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Gordon Leasing Co. v. Navajo Freight Lines

September 26, 1974

GORDON LEASING CO., PLAINTIFF,
v.
NAVAJO FREIGHT LINES, DEFENDANT, AND RANCH & FARM LINES AND RICHARD WEBB, DEFENDANTS AND THIRD-PARTY PLAINTIFFS, V. HERBERT J. KRAUSE, JOSEPH F. STRUNESKI, GENERAL EXPRESSWAYS, INC. AND SEABOARD SURETY CO., THIRD-PARTY DEFENDANTS



Gaynor, J.c.c.

Gaynor

This case involves the application of an indemnification provision contained in a so-called "trip lease" covering the use of a motor truck while engaged in the transportation of goods in interstate commerce. The issue before the court is whether such provision whereby the lessor indemnifies the lessee for any loss resulting from the use of the vehicle is unenforceable as being contrary to public policy as expressed in regulations promulgated by the Interstate Commerce Commission providing in such cases for assumption of all liability by the lessee. Although the subject of conflicting decisions in other jurisdictions, this question is novel in New Jersey.

On June 7, 1969 Ranch & Farm Lines Nonstock Cooperative Marketing Association, Inc. (hereinafter Ranch or lessor),

the lessee, of a tractor-trailer, with the right to re-lease, entered into a trip lease with Navajo Freight Lines and General Expressways, Inc. (hereinafter Navajo or Lessee) for the use of said tractor-trailer in the transportation of certain goods by lessee from South Kearney, New Jersey, to Cornhusker, Nebraska. While traveling on Route 22 in Green Brook, New Jersey, the tractor-trailer was involved in an accident resulting in damages to a vehicle owned by Gordon Leasing Co. A consent judgment against Navajo for the amount of such damages was entered and its claim against Ranch for indemnification was reserved, which claim is the subject of the present proceedings.

The trip lease provided for the payment of a flat rental charge, inclusive of the driver's wages; required the lessor to deliver and maintain the equipment in good working condition, to furnish all necessary fuel, tires and repairs for the operation of the vehicle as well as all other expenses incident to such operation, and also included the following terms:

The Lessor shall surrender full control, possession, and management of said equipment to the Lessee during the term of this lease which shall start at delivery of equipment and end with delivery of cargo at destination, and the Lessor further agrees to operate said equipment as directed by Lessee.

It is understood that the leased equipment under this agreement is in the exclusive possession, control and use of the authorized carrier Lessee and that the Lessee assumes full responsibility in respect to the equipment it is operating to the public, the shippers, and the INTERSTATE COMMERCE COMMISSION. It is agreed that Lessor will carry acceptable Public Liability and Property Damage insurance. Lessor agrees to reimburse and otherwise indemnify Lessee for any and all losses sustained by Lessee resulting from the use of the aforesaid equipment.

Lessor hereby agrees further to maintain his equipment in a good and efficient manner, observe all safety and other requirements of the I.C.C. and all other regulatory bodies having jurisdiction and to indemnify carrier against any losses in connection with this operation.

In opposing lessee's claim for indemnification under the above terms of the trip lease, lessor contends that such provision is unenforceable as being contrary to public policy as expressed in I.C.C. regulations imposing liability upon the lessee. The specific regulations relied upon by the lessor, as set forth in 49 C.F.R. § 1057 entitled "Lease and Interchange of Vehicles" and adopted by the Interstate Commerce Commission pursuant to 49 U.S.C.A. § 304 et seq., are the following provisions governing truck leasing operations:

(a) Contract requirements. The contract, lease, or other arrangement for the use of such equipment:

(4) Exclusive possession and responsibilities. Shall provide for the exclusive possession, control, and use of the equipment, and for the complete assumption of responsibility in respect thereto, by the Lessee for the ...


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