B-141509, APRIL 12, 1960, 39 COMP. GEN. 700

B-141509, APRIL 12, 1960, 39 COMP. GEN. 700

PROPERTY - PUBLIC - LOSS OR DAMAGE - REPLACEMENT COSTS - CARRIER LIABILITY - GENERAL DAMAGES - ALASKA RAILROAD AIR TRANSPORTATION COSTS WHICH WERE INCURRED IN THE SHIPMENT OF REPLACED CONSTRUCTION MATERIAL LOST OR DAMAGED BEYOND REPAIR IN A DERAILMENT ON THE ALASKA RAILROAD SO THAT THE REPLACED MATERIAL COULD REACH THE CONSTRUCTION SITE BEFORE ADVERSE WEATHER CONDITIONS BEGAN MAY NOT BE REGARDED AS A COST INCIDENT TO AN URGENT OR SPECIAL CONDITION WHICH WAS WITHIN THE KNOWLEDGE OF THE ALASKA RAILROAD AT THE TIME OF ACCEPTANCE OF THE RAIL SHIPMENT TO MAKE THE CARRIER LIABLE, EVEN THOUGH THE RAILROAD HAD KNOWLEDGE OF THE CHARACTER AND USE OF THE MATERIAL AND GENERAL KNOWLEDGE OF WHEN ADVERSE CONSTRUCTION WEATHER WOULD BEGIN; THEREFORE, IN THE ABSENCE OF ACTUAL COMMUNICATION TO THE RAILROAD OF THE IMPORTANCE OF PROMPT DELIVERY AND THE CONSEQUENCES OF DELAY, THE AIR TRANSPORTATION COSTS ARE NOT FORESEEN OR ANTICIPATED EXPENSES TO BE THE NATURAL AND PROBABLE CONSEQUENCES OF A BREACH OF THE CONTRACT FOR SHIPMENT WITHIN THE DEFINITION OF GENERAL DAMAGES TO MAKE THE RAILROAD LIABLE.

TO THE SECRETARY OF THE AIR FORCE, APRIL 12, 1960:

REFERENCE IS MADE TO LETTER OF DECEMBER 14, 1959, FROM THE ASSISTANT SECRETARY OF THE AIR FORCE, RELATIVE TO A DISPUTE BETWEEN YOUR DEPARTMENT AND THE ALASKA RAILROAD, DEPARTMENT OF THE INTERIOR, CONCERNING PAYMENT OF A SUBROGATED CLAIM IN THE SUM OF $16,196.54 TO COVER ADDITIONAL COSTS INCURRED BY THE AIR FORCE IN TRANSPORTING VIA AIR CERTAIN REPLACEMENT CONSTRUCTION MATERIAL FROM BLAWNOX, PENNSYLVANIA, TO FAIRBANKS, ALASKA, THE INCIDENT ARISING OUT OF A DERAILMENT ON THE ALASKA RAILROAD.

IT APPEARS FROM THE FILE OF DOCUMENTS ACCOMPANYING THE LETTER OF DECEMBER 14, THAT EARLY IN JUNE 1956, THE BLAW-KNOX COMPANY, A SUB CONTRACTOR OF THE WESTERN ELECTRIC COMPANY PERFORMING A PRIME CONTRACT WITH THE AIR FORCE IN CONNECTION WITH THE CONSTRUCTION OF THE DISTANT EARLY WARNING LINE, TENDERED TO A RAIL CARRIER 3 CARS OF STEEL ANTENNA TOWER MATERIAL FOR SHIPMENT FROM BLAWNOX, PENNSYLVANIA, TO FAIRBANKS, ALASKA, FOR ACCOUNT OF THE AIR FORCE. ON JUNE 16, 1956, WHILE THE SHIPMENT WAS EN ROUTE TO FAIRBANKS, THE CARS WERE INVOLVED IN A DERAILMENT ON THE ALASKA RAILROAD LINE AT TALKEETNA, ALASKA, AS A RESULT OF WHICH MUCH OF THE MATERIAL IN THE CARS WAS DESTROYED OR DAMAGED BEYOND REPAIR.

A PHYSICAL INVENTORY OF THE DAMAGED MATERIALS WAS MADE BY REPRESENTATIVES OF THE AIR FORCE, THE BLAW-KNOX COMPANY, AND OTHERS CONCERNED IN THE MATTER, WHICH ACTION REQUIRED A PERIOD OF APPROXIMATELY 2 WEEKS. THE AIR FORCE THEN DIRECTED THE WESTERN ELECTRIC TO HAVE ITS SUPPLIER UNDERTAKE IMMEDIATE REPLACEMENT OF THE DAMAGED MATERIAL, ESTIMATED TO REQUIRE 6 WEEKS, AND, IF NECESSARY, TO PERFORM WORK ON A PREMIUM PRODUCTION BASIS. IN ADDITION, THE AIR FORCE AUTHORIZED SHIPMENT OF THE REPLACEMENT MATERIAL BY AIR TRANSPORTATION. IT WAS DETERMINED THAT SHIPMENT VIA AIR WOULD ENABLE DELIVERY OF THE MATERIALS ON THE SITE BETWEEN AUGUST 20 AND SEPTEMBER 7, WHEREAS THE USE OF RAIL OR OTHER SURFACE TRANSPORTATION WOULD EFFECT DELIVERY BETWEEN SEPTEMBER 13 AND 30, A PERIOD CONSIDERED DANGEROUSLY CLOSE TO THE BAD WEATHER CONSTRUCTION SEASON AND, THEREFORE, TOO LATE TO RISK COMPLETION OF THE SCHEDULED ANTENNA ERECTION WORK. IT IS INFORMALLY UNDERSTOOD THAT ALL COMPONENTS OF THE REPLACED MATERIAL WERE SHIPPED VIA AIR AT VARIOUS TIMES BETWEEN JULY 22 AND AUGUST 24, AND ARRIVED AT THE SITE ON OR BEFORE AUGUST 26.

THE WESTERN ELECTRIC COMPANY MADE CLAIM UPON THE ALASKA RAILROAD IN THE SUM OF $32,472.93, WHICH INCLUDED AIR TRANSPORTATION CHARGES OF $18,035.92, FOR LOSS AND DAMAGES SUSTAINED AS A RESULT OF THE TRAIN WRECK. BY ALASKA RAILROAD CLAIM SETTLEMENT DATED OCTOBER 8, 1957, THERE WAS ALLOWED AND PAID THE AMOUNT OF $16,276.39. THE DIFFERENCE OF $16,196.54 REPRESENTS THE UNPAID COSTS OF AIR TRANSPORTATION LESS THE AMOUNT OF $1,839.38 FOR PREPAID RAILROAD RESHIPPING CHARGES INCLUDED IN THE SETTLEMENT OF OCTOBER 8, WHICH IS THE SUBJECT OF THE CLAIM UNDER CONSIDERATION.

THE WESTERN ELECTRIC COMPANY PROTESTED THE SETTLEMENT AND REQUESTED PAYMENT OF THE ENTIRE AMOUNT OF ITS CLAIM, WHICH THE ALASKA RAILROAD DENIED. THEREAFTER THE AIR FORCE, IN ACCORDANCE WITH THE TERMS OF ITS CONTRACT WITH THE COMPANY, REIMBURSED THE LATTER FOR THE FULL EXPENSE OF AIR TRANSPORTATION IN THE AMOUNT OF $16,196.54, AND SUBMITTED A CLAIM FOR THAT AMOUNT TO THE ALASKA RAILROAD AS A SUBROGEE OF THE CLAIM OF WESTERN ELECTRIC, WHICH CLAIM ALSO WAS DENIED.

THE ALASKA RAILROAD'S DENIAL OF LIABILITY FOR THE AIR TRANSPORTATION CHARGES, TO THE EXTENT THAT THE CHARGES EXCEEDED THE COST OF RESHIPMENT BY RAIL, IS BASED UPON THE GROUNDS THAT NO SHOWING WAS MADE EITHER THAT THE CONTRACT FOR ANTENNA MATERIALS REQUIRED THE SHIPMENT TO BE MADE WITHIN A SPECIFIED PERIOD OF TIME, OR THAT THE CONTRACT CONTAINED A PENALTY CLAUSE BASED UPON A SPECIFIC COMPLETION DATE OF CONSTRUCTION, AND THAT, ACCORDINGLY, THERE WAS NO DOCUMENTARY PROOF FURNISHED THAT REPLACEMENT OF THE ANTENNA MATERIALS BY AIR TRANSPORTATION SERVICE WAS AN ABSOLUTE NECESSITY.

IN JUSTIFICATION OF THE USE OF AIR TRANSPORTATION FOR REPLACEMENT OF THE MATERIALS THE ASSISTANT SECRETARY EMPHASIZES THE IMPORTANCE OF THE DEW LINE TO THE AIR DEFENSE PROGRAM OF THE UNITED STATES, AND THE FACT THAT A DELAY IN CONSTRUCTION OF ANY PART OF IT WITH THE RESULTING DELAY IN THE ENTIRE SYSTEM COULD NOT BE CONSIDERED. AND IN SUPPORT OF THE CLAIM FOR REIMBURSEMENT OF THE COST OF AIR TRANSPORTATION INCURRED IT IS STATED IN THE LETTER AS FOLLOWS:

THE GENERAL RULE AS TO THE LIABILITY OF A CARRIER FOR BREACH OF CONTRACT IS AS FOLLOWS:

"A SELLER OR CARRIER OF GOODS WHO KNOWS THAT THEY ARE BOUGHT OR SHIPPED FOR CONSUMPTION OR USE, HAS REASON TO FORESEE THE INJURY THAT MAY BE CAUSED BY HIS BREACH IN CASE OF THE CUSTOMARY METHODS OF CONSUMPTION OR USE.' RESTATEMENT, CONTRACTS, SEC. 330D (1932). SEE ALSO, MILLER, LAW OF FREIGHT LOSS AND DAMAGE CLAIMS, SEC. 505.1-.9 (1953).

THUS, AS IN THE ORDINARY CONTRACT SITUATION, THE CARRIER IS LIABLE FOR GENERAL DAMAGES, I.E., THOSE WHICH NATURALLY FLOW FROM THAT TYPE OF BREACH, AS DISTINGUISHED FROM SPECIAL DAMAGES. IT CAN BE ASSUMED THAT THE ALASKA RAILROAD IS WELL AWARE OF THE SEASONAL NATURE OF THE CONSTRUCTION INDUSTRY IN ALASKA AND THE FACT THAT A DELAY OF A FEW WEEKS AT THE END OF THE CONSTRUCTION SEASON MAY WELL PREVENT THE COMPLETION OF A PROJECT FOR A NUMBER OF MONTHS. THIS BEING TRUE, THE RAILROAD SHOULD FORESEE THAT IN ANY CASE INVOLVING THE SHIPMENT OF CONSTRUCTION MATERIAL FOR THE SHIPPER TO USE THE MOST EXPEDITIOUS MEANS OF TRANSPORTATION IN ORDER TO AVOID DELAYING CONSTRUCTION UNTIL THE NEXT SEASON. THIS IS PRECISELY WHAT HAPPENED IN THE INSTANT CASE AND THE RAILROAD SHOULD BE LIABLE FOR THE EXPENSE OF AIR FREIGHT AS ONE OF THE ELEMENTS OF GENERAL DAMAGES.

THERE IS NO ISSUE AS TO THE RESPONSIBILITY OF THE ALASKA RAILROAD FOR DAMAGES RESULTING FROM THE DERAILMENT OR AS TO THE CORRECTNESS OF THE AMOUNT EXPENDED FOR AIR TRANSPORTATION. HENCE, THE QUESTION INVOLVED IN THIS CASE IS WHETHER, UNDER THE FACTS AND CIRCUMSTANCES OUTLINED HEREIN, THE ADDITIONAL EXPENSES INCURRED BY THE AIR FORCE FOR AIR TRANSPORTATION ARE PROPERLY CHARGEABLE TO THE ALASKA RAILROAD AS AN ELEMENT OF GENERAL DAMAGES.

THE LIABILITY OF A RAIL CARRIER FOR NEGLIGENT LOSS OR DAMAGE TO GOODS IN TRANSIT UNDER THE FEDERAL LAW APPLICABLE TO INTERSTATE SHIPMENTS (49 U.S.C. 20 (11) (, AS IN OTHER CASES OF BREACH OF CONTRACT, IS THE SHIPPER IS ENTITLED TO RECOVER "THE FULL ACTUAL LOSS, DAMAGE OR INJURY TO SUCH PROPERTY" AT POINT OF DESTINATION. ILLINOIS CENT. R. CO. V. CRAIL, 281 U.S. 57, 63; 30 COMP. GEN. 191, 193 AND CASES THERE CITED. GENERAL DAMAGES ARE SUCH AS ARE THE DIRECT, NATURAL AND PROXIMATE RESULT OF A BREACH, OR SUCH AS MAY REASONABLY BE SUPPOSED TO HAVE BEEN IN THE CONTEMPLATION OF THE PARTIES AT THE TIME THEY MADE THE CONTRACT AS THE PROBABLE RESULT OF THE BREACH OF IT, AND WILL BE IMPLIED AND PRESUMED BY THE LAW; WHILE SPECIAL DAMAGES ARE SUCH AS GO BEYOND THE LOSS OR DAMAGE OF PROPERTY AND ARE THE NATURAL BUT NOT THE NECESSARY CONSEQUENCES THEREOF. SPECIAL DAMAGES ARE RECOVERABLE IF THEY ARE SHOWN TO BE WITHIN THE CONTEMPLATION OF THE PARTIES AND, THEREFORE, REGARDED AS FORMING A PART OF THE CONTRACT. 25 (C.J.S., PAGES 456 AND 457 ( GENERAL DAMAGES), AND 459 AND 460 ( SPECIAL DAMAGES). ALSO, SEE MOSS JELLICO COAL CO. V. AMERICAN RY. EXPRESS CO., 248 S.W. 508; GARDINER V. MIDCONTINENT GRAIN CO. 168 F.2D 819, WHEREIN REFERENCE IS MADE (NOTE 2 BOTTOM OF PAGE 822), TO RESTATEMENT OF CONTRACTS, SECTION 330, CITED IN THE LETTER, AND TO THE DISTINCTION BETWEEN GENERAL AND SPECIAL DAMAGES.

TO ESTABLISH THE LIABILITY OF THE ALASKA RAILROAD FOR THE EXPENSES OF AIR TRANSPORTATION AS AN ELEMENT OF GENERAL DAMAGES, WITHIN THE DEFINITION OF GENERAL DAMAGES STATED ABOVE, IT MUST BE DETERMINED THAT SUCH EXPENSES WERE THE NATURAL AND PROBABLE CONSEQUENCES OF THE CARRIER'S DELAY IN TRANSPORTING THE MATERIALS, WHICH THE CARRIER SHOULD REASONABLY HAVE FORESEEN OR ANTICIPATED WHEN THE CONTRACT OF CARRIAGE WAS ENTERED INTO, AS THE PROBABLE RESULT OF A BREACH OF IT. WE ARE NOT AWARE OF ANY CONTROLLING DECISIONS BY THE COURTS DEALING WITH THE ALLOWABILITY OF REPLACING AIR TRANSPORTATION COSTS AS DAMAGES IN THE CASE OF LOSS OR DAMAGE TO SHIPMENTS BY A RAIL CARRIER.

WE BELIEVE THAT THE KNOWLEDGE OF THE ALASKA RAILROAD, AT THE TIME OF ITS ACCEPTANCE ( JUNE) OF THE CONSTRUCTION MATERIAL FOR TRANSPORTATION TO FAIRBANKS, OF THE CHARACTER OF SUCH MATERIAL TOGETHER WITH GENERAL KNOWLEDGE OF ADVERSE CONSTRUCTION WEATHER CONDITIONS STARTING ABOUT THE MIDDLE OF OCTOBER, STANDING ALONE, WAS NOT SUFFICIENT TO CHARGE IT WITH ACTUAL OR CONSTRUCTIVE NOTICE OF THE URGENCY, IMPORTANCE, OR SPECIFIC USE OF THE MATERIAL IN ORDER TO RENDER THE CARRIER LIABLE FOR THE REPLACING AIR TRANSPORTATION COSTS, BY REASON OF A FAILURE IN TRANSPORTATION AND DELIVERY OF THE SHIPMENT. IN THIS CONNECTION, WE INFORMALLY LEARNED FROM THE WEATHER BUREAU, DEPARTMENT OF COMMERCE, THAT THE CONSTRUCTION SEASON FOR FAIRBANKS, ALASKA, GENERALLY PREVAILS BETWEEN MAY AND THE MIDDLE OF OCTOBER OF EACH YEAR.

TO VIEW THE MATTER OTHERWISE WE MUST CONCLUDE THAT THE RAILROAD HAD NOTICE NOT ONLY THAT THE MATERIAL IN THE CARS WAS TO BE USED FOR PURPOSES OF CONSTRUCTION, BUT THAT IT MUST ALSO INFER THAT IF THE SHIPMENT WERE NOT ACCOMPLISHED AN EMERGENCY WOULD ARISE, WHICH THE CONSIGNEE WOULD BE UNABLE TO BRIDGE BY OBTAINING REPLACEMENT MATERIAL WITHIN A SUFFICIENT TIME VIA RAIL TO PERMIT COMPLETION OF THE CONSTRUCTION BEFORE THE BAD WEATHER SEASON FOR CONSTRUCTION SETS IN, AND, THEREFORE, WOULD BE FORCED TO STOP CONSTRUCTION WITH RESULTING DAMAGES, OR IF THE REPLACEMENT MATERIAL WERE SO PROCURED AND CONSTRUCTION CONTINUED UNDER ADVERSE WEATHER CONDITIONS AND ADDITIONAL COSTS INCIDENT THERETO WOULD MINIMIZE OR EQUAL THE EXPENSE OF SHIPPING THE REPLACEMENT MATERIAL BY AIR TRANSPORTATION. SUCH A VIEW, WE THINK, WOULD PLACE AN UNREASONABLE BURDEN ON THE CARRIER, AND IF FOLLOWED TO A REASONABLE CONCLUSION COULD BE SAID TO APPLY TO EVERY BREACH OF A SIMILAR CONTRACT OF CARRIAGE, REGARDLESS OF HOW EARLY IN THE CONSTRUCTION SEASON OF THE YEAR IT WAS ACCEPTED FOR TRANSPORTATION, OR THE CHARACTER AND INTENDED USE OF THE CONSTRUCTION MATERIAL BEING SHIPPED.

IF SUCH AN URGENT CONDITION EXISTED, IT SHOULD HAVE BEEN COMMUNICATED TO THE ALASKA RAILROAD, AND THE IMPORTANCE OF PROMPT DELIVERY OF THE SHIPMENT AND THE UNUSUAL CONSEQUENCES OF DELAY IMPRESSED UPON IT SO THAT IT COULD, IF DEEMED NECESSARY, PROTECT ITSELF BY SPECIAL PRECAUTION AGAINST FAILURE IN TRANSPORTATION AND DELIVERY, OR TO ENABLE IT TO DECLINE THE SHIPMENT IF, BY REASON OF THE UNUSUAL CONDITIONS, IT DID NOT CARE TO ASSUME THE RESPONSIBILITY THEREFOR. THE RECORD IN THIS CASE INDICATES THAT THE ALASKA RAILROAD HAD NO SUCH NOTICE OF THE URGENCY OR SPECIAL CONDITIONS INCIDENT TO ERECTION OF THE ANTENNA MATERIAL, SO AS TO TO IMPOSE UPON IT, WITHOUT ITS CONSENT, ANY SPECIAL LIABILITY. WOONSOCKET MACH. AND PRESS CO. V. NEW YORK, N.H. AND H.R. CO., 131 N.E. 461; ALTON R. CO. V. OKLAHOMA FURNITURE MFG. CO., 122 P.2D 152; STOLTZ V. CONVERSE, 172 P.2D 78; LAMBERT V. JEFFERSON, 30 SO.2D 594. CF. ADAMS EXPRESS CO. V. ALLEN, 100 S.E. 473; ZIZZO V. RAILWAY EXPRESS AGENCY, 131 F.1SUPP 326; DALE TRUCK LINE V. R. AND M. WELL SERVICING AND DRILLING CO., 286 S.W. 2D 446.

ACCORDINGLY, IT IS OUR VIEW THAT THE DAMAGES UNDER CONSIDERATION COULD NOT HAVE BEEN WITHIN THE CONTEMPLATION OF THE PARTIES WHEN THE STEEL ANTENNA MATERIAL WAS ACCEPTED FOR TRANSPORTATION. NEITHER DO WE BELIEVE THAT THEY WERE THE PROXIMATE RESULT OF THE DELAY IN TRANSPORTATION. THE DAMAGES NOT FALLING UNDER THE DEFINITION OF GENERAL DAMAGES IN THE CASES AND AUTHORITY CITED ABOVE WE CONCLUDE, THEREFORE, THAT THE ALASKA RAILROAD IS NOT LIABLE FOR PAYMENT OF THE SUBROGATED CLAIM OF THE AIR FORCE IN THE SUM OF $16,196.54.

A COPY OF THIS DECISION IS BEING FURNISHED TO THE GENERAL MANAGER OF THE ALASKA RAILROAD.