Continental Grain Co. v. PR MARITIME SHIPPING AUTH., Civ. No. 88-0001 GG.

• Decision Date: 11 January 1991
• Docket Number: Civ. No. 88-0001 GG.
• Citation: 755 F. Supp. 506
• Parties: CONTINENTAL GRAIN COMPANY, Molinos Nacionales, Inc., and Eagle Star Insurance Company of America, Plaintiffs, v. PUERTO RICO MARITIME SHIPPING AUTHORITY, Puerto Rico Marine Management, Inc., the Government of Grenada Marketing National Import Board, Defendants.
• Court: U.S. District Court — District of Puerto Rico

755 F. Supp. 506

CONTINENTAL GRAIN COMPANY, Molinos Nacionales, Inc., and Eagle Star Insurance Company of America, Plaintiffs, v. PUERTO RICO MARITIME SHIPPING AUTHORITY, Puerto Rico Marine Management, Inc., the Government of Grenada Marketing National Import Board, Defendants.

Civ. No. 88-0001 GG.

United States District Court, D.Puerto Rico.

January 11, 1991.

Antonio M. Bird, Jr., San Juan, Puerto Rico, for plaintiffs.

Jiménez, Graffam & Lausell, Nicolás Jiménez, San Juan, Puerto Rico, for defendants.

OPINION

GIERBOLINI, District Judge.

I. INTRODUCTION

On January 14, 1987, the M/V ALBATROS (the "ALBATROS") encountered rough weather twenty miles off the island of Dominique. Due to winds of thirty to forty knots and choppy seas, the merchandise in the cargo hold of the ALBATROS which had been improperly stowed shifted to port, forcing the vessel to take a list to port which increased until the crew abandoned it, and the ALBATROS capsized and sank. Continental Grain Company ("Continental"), the charterer and owner of the lost merchandise, Molinos Nacionales, Inc. ("Molinos")¹, the sellers and stevedores, and Eagle Star Insurance, the insurer of the cargo, brought suit against the owners of the ALBATROS, the Government of Grenada and the Grenada Marketing National Import Board (referred herein jointly as the "Import Board").²

Defendants counterclaimed for the value of the vessel³ asserting claims for breach of the charter party, breach of the stevedore's warranty of workmanlike service and negligence. Jurisdiction is predicated on 28 U.S.C. § 1333(1).

Both plaintiffs and defendants moved for summary judgment. The case was submitted to the United States Magistrate for Report and Recommendation, who on April 24, 1990, recommended the entry of summary judgment in favor of defendants. Plaintiffs filed a timely opposition to the Magistrate's Report and Recommendation.

II. SUMMARY JUDGMENT

In determining whether summary judgment is appropriate, the court must view the record in the light most favorable to the party opposing the motion, and indulge all inferences favorable to that party. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Santiago Hodge v. Parke Davis & Co., 909 F.2d 628, 633-34 (1st Cir.1990). Summary judgment may be granted only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R. Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); General Office Products v. A.M. Capen's Sons, Inc., 780 F.2d 1077 (1st Cir. 1986).

Guided by this standard, and after an extensive review of the depositions, affidavits, exhibits, memoranda and briefs submitted by both parties, we find that summary judgment in favor of defendants is warranted.

III. DISCUSSION

A. THE VOYAGE

On December 1986, Continental entered into a voyage charter contract with the Import Board to transport two loads of grain in bulk from Guánica, Puerto Rico to the islands of Guadaloupe and Martinique. The ALBATROS made three voyages to and from Guánica and Guadaloupe and Martinique under the charter contract. On the fourth and final voyage, Continental directed the ALBATROS to Guánica for the loading of cargo which was to be performed by its subsidiary and the seller of the cargo, Molinos. The delivery basis under the purchase contract between Continental and Molinos for the cargo was "F.O.B. Guánica Stowed and Trimmed" and the delivery basis on the sales contract between Continental and the buyer of the cargo was "Delivery By Vessel C.I.F. Martinique Free Out."

The cargo on the fourth voyage consisted of 245.13 metric tons of whole u.s. corn in bulk, 80.36 metric tons of soy bean meal in bulk, and 998, twenty-five pound bags of layer and broiler premix. Under the terms of sale "F.O.B. Guánica Stowed and Trimmed", Molinos provided all the loading equipment, personnel and supervision for the loading operation. To assist in the loading operation, Molinos hired Luis Ayala Colón Sucesores, Inc. ("Ayala"), a Ponce stevedoring contractor, who planned and actually loaded the ALBATROS with 18 stevedores.⁴

The cargo aboard the ALBATROS was stowed in the same manner as it had been stowed on the previous three voyages. At the completion of the loading, stowing and trimming operation, the cargo hold of the ALBATROS was left partially filled. As a receipt for the grain cargo, Captain McLawrence signed a Puerto Rico Maritime Shipping Authority ("PRMSA") short form of bill of lading.⁵

B. THE VOYAGE CHARTER AGREEMENT

Maritime law divides contracts for the transportation of goods into two categories: common and private carriage. T.J. Schoenbaum, Admiralty and Maritime Law § 9-6, at 292 (1987). The agreement between Continental and the Import Board for the chartering of the ALBATROS was a private carriage agreement.⁶ See 2A Benedict on Admiralty § 22, at 3-2 (7th ed. 1985) ("Where one shipper's cargo takes up the full reach of the ship, it will be presumed ... that the ship is a private carrier ..."). The difference between common and private carriage is significant. In common carrier contracts, the shipowner insures the transportation of the goods until delivery. In private carriage, however, the shipowner is "only liable for loss or damage to the extent this was proximately caused by a breach of an obligation contained in a contract of carriage." T.J. Schoenbaum, supra, § 9-6, at 293. The private carriage agreement in this case had no express clause allocating the risk for loss or damage to either the cargo or the vessel.

The rights and obligations under a private carriage agreement are determined by the contract between the parties which may be in the form of a bill of lading or a written or oral agreement. In private carriage, the parties may agree to govern their agreement by the Carriage of Goods by Sea Act ("COGSA")⁷ or the Harter Act.⁸ See Larsen v. A.C. Carpenter, Inc., 620 F.Supp. 1084, 1107-1111 (E.D.N.Y. 1985) (charter agreement not the bill of lading is contract and its terms governs legal relationship, not COGSA); Sucrest Corp. v. M/V JENNIFER, 455 F.Supp. 371, 380 (N.D.Maine 1981) ("charter party governs rights and liabilities of the parties. COGSA, of course, would apply if the bill of lading served as the contract for the carriage of the goods"); see also T.J. Schoenbaum, supra, § 10-7, at 392 ("COGSA and other bills of lading statutes normally do not apply to charter parties, although COGSA may apply by contract through a Clause Paramount, or even by operation of law if the parties specify that the bill of lading should govern their relations").

Plaintiffs contend that the bill of lading governed the relationship among the parties. We disagree. The evidence shows that the bill of lading served as the receipt for the grain; the contract for the carriage of the goods was the charter agreement. See Alamo Barge Lines, Inc. v. Rim Maritime Co., Ltd., 596 F.Supp. 1026, 1035 (E.D.La.1984) (bill of lading constituted a mere receipt for the goods carried); 2A Benedict on Admiralty § 34, at 4-13 ("Any bill of lading which may be issued in private carriage serves only as a receipt for the cargo and, when in negotiable form as an indicia of title ...").

A fundamental principle in the contractual relationship between a shipowner and the charterer is that "the responsibility for cargo loss falls on the party who agreed to perform the duty involved." Nissho-Iwai Co. Ltd v. M/T Stolt Lion, 617 F.2d 907, 914 (2d Cir.1980), appeal after remand, 719 F.2d 34 (2d Cir. 1983). Absent an express contractual provision to the contrary, the duty to load, stow, trim and discharge the vessel cargo remains the obligation of the vessel owner and the consequences for failing to do so properly fall upon the vessel owner. Nichimen Company, Inc. v. M/V Farland, 462 F.2d 319 (2d Cir.1972); Wright v. P.J. St. Pierre, 1990 AMC 325, 1989 WL 211485 (S.D.Tex.1989). However, these duties may be shifted to the charterer by express provision. As one commentator has stated:

Under a voyage charter, if the charter party requires the charterer to do the loading, stowing, and unloading with his stevedores at his risk and expense, the negligence of those stevedores will make the charterer, not the owner, bear the loss of cargo. (citations omitted).

Bauer, Responsibilities Of Owner And Charterer To Third Parties-Consequences Under Time And Voyage Charters, 49 Tul.L.Rev. 996, 1012 (1975) hereinafter Voyage Charters.

The issue is whether only one party was responsible for the negligent stowage and loss of the cargo and, if so, whether that party must also bear the responsibility for the loss of the vessel. Generally, the party responsible for stowing cargo, who performs this task negligently is liable for any damage proximately caused by the negligent stowage, including the loss of the vessel. Nichimen Company v. M.V. Farland, 462 F.2d 319 (2d Cir.1972); Dow Chemical Pacific v. Rascator Maritime S.A., 594 F.Supp. 1490, 1496 (S.D.N.Y. 1984); T.J. Schoenbaum, supra, § 10-12, at 493. Under the circumstances of this case, this general rule is appropriate.

The parties disagree vigorously as to whether under the terms of the consecutive voyage charter, responsibility for loading and stowing the cargo remained on the vessel owner or was shifted to the charterer. Under a FREE-IN-AND-OUT ("FIO") term, the owner of the vessel does not pay for the loading and discharging costs of the cargo, but it retains the complete responsibility for all loading, storage and unloading of the cargo. Under a FREE-IN-AND-OUT-STOWED-AND-TRIMMED ("FIOST") term, the responsibility for the loading, stowing and trimming is transferred to the...