Cook Industries, Inc. v. Barge UM-308

• Decision Date: 31 July 1980
• Docket Number: UM-308,No. 78-2797,78-2797
• Parties: COOK INDUSTRIES, INC., Plaintiff-Appellant Cross-Appellee, v. BARGE, her tackle, apparel, etc., in rem, Defendant, Upper Mississippi Towing Corporation, in personam, Defendant-Appellee Cross-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 851

622 F.2d 851

COOK INDUSTRIES, INC., Plaintiff-Appellant Cross-Appellee, v. BARGE UM-308, her tackle, apparel, etc., in rem, Defendant Upper Mississippi Towing Corporation, in personam Defendant-Appellee Cross-Appellant.

No. 78-2797.

United States Court of Appeals Fifth Circuit.

July 31, 1980.

Thomas W. Thorne, Jr., New Orleans, La., for plaintiff-appellant cross-appellee.

Faris, Ellis, Cutrone, Gilmore & Lautenschlaeger, J. Y. Gilmore, Jr., New Orleans, La., for defendant-appellee cross-appellant.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before FAY, KRAVITCH and RANDALL, Circuit Judges.

FAY, Circuit Judge:

This appeal concerns the proper measure of damages to compensate a shipper for injury to a cargo of soybeans aboard a carrier's vessel en route from Oklahoma to Louisiana. The shipper accepted the cargo of deteriorating soybeans, blended the beans with a higher grade of soybean, and sold the blend at a price equal to the original market value of the cargo. The shipper then sued the carrier for damages. The district court found the carrier liable for the cargo damage but held that the shipper could recover only the cost of blending the deteriorated soybeans with the higher grade beans. Because the shipper failed to present any evidence of its blending costs, all recovery was denied.

We hold that the district court applied the incorrect rule of damages. The usual measure of damages for injury to goods in the possession of a carrier is the difference between the fair market value of the cargo at the place of destination, in like condition as when it was shipped, and its actual value at the place of destination. This market value test should determine the shipper's damages in this case. We therefore reverse the district court judgment denying recovery to the shipper, and order that damages be awarded in accordance with the traditional rule.

I. The Facts

The facts of the case are clearly set out in the district court's Statement of the Case and Findings of Fact. Record at 176-81. In February, 1973, defendant carrier Upper Mississippi Towing Corporation (UMTC) contracted to carry from Wagoner, Oklahoma to Reserve, Louisiana a consignment of soybeans belonging to plaintiff shipper Cook Industries, Inc. (Cook). On February 27, 1973, UMTC loaded the Barge UM-308 ¹ with approximately 43,000 bushels of soybeans ² and issued its bill of lading to the order of Cook in Reserve, Louisiana. The bill of lading noted that the cargo was "in apparent good order" at the time of loading. Record at 5. The cargo was subsequently sampled and an Official Grain Inspection Certificate was issued and transmitted to Cook. The certificate classified the cargo as Grade No. 3 yellow soybeans with a moisture content of 14.5%. ³ Plaintiff's Exhibit 2.

Subsequent to loading, the Barge UM-308 was shifted from the loading facility to a fleeting area on the Verdigris River. Because UMTC did not operate its own towboats on the Verdigris River, it customarily arranged for other companies to tow its barges through the McClellan-Kerr Arkansas River Navigation System, of which the Verdigris River is a part. Generally, it took one to three days to obtain towing service for a barge awaiting transit to the Mississippi River. UMTC made daily efforts to secure a tow for the UM-308, but before towage could be arranged the waters in the McClellan-Kerr Navigation System reached flood stage due to heavy rains, and the system was closed to traffic.

Because of the long delay, UMTC hired Muskogee Marine Service to periodically check the UM-308 to insure that her moorings were secure and her hatches tight and seaworthy. No provision, however, was made to inspect the cargo itself or to insure that it was properly ventilated. Although the shipper, Cook, neither requested UMTC to inspect the cargo nor notified the carrier of the soybeans' moisture content, UMTC was aware of the nature of the cargo and knew that soybeans would spoil if left in an unventilated barge for an extended period of time.

In March, Cook notified UMTC by telex to reconsign the UM-308's cargo to Cargill, Inc. at Baton Rouge. The barge remained in the Verdigris River fleeting area until May 12, 1973, seventy-four days after loading, when it was finally towed to the Mississippi River, and then to Baton Rouge, where it arrived on May 25 with hatch covers secure and undamaged.

Cargill, Inc., Cook's consignee, inspected the cargo upon arrival and rejected it as damaged. Cook notified UMTC of the alleged damage and abandoned the entire cargo to the carrier for salvage. A cargo surveyor inspected the cargo for UMTC and found excessive heating ⁴ but no damage from water leakage. His report indicated that the cargo damage resulted from the moisture content of the soybeans and the extended period of stowage in an unventilated hold. Although the surveyor made no chemical or weight analysis of the cargo, his report suggested that the sour odor of the soybeans automatically downgraded them from No. 3 to sample grade.

After initially rejecting the soybeans, Cook agreed to accept the cargo and arrange for its delivery to Reserve, Louisiana. There, a cargo sample was taken and an Official Certificate of Inspection was issued classifying the cargo as sample grade yellow soybeans. See Plaintiff's Exhibit 3. Cook subsequently blended ⁵ the entire cargo of damaged soybeans with other soybean shipments and sold the resulting mixture at a price at least equal to the original market value of the cargo in question.

In 1975 Cook instituted this admiralty and maritime action against UMTC for cargo damage, invoking jurisdiction under 28 U.S.C. § 1333 (1976). The nonjury trial resulted in a pyrrhic victory for the plaintiff: the defendant carrier was held liable for the deterioration of the soybeans, but no damages were awarded. Both parties appeal the district court's judgment: UMTC contests the finding of liability and the assessment of costs against it, while Cook takes issue with the court's denial of damages. We affirm the finding of liability and the assessment of costs and reverse on the issue of damages, for reasons to be set forth infra.

II. The Liability Issue

The district court found that although UMTC did not know the precise grade of soybeans shipped aboard the UM-308, or the moisture content of the cargo, it knew or should have known that a delay in transit of seventy-four days would create a substantial likelihood of cargo deterioration. Trial testimony indicated that UMTC frequently handled shipments of soybeans and was familiar with the spoilage problems associated with this type of dry cargo. See Supplemental Record at 121-23. The court concluded that UMTC was negligent in failing to inspect the cargo aboard the Barge UM-308 during the unusually long delay on the Verdigris River, and that UMTC's negligence was a proximate cause of the cargo damage. Had the cargo been inspected, said the court, remedial action, such as providing ventilation, could have been undertaken to protect the soybeans. Record at 180.

We have reviewed the record in the case, and we do not find the district court's findings of fact as to UMTC's negligence to be clearly erroneous. See Fed.R.Civ.P. 52(a); Chaney v. City of Galveston, 368 F.2d 774, 776 (5th Cir. 1966). Because deterioration is an inherent vice of a cargo of soybeans, and because even the better grades of soybeans are likely to begin to deteriorate after six to eight weeks when stored in the unventilated hold of a cargo barge, see Supplemental Record at 49-53, we agree that the carrier UMTC was obligated to inspect the cargo during the seventy-four day delay in shipping. A common carrier is under a continuing duty to protect a shipper's cargo against damage while the cargo remains in the carrier's custody. This duty includes an obligation to inspect a cargo which may deteriorate because of unforeseen transit delays or because of inherent problems in the cargo. See United States v. Lykes Bros. Steamship Co., 511 F.2d 218 (5th Cir. 1975); United States v. Central Gulf Steamship Corp., 456 F.2d 1281 (5th Cir. 1972). Because UMTC breached its duty to Cook, UMTC is responsible for any damage resulting from its failure to inspect the soybeans aboard the UM-308. We hold that the district court's finding of liability is not clearly erroneous, and we affirm on that issue.

III. The Damage Issue

The district court found that Cook had blended the entire cargo from the UM-308 with other shipments of soybeans, and that the damaged soybeans may have been blended with shipments of Grade No. 3 or higher. Since there was no evidence that any of the bushels of soybeans aboard the UM-308 had been discarded or were sold at less than their original market value, the court concluded that "the only actual loss that plaintiff may have sustained is the cost of the blending process itself." Record at 181. The court denied any recovery because Cook presented no evidence of blending costs, thus failing to meet the burden of proving the existence and amount of damages sustained.

Generally, when a common carrier is held liable for loss or damage to goods transported, the measure of the shipper's recovery is the difference between the market value of the cargo in the condition in which it would have arrived had the carrier performed properly, and the cargo's market value in its damaged state on arrival at port of destination. The Ansaldo San Giorgio I v. Rheinstrom Bros. Co., 294 U.S. 494, 496, 55 S.Ct. 483, 484, 79 L.Ed. 1016 (1935); Holden v. S/S Kendall Fish, 262 F.Supp. 862 (E.D. La. 1966), aff'd, 395 F.2d 910 (5th Cir. 1968). The district court took note of this general rule; however, its conclusions of law were that:

7. The primary object in awarding damages is to indemnify the shipper for the loss sustained as a result of the carrier's negligence. F. J. Walker Ltd. v. The M/V LEMONCORE, 561 F.2d 1138 (5th Cir. ...