Allstate Ins. Co. v. Inversiones Navieras Imparca, C.A.

Decision Date26 May 1981
Docket NumberNo. 80-5071,80-5071
Citation646 F.2d 169
PartiesALLSTATE INSURANCE COMPANY, a corporation and Delta Overseas, Inc., a corporation, Plaintiffs-Appellants, v. INVERSIONES NAVIERAS IMPARCA, C.A., d/b/a Imparca Lines, a foreign corporation and the M/V "Tamanaco", its engines, tackle, appurtenances, etc., in Rem., Defendants-Appellees. . Unit B
CourtU.S. Court of Appeals — Fifth Circuit

Richard R. McCormack, Miami, Fla., for plaintiffs-appellants.

Gerhardt A. Schreiber, Miami, Fla., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before JONES, HILL and ANDERSON, Circuit Judges.

R. LANIER ANDERSON, III, Circuit Judge:

Once again we are called upon "to determine what Congress would have thought about a subject about which it never thought or could have thought and one about which we have never thought Technology has created a maritime transportation system unlike any which was in existence in 1936 when Congress enacted" the Carriage of Goods by Sea Act ("COGSA"). Wirth Ltd. v. S/S Acadia Forest, 537 F.2d 1272, 1276 (5th Cir. 1976). Specifically, we must decide what is a "package" as defined in section 4(5), 46 U.S.C.A. § 1304(5) (1975), which limits a carrier's liability to the shipper for lost or damaged goods to $500 per package. The goods in question which were lost or stolen during shipment consisted of a number of cartons of electronic goods valued at $33,560, which were shipped in a 20-foot cargo container. The district court concluded that the entire container was the package for purposes of the limitation of liability clause and entered judgment for $500 in favor of the shipper. We reverse.

FACTS

The facts are not in dispute. Delta Overseas, Inc. ("Delta" or "shipper") is an import-export company specializing in electronic goods. One of its customers was Celta Electronics, S.A. ("Celta"), a Venezuelan company, which in July, 1977, ordered a quantity of stereo receivers and digital clock radios. Delta obtained a 20-foot container from Farovi Shipping Corporation, an agent for appellee Inversiones Navieras Imparca, C.A., d/b/a Imparca Lines ("Imparca" or "carrier"). The evidence shows that the container belonged to Imparca. The container was loaded at Delta's warehouse by Delta's employees with 100 stereo receivers in individual cartons and numerous digital clock radios packaged, on average, six to a carton, totaling 241 cartons. The total number of cartons placed in the container was 341. The container was sealed by Delta and delivered to Imparca by Delta's agent, Sunshine Cartage Corp. The container was placed upon Imparca's vessel the M/V TAMANACO in September, 1977. Imparca issued a bill of lading for the container which described the cargo as "One 20' Ft. Container With 341 Cartons," and as "One 20' Container said to contain electronic equipment radio apparatus."

Upon arrival in Venezuela, the container was discovered to have been opened and all 100 stereo cartons and 102 of the clock radio cartons were missing. Appellant Allstate Insurance Company ("Allstate") paid Delta for the loss and obtained an assignment of its rights against Imparca. Allstate filed this suit in admiralty to recover the value of the missing goods. The district court determined that Imparca was liable for the loss; Imparca does not appeal from this ruling. The district court also found that the value of the goods was $33,560 plus $1,606 in prorated freight, storage, insurance and miscellaneous expenses or a total loss of $35,166. This finding is also unchallenged on appeal. However, the district court concluded that the entire container was the appropriate "package" for the purpose of the $500 limitation of liability contained in COGSA and entered a judgment in favor of Allstate for only $500.

DISCUSSION

Section 4(5) of the Carriage of Goods by Sea Act, 46 U.S.C.A. § 1304(5) (1975), provides in part:

(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of the that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.

By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained.

This limitation was enacted in light of the superior bargaining power which the carrier has over the shipper. The apparent purpose of the provision "was to set a reasonable figure below which the carrier should not be permitted to limit his liability." Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800, 815 (2d Cir. 1971). See also Shinko Boeki Co. v. S.S. "Pioneer Moon", 507 F.2d 342 (2d Cir. 1974).

The advent of the containerized cargo method of transporting goods has created problems not envisioned by the framers of COGSA. The "containers are large metal boxes resembling truck trailers save for the absence of wheels, roughly 8' high, 8' wide and with lengths up to 40' capable of carrying hundreds of packages in the normal sense of that term." Mitsui & Co. v. American Export Lines, Inc., 636 F.2d 807, 816 (2d Cir. 1981). Obviously, a container of this size, even when loaded with inexpensive goods, would far exceed the $500 limitation in value in virtually every case.

This court has not addressed the issue whether a container is the appropriate "package" for purposes of the limitation of carriers' liability; however, other courts, notably the Second Circuit Court of Appeals, have faced the question. The first case was Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800 (2d Cir. 1971). In Leather's Best, the carrier furnished the seller with a 40-foot container which the seller loaded with 99 cartons or bales of leather. The container was then sealed by the seller and was placed upon the Mormaclynx for shipment from Germany to New York. The carrier's agent issued a bill of lading which described the cargo as "1 container s.t.c. (said to contain) 99 bales of leather." Upon arrival in New York, the container was stolen and the goods never recovered. On the issue of the proper "package" for purposes of the limitation of liability, the court held:

(W)e cannot escape the belief that the purpose of § 4(5) of COGSA was to set a reasonable figure below which the carrier should not be permitted to limit his liability and that "package" is thus more sensibly related to the unit in which the shipper packed the goods and described them than to a large metal object, functionally a part of the ship, in which the carrier caused them to be "contained."

451 F.2d at 815 (footnote omitted).

Subsequent to the Leather's Best decision, the Second Circuit expounded on the question and developed the so-called "functional economic" test for determining the appropriate package. See Cameco, Inc. v. S.S. American Legion, 514 F.2d 1291 (2d Cir. 1974); Royal Typewriter Co., Division of Litton Business Systems, Inc. v. M/V Kulmerland, 483 F.2d 645 (2d Cir. 1973). As explained in Matsushita Electric Corporation of America v. S.S. Aegis Spirit, 414 F.Supp. 894 (W.D.Wash.1976), the "functional economic" test:

(D)eemed the shipper's own...

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