The opinion of the court was delivered by: SMITH
The Empire Box Corporation of Stroudsburg, a Delaware corporation, hereinafter identified as Empire of Stroudsburg, is engaged in the manufacture and production of paper board and maintains a plant in Stroudsburg, Pennsylvania. The Empire Box Corporation, a Delaware corporation, hereinafter identified as Empire of Garfield, is engaged in the manufacture and production of paper board boxes and maintains a plant in Garfield, New Jersey. The paper board manufactured by the former is used by the latter in the manufacture of its products.
The Willard Sulzberger Motor Co., a corporation of New Jersey, hereinafter identified as Sulzberger Motors, is a motor carrier and maintains an office in Passaic, New Jersey. This corporation does not own any motor trucks but leases from others such equipment as may be necessary in its operations.
The Sulzberger Motors and the Empire of Garfield entered into a contract by the terms of which the former ostensibly leased to the latter five tractors and ten trailers for use primarily in the transportation of paper board and waste paper over routes between Stroudsburg and Garfield, and New York City and Stroudsburg. This contract was assigned by Empire of Garfield to Empire of Stroudsburg, and thereafter, in May of 1947, the operations thereunder were commenced. The pertinent clauses of the contract are recited in the appendix hereto annexed.
The pertinent terms and conditions embodied in the contract may be briefly summarized as follows:
Sulzberger Motors agreed to (a) furnish five tractors and ten trailers and maintain this equipment in good repair; (b) procure drivers, subject however to 'selection' by Empire of Stroudsburg; (c) supply gasoline, oil, parts, etc.; (d) supervise the operation of the tractors and trailers; (e) procure the necessary licenses and pay the fees therefor; (f) maintain 'such cargo insurance and fire, theft and collision insurance upon the tractors and trailers as Empire (of Stroudsburg) may deem necessary.'
Empire of Stroudsburg agreed to: (a) pay a 'rental,' determined on the basis of $ 2.50 per ton of paper board or waste paper carried, less deductions for wages, workmen's compensation insurance, and social security taxes, provided the transportation was within the radius prescribed by the contract, to wit, 100 miles from the point of origin; (b) pay 'a sum equal to the present carload rail rates' for the transportation of paper board and waste paper to and from points beyond the said radius; (c) pay a minimum 'rental' of $ 5,600 for a twenty-eight day period, determined on the basis of $ 2.50 per ton for a minimum of 2,240 tons. The base rate was subject to adjustment under the formula prescribed by the seventeenth clause, in which the increase or decrease of labor cost is made the determinative factor.
It was further agreed that 'possession' of the vehicles was to be vested in Empire of Stroudsburg, and that the control and operation thereof was to be under its direction. This seemingly broad grant of possession and control was limited, as indicated by specific provisions of the contract. The right of Empire of Stroudsburg to use the vehicles was restricted to the use of the trailers 'in and around' the plants in Garfield and Stroudsburg and the use of the tractors 'in and around' the plant at Garfield; the use of the tractors in the operations at the Stroudsburg plant was prohibited. (Fourth Clause). The liability of Empire of Stroudsburg for damage to the vehicles was limited to damage occasioned in their permitted use; it assumed no liability for any other damage, including damage occasioned by the negligence of its employees. (Sixth Clause). The grant of possession and control was obviously ostensible and so intended by the parties.
the course of conduct subsequently pursued by the parties is clearly consistent with their obvious intent to establish an interstate carrier service under the mere guise of a lease. Sulzberger Motors furnished to Empire of Stroudsburg a transportation service usually furnished by a contract carrier.
Sulzberger Motors (a) rendered a transportation service for which it was compensated on the basis of actual tonnage carried over routes within prescribed territorial limits, a basis commonly adopted by a contract carrier; (b) supervised the operations, either directly or indirectly, except the operations 'in and around' the plant of Empire of Stroudsburg; (c) hired a dispatcher who supervised the operations as its employee, although carried on the payroll of Empire of Stroudsburg; (d) leased the vehicles from their owners, who hired the drivers; (e) assumed responsibility for the maintenance of the vehicles and supplied gasoline, oil, tires, etc.; (f) assumed responsibility for the safe delivery of cargo; (g) maintained the necessary insurance as required by contract, including public liability insurance; (h) indirectly assumed liability for the wages due and payable to the dispatcher and drivers; (i) indirectly assumed liability for the costs of employment compensation insurance and social security taxes incurred by reason of the employment of the dispatcher and drivers; (j) permitted the deduction of the said wages and costs, which were paid directly by Empire of Stroudsburg, from the total charges due and payable under the contract; (k) imposed upon its lessors the responsibility for the procurement of necessary licenses for the vehicles, a responsibility directly assumed by it under the contract.
Empire of Stroudsburg (a) assumed nothing more than its liability for the transportation charges due and payable under the contract; (b) permitted the Sulzberger Motors to select and hire the dispatcher and drivers notwithstanding the right of 'selection' reserved to it by the contract; (c) carried the dispatcher and drivers on its pay-roll, and paid the costs of employment compensation insurance and social security taxes, but deducted these wages and costs from the total charges due and payable to Sulzberger Motors under the contract; (d) exercised no control or supervision over the operations, except that usually exercised by a shipper.
These operations were consistent with the provisions of the contract, except the provisions of the Fifth Clause, and were obviously contemplated by the parties at the time the contract was made. The specious nature of the Fifth Clause, under which possession of the vehicles and control of the operations were purportedly vested in Empire of Stroudsburg, is clearly evidenced not only by the related clauses but also by the conduct of the parties. Sulzberger Motors retained possession of the vehicles and control of the operations; the possession and control actually vested in Empire of ...