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Mitsui O.S.K. Lines, Ltd v. Consolidated Rail Corporation

January 19, 2000

MITSUI O.S.K. LINES, LTD. AND MOL INTERMODAL, INC., PLAINTIFFS-APPELLANTS,
v.
CONSOLIDATED RAIL CORPORATION, DEFENDANT-RESPONDENT.



Before Judges Baime, Eichen and Bilder.

The opinion of the court was delivered by: Eichen, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted October 20, 1999

On appeal from the Superior Court of New Jersey, Law Division, Hudson County.

Plaintiffs Mitsui O.S.K. Lines (Mitsui) and MOL Intermodal, Inc. (Intermodal) appeal from an order granting defendant Consolidated Rail Corporation's (Conrail) cross-motion for summary judgment dismissing their action for damages incurred following a derailment of a Conrail train, and denying their motion for summary judgment. The damages sought consist of the cost of hiring surveyors to inspect and survey the damaged cargo in the amount of $42,382. Conrail paid for the cargo losses but refused to pay for the survey expenses, claiming that plaintiffs should have used Conrail's inspection team to conduct the surveys and that liability for such expenses is excluded under a limitation on damages provision in the parties' shipping contract. *fn1

The contract was governed by Conrail's Exempt Trailvan Rules Circular CR No. 1 (Circular No. 1) which sets forth Conrail's liability for damage to cargo, and contains procedures for processing claims. Paragraph 8.7 of Circular No. 1, entitled "Special or Consequential Damages," contains a provision limiting Conrail's liability for damages, as follows:

In no event shall Conrail be liable for any special, consequential, indirect or punitive damages, interest or attorney's fees.

Conrail contended survey expenses are included within this limitation on damages provision. Plaintiffs countered that survey expenses are "incidental" damages which are different from "consequential" damages and not excluded by the provision.

In granting Conrail's cross-motion for summary judgment and denying plaintiffs' motion, the judge, in a brief conclusory oral decision, determined that the limitation on damages contained in paragraph 8.7 included survey expenses "by [its] literal reading" and also that such expenses were not recoverable because Conrail had made inspectors and surveyors available to plaintiffs as set forth in the Guide.

The principal issue on this appeal is whether survey expenses are "special, consequential, [or] indirect" damages or "incidental" damages. If they are "incidental" damages, then Conrail is liable to reimburse plaintiffs for the survey expenses they incurred because that term was not included in Conrail's limitation of damages provision; if not, then plaintiffs cannot recover these costs from Conrail.

By the clear implication of their arguments, both parties believe the limitation on damages provision in paragraph 8.7 is clear and unambiguous. Plaintiffs contend that survey expenses constitute "incidental" damages as a matter of law because "incidental damages" are damages directly associated with their obligation to mitigate their cargo losses. Conrail argues that survey expenses are "special," "indirect," or "consequential" damages, because they are the "natural and proximate consequence[s] of the [cargo] loss," or because they do "not follow immediately" after the loss.

We resolve the issue by applying general contract principles. Both plaintiffs and defendant agree that the contract requires the law of the Commonwealth of Pennsylvania to govern the interpretation of the disputed provision. Under Pennsylvania law, "'[t]he task of interpreting ... contract[s] is generally performed by a court rather than by a jury.'" Madison Constr. Co. v. Harleysville Mutual Ins. Co., 735 A.2d 100, 106 (Pa. 1999) (citations omitted).

"When courts interpret a contractual agreement, their duty is to 'ascertain the intent of the parties as manifested by the language of the written agreement.'" Glen-Gery Corp. v. Warfel Constr. Co., 734 A.2d 926, 929 (Pa. Super. 1999) (quoting Standard Venetian Blind Co. v. American Empire Ins. Co., 469 A.2d 563, 566 (Pa. 1983)). The intent of the parties is to "be ascertained from the document itself when its terms are clear and unambiguous." ...


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