Fullerton Lumber Co. v. Chicago, Milwaukee, St. Paul & Pacific Railroad

Background

A railroad company sued a lumber company to recover freight charges for a carload of coal. The carrier accepted the lumber company’s check at delivery, which was customary. The carrier delayed presenting the check for payment, and before presentation the bank failed so the check went unpaid. The lumber company argued it was relieved from liability because of the carrier’s delay. The trial court held that the federal law governing railroads required payment strictly in currency, and judgment was entered for the carrier; the court of appeals affirmed and the case reached this Court.

Reasoning

The central question was whether the federal railroad statute requires payment only in coin or currency. The Court said the statute does not expressly require coin. It explained the statute’s purpose is to prevent rebates and unfair discrimination among shippers. The Court recognized the convenience and safety of ordinary business use of checks drawn on going banks with ample deposits. It held that whether the lumber company is liable depends on ordinary legal rules about payment by check, not on the railroad statute. The Court reversed the judgment below and declined to decide other related questions argued by the parties.

Real world impact

The decision affects everyday freight transactions between shippers and carriers. It permits acceptance of demand checks on solvent local banks to be treated as payment when commercial practice supports it. The ruling limits using the railroad statute to require strict cash-only payments and sends disputes about unpaid checks to ordinary banking and check-law rules. Because the Court left other issues undecided, liability may still turn on facts like delay or negligence in presenting the check.