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Volume 9, Edition 8

Dones v. Super Service

Court of Appeals of Kentucky.

Pamela DONES, Appellant

v.

SUPER SERVICE, INC., Appellee.

No. 2005-CA-001696-MR.

 

Aug. 18, 2006.

 

OPINION

COMBS, Chief Judge.

Pamela Dones appeals from entry of a summary judgment by the Madison Circuit Court in favor of Super Service, Inc., (“Super Service”), and its denial of Dones’s motion for partial summary judgment. Dones filed a lawsuit against Super Service, a trucking company, for injuries that she sustained in an accident involving a Super Service tractor (minus the trailer) in which she was a passenger. At issue is the enforceability of a release signed by Dones prior to the accident purporting to relieve Super Service of liability for her injuries.

 

Super Service is a general freight trucking company located in Somerset, Kentucky. It is wholly owned by the Gainey Corporation, which is incorporated in Michigan. Super Service has a “rider program” that permits drivers employed by Super Service to bring along a passenger while they are transporting freight for Super Service. Such programs are standard in the trucking industry. In order to participate in the Super Service rider program, the passenger is required to sign a release form which expressly relieves Gainey Corporation (the parent corporation of Super Service) from all liability for potential damages incurred by such passengers. This form (“the Release”) must be signed by the prospective passenger, by the driver, and by a representative of Super Service.

 

The driver must also sign a separate authorization for insurance coverage for the passenger; the monthly premium for this coverage ($15.00 at the time of this accident) is deducted by Super Service from the driver’s wages and is then paid directly to the AIG Life Insurance Company. The insurance request form (“the Insurance Request”) has signature lines for only the driver and the company representative. Although the prospective passenger does not sign this form, it does provide that the passenger and the driver should read it carefully.

 

At the time of the accident, Dones’s boyfriend, Gary Dickinson, was employed as a driver for Super Service. On August 2, 2002, Dickinson, Dones, and Trampas Newberry, a dispatcher for Super Service, executed a Release form. Dones did not read the form before signing it-although she testified that she could have done so. The Super Service Release provides as follows:

 

 

PASSENGER AUTHORIZATION AND RELEASE OF LIBILITY [SIC]

 

(Both Passenger and Driver Should Read Carefully Before Electing to Voluntarily Sign)

 

I. PASSENGER AUTHORIZATION

 

 

 

This document constitutes authority by Gainey Corporation for Pamela Dones (“Passenger”) to be transported as the only passenger with Gary L. Dickinson (Driver’s Name) for the following trip:

Beginning Date: [blank]

Origin: [blank] Destination: [blank]

 

 

 

Neither party has addressed the implications-if any-of the fact that spaces for “Beginning Date,” “Origin,” and “Destination” were left blank on this form. However, the appellee has included as an appendix to its brief a copy of 49 CFR (Code of Federal Regulations) 392.60, which provides in relevant part that “[w]hen authorization [for a passenger] is issued, it shall state … the points where the transportation is to begin and end, and the date upon which such authority expires.”

 

Unit Number/Driver Number: 2913

This authorization shall end with the Destination reached and shall not include any deviations or detours for personal reasons. Passenger is not authorized to operate the unit or associated trailer (collectively “Equipment”) or to perform any labor Associated with the Equipment or load at any time.

By signing below, Passenger acknowledges and agrees that Passenger is not an employee of Gainey Corporation or an independent contractor providing goods or services to Gainey Corporation. Passenger further acknowledges and understands that Gainey Corporation will not pay any amount for any accident, injury, loss or damage arising out of or related to Passenger riding in the Equipment, nor will Gainey Corporation provide a policy of insurance that provides coverage, including workers’ compensation coverage, for Passenger or Passenger’s property. [Emphasis added.]

 

 

 

II. RELEASES OF LIABILITY

 

A. Driver’s Full Release of Liability. In consideration for Gainey Corporation’s authorization to allow Driver’s spouse, son, daughter, or any other passenger to ride in the Equipment, Driver, by signing below, hereby releases Gainey Corporation from any and all claims, liability, rights, actions, suits and demands, including any rights under a claim of loss of affection or of consortium, whether in law or in equity, that Driver may have against Gainey Corporation, including its affiliates, employees, agents, officers, directors or successors. Moreover, this signed Release may be pleaded by Gainey Corporation as a counterclaim to or as a defense in bar or abatement of any action of any kind whatsoever brought, instituted, or taken by or on behalf of Driver. Driver also agrees that this Release shall be governed by the law of Michigan.

B. Passenger’s Parent’s or Guardian’s Full Release of Liability. In consideration for Gainey Corporation’s authorization to allow Passenger to ride in the Equipment, Passenger, or Passenger’s parent or guardian if Passenger is under the age of 18, by signing below, hereby releases Gainey Corporation from any and all claims, liability, rights, actions, suits and demands, including any rights under a claim of loss of affection or of consortium, whether in law or in equity, that Passenger may have against Gainey Corporation, including its affiliates, employees, agents, officers, directors or successors. Moreover, this signed Release may be pleaded by Gainey Corporation as a counterclaim to or as a defense in bar or abatement of any action of any kind whatsoever brought, instituted, or taken by or on behalf of Passenger. Passenger also agrees that this Release shall be governed by the law of Michigan.

/s/ Gary Dickinson, Pamela Dones, and Trampas Newberry (dispatcher)

 

Dickinson and Newberry also executed an Insurance Request form. It provides:

 

 

PASSENGER ACCIDENT COVERAGE REQUEST

 

(Both Passenger and Driver Should Read Carefully Before Electing to Voluntarily Sign)

This document constitutes a request from Gary L. Dickinson (Driver’s Name) for a passenger authorization from Gainey Corporation for any person meeting Gainey Corporation passenger policy requirements to be transported with said driver for the specified duration time of the passenger insurance coverage.

Beginning Date: 8/2/02

Ending Date: 8/2/03

Note: This authorization shall end upon the expiration date of the passenger insurance coverage.

Passenger is not authorized to operate the unit or associated trailer (collectively “Equipment”) or to perform any labor associated with the Equipment or load at any time.

By signing below, driver/owner voluntarily request[s] insurance coverage for passengers under the AIG Life Insurance Company, Policy No. 8046026. A copy of the policy shall be available upon reasonable request. For this coverage, the driver/owner hereby authorizes Gainey Corporation to deduct the premium of $15.00 per month from the Driver’s bond account.

(Deduction will equal $15.00 X no. mo.’s indicated above)

 

The $15.00 monthly insurance premiums were deducted directly from Dickinson’s wages until he terminated the coverage in December 2002. Since another Super Service driver had agreed to partner with Dickinson to share the driving responsibilities in Dickinson’s tractor, Dickinson would no longer have room to carry Dones on most runs.

 

On May 18, 2003, Dones accompanied Dickinson in his tractor on a run to Georgetown, Kentucky, to pick up a trailer which he was to transport to West Virginia. Dickinson did not inform Dones that he had allowed the insurance coverage to lapse. Dones was unaware that she was no longer authorized to ride as a passenger in the truck.

 

An accident occurred on I-75 as the tractor was traveling at approximately seventy miles per hour on cruise control; a light rain was falling. Dones had gone to the back of the tractor at Dickinson’s request to fetch a snack. Meanwhile, Dickinson unfastened his seat belt in order to reach for his cell phone, which was resting on top of his CB radio. As he reached for the phone, he pulled up on his left hand to grip the steering wheel. By the time he started to sit back down, the tractor had veered over into the left lane where a car was approaching. Dickinson jerked the steering wheel back to the right, failing to account for the fact that he was not yet towing a trailer. The tractor spun out of control and struck a rock embankment at least twice.

 

Dones was seriously injured as a result of the accident. She suffered numerous broken ribs, a ruptured spleen, a severe liver laceration, a collapsed lung, an injury to her cervical spine, a crushed windpipe, and multiple lacerations and abrasions.

 

On August 27, 2003, Dones filed suit against Super Service in Madison Circuit Court, alleging negligence and seeking damages for pain and suffering, medical expenses, loss of earnings, physical impairment, psychological injuries, future conditions, and punitive damages. Super Service filed a motion for summary judgment and argued that Dones’s claims were barred by the Release that she had signed. In the alternative, Super Service contended that Dickinson’s decision to allow the insurance to lapse had rendered Dones an unauthorized passenger for whom Super Service could incur no vicarious liability. Dones filed a motion for partial summary judgment on the issue of Dickinson’s negligence as the cause of the accident. The trial court granted Super Service’s motion and denied Dones’s motion. This appeal followed.

 

In reviewing a grant of summary judgment, case law carefully defines our parameters.

The standard of review on appeal of a summary judgment is whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law.

 

Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App.1996) citing CR   56.03. The burden of proof rests on the party seeking summary judgment: “The record must be viewed in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his favor.”  Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky.1991) (citations omitted).

 

 

Kentucky Rules of Civil Procedure.

 

Super Service prevailed before the trial court primarily with two arguments: first, that Dones was an unauthorized passenger at the time of the accident, and employers are not vicariously liable for unauthorized passengers; second, that the Release which she had signed was valid and enforceable and thus relieved Super Service of any liability.

 

We shall first consider the lapse of insurance coverage-its effect both on Dones’s status as a passenger and on the enforceability of the Release agreement. By the express terms of the “Insurance Request” signed by Dickinson and by a representative of Super Service, Dones was rendered “unauthorized” to ride as a passenger as soon as Dickinson stopped paying the insurance premiums. The form emphatically stated in bold, underlined typeface: “This authorization shall end upon the expiration date of the passenger insurance coverage.”

 

The issue is whether this provision served to void the agreement between Dones and Super Service in which she released Super Service from liability in exchange for permission to ride as a passenger. When the insurance coverage lapsed and she became an unauthorized passenger, did her previous release also become void? Dones was not a party to the insurance agreement; that form required only the signatures of the driver and a Super Service representative. Thus, Dones was entirely dependent on Dickinson to inform her of the status of her authorization as a passenger. The record indicates that she was never informed that her authorization to ride was wholly dependent on Dickinson’s payment of the insurance premiums. Super Service did not contact her to notify her of the expiration of the coverage.

 

Dickinson testified in his deposition that Dones requested assurance that she had continuing permission to ride in the truck. He stated: “I told her I still had a copy of this here [the Release agreement] inside my log book. That gave her permission to ride. And I never said anything else about it.” However, the Insurance Request was a separate agreement solely between Dickinson and Super Service.

 

Although Dones was never a party to the Insurance Request, Super Service argues that under its express terms, Dones became an unauthorized passenger. Therefore, since Dickinson was acting outside the scope of his employment in allowing her to ride in the truck, Super Service cannot be vicariously liable for her injuries.

The rule is well settled in this jurisdiction that a servant has no implied authority to invite or permit a third person to ride on a vehicle in his charge and if, in so doing, the invitee sustains injuries through negligence of the servant, the master will not be liable, as the servant is not acting within the scope of his authority.

 

Wigginton Studio, Inc. v. Reuter’s Adm’r, 71 S.W.2d 14, 16 (Ky .1934).

 

An exception to this rule was carved out in Estell v. Barrickman, 571 S.W.2d 650 (Ky.App.1978), in which this Court concluded that if an employee was vested with apparent authority to authorize passengers, the employer could be held vicariously liable for the employee’s negligence.

Apparent authority is not actual authority, but rather “is that which, by reason of prevailing usage or other circumstance, the agent is in effect held out by the principal as possessing. It is a matter of appearances, fairly chargeable to the principal and by which persons dealt with are deceived, and on which they rely.”

 

Estell, at 652. citing Annot., 2 A.L.R.2ND, 406, 407 (1948).

 

Under the facts of this case, Dickinson arguably possessed the apparent authority to carry passengers. David Hargis, the Director of Safety and Compliance for Super Service, testified at his deposition as follows:

Q. And Super Service relies solely on-in this chain of communication between Super Service and Ms. Dones, solely on the representations of its drivers to its passengers?

A. That’s correct, sir.

 

Dones had no means of knowing of the termination of the Insurance Request agreement except through what Dickinson chose to tell her. Therefore, at the time of the accident, Dones might have believed that she was duly authorized to ride as a passenger with Dickinson. She had received such assurance from Dickinson after deliberately asking him about her status as an authorized passenger. Pursuant to the Estell exception as to the binding effect on a principal by virtue of the apparent authority of an agent, Super Service could be vicariously liable for Dones as an invitee. We agree with Dones that the nature of her understanding of the arguable apparent authority of Dickinson was indeed an issue of fact rendering inappropriate and premature the entry of summary judgment in favor of Super Service. We vacate on this issue and remand for further proceedings.Dones has argued in the alternative that

[a]s the Release is expressly limited in effect to “authorized transportation,” and Super Service has declared unconditionally Ms. Dones was in fact not authorized to be in the truck, the Release cannot be enforced against Ms. Dones.

 

We disagree. Dones cannot simultaneously or alternatively be authorized and unauthorized. She cannot claim that she was an unauthorized passenger by seeking to void the effect of the Release while also contending that she was authorized under the theory of apparent authority in order to invoke the vicarious liability of Super Service. Since she was authorized as far as her own agreement with Super Service was concerned, she was bound by the Release-unless it is determined by its terms to be invalid.

 

Highly relevant to this issue of validity of the Release is the choice of law provision contained in the Release, which provides that “Passenger … agrees that this Release shall be governed by the laws of Michigan.”

 

Super Service has observed that contract provisions electing choice of applicable law have been upheld and applied by Kentucky courts. In General Elec. Co. v. Martin, 574 S.W.2d 313 (Ky.App.1978), an article of a pension plan provided that the law of New York would govern its construction and administration. In a footnote, the court noted that “Such provisions are intended to insure uniformity in administration of pension plans of multi-state corporations…. As a matter of Kentucky Law, the provision is valid.”  General Elec., 574 S.W.2d at 316-17, n. 1. However, in that case, there was no significant difference between the law of the two states regarding the pension issues. Id.

 

In the case before us, there is a significant difference between Michigan and Kentucky with respect to releases and/or exculpatory contracts. Michigan permits a releasor to disavow such a provision only under rather extreme circumstances or rare conditions. If a release is entered into knowingly, Michigan law will find it invalid only if:

(1) the releasor was dazed, in shock, or under the influence of drugs, (2) the nature of the instrument was misrepresented, or (3) there was other fraudulent or over reaching conduct.

 

Skotak v. Vic Tanny Int’l, Inc., 513 N.W.2d 428, 430 (Mich.Ct.App.1994). Under Michigan law, therefore, Dones cannot prevail in seeking to avoid the Release that she signed.

 

Dones urges that Kentucky law should apply under the holding in Breeding v. Massachusetts Indem. & Life Ins., 633 S.W.2d 717 (Ky .1982). That case involved an insurance contract of adhesion, which contained a provision that it was to be governed by “the law of the state of the delivery of the policy.” The policy was delivered to Delaware. The Supreme Court of Kentucky nonetheless determined that Kentucky had “the greater interest in and the most significant relationship” to the transaction and the parties and that Kentucky law would apply. As the basis for its decision, the Court noted that the insurance was purchased in Kentucky by a Kentucky resident from a Kentucky corporation. The claim arose from an accidental death in Kentucky, and the lawsuit was filed by a resident of Kentucky.

 

In this case, Dones signed the Release in Kentucky; Super Service is a Kentucky corporation whose principal place of business is Somerset, Kentucky; Dickinson’s alleged negligence and the accident occurred in Kentucky; and finally, Dones is a resident of Kentucky. No vital element of the contract was associated with Michigan. Therefore, pursuant to Breeding, we conclude that Kentucky has more significant contacts with the parties and the subject matter and that Kentucky law should be applied.

 

Dones argues that under Kentucky law, the release that she signed is unenforceable because “[a] party cannot contract away liability for damages caused by that party’s failure to comply with a duty imposed by a safety statute.” Hargis v. Baize, 168 S.W.3d 36, 47 (Ky.2005) (citations omitted). Dones claims that Dickinson’s actions violated numerous provisions of KRS Chapter 189, which provides:

The operator of any vehicle upon a highway shall operate the vehicle in a careful manner, with regard for the safety and convenience of pedestrians and other vehicles upon the highway.

 

KRS §  189.290.(1) The operator of any vehicle when upon a highway shall travel upon the right side of the highway whenever possible, and unless the left side of the highway is clear of all other traffic or obstructions and presents a clear vision for a distance of at least one hundred and fifty (150) feet ahead.

(2) The operator of any vehicle moving slowly upon a highway shall keep his vehicle as closely as practicable to the right-hand boundary of the highway, allowing more swiftly moving vehicles reasonably free passage to the left.

 

KRS §  189.300.(6) Whenever any roadway has been divided into three (3) clearly marked lanes for travel, the following additional rules shall apply:

(a) A vehicle shall be driven as nearly as may be practical entirely within a single lane and shall not be moved from that lane until the driver has first ascertained that the movement can be made with safety[.]

 

KRS §  189.340.

 

Super Service contends that this argument regarding statutory duty was not preserved for our review. We disagree. In a memorandum filed with her motion for partial summary judgment (filed on April 21, 2005-the same day that Super Service filed its motion for summary judgment), Dones alleged that Dickinson had violated numerous safety statutes (citing KRS 189.290(1), KRS 189.300, KRS 189.340). She argued that a party violating a safety statute is negligent per se.

 

Dones relies on Hargis, supra, in which an employer knowingly and blatantly violated a regulation of the Kentucky Occupational Health and Safety Act involving the duty to secure logs. Hargis, 168 S.W.3d at 39-40. However, Hargis dealt with a particularized safety regulation involving a specific duty as distinguished from the general duty of care imposed on the motoring public at large. Super Service contends that its alleged negligence involved the violation of general traffic statutes rather than a safety statute specifically regulating the trucking industry. It observes that the cited portions of KRS 189 pertain to the duty of ordinary care required of all motorists-not particular duties unique to trucking companies. We agree with Super Saver that KRS Chapter 189 does not impose an independent or special statutory duty on Super Service as a freight carrier and that Hargis is distinguishable on this issue.

 

Dones also relies on Hargis as requiring a heightened degree of precision by a party drafting an exculpatory contract (or release) in an attempt to avoid liability for its future, potential negligence-be it ordinary or gross negligence. While Hargis does not hold such agreements to be invalid per se, it nonetheless states that “such contracts are disfavored and are strictly construed against the parties relying upon them.” Id., 168 S.W.3d at 47. In addition to imposing the rule of more strict construction against the drafter of such a release, Hargis provides that the release must contain utmost clarity in order to be enforceable. Its wording must be “so clear and understandable that an ordinarily prudent and knowledgeable party to it will know what he or she is contracting away; it must be unmistakable.” Id. (Citation omitted.) (Emphasis added.)

 

Hargis sets forth four conditions for enforceability for a release:

Specifically, a preinjury release will be upheld only if (1) it explicitly expresses an intention to exonerate by using the word “negligence;” or (2) it clearly and specifically indicates an intent to release a party from liability for a personal injury caused by that party’s own conduct; or (3) protection against negligence is the only reasonable construction of the contract language; or (4) the hazard experienced was clearly within the contemplation of the provision. Thus, an exculpatory clause must clearly set out the negligence for which liability is to be avoided.

 

Id. (Citations omitted.) (Emphasis added.)

 

Dones contends that the Release fails to meet any of the four conditions described in the opinion above. She claims that the Release fails to include the word negligence, specifically naming only claims for loss of consortium and for coverage under workers’ compensation insurance.

 

Although the language of the Release is rather broad, it provides that the corporation “will not pay any amount for any accident, injury, loss or damage arising out of or related to Passenger riding in the Equipment”-thus complying with the substantive requirements of Hargis. It clearly sets out the liability to be avoided; i .e., liability for any injuries that the applicant might suffer while riding as a passenger in the Super Service vehicle. See, e.g., Miller v. Pro-Transportation, 77 S.W.3d 551, 553-54 (Ark.App .2002) (upholding as valid a similar release signed by a trucker’s wife). We disagree that the Release covers only workers’ compensation and loss of consortium claims since it refers to “any and all claims, liability, rights, actions, suits and demands, including any rights under a claim of loss of affection or consortium….” (Emphasis added.)

 

Dones also argues that failure to mention Super Service by name in the Release makes it unenforceable under Kentucky law. We disagree. The language releases affiliates of Gainey Corporation. Since Super Service is indisputably an affiliate of Gainey Corporation, it is covered by the Release.

 

Dones raises Section 196 of the Kentucky Constitution as a bar to exculpatory clauses by common carriers like Super Service. Section 196 provides as follows:

Transportation of freight and passengers by railroad, steamboat or other common carrier, shall be so regulated, by general law, as to prevent unjust discrimination. No common carrier shall be permitted to contract for relief from its common law liability.

 

 

Dones argues that this section prohibits the prospective attempt by a common carrier to contract away its negligence for damages from transporting animals and general freight and that it also prohibits a prospective release of liability for personal injuries to human passengers.

 

Super Service believes that Section 196 has been pre-empted by the Carmack Amendment of the Interstate Commerce Act:

the interstate commerce act, and the several amendments, particularly the Carmack amendment … have had the effect of superseding all regulations and policies of any particular state upon the same subject…. And to this extent has been abrogated section 196 of our Constitution, prohibiting a common carrier from contracting for relief against its common-law liability.

 

See Robinson v. Louisville & N.R. Co., 169 S.W. 831, 832-33(Ky .1914) (Citations omitted)).

 

It is true that Congress has “occupied the field” on this subject. For example, the regulation of free passes for passengers has been pre-empted by federal law. See 14 Am.Jur.2d Carriers § §  910, 911 (2005). Kentucky has addressed this issue in Louisville & N.R. Co. v. George, 129 S.W.2d 986 (Ky.1939), a case involving the validity of a release contained on a free pass issued to a railroad passenger, Lydia George. George signed the free pass, which stated the following condition: “The person accepting and using it [the pass] thereby assumes all risk of accident to person or property.” George was injured and argued that the release was void under Section 196 of the Kentucky Constitution. The Court held that Section 196 had been abrogated by federal law, observing that:

[T]he Supreme Court, in Kansas City Southern Railroad Company v. Van Zant, 260 U.S. 459, 43 S.Ct. 176, 177, 67 L.Ed. 348, has construed Section 1, Paragraph (7) of Title 49, U.S.Code, 49 U.S. C .A. §  1(7), prohibiting a common carrier subject to the provisions of the Interstate Commerce Act from issuing free transportation for passengers except to specified classes of persons, as the assumption by Congress of its powers to regulate the subject to the exclusion of State laws and policies…. We, therefore, look to the decisions of the Supreme Court of the United States to determine the validity of the contract of exemption from liability of the appellant for the accident sustained by the appellee.

 

Louisville & N.R. Co., 129 S.W.2d at 987-88. The Court also determined that Supreme Court precedent dictated that only willful or wanton negligence on the part of the railroad was actionable:unless it can be said that the negligence shown by the evidence introduced in her behalf as causing her injury was wilful or wanton, the provision in the pass by which she agreed to assume the risk of the accident bound her and afforded the appellant [railway company] a complete defense under the federal law.

 

Id. at 988.

 

Under Kentucky law, “wilful and wanton negligence” is “substantially the equivalent of ‘gross negligence’ of the character and degree which under our practice authorizes a punitive damage instruction.” Id. at 989. Since there was no allegation of this degree of negligence either as to Super Service or as to Dickinson, Dones cannot avoid the Release based on Section 196 of the Kentucky Constitution.

 

Dones last argues that Super Service is vicariously liable for the negligence of its employee (Dickinson) and cannot avoid liability as a matter of law for his liability under the doctrine of respondeat superior. She argues that the trial court erred in failing to enter partial summary judgment in her favor on this issue. Since we have concluded that entry of summary judgment was improper in this case based on issues of fact concerning the apparent authority of Dickinson, an entry of partial summary judgment on the vicarious liability of Super Service would have been equally untimely and inappropriate. We find no error in the denial of her motion for partial summary judgment on this issue.

 

In summary, we affirm on all issues except that of the apparent authority of Dickinson to permit Dones to ride as a passenger and accordingly whether Super Service could be vicariously liable as his principal.

 

We affirm in part and vacate in part the summary judgment entered in favor of Super Service, and we remand this case for further proceedings consistent with this opinion.

 

BARBER, Judge, concurs.

POTTER, Senior Judge, concurs in part and dissents in part by separate opinion.POTTER, Senior Judge, concurring in part and dissenting in part:

I concur in part and respectfully dissent in part.

 

I agree that that the summary judgment should be set aside. However, I believe that in order to do so, this Court must not only find that Dones had permission to ride in the truck (through its driver’s apparent authority) but also that she did not waive her claim against Super Service in the release. The majority holds that there was an issue of fact as to her status as an authorized passenger but finds that waiver effective.

 

I agree that she was an authorized passenger. Further, I find that the waiver was without effect under the stringent requirements of Hargis v. Baize, 168 S.W.3d 36 (Ky.2005). To reach this result, one need go no further than the language of the release itself. The operative paragraph is mislabeled and releases only the Gainey Corporation, Super Service’s parent.

 

Shorn of the excess verbiage, the release, entitled “Passenger’s Parent’s or Guardian’s Full Release of Liability” reads: “… Passenger …, by signing below, hereby releases Gainey Corporation from [all liability] that Driver may have against Gainey corporation, including its affiliates, employees …”

 

First, the title is misleading. Dones was neither the passenger’s parent nor guardian. Undoubtedly, Gainey meant to say: “Passenger’s, Parent’s or Guardian’s Full Release …”

 

 

Lynne Truss, Eats, Shoots & Leaves: The Zero Tolerance Approach to Punctuation, Gotham 2004.

 

Second, the release releases only Gainey Corporation. It releases Gainey Corporation from liability based on claims against itself, its affiliates, its employees, etc. Nowhere does it say I hereby release Super Service. If Super Service wanted to be released, it should have read: “… hereby releases Gainey Corporation, its affiliates, employees … from [all liability]….”

Direct Shippers Association v. Sanyo Automotive Parts

Superior Court of New Jersey,Appellate Division.

DIRECT SHIPPERS ASSOCIATION, INC., Plaintiff-Appellant,

v.

SANYO AUTOMOTIVE PARTS, LTD., d/b/a Brake Headquarters; Bopper Motor Parts, Inc.; Border Motor Parts, Inc.; Tricity Auto Warehouse, Inc., Midstate Automotive, Inc.; Henderson Wheels & Warehouse, Inc.; Ozark Automotive, Inc.; Discount Auto Parts, Inc; R.J. Templeton Co.; Grand Auto Parts, Inc.; East Alabama Auto Parts; Star District Co.; CCF Worldwide Agency, Inc.; Parts Source, Inc.; Empresa Monreal, Inc.; Mayored De Refracciones, Inc.; Bhusa-La, Inc.; Waw D. Hayward, Inc.; Auto Suridora, Inc. Mid Florida Auto, Inc.; San Antonio, Inc.; and An Mex International, Inc., Defendants,

andGonzalez Auto Parts, Inc., Defendant-Respondent.

Argued April 26, 2006.

Decided Aug. 16, 2006.

 

 

Before Judges STERN and GRALL.

PER CURIAM.

Plaintiff, Direct Shippers Association, Inc., appeals from an order of October 22, 2004 which granted summary judgment in favor of defendant Gonzalez Auto Parts and an order of December 17, 2004 denying reconsideration. Plaintiff argues that “the trial court erred by granting summary judgment since defendant, as consignee, was liable for freight transportation charges” and that “summary judgment was premature since discovery on genuine issues of material facts was incomplete.”

 

Plaintiff seeks to recover “unpaid charges for freight transportation services” incident to the delivery to defendant of parts from Sanyo Automotive Parts, Ltd., d/b/a Brake Headquarters. In counts thirteen through sixteen of its amended complaint as to this defendant, plaintiff asserts it delivered parts to defendant, which services “originated” in Keasby, New Jersey, and sought $21,788.79. The complaint claimed to have attached the freight bills evidencing “services rendered by the Plaintiff to the Defendant upon the promise of the Defendant to pay a reasonable price for the same.” The attachment is a “statement of account” in an amount allegedly owed to plaintiff for shipments by Brake Headquarters to all defendants with a balance due of $73,757.45.

 

The record contains seventeen invoices and bills of lading in the aggregate amount of $21,788.79. Each such bill lists defendant in Laredo, Texas as “consignee” with the “bill to” address of Brake Headquarters as “the shipper” in Long Island City, New York. The accompanying “shipping order” for each is marked prepaid and is stamped:

It is understood that shipper assumes liability for freight payment to party listed above. Other carriers involved in this movement of goods can seek payment from that party only and not from shipper.

 

 

 

Defendant states that plaintiff was “not a party” to the bills of lading and defendant “never received these invoices, and Plaintiff Direct does not deny same.”

 

There was no dispute that shipments to defendant Gonzalez were made by Sanyo or its Brake Headquarters subsidiary (which is now bankrupt), but the bills of lading were marked as “pre-paid.” Plaintiff asserts it was never paid the freight charges. The motion judge found insufficient evidence to permit plaintiff to satisfy its burden of proceeding against defendant. Plaintiff insists that “the record below did not show that the Defendant paid for all of the freight costs or even some.”

 

Plaintiff asserts that there are genuine issues of material fact including whether defendant paid any or all of the freight transportation charges billed to Sanyo. Plaintiff argues that if defendant did not pay for the transportation of the goods, defendant is liable for the transportation charges, despite the bills of lading being marked as “pre-paid.”

 

Defendant contends, however, that plaintiff cannot rely on federal statutory and case law, as it did on the motion for summary judgment and on this appeal, because it provides remedies against the consignee only to motor or common “carriers” or a party to the bill of lading. Defendant submits that plaintiff is not a “carrier,” but a “shipping association,” and therefore the federal law regarding a consignee’s liability to the carrier is inapplicable to the present situation.

 

Under the Interstate Commerce Act, a bill of lading embodies “the contract for transportation [between the shipper-consignor and carrier] from point of origin to destination.” Texas & P.R. Co. v. Leatherwood, 250 U.S. 478, 481, 39 S.Ct. 517, 518, 63 L. Ed. 1096, 1098 (1919); see also S. Pac. Transp. Co. v. Commercial Metals Co., 456 U.S. 336, 342, 102 S.Ct. 1815, 1820, 72 L. Ed.2d 114, 120 (1982). Under the bill of lading provisions of the Act, a consignee is defined as “the person named in a bill of lading as the person to whom the goods are to be delivered.” 49 U.S.C.A. §  80101. A consignor is “the person named in a bill of lading as the person from whom the goods have been received for shipment.” Ibid.

 

Plaintiff states “[f]ederal statutory law now renders a consignee independently liable to a carrier for freight charges upon his acceptance and delivery of the goods,” citing 49 U.S.C. 13706(a) and Checker Van Lines v. Siltek Int’l, Ltd., 169 N.J.Super. 102, 106 (App.Div.1979). The liability of the consignee for the payment of rates for the transportation for a shipment of property is governed by the Interstate Commerce Act, 49 U.S.C.A. §  13706, when and if “the transportation is provided by a motor carrier.” See also 49 U.S.C.A. §  80102 (governing when the bill of lading is issued by a common carrier). A “consignee becomes liable, as a matter of law,” if a shipment is accepted, Louisville & Nashville R.R. Co. v. Cent. Iron & Coal Co., 265 U.S. 59, 70, 44 S.Ct. 441, 444, 68 L. Ed. 900, 904 (1924); S. Pac. Co. v. Wheaton Brass Works, 5 N.J. 594, 603-04 (1950), cert. denied, 341 U.S. 904, 71 S.Ct. 614, 95 L. Ed. 1343 (1951). However, the consignee is not so liable if the bill of lading is marked “prepaid.” E.F. Operating Corp. v. Am. Bldgs., 993 F.2d 1046, 1051 (3d Cir.), cert. denied, 510 U.S. 868, 114 S.Ct. 193, 126 L. Ed.2d 151 (1993).

 

In Checker, relied upon by plaintiff, the defendant, who resided in Pennsylvania accepted a new job from co-defendant Siltek International, Ltd. Checker Van Lines, supra, 169 N.J.Super. at 104. As part of the defendant’s compensation, Siltek agreed to pay the costs of shipping the defendant’s household goods from Pennsylvania to Quebec, Canada. Ibid. The defendant arranged for plaintiff to do the moving and informed plaintiff that Siltek would be solely responsible for the charges involved. Ibid . Plaintiff delivered the goods on September 20, 1974. Ibid. The shipping order showed defendant as the shipper and the consignee and directed Siltek to be billed.  Id. at 105. In May 1977, the defendant was served with a summons and complaint. Ibid. Siltek had filed bankruptcy two years before. Ibid. The trial judge granted plaintiff’s motion for partial summary judgment, and the parties stipulated to damages. Ibid.

 

In reversing the order, we addressed the fact that the trial judge relied upon the then controlling provision of the Interstate Commerce Act, as the basis for imposing liability on the defendant. Ibid. We stated that in interpreting and applying a federal statute, federal case law binds state courts. Ibid. Furthermore, we recognized that:

[t]he United States Supreme Court has held that this statute imposes liability for shipping costs upon the consignee of an interstate shipment of goods when, as owner of the goods he accepts the shipment from the carrier. Under this rule a consignee accepting the shipment as the owner “becomes liable, as a matter of law, for the full amount of the freight charges whether they are demanded at the time of delivery, or not until later.”

[Id. at 105-06 (internal citation omitted).]

 

Although the bill of lading was not marked “prepaid,” we noted that “[m]any federal and state cases have recognized that a carrier may be estopped from recovering from a consignee,” and that defendant could assert that “Siltek was to pay the full charges for shipping” and defendant “was not barred thereby from asserting estoppel as a defense.” Id. at 106-07.

 

 

Defendant could also assert “plaintiff’s delay in seeking payment” from defendant. Id. at 109.

 

When a carrier delivers goods under a bill of lading marked “pre-paid,” the carrier may be equitably estopped from seeking the charges from the consignee:

The shipper-consignor … “assumes the obligation to pay the freight charges, and his obligation is ordinarily a primary one.” [Louisville & Nashville R.R. Co., supra, 265 U.S. at 67, 44 S.Ct. at 443, 68 L. Ed. at 903.] We have held that when a carrier delivers goods under a bill of lading marked “prepaid,” and when the consignee pays the shipper-consignor the freight charges under this bill, equitable estoppel precludes the carrier from collecting those charges from the consignee. [Missouri Pac. R.R. Co. v. Nat’l Milling Co., 409 F.2d 882, 884 (3d Cir.1969).] The rationale is simple: if the consignee has performed its purchase agreement in good faith by paying the shipper for freight charges, and if the carrier knows this and acknowledges the payment by marking the bill of lading “prepaid,” the carrier is then estopped from forcing an innocent consignee to pay twice for services rendered only once. Other courts have agreed.

[E.F. Operating Corp., supra, 993 F.2d at 1051 (citing United States v. Mason & Dixon Lines, Inc., 222 F.2d 646, 650 (6th Cir.1955); Consol. Freightways Corp. v. Admiral Corp., 442 F.2d 56, 62-63 (7th Cir.1971); S. Pac. Transp. Co. v. Campbell Soup Co., 455 F.2d 1219, 1222 (8th Cir.1972)).]

 

In the certification submitted by plaintiff’s general manager, Robert Tavani, in opposition to a co-defendant’s motion for partial summary judgment, plaintiff asserted that it “is a shippers’ association, which arranges the transportation of freight at the request and benefit of shippers, consignees and intermediaries, such as freight forwarders and brokers.” “A cooperative or shippers’ association is formed to provide lower freight rates and the ability to contract for large volume shippers.” “[A]ssociations do not issue bills of lading.” According to the certification, plaintiff “is not and has never been a motor carrier subject to regulation and jurisdiction of the United States Department of Transportation.” See 49 U.S.C.A. §  13706 (governing recovery by “motor carrier”). The certification apparently sought to avoid the applicable statute of limitations under the Act and to proceed under the common law.

 

In its reply brief and before us at argument, plaintiff asserts that “as a freight transportation company,” it has standing to seek unpaid freight charges from a consignee. Plaintiff argues that it “fits within the category of either a carrier and/or freight forwarder,” and that it could also be viewed as a “broker” or a “shippers agent.” In essence, it asserts that as a “transportation intermediary … which holds itself out as ‘carrier,’ [it] should be able to collect freight charges for transportation,” and as it “made itself available to the general shipping community” and the public as an entity that can transport products “from origin to destination at specific freight rates for the entire transportation,” “plaintiff had ample standing to institute the action for collection of unpaid freight charges from the consignee-defendant.”

 

As noted, plaintiff’s general manager in response to a co-defendant’s motion for summary judgment certified that plaintiff is “a shipper’s association which arranges the transportation of freight at the request and benefit of shipper, consignees and intermediaries, such as freight forwarders and brokers.” In addition to denying the status of a “carrier,” the language in the certification suggests that plaintiff is not a freight forwarder or broker since it states it arranges transportation between “consignees and intermediaries, such as freight forwarders and brokers.”

 

Furthermore, in its opposition brief in response to co-defendant’s summary judgment motion, plaintiff argued that it was exempt from the federal statute of limitations by claiming it was neither a carrier nor freight forwarder. According to its “legal argument” in the trial court:

The ICC Termination Act of 1995 defines “carriers” to include rail carriers, motor carriers and pipeline carriers. 49 U.S.C. 11101. A motor carrier is defined as a person providing motor vehicle transportation for compensation. 49 U.S.C. 13102(12). Accordingly, all interstate motor carriers must register with the Secretary of Transportation as a motor carrier.

… Direct was not a “carrier” providing transportation services subject to jurisdiction of the U.S. Department of Transportation. Direct, as a shippers’ association or cooperative, is not required to register with the federal Highway Authority.

 

Moreover, according to plaintiff’s supporting brief on the motion, “[a] cooperative or shippers association … do[es] not issue bills of lading and do [es] not provide actual transportation and therefore, ha[s] been held not to be a surface freight forwarder.”

 

Plaintiff has not advanced a clear, concise or consistent theory or approach in support of its claim. However, the mere marking of the bill of lading as “pre-paid” may not by itself warrant summary judgment and dismissal of the complaint. Moreover, whether an entity is a “motor carrier” or some other entity for purposes of the Interstate Commerce Act is a question of fact precluding summary judgment, see Phoenix Assurance Co. v. Kmart Corp., 977 F.Supp. 319, 326 (D.N.J.1997), although it may be bound by “what it holds itself out to be.” Ensco, Inc. v. Weicker Transfer & Storage Co., 689 F.2d 921, 925 (10th Cir.1982). Accordingly, we reverse the grant of summary judgment and remand for further proceedings at which the nature of plaintiff’s actual status, its impact on the issue of governance of the Interstate Commerce Act and preemption, and the question of estoppel (including one premised on plaintiff’s different assertions of its status) should be fully developed, after which the issue of summary judgment and dismissal may be reconsidered.

 

The judgment on review is reversed and the matter is remanded for further proceedings consistent with this opinion. No costs are awarded to plaintiff on this appeal.

 

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