettes and smoking tobacco to the Overnite Transportation Company, a common carrier, for shipment to these various customers.

Prior to the withdrawal of those tobacco products from its factory and their delivery to the Overnite Transportation Company, the plaintiff had duly affixed to such packages Federal Internal Revenue stamps, of series 121, of the value of $5,840 with respect to the cigarettes and $24.26 with respect to the smoking tobacco, that is, stamps in a total value of $5,864.26.

3. The Overnite Transportation Company issued and delivered to the plaintiff straight bills of lading covering the shipments consigned to the various purchasers. The plaintiff prepaid the freight charges and included these freight charges in the invoices to its customers as a part of the selling price of the products.

4. The total amount of each invoice included the prepaid freight, the value of the stamps affixed to each package as well as the plaintiff’s other costs and the profit on the sale, and such total amount was charged by the plaintiff to the account of each purchaser. Each purchaser had an open running account with the plaintiff. The invoices contained the following provisions:

Subject to a 2% cash discount if paid within 10 days from date of this invoice;

and

Transportation at purchaser’s risk.

The invoices were in the total amount of $11,562.24.

5. On the night of December 3,1951, during the course of the transportation of the tobacco products mentioned above, an accident occurred in which the truck containing such products ran off the road and over the railing of a bridge near Danville, Virginia, resulting in a fire which destroyed the truck and most of the tobacco products as well as the stamps affixed thereto. The tobacco products which were not burned were so completely water-soaked that they, as well as the stamps affixed thereto, were a complete loss and none of the tobacco cargo or the stamps was recovered.

6. Immediately after the accident, the Overnite Transportation Company, in accordance with the customary practice in the matter of such losses, notified the plaintiff of the destruction of the products in order that the plaintiff could duplicate the shipments and avoid inconveniencing its customers. Shortly thereafter, the New York office of the plaintiff received a teletype message from its Eichmond representative as follows :

Overnite Transportation Company advises the following orders were burned up in truck last night and suggest we duplicate the shipments and file claim.

The teletype message then listed the various customers involved as well as the quantity and character of each shipment. The plaintiff thereupon, in accordance with its customary procedure, made replacement shipments to each of these customers under the same conditions and in the same amounts as the original shipments, and charged these shipments to these customers at the same price as shown in the original invoices for the shipments which were destroyed.

7. On December 11, 1951, the plaintiff prepared invoices through which it charged the Overnite Transportation Company with the invoiced amounts of the various shipments which had been destroyed and, at the same time, issued credit vouchers through which it credited the various customers with the invoiced amounts of the original shipments which had been destroyed.

8. On or about December 11, 1951, the plaintiff prepared and forwarded to the Overnite Transportation Company claims for loss and damage covering the shipments of the tobacco products which were destroyed on December 3,1951, as described above. Such claims were in the amounts of the invoices to its customers for such products, which invoices, as described above, included prepaid freight as well as the cost of the stamps which were affixed to the packages. Invoices made out to Overnite Transportation Company for each shipment and in the same amount as each original invoice to the plaintiff’s customers, the original bills of lading, and bonds of indemnity accompanied the claims which were forwarded by the plaintiff to the Overnite Transportation Company.

9. The Overnite Transportation Company was insured against losses of the nature involved in this proceeding under a continuing insurance policy with the Aetna Insurance Company. On January 31, 1952, the Aetna Insurance Company issued twenty-one checks in the total amount of $11,479.82 made payable to “Overnite Transportation Company and Philip Morris & Company, Ltd., Inc.”, such checks being in the amounts of the respective invoices less the amount of the prepaid freight. After the receipt of the checks, the Overnite Transportation Company endorsed them and transmitted them to the plaintiff with its own check in the amount of $82.42, which latter amount represented the prepaid freight charges which had been included in the invoices but were not paid by the Aetna Insurance Company. With these checks, the plaintiff has been paid in full for the sale price of the tobacco products, including the value of stamps affixed thereto, which were shipped on December 3, 1951, and lost in the accident on that date, as described in these findings. The insurance adjuster had no contact or correspondence with the plaintiff or its consignees of the products in question prior to the settlement and payment of the claims in question.

The policy of the Overnite Transportation Company with the Aetna Insurance Company referred to above contained the following provision:

SubROgatioN. (8) This Company shall, on payment of any claim hereunder, be subrogated to the extent of such payment to all rights of recovery by the Assured against any person or corporation, and as a further assurance the Assured shall assign all such rights of action to the Company or its nominee; and permit suit to be brought in the Assured’s name, but at this Company’s expense, and through such counsel as the Company may designate, and the Assured further agrees to render all' reasonable assistance in the prosecution of said suit or suits.

10. On October 29,1952, the plaintiff duly filed a claim for refund or redemption of the stamps in the sum of $5,864.26, which had been destroyed as set out above, and on November 18, 1953, the defendant rejected that claim in full.

11. The plaintiff in case No. 684 — 53 is a New Jersey corporation. At all times hereinafter mentioned, it was a manufacturer of tobacco products, including cigars and cigarettes, having a factory at Richmond, Virginia, which it operated for that purpose.

12. On December 3, 1951, pursuant to a standing order from Bennett Lewallen Company, of Winston-Salem, North Carolina, the plaintiff withdrew from its warehouses in Richmond, Virginia, for consumption or sale, original, full and unbroken statutory packages containing 40,000 cigarettes manufactured by it, and delivered these cigarettes to the Overnite Transportation Company, a common carrier, for shipment to Bennett Lewallen Company.

13. On December 3,1951, pursuant to a standing order from Piedmont Cigar Company, of High Point, North Carolina, the plaintiff withdrew from its warehouse in Richmond, Virginia, for consumption or sale, original, full and unbroken statutory packages containing 20,000 cigars manufactured by it, and delivered these cigars to the Overnite Transportation Company, a common carrier, for shipment to Piedmont Cigar Company.

14. At or shortly prior to the withdrawal of those tobacco products from its factory and their delivery to the Overnite Transportation Company, the plaintiff had duly affixed to the packages of cigarettes Federal Internal Revenue stamps of series 121 of the value of $160; to the packages containing 5,000 cigars involved in this action Federal Internal Revenue stamps, class C, series 121, of the value of $20; and to the packages containing 15,000 cigars involved in this action Federal Internal Revenue stamps, class C, series 121, of the value of $150, making a total value for the stamps affixed to the packages of cigars and cigarettes of $380.

15. The Overnite Transportation Company issued and delivered to the plaintiff straight hills of lading covering the shipments consigned to the purchasers. The plaintiff prepaid the freight charges and included these freight charges in the invoices to its customers as a part of the selling price of the products.

16. The total amount of each invoice, including freight charges and value of stamps, was charged by the plaintiff to the account of each purchaser, such invoices being in the following amounts:

Bennett Lewallen Company_ $308.38
Piedmont Cigar Company_1,183. 60

Each purchaser had an open running account with the plaintiff. The invoices contained the following provisions:

Terhs Cash : We allow a discount of 2% for cash in 10 days from date of invoice payable * * * to the order of P. Lorillard Company, Inc. * * * Goods sold on the express condition that transportation is at purchaser’s risk.

17.On the night of December 3,1951, during the course of the transportation of the tobacco products mentioned above, an accident occurred in which the truck containing such products ran off the road and over the failing of a bridge near Danville, Virginia, resulting in a fire which destroyed the truck and most of the tobacco products as well as the stamps affixed thereto. The tobacco products which were not burned were so completely water-soaked that they, as well as the stamps affixed thereto, were a complete loss and none of the tobacco cargo or the stamps was recovered.

18. Immediately after the accident, the Overnite Transportation Company, in accordance with the customary practice in the matter of such losses, notified the plaintiff of the destruction of the products in order that the plaintiff could duplicate the shipments and avoid inconveniencing its customers.

19. On December 5, 1951, the plaintiff, in accordance with its customary procedure, made a shipment to Bennett Lewal-len Company, of Winston-Salem, to replace the shipment of December 8,1951, which had been destroyed, and charged the account of Eli Witt Cigar Company (the owner of Bennett Lewallen Company branch) with the same amount as the original shipment, that is $308.38, and under the same terms and conditions as the original shipment.

20. On December 10,1951, the plaintiff, in accordance with its customary procedure, made a shipment to Piedmont Cigar Company to replace the shipment which had been destroyed on December 3,1951, and charged the account of Piedmont Cigar Company with the same amount as in the case of the original shipment, that is $1,183.60, and under the same terms and conditions as the original shipment.

21. On December 14, 1951, the plaintiff charged the Over-nite Transportation Company with the invoiced amounts of the two shipments which had been destroyed and, at the same time, made corresponding credits to the two customers, that is, $308.38 in favor of Bennett Lewallen Company and $1,183.60 in favor of Piedmont Cigar Company.

22. The plaintiff prepared and forwarded to the Overnite Transportation Company claims for loss and damage covering the shipments of the tobacco products which were destroyed in the accident on December 3, 1951. Such claims were in the amount of the invoices to its customers for such products, which invoices included prepaid freight as well as cost of the stamps which were affixed to the packages, that is, in the total amount of $1,491.98. The original invoices and bills of lading accompanied the claims when they were forwarded by the plaintiff to the Overnite Transportation Company.

23. The Overnite Transportation Company was insured against losses of the nature involved in this proceeding under a continuing insurance policy with the Aetna Insurance Company. On January 31,1952, the Aetna Insurance Company issued one check to “Overnite Transportation Company and P. Lorillard Company, Inc.” in the amount of $1,175.64 on account of the loss of the shipment to the Piedmont Cigar Company, and another check payable in the same manner in the amount of $306.83 on account of the shipment to Bennett Lewallen Company. After the receipt of the checks, the Overnite Transportation Company endorsed them and transmitted them to the plaintiff with its own check in the amount of $9.51, which latter amount represented the prepaid freight charges which had been included in the invoices but were not paid by the Aetna Insurance Company. With these checks, the plaintiff has been paid in full for the sale price of the tobacco products (including the value of stamps affixed thereto) which were shipped on December 3,1951, and lost in the accident on that date as described in the preceding findings. The insurance adjuster had no contact or correspondence with the plaintiff or its consignees of the products in question prior to the settlement and payment of the claims in question.

The policy of the Overnite Transportation Company with the Aetna Insurance Company referred to above contained the following provision:

Subrogation. (8) This Company shall, on payment of any claim hereunder, be subrogated to the extent of such payment to all rights of recovery by the Assured against any person or corporation, and as a further assurance the Assured shall assign all such rights of action to the Company or its nominee; and permit suit to be brought in the Assured’s name, but at this Company’s expense, and through such counsel as the Company may designate, and the Assured further agrees to render all reasonable assistance in the prosecution of said suit or suits.

24. On October 29,1952, the plaintiff duly filed a claim for refund or redemption of the stamps in the sum of $330, which had been destroyed as set out above, and on November 18, 1953, the defendant rejected that claim in full.

CONCLUSION OF LAW

Upon the foregoing findings of fact, which are made a part of the judgments herein, the court concludes as a matter of law that the plaintiffs are entitled to recover, and it is therefore adjudged and ordered that they recover of and from the United States Five Thousand Eight Hundred and Sixty-four Dollars and Twenty-six Cents ($5,864.26) in case No. 688-53, and Three Hundred and Thirty Dollars ($330) in case No. 684-53, each with interest as provided by law.