
    INLAND TRUCKING CORPORATION v. THE UNITED STATES
    [No. 50095.
    Decided July 15, 1960]
    
      
      Mr. Julius Bchlezinger for plaintiff. Messrs. Joseph B. Friedman and Friedman, Locker <& Bchlezinger were on the briefs.
    
      Mr. Kendall M. Barnes, with whom was Mr. Assistant Attorney General George Gochran Doub, for defendant.
   Whitaker, Judge,

delivered the opinion of the court:

Plaintiff, a Philippine trucking company, sues to recover $56,022.56 which it says is due under a Government contract which it alleges it has successfully performed. The contract in question was for the transportation of Government cargo from piers in Manila to army depots in the Manila area. The defendant has withheld payment of the amount in suit to reimburse it for cargo lost while in transit in plaintiff’s trucks.

The issue presented is whether, under the contract, plaintiff is liable for the losses. The specific contract provision in question is Article 3, which reads as follows:

Responsibility for Cargo. — The Contractor shall assume full responsibility for cargo in transit from the gier to the Depot until it has been delivered to the rovemment. Any loss or damage to the cargo due to the fault of the Contractor’s employees prior to the delivery shall be upon the Contractor and not upon the Government, and the Government shall deduct from each current invoice such reimbursement or compensation as may be due and owing it from the Contractor on account of loss or damage of cargo suffered by the Government.

Plaintiff claims that it is not liable under this provision since its negligence did not cause the losses. To the contrary, defendant says that the contract made plaintiff liable for all losses incurred during transit regardless of cause. In the alternative, the defendant argues that even if plaintiff’s construction of the contract is correct, it is not entitled to recover, since it accepted without protest the amount of its charges, less a deduction for lost cargo, and thereby waived its right to demand the amount withheld.

The contract was performed by plaintiff during the period from November 14, 1946, to June 16, 1947. Shortly before that time, the Armed Forces in the Far East, including the Philippines, had been demobilized and returned to the United States, and because of the resulting shortage of military transportation it became necessary to hire commercial vehicles to transport military supplies. Shortly after this practice began, some time in September or October 1946, it became apparent that measures would need to be taken to protect the Government cargoes from theft while being hauled by commercial carriers. At first the Base Commander of the Philippine Base Command ordered his Provost Marshal to place military policemen, when available, on all trucks leaving the Post area loaded with pilferable cargo. At this time the military guards supplemented any guards furnished by the private carriers, and the carriers were urged to do all they could do to help lessen the thefts.

Sometime in December 1946 defendant changed its policy. Experience had disclosed that frequently there was collusion between the private company guards and drivers and the thieves to loot the cargoes, and, therefore, the Army prohibited from this time on any employees of the trucking companies, other than the driver, from riding in trucks carrying Government cargo.

The exact date of the issuance of this order is important and is in dispute. Defendant has produced a letter from the Provost Marshal to all contract trucking companies, dated February 14,1947, which stated that it was written to confirm verbal orders issued on December 27, 1946, prohibiting civilian riders in trucks carrying Government cargo. Plaintiff’s witnesses testified that the order was in fact issued earlier, in the middle of December. The witnesses were unable, however, to fix an exact date. Defendant’s evidence is the more convincing, and, accordingly, we find that the date of the order was December 27, 1946. After this date, the United States assumed full responsibility for the protection of the cargoes from molestation by third parties. Plaintiff, however, remained responsible for the fault of its employees.

Army cargoes which were being transported by plaintiff pursuant to the contract were “hijacked”, that is, held up and robbed, on November 19, 1946, December 18, 1946, December 28, 1946, January 11, 1947, and February 5, 1947. In each case the truck was being guarded by an armed military policeman and the cargo was lost because the military policeman and the driver employed by plaintiff connived with the hijackers in the robbery.

Under these facts, we believe plaintiff is liable for all losses which occurred prior to December 27, 1946, and that defendant must assume liability for losses after that date. As we have pointed out, prior to December 27, plaintiff was allowed and urged to do whatever it could to protect the cargoes. Under Article 8 of the contract, plaintiff assumed this obligation when it accepted full responsibility for the loss or damage of Government property in transit. The record is clear that plaintiff did little or nothing to protect this property, since the cost of furnishing guards was prohibitive. We think this failure amounts to negligent action on the part of the plaintiff and, therefore, it must, under the plain terms of Article 3 of the contract, assume the loss which resulted.

The fact that defendant provided guards for the trucks does not alter this responsibility. The defendant was under no obligation to guard the cargoes and it did so only after plaintiff failed to fulfill its contractual duty. Under such circumstances, liability for loss remains with the plaintiff. The contract provided that “the contractor shall assume full responsibility for cargo in transit.”

It is true that defendant’s agents, the military policemen, were in part responsible for the thefts, but of course criminal activities of this nature are outside the scope of the agent’s employment, and it is well settled that the principal is not responsible for such action. There is no evidence in the record which would indicate that the defendant was negligent in selecting its guards, and it, therefore, cannot be clothed with liability. On the other hand, the contract provided that “any loss or damage to the cargo due to the fault of the contractor’s employees prior to delivery shall be upon the contractor and not upon the Government. * * *” [Italics supplied.] Under this the contractor was responsible for what its employees did, whether their acts were in the scope of their employment or not.

However, what we have said above is not applicable to losses which occurred after December 27, 1946. After that date defendant no longer allowed plaintiff to provide protection of any sort for the trucks. The defendant assumed the full responsibility for the security of the cargoes, except for the negligence or wrongdoing of plaintiff’s employees, and specifically denied plaintiff the right to participate in their protection. Plaintiff was no longer capable of performing its duty of safeguarding the cargoes from loss, since the defendant by its assumption of full control over security had made plaintiff’s performance impossible, and discharged plaintiff from its obligation to pay for losses under Article 3 of the contract, except those for which its own agents can be shown to be responsible. But it is impossible to show this, because, while plaintiff’s drivers continued to connive with the hijackers, defendant’s guards did so also, at least to some extent.

Besides the deduction made for the value of the five hijacked cargoes previously discussed, the defendant has also deducted the sum of $5,836.25 for shortages attributed by the defendant to other causes. These involve minor losses incurred at various periods during plaintiff’s performance. There is no evidence in the record which shows the cause of any of these shortages. For the reasons previously stated, we believe that plaintiff must bear the expense for items lost prior to December 27,1946, since it had the right and the duty to provide security for the trucks during that period. Plaintiff, however, was discharged from its obligation under Article 3 of the contract by defendant’s interference after December 27, and deductions made after that time were improper.

In both its brief and oral argument defendant has contended that plaintiff’s petition must be dismissed since plaintiff accepted the sum actually paid without protesting the deductions made for lost cargo. All of the shortages above described were set forth on one or another of a succession of invoices submitted by plaintiff to defendant, and in each case it was certified by one of plaintiff’s officers that the invoice was “correct and just.” Also, on January 8, 1948, at the time of final payment of the balance of amounts due under the contract, less the deductions, plaintiff signed a voucher prepared by the Army which contained a certificate which stated “that payment of this voucher represents complete and final settlement of the contractor’s claim under this contract and a formal release is not required.” Plaintiff, however, contends that at the time of each payment it orally protested the deductions. Plaintiff’s General Manager, E. L. Kincaid, testified at the trial that he had protested some deductions and he had ordered the other officers of the corporation who accepted payment to protest the others. This testimony is strengthened by the fact that in the case of each deduction, timely appeals were filed with the Chief of the Claims Service, AFWESPAC, and these appeals were diligently prosecuted. These appeals were still pending at the time plaintiff accepted the final payment under the contract.

On these facts the Trial Commissioner has found that plaintiff in fact did protest the deductions and that it did not intend to waive its protest or abandon its claim when it accepted final payment and the defendant’s representatives so understood. We concur in this finding.

It results that plaintiff is entitled to recover all deductions made by defendant for losses which occurred after December 27, 1946. Judgment will be entered to that effect, and the amount of recovery will be determined pursuant to Rule 38(c).

It is so ordered.

Durfee, Judge; Laramore, Judge; Madden, Judge; and Jones, Chief Judge, concur.

FINDINGS OF FACT

The court, haying considered the evidence, the report of Trial Commissioner Eobert K. McConnaughey, and the briefs and argument of counsel, makes findings of fact as follows:

1. Plaintiff is a corporation organized and existing under the laws of the Eepublic of the Philippines. At all times material to this suit it was engaged in the business of private transportation of goods by truck.

All of its corporate records were destroyed in. a flood in December 1947.

2. The Eepublic of the Philippines grants the right to sue in its courts to citizens of the United States and to corporations and other juridical entities organized and existing under laws of the United States.

3. On November 14,1946, plaintiff entered into a contract with defendant for the transportation by plaintiff of cargo owned by the defendant from piers in Manila to Army depots in the Manila area. Under the contract, defendant was obligated to pay plaintiff at the rate of six pesos ($3.00) for each ton of cargo transported.

4. The contract includes the following provisions:

* * * #
AETICLE 3 — Responsibility for Cargo — The Contractor shall assume full responsibility for cargo in transit from the pier to the Depot until it has been delivered to the Government. Any loss or damage to the cargo due to the fault of the Contractor’s employees prior to the delivery shall be upon the Contractor and not upon the Government, and the Government shall deduct from each current invoice such reimbursement or compensation as may be due and owing it from the Contractor on account of loss or damage of cargo suffered by the Government.
‡ ‡ $
AETICLE 9 — Disputes—Except as otherwise specifically provided in this contract, all disputes concerning questions of fact arising under this contract, which are not disposed of by mutual agreement, shall be decided by the Contracting Officer, subject to written appeal by the Contractor within thirty (30) days to the Chief of Claims Service, AFWESPAC, APO 707, or the successor to his functions, whose decision shall be final and conclusive upon the parties hereto. Pending decision of a dispute hereunder, the Contractor shall diligently proceed with the performance of this contract.

5. From November 14, 1946, until June 16,1947, plaintiff transported cargo in performance of the contract. For those services plaintiff earned, at the rates specified in the contract, $240,021.48.

6. According to the record defendant withheld $58,960.33 as setoffs against the amount admittedly earned by the plaintiff under the contract. Defendant attributed $56,358.80 of these setoffs to losses of Army cargo which defendant claimed occurred between November 14, 1946, and May 2, 1947, largely as a result of hijacking of plaintiff’s trucks. Through this suit plaintiff seeks to recover $56,022.55 of the amount withheld.

7. Before October 1956, Army vehicles had transported Army cargo of the kind carried by the plaintiff under the contract. Because of demobilization of the United States Armed Forces in the Far East, by September 1946, there were no longer enough military truck companies available in Manila to handle the cargoes requiring truck transportation. Accordingly, beginning in September or October 1946, the Army made arrangements for commercial trucking companies, including the plaintiff, to transport such cargoes.

8. Providing security against theft of cargoes hauled by the commercial trucks presented serious problems. Experience disclosed that frequently there was collusion between the private company guards and drivers in looting the cargoes.

In October 1946 the Base Commander of the Philippines Base Command ordered his Provost Marshal to place security guards on all tracks leaving the Post area, with a few exceptions in the case of very heavy, non-pilferable cargo. This order was later changed to provide that no loaded trucks would be permitted to leave the Post area without a security guard or convoy.

Immediately after tbe first of these orders, military guards were placed on commercial trucks hauling Army cargoes whenever such guards were available. The Army’s purpose was either to have a military guard on each truck or to have such a guard on every other truck, with a convoy NCO in charge. At first the military guards supplemented any guards or other provisions for cargo security furnished by the private companies. Until December 27, 1946 plaintiff was allowed and encouraged to do whatever it could to help lessen the thefts. The cost to plaintiff of placing an armed guard on each truck would have exceeded the amount the truck would earn. Instead, plaintiff’s officers or responsible employees, riding in separate cars or jeeps, convoyed groups of trucks.

In December 1946 the Army authorities prescribed particular routes that trucks were required to follow. Deviations from the prescribed routes were presumed to indicate a purpose to steal cargo. After the routes were established the military guards were expected to see to it that drivers did not deviate from them.

Beginning on December 27,1946, the Army prohibited any employees of the commercial trucking companies, other than the drivers, from riding trucks carrying Government cargo. Thereafter, the commercial trucking companies were not permitted to place any guards on their trucks and did not do so.

The Deputy Provost Marshal upon assuming his duties in September 1946, inquired what the responsibilities of the commercial trucking contractors were and where his responsibilities began. He concluded that, under his orders from the Provost Marshal, the responsibility for protecting cargo in transit was wholly Ms. He had no control over civilians but did have control over military personnel. Eequests by some of the private companies that military guards be removed from the trucks were denied because the Deputy Provost Marshal could not trust people over whom he had no control. Eequests by some of the private companies for permission to put their own guards on their trucks were denied because the Provost Marshal regarded the responsibility for security of the cargoes as Ms and did not want to compromise that responsibility by permitting other guards to ride the same trucks with his people.

The Army officers who established and administered these security measures hoped and intended that the Army’s assumption of exclusive functional responsibility for the security of cargoes hauled in trucks of private trucking contractors would not diminish the financial responsibility of the contractors in case any losses should occur as a result of failure of the security measures which the Army wholly dominated and controlled.

They made this intention a matter of written record only after some of the trucking companies expressed an intention to file claims for amounts withheld on account of losses resulting from thefts.

9. Truckloads of Army cargo being transported under the contract were hijacked on November 19,1946, December 18, 1946, December 23,1946, January 11,1947, and February 5, 1947. The driver employed by the plaintiff was, in each case in connivance with the thieves. The defendant had assumed full functional responsibility for security against theft in the case of each of the stolen cargoes. In each case the truck was being guarded by an armed Military Police guard who had complete responsibility for the security of the cargo. Plaintiff had no part in selecting the Military Police guards assigned to its trucks and no authority or control over such guards. The Military Police guards connived with the hijackers and failed to perform effectively their responsibilities for protecting these cargoes.

10. The nature of the cargoes hijacked on the occasions described in finding 9, and the value of such cargoes as claimed by the defendant and deducted from the amounts paid to the plaintiff were as follows:

11.The following list includes all deductions made by the defendant for shortages it claimed to be attributable to the plaintiff from November 19,1946, through June 6,1947 (including those referred to in findings 9 and 10):

The record does not show the cause of any of the shortages listed in finding 11 except those resulting from the thefts described in findings 9 and 10.

The total of the deductions made by the defendant for shortages attributed by the defendant to causes not shown in the record is $5,836.25 (¥11,■672.50).

There is no evidence in the record to show the basis on which the defendant computed the value of any of the items claimed to be short.

12. Each of the items of shortage claimed by the defendant and listed in finding 11 was set forth under headings such as “Less Shortages”, “Less Hijacked”, or “Less Shortages Hijacked”, on one or another of a succession of invoices submitted by the plaintiff to the defendant.

Each of such invoices was signed on behalf of the plaintiff and each bore the following certificate:

I CERTIFY that the above bill is correct and just and that payment therefor has not been received; that all statutory requirements as to Philippine production and labor standards and all conditions of purchase applicable to the transaction have been complied with; and that Republic and local taxes are not included in the amounts billed.

13. The defendant’s representatives instructed plaintiff’s representatives that, as a prerequisite to payment of amounts due plaintiff under the contract, they must execute and submit invoices setting forth the deductions claimed by the defendant and including the certificate quoted in finding 12.

The plaintiff, in order to get its money, executed and submitted the invoices in the form required by the defendant’s representatives and orally protested the deductions based on hijacking of cargoes. The record contains no evidence of written protests made when the invoices were submitted.

14. On March 24,1947, plaintiff appealed to the Chief of the Claims Service, AFWES PAC from the decision of the contracting officer that $5,481 (¥10,962) should be deducted for the loss of the 18 cases of blankets hijacked from plaintiff’s truck November 19, 1946.

Appeals and objections to other deductions were filed by the plaintiff on May 7, 1947, and June 21, 1947.

These appeals were filed in time and were diligently prosecuted.

15. On January 8,1948, while plaintiff’s appeals were still pending, final payment of the balance of the amounts due the plaintiff under the contract, less the deductions, was authorized. The voucher prepared by the Army to cover the final payment contained the following printed or stamped certificate:

I certify that the work called for in Contract No. W 427 200 tc 246 final payment for which is made on this voucher has been completed in accordance with the terms of the contract and the plans and specifications applicable thereto that the work as completed is acceptable to, and is hereby accepted for the Government; that any delay in completion of the work called for in the contract resulted in no damage or loss to the Government and the contractor is excused from any penalty because of such delay and that payment of this voucher represents complete and final settlement of the contractor’s claim under this contract and a formal release is not required.
I certify that expenditures for supplies, equipment, materials, services or construction as specified in attached instrument are made pursuant to blanket approval granted by the Director, Procurement and Disposal Division, G-4 Section Hq. AFWESPAC, and the prices paid are deemed to be fair and reasonable when not established by regulations or local law.

The voucher also contained the following typed-in notation:

Certificate above a part hereof.

In accepting the final payment plaintiff did not intend to waive its protest against the deductions made or to abandon its claim to the amounts deducted and defendant’s representatives handling the claim so understood.

On January 16,1948, eight days after the last payment was authorized, the Chief of the Claims Service asked plaintiff to furnish further evidence in support of its claim. On March 31, 1948, plaintiff filed an amended claim. Plaintiff was informed on March 14, 1949, that its claim was denied.

16. During the performance of this contract plaintiff owned approximately 16 trucks. The performance of the contract required a total of about 100 trucks, and plaintiff secured the additional ones from subcontractors. When a deduction was made from one of plaintiff’s vouchers for a shortage, plaintiff in turn charged this against the subcontractor involved. The record does not establish whether any of the shortages claimed in this case was charged against a subcontractor, nor does the record establish that plaintiff has any liability to any subcontractor.

CONCLuSION of law

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is entitled to recover, and judgment will be entered to that effect. The amount of recovery will be determined pursuant to Eule 38 (c).

In accordance with the opinion of the court and on a memorandum report of the commissioner as to the amount due thereunder, it was ordered on September 9, 1960, that judgment for the plaintiff be entered for $25,859.64. 
      
       Plaintiff and defendant have agreed that $56,022.55 represents the correct computation of net deductions for shortages after eliminating a deduction, attributable to a duplicate payment, not questioned by plaintiff.
     