Lee v. Arrowpac, Inc.

179 B.R. 10, 32 Fed. R. Serv. 3d 155, 1995 U.S. Dist. LEXIS 3710, 1995 WL 121563
CourtDistrict Court, D. Puerto Rico
DecidedMarch 13, 1995
DocketCiv. No. 92-2185 (JP)
StatusPublished
Cited by3 cases

This text of 179 B.R. 10 (Lee v. Arrowpac, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Puerto Rico primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lee v. Arrowpac, Inc., 179 B.R. 10, 32 Fed. R. Serv. 3d 155, 1995 U.S. Dist. LEXIS 3710, 1995 WL 121563 (prd 1995).

Opinion

OPINION AND ORDER

PIERAS, District Judge.

The Court has before it an appeal pursuant to 28 U.S.C. § 158(a) (1993) from the Bankruptcy Court’s Opinion and Order granting defendant’s motion for summary judgment. The issue before the Court is whether the mark of “freight is prepaid” on the face of the debtor’s bill of lading is sufficient evidence to demonstrate that the freight charges had in fact been paid prior to shipment of the goods. The Bankruptcy Court determined the issue in the affirmative, and granted defendant’s motion for summary judgment reasoning that if the debt had been prepaid, the debtor could not sustain a subsequent action for collection of the debt. After carefully reviewing the record and the arguments presented, the Bankruptcy Court’s decision is hereby AFFIRMED.

I. BACKGROUND

Neither party contests the Bankruptcy Court’s findings of facts, summarized as follows. Arrowpac, a New Jersey corporation, contracted with Carolina Steamship, Inc., to transport cargo from North Carolina to its subsidiary corporation, Arrow Carrier, in Puerto Rico. On June 23, 1987, Carolina Steamship, the carrier, picked up the goods from Arrowpac, the shipper, and delivered the goods to Arrow Carrier, the consignee. Upon delivery of the cargo, Carolina Steamship issued a bill of lading, which indicates that urgent delivery was required and that the amount of freight charges was $3,196.00. [12]*12There is also a mark of “FREIGHT IS PREPAID” stamped in the portion of “description of packages and goods”, and an “X” in the section “Terms: Prepaid”.

Two months after the delivery of the merchandise, Carolina Steamship was experiencing financial difficulties. It filed a petition under Chapter 11 of the Bankruptcy Code (the “Code”) to reorganize its debt structure. Soon thereafter, Carolina Steamship converted its Chapter 11 petition for reorganization to a Chapter 7 petition for liquidation. A bankruptcy trustee was appointed to gather together all the assets of the debtor estate, sell the assets, and satisfy the debts of Carolina Steamship’s existing creditors with the proceeds of the assets.

As part of the collection efforts of Carolina Steamship’s accounts receivables, the trustee sent Arrowpac two separate letters alleging that Arrowpac had never paid the freight charges incurred in the June 1987 shipment and demanding the payment of $3,196.00. As payment was not forthcoming, the trustee filed a complaint in the Bankruptcy Court for the collection of the freight charges. Thereafter, Arrowpac filed a Motion for Summary Judgment,1 alleging that the claim must be barred either because the statute of limitations for the collection of freight charges had expired, or alternatively, because the doctrine of laches prevented the collection of a debt so long after it had been incurred. Pri- or to ruling on the motion, the Bankruptcy Court entered an order stating in pertinent part:

The bill of lading that accompanies Arrow-pac’s Motion shows that the freight charges of $3,196.00 claimed in the complaint appear to be prepaid. If this is correct, the complaint should be dismissed for this reason. Since the parties have not addressed this question, the Court hereby orders them to do it simultaneously within 30 days.

In response to this order, each party submitted a memorandum of law discussing the significance of the prepaid mark. After considering all the evidence provided by the parties, the Bankruptcy Court granted the motion for summary judgment, reasoning that the freight is prepaid mark evidenced that the freight charges had been paid. Since the debt had already been discharged, the trustee was precluded from collecting the freight charges twice.

The trustee appeals, arguing that the Bankruptcy Court erred in finding that the bill of lading was sufficient evidence that the freight charges had been paid. Appellant contends that the “prepaid” mark signifies only that the carrier should look exclusively to the shipper-consignor for payment, not that the freight charges had been paid. Further, appellant argues that prepayment of the freight charges is an affirmative defense to the collection of a debt. As appellee did not raise the affirmative defense in their answer to the complaint, the defense has been waived.

Appellee asserts that the freight charges were paid, as evidenced by the “freight is prepaid” mark on the face of Carolina Steamship’s bill of lading. Further, the bill of lading, submitted with its motion for summary judgment, was sufficient to shift the burden back to plaintiff-appellant to show that the debt had not, in fact, been paid. Plaintiff failed to produce any evidence which would demonstrate that the debt had not been paid. Therefore, appellee argues, the Bankruptcy Court correctly entered summary judgment after finding that there was no genuine issue of material fact regarding whether or not the alleged debt had been discharged.

II. DISCUSSION

There are two issues on appeal. First, whether the Bankruptcy Court erred in determining that a prepaid mark on a bill of lading signifies that the carrier has received payment for freight charges from the shipper prior to the shipment of the cargo. Second, whether the Bankruptcy Court erred in raising the significance of the prepaid mark sua sponte, since the payment of the debt is an affirmative defense which, having not been raised in defendant’s answer to the complaint, had been waived.

[13]*13A. THE MEANING OF THE PREPAID MARK

A bill of lading is the basic contract of carriage between the shipper and the carrier. Southern Pacific Transp. Co. v. Commercial Metals Co. 456 U.S. 336, 343, 102 S.Ct. 1815, 1820-21, 72 L.Ed.2d 114 (1982). The terms and conditions of the bill of lading bind the shipper and all connecting carriers. Texas & P.R. Co. v. Leatherwood, 250 U.S. 478, 481, 39 S.Ct. 517, 518, 63 L.Ed. 1096 (1919). Carolina Steamship’s bill of lading had two separate markings printed on the front of the document: an “X” in the box responding to whether the freight charges had been prepaid in the “Terms” section, and a “freight is prepaid” stamp in the description of goods section. The particular significance of these markings are central to the questions before this Court.

The trustee argues that prepaid marks have a special meaning in the shipping industry, and that it is within this context that the bill of lading must be interpreted. Specifically, appellant argues that certain terms define which party has assumed responsibility for payment of the freight charges. A stamp of “collect freight” on a bill of lading signifies that the consignee has assumed responsibility for payment, whereas “freight is prepaid” signifies that the shipper will pay the freight charges. See Koninklijke Nedlloyd BV v. Uniroyal, Inc., 433 F.Supp. 121, 129 (S.D.N.Y.1977). See also Sea-Land Service, Inc. v. Andrew Corp., 1992 WL 41344, at *3-4, 1992 U.S.Dist. LEXIS 2092, at *9-10 (N.D.Ill. Feb. 25, 1992). Therefore, the trustee argues that the “FREIGHT IS PREPAID” mark on Carolina’s bill of lading means only that Arrow-pae, as the shipper, had assumed the legal responsibility to pay the freight charges.

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179 B.R. 10, 32 Fed. R. Serv. 3d 155, 1995 U.S. Dist. LEXIS 3710, 1995 WL 121563, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lee-v-arrowpac-inc-prd-1995.