BENAVIDES, Circuit Judge:
The ultimate issue in this appeal is whether Canal Insurance Company ("Canal") has indemnity obligations under an MCS-90 Endorsement issued in connection with the insurance policy of an interstate carrier. To get to the bottom of Canal's indemnity obligations, we must resolve whether a lease between a tractor owner and carrier that is licensed by the Interstate Commerce Commission ("ICC") can be effectively terminated when the carrier's ICC placard and emblem remain on the tractor and the carrier has not obtained a receipt from the owner-lessor confirming the termination of the lease. We conclude that the presence of a carrier's ICC placard on leased equipment and the carrier's failure to obtain a receipt upon return of the leased equipment do not alone preclude a determination that a lease has been terminated.
On January 31, 1993, a 1976 Freightliner tractor-trailer rig hauling oysters collided with an automobile driven by Sarah Jackson and occupied by Leo Smith. Jackson and Smith allegedly suffered personal injuries as a result of the accident. The tractor-trailer rig was driven by Timothy O'Shields and owned by Larry Wallen. At the time of the accident, the tractor bore the painted ICC placard and the emblem of J & T Enterprises, an ICC-authorized carrier.
Jackson and Smith brought suit for personal injuries against O'Shields, Wallen, J & T Enterprises, and John and Theresa Hanna (partners in J & T Enterprises). Canal brought a separate action, seeking a declaration that it had no defense or indemnity obligations to any of the parties in the suit brought by Jackson and Smith. The district court consolidated the underlying tort suit and Canal's declaratory judgment action and bifurcated the matters for trial purposes.
Following a bench trial of Canal's declaratory judgment action, the district court held that there was no lease between J & T Enterprises and Wallen (the owner of the
J & T Enterprises's insurance policy with Canal contained an MSC-90 Endorsement ("Endorsement for Motor Carrier Policies of Insurance for Public Liability Under Sections 29 and 30 of the Motor Carrier Act of 1980").
There is no question that from September 3, 1992 to October 30, 1992, J & T Enterprises and Wallen were parties to a Lease Purchase Agreement and a Contractor Operating Agreement with respect to the 1976 Freightliner involved in the accident. As its name suggests, the Lease-Purchase Agreement focused on the terms of J & T Enterprises's eventual purchase of the 1976 Freightliner and contained a warranty of title. The Contractor Operating Agreement, by contrast, provided the nitty-gritty terms of the leasing arrangement between J & T Enterprises and Wallen. Soon after entering into the agreements, however, the Hannas, partners in J & T Enterprises, discovered that expensive repairs and insurance costs made the arrangement infeasible.
The district court found that John Hanna promptly took formal steps to cancel the Lease Purchase Agreement and the Contractor Operating Agreement on behalf of J & T Enterprises. On October 30, 1992, Hanna personally delivered to Wallen a signed and notarized termination notice. At that time, Wallen had already retaken possession and control of the tractor. Wallen refused to sign the cancellation receipt at the bottom of the termination notice. Approximately a week later, Hanna repeated his request that Wallen sign a receipt. Again, Wallen refused to do so. John Hanna also repeatedly asked Wallen to remove J & T Enterprises's painted ICC placard and its emblem from the side of Wallen's 1976 Freightliner. Although Wallen agreed on several occasions to "take care of" removing the painted J & T Enterprises placard from the tractor, he never did so.
Smith and Jackson contend that the lease relationship nevertheless continued in effect through the date of the accident because J & T Enterprises's emblem and ICC placard were not removed from the door of Wallen's truck and because J & T Enterprises did not obtain a receipt from Wallen showing that the lease had been terminated. They also contend that trips undertaken jointly by J &
Under the authority of 49 U.S.C. § 11107, the Interstate Commerce Commission regulates leases of equipment used in interstate commerce. See 49 C.F.R. § 1057.1 et seq. One of the primary purposes of the ICC's leasing regulations is to ensure that carrier-lessees take control of and responsibility for leased equipment during the term of a lease.
This case is not squarely governed by Simmons, however, because in Simmons there was no doubt that there was a lease in effect between the equipment owner and the ICC-authorized carrier when the accident occurred. Here, the central issue is whether there was a lease between J & T Enterprises and Wallen for the tractor at the time the accident occurred.
Jackson and Smith rely on decisions from other circuits, in which courts have held that a lease can be effectively terminated only if the carrier-lessee (1) removes its identifying placard from the leased equipment, and (2) obtains a cancellation receipt from the equipment owner.
In 1986, the ICC regulations were substantially modified, giving the leasing parties a much broader range of discretion as to the
The history of the amendments reflects that they were prompted by the Interstate Carrier Conference's concern (expressed in a petition to the Interstate Commerce Commission) that carriers could face tort liability even if "equipment owners ... wrongfully continue to display the carrier's identification devices on equipment after a lease contract has terminated." 3 I.C.C.2d at 92; see also Williamson v. Steco Sales, Inc., 191 Wis.2d 608, 530 N.W.2d 412, 418-19 (App.1995) (discussing the amendment of the ICC placard removal regulation), review denied, 537 N.W.2d 571 (Wis.1995). In enacting the amendments, the ICC made clear that ICC "leasing rules do not and are not intended either to assign liability based on the existence of placards or to interfere with otherwise applicable State law." 3 I.C.C.2d at 93.
In the aftermath of the ICC amendments, the continued vitality of decisions in other circuits holding that a lease cannot be effectively terminated until a carrier removes its placard and obtains a receipt is at best questionable. Even if those decisions could survive the amendments, we decline to hold that the lease between Wallen and J & T Enterprises continued in effect despite J & T Enterprises's conscientious efforts to terminate the lease. Notably, none of the preamendment cases cited by Jackson and Smith involved a carrier who conscientiously attempted to remove its placard and to obtain a receipt. Rodriguez, 705 F.2d at 1230-31; Mellon, 289 F.2d at 477; Cosmopolitan Mut. Ins. Co., 336 F.Supp. at 97 ("The record does not indicate a single effort on McCormick's part to comply with its ICC obligations."). In fact, in both Rodriguez v. Ager and Mellon National Bank & Trust Co. v. Sophie Lines, Inc., the underlying leases between the carriers and the equipment owners were apparently still in effect at the time of the accidents. See Rodriguez, 705 F.2d at 1230 ("[T]he lease was on the verge of being terminated, but at the time of the accident ... the lease had not been cancelled...."); Mellon, 289 F.2d at 475 (noting that the "collision occurred October 4, 1955, within the period of the [30-day] lease").
When faced with a case in which a carrier had assiduously attempted to cancel a lease in accordance with the lease's provisions, a Florida court held in Atlantic Truck Lines, Inc. v. Kersey, that the presence of an ICC placard and lack of a receipt are not alone dispositive of the existence of a lease. 387 So.2d 411, 416 (Fla.App.1980), review denied, 397 So.2d 778 (Fla.1981). As the Florida court explained, cases like Rodriguez and Mellon could produce unjust results if applied to a diligent carrier:
The district court's findings reflect that the Hannas, partners in J & T Enterprises, terminated the lease in compliance with its terms and took reasonable steps to remove their ICC placard and to obtain a receipt from Wallen. On October 30, 1992, John Hanna presented Wallen with a written and notarized termination notice. Wallen twice refused to sign the termination notice to acknowledge receipt of the equipment. We decline to hold that Wallen's unilateral refusal to sign a receipt extended the term of the Contractor Operating Agreement. Under the agreement's termination clause, either party could terminate the agreement by giving the other a written notice.
The presence of J & T Enterprises's ICC placard does not vitiate the otherwise valid termination notice. Under the agreement, Wallen, not the Hannas, bore the responsibility of removing J & T Enterprises's ICC placard and emblem upon the termination of the lease.
We hold that the presence of J & T Enterprises's ICC placard on the 1976 Freightliner and the lack of a termination receipt did not alone keep the otherwise-terminated agreement alive.
Jackson and Smith next contend that J & T Enterprises's and Wallen's periodic joint ventures after the termination of the written lease support imposing vicarious liability on J & T Enterprises for the injuries suffered by Jackson and Smith. During the months following the termination notice, Wallen's 1976 Freightliner was used to pull J & T Enterprises's trailers on various hauls. These joint hauls, Jackson and Smith allege, somehow vitiated J & T Enterprises's written notice terminating the Contractor Operating Agreement. They argue alternatively that the joint hauls created a new lease or leases between Wallen and J & T Enterprises that were in effect when the accident occurred.
The district court found that the hauls after October 30, 1992 were not a continuation of the Contractor Operating Agreement. We agree. As the district court explained, the terms of the later hauls were "substantially and materially different from the long since cancelled contractor operating agreement." For example, under the Contractor Operating Agreement, the parties agreed to a 90-10% revenue split, compared to an agreed 50-50% split for later loads. Further, although the Contractor Operating Agreement by its terms did not apply to tractor-only hauls (those involving a J & T
Jackson and Smith are no doubt correct that the fact that no written lease was in effect at the time of the accident does not foreclose the possibility that an oral lease existed between the parties. See Zamalloa v. Hart, 31 F.3d 911, 917 (9th Cir.1994) (holding that a statutory employment relationship between a driver and a carrier "can be formed via an oral lease between the carrier and vehicle owner even before the driver picks up the cargo"); Williamson, 530 N.W.2d at 416 ("Although ICC regulations require the carrier to have a written lease, the failure to have one does not absolve the carrier of liability if an oral lease exists.") (citation omitted). But the district court found that no oral lease between J & T Enterprises and Wallen governed the fateful oyster haul, and the record supports the district court's conclusion. J & T Enterprises was in no way connected to Wallen's haul of oysters on the night the accident occurred. The haul was coordinated exclusively by Wallen. Sam Styron, a broker who arranged the oyster haul at Wallen's request, testified that Wallen told him that he would be hauling the oysters on behalf of Larry's Express. Unlike the previous hauls undertaken jointly by J & T Enterprises and Wallen, which were "tractor only," both the tractor and the trailer involved in the accident belonged to Wallen. The oyster haul did not benefit the Hannas or J & T Enterprises in any way. The trailer carried oysters; the Hannas dealt only in produce. The district court's findings reflect that the Hannas had no knowledge of the haul until days later.
Our holding in Price v. Westmoreland does not compel a contrary conclusion. In that case, we held that a carrier-lessee was vicariously liable for injuries to a passenger in a leased truck even though the driver of a truck leased by the carrier did not have permission to carry passengers and the carrier had no knowledge of the passenger's presence. 727 F.2d at 495. There was no question in Price, however, that a lease existed between the truck owner and the ICC-authorized carrier. Id. Under Price and Simmons, if the Wallen's truck had been the subject of a lease by J & T Enterprises at the time of the accident, J & T Enterprises would be liable for Jackson's and Smith's injuries regardless of whether the particular trip was on J & T Enterprises's behalf. As the district court found, however, there was no lease in place to connect J & T Enterprises to the truck.
As Jackson and Smith point out, the regulations require leases between an ICC-authorized carrier and an equipment owner to be in writing and require that the lease specify its duration.
For the foregoing reasons, the judgment of the district court is AFFIRMED.
49 C.F.R. § 1057.12(e). The regulations as amended still require the authorized carrier to identify leased equipment by displaying its name and MC number on the equipment. 49 C.F.R. §§ 1057.11(c)(1), 1058.2. The control-and-responsibility provisions were also left intact. 49 C.F.R. § 1057.12(c).
49 C.F.R. § 1057.12(e).