THE FRED SMARTLEY, JR., 4553.

Citation108 F.2d 603
Decision Date08 January 1940
Docket NumberNo. 4553.,4553.
PartiesTHE FRED SMARTLEY, JR. S. C. LOVELAND CO., Inc., et al. v. PENNSYLVANIA SUGAR CO.
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

COPYRIGHT MATERIAL OMITTED

James J. Lenihan, of Washington, D. C. (Forrest E. Single, of New York City, and Lester S. Parsons, of Norfolk, Va., on the brief), for appellants.

T. Catesby Jones, of New York City (Leonard J. Matteson, Richard F. Shaw, and Bigham, Englar, Jones & Houston, all of New York City, and Vandeventer & Black, of Norfolk, Va., on the brief), for appellee.

Before PARKER and SOPER, Circuit Judges, and COLEMAN, District Judge.

PARKER, Circuit Judge.

This is an appeal from a decree dismissing a petition for limitation of liability. The appellant is the owner of the barge Fred Smartley, Jr., upon which a cargo of sugar was shipped by the Pennsylvania Sugar Company in November 1935. The cargo was damaged as a result of the unseaworthiness of the barge, and this court affirmed a decree of the District Court awarding damages to the shipper on the ground that the barge was unseaworthy at the inception of the voyage. The Fred Smartley, Jr., 4 Cir., 100 F.2d 971. The court below denied limitation of liability on two grounds: (1) that, as the shipment was made pursuant to a personal contract containing an implied warranty of seaworthiness, the owner of the barge was not entitled to limit liability; and (2) that the petition for limitation of liability was not filed within the time required by statute.

The facts are that the shipment was made pursuant to an oral contract between the shipper and the president, and owner of 90% of the stock, of the corporation that owned the barge. Bill of lading covering the shipment was issued by the vice president and was in the usual form of bills, approved by the Interstate Commerce Commission, covering either rail or water transportation. It contained the following provisions as sec. 9(a): "If all or any part of said property is carried by water over any part of said route, such water carriage shall be performed subject to all the terms and provisions of, and all the exemptions from liability contained in, the Act of the Congress of the United States, approved on February 13, 1893 46 U.S.C.A. § 190 et seq., and entitled `An Act relating to the navigation of vessels, etc.,' and of other statutes of the United States according carriers by water the protection of limited liability, and to the conditions contained in this bill of lading not inconsistent therewith or with this section."

The shipper filed written claim of loss and damage with the owner on April 18, 1936 and filed libel to recover same August 13, 1936. The owner did not file petition for limitation of liability until March 11, 1939, notwithstanding the passage of the statute approved June 5, 1936, limiting to six months after the filing of written notice of claim the time within which the owner might petition for limitation of liability.

On the first question, the learned counsel for appellant properly makes the following admission in his reply brief, which serves to greatly narrow the controversy, viz.: "We concede that the question of liability between petitioner and appellee is res adjudicata. We likewise concede that there was an implied warranty of seaworthiness in the contract of carriage herein, and that it is res adjudicata between the parties that the barge `Smartley' was unseaworthy, and that due diligence had not been exercised to make her seaworthy. We further concede that the contract of carriage involved herein was a personal contract of the S. C. Loveland Company, Inc."

On the first question, therefore, the question is: Does the language of the bill of lading above quoted give to the owner the right to limit liability as against a liability arising from the breach of a warranty of seaworthiness contained in a personal contract of the owner? We think not. The manifest purpose of the language quoted is to preserve to the owner, as an exception to the common law liability assumed in sec. 1(a) of the bill of lading, the rights accorded by the limitation of liability statutes of the United States. 46 U.S.C.A. § 181 et seq. The exception, manifestly, confers no right to limit liability unless such right is given by the statutes therein referred to; and these statutes confer no such right as against a liability arising out of a breach of the warranty of seaworthiness contained in the personal contract of the owner. Cullen Fuel Co. v. W. E. Hedger Co., Inc., 290 U.S. 82, 54 S.Ct. 10, 78 L.Ed. 189; Capital Transportation Co. v. Cambria Steel Co., 249 U.S. 334, 39 S.Ct. 292, 63 L.Ed. 631.

The position of appellant is not helped by the argument that only where there is privity and knowledge on the part of the owner is he denied limitation of liability under the statutes; for privity and knowledge of unseaworthiness, where it exists, are imputed to the owner in the case of a personal contract containing an express or implied warranty of seaworthiness. In the Soerstad, D.C., 257 F. 130, cited by the Supreme Court in Cullen Fuel Co. v. W. E. Hedger Co., supra, Judge Learned Hand went into the matter fully, saying:

"A warranty is a promise that a proposition of fact is true. Theoretically it is extremely difficult to interpret it otherwise than as a promise to make whole the warrantee, if the warranty turns out to be false, since a promise is normally a stipulation for some future conduct by the promisor. If it is so regarded, then clearly the breach of warranty is with the warrantor's privity, for by hypothesis he has deliberately refused to make whole the warrantee. However, it must be conceded that the law regards the breach as arising at once if the warranty be false, and the warrantee's loss as damages, not as a condition for the warrantor's performance. So viewed, the warrantor has misled the warrantee by falsely assuring him of the truth through the warranty, and the wrong consists of the assurance, the warrantee's reliance upon it, and his loss; just as in cases of deceit, except that no scienter is necessary. And so the action on warranty was originally `a pure action of tort' (Ames, History of Assumpsit, 2 Harv.L.R. 1, 8), and arose a century before action on the case for assumpsit. The action sounded indeed in deceit (Y. B. 11 ed. IV, 6, plac. 11), and it was not till 1778, in Stuart v. Wilkins, 3 Doug. 118, that assumpsit appears to have been used on a seller's warranty.

"Regarded in this way, which is probably the correct way historically, it follows inevitably that a breach of warranty should be held to be with the warrantor's privity, because all the elements of the cause of action are `done, occasioned, or incurred' by him personally; that is to say, he personally gives the false assurance, he intends the warrantee to rely upon it, and the loss arises from the mistaken reliance, as he knows it will. Thus he personally occasions the loss."

The Yungay, D.C., 58 F.2d 352 is authority to the contrary; but a careful reading of the opinion therein leads to the conclusion that the learned judge who decided that case ignored the basis upon which privity and knowledge of unseaworthiness are imputed to the owner in the case of a personal contract. As pointed out by Judge Hand, the owner is charged with privity and knowledge of the unseaworthy condition because of the warranty of seaworthiness implied in his contract; and the statutes do not give the right to limit liability where the owner is thus charged with privity and knowledge of the unseaworthy condition. It is difficult to see, therefore, how the fact that the protection of the statutes was reserved by the provisions of the bill of lading could avail an owner so charged with privity and knowledge of unseaworthiness. Certainly the reservation of rights accorded by the statutes cannot result in conferring upon him greater rights than the statutes themselves afford.

And we agree with the court below that the petition for limitation of liability was filed too late in any event. Of course, the limitation of liability statutes conferred a right upon the owner and...

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