Brown & Root, Inc. v. M/V Peisander

Decision Date19 June 1981
Docket NumberNo. 77-3277,77-3277
PartiesBROWN & ROOT, INC., Plaintiff-Appellant, v. M/V PEISANDER, etc., et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

W. D. Nelson, Houston, Tex., John T. Kochendorfer, New York City, for plaintiff-appellant.

John K. Meyer, Houston, Tex., for defendants-appellees.

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

Before JONES, BROWN and RUBIN, Circuit Judges.

JOHN R. BROWN, Circuit Judge:

The question in this case is whether the $500 package limitation provided in the Carriage of Goods by Sea Act (COGSA) limits the recovery of a shipper against a stevedore when the bill of lading incorporating COGSA expressly states that "in no case" will recovery exceed $500, but the applicable tariff, obliquely referred to in the bill of lading (B/L) establishes a means to obtain increased liability by payment of a specified additional transportation charge.

What's It All About?

This case was tried in the District Court on a stipulated set of facts. As the stipulations reveal, 1 Brown & Root (Shipper) delivered a crate of machinery on December 24, 1974, to the dock in Houston. Young & Co. of Houston (Stevedore) was the contracting Stevedore. The crate was to be loaded aboard M/V Peisander, owned by China Mutual Steam Navigation Co., Ltd. and operated by Barber Blue Sea Line (Carrier). Unfortunately, the forklift truck operated by Stevedore dropped the crate while transporting it toward shipside. The damage amounted to $56,048.75.

All the parties agree that the Stevedore was at fault. Yet the parties disagree 2 on the extent of the Stevedore's liability in dollars and cents the difference exceeds $55,000.

Whatever the ultimate legal conclusion about the application and significance of the tariff, the parties stipulated also that the cargo interest did not declare any value and, for whatever it's worth, Shipper "had shipped frequently in the past and shipped frequently after this occurrence with Barber Blue Sea Line " but had not "on any of these occasions declared any value."

Scaling The Himalaya

The principal controversy below was whether the Stevedore could claim the benefit of the $500 COGSA limitation. This in turn depends on the validity and application of that clause which, following the tradition of the admiralty that speaks in terms of the "Jason clause" 3 and the "Inchmaree clause" 4, is attributed universally, but nevertheless quite erroneously, to the Himalaya. 5 Ironically, the Carrier here expressly repeated this popular misnomer in the stipulated B/L clause 3, "Identity of Carrier and Himalaya Clause," which provided that "all defenses under the B/L shall inure to the benefit of the Carrier's agents (and) any independent contractor, including Stevedores, performing any of the Carrier's obligations under the contract of carriage 6 " As we shall see later, it takes many Sherpas to carry away the Himalaya.

Although the matter is not completely free of doubt, because Shipper's final brief to the trial court on the merits concluded that judgment " should be entered for (Shipper) against all three defendants (vessel interests and Stevedore) jointly and severely, in the amount of $56,048.75," the parties were focusing primarily on the liability of Stevedore, not the Carrier, for unlimited damage. So intent were the parties that the formal stipulation, providing, first, that the Stevedore is liable for $56,048.75 "unless its liability is limited to $500," went on to provide that if it maintained its Himalaya defense, judgment should be entered for Shipper against all defendants in the sum of $500, but if that defense is rejected, judgment should be entered for Shipper against Stevedore for the full amount but in favor of Shipper against the Carrier in the amount of $500. 7

Indeed, as we read the stipulation, it was the purpose of the parties in the event Stevedore lost on Himalaya to impose the full burden on Stevedore since even the limited liability of the Carrier for $500 was conditioned on the financial inability of Stevedore to pay the full sum.

Thus, in the trial court, except for the concluding demand for full recovery against Carrier and Stevedore, the attack was entirely on the right of Stevedore to a Himalaya $500 limitation.

What's Before Us?

When the case came before us on appeal, things became quite different. Without the least deferential nod toward the specific stipulated limitation as to the Carrier (see note 7, supra ), Shipper's brief contended specifically that the trial court "erred in allowing defendants (Carrier and Stevedore) to limit their liability to $500 per package, as defendants failed to meet their burden of establishing the validity of the package limitation " and by prayer requested that the "judgment should be reversed and (Shipper) should be awarded recovery in full against all defendants, both jointly and severely." This theme was sounded fervently on oral argument.

Both on argument and by formal brief, Carrier and Stevedore pointed out this marked change in theory between that asserted at the trial and in this Court. As they say it, Shipper went on the theory that Carrier was entitled to limit its liability but not Stevedore. No contention was made below by Shipper that the COGSA limitation was unavailable to Carrier because of any deficiency in the B/L clause.

This change of heart came about because of the intervening decision of the Ninth Circuit in Pan American World Airways, Inc. v. California Stevedore and Ballast Company, 559 F.2d 1173, 1978 A.M.C. 1839 (9th Cir. 1977), which held under a substantially identical Barber Blue Sea Line B/L that the "in no case" language in clause 18 8 made the limitation void, thus putting on the carrier the burden of establishing that the shipper had the choice of rates to attain increased valuation.

In view of the very precise stipulation (see note 7, supra ), Shipper can complain of no error with respect to the judgment against Carrier. This Court has no right or power to modify the judgment as against the Carrier based, as it was, on this precise stipulation. An affirmance of that part of the judgment is therefore in order.

But what of the claim by Shipper against Stevedore? Here things are quite different. The stipulation on judgment see (p 12, note 7, supra ) plainly states that if Stevedore succeeds in its Himalaya defense, judgment is to be entered against Stevedore and Carrier for $500; but if this defense fails for Stevedore, it is liable for the full damage sum of $56,048.75. More important, the stipulation (see P 6, note 1, supra ), after prescribing that as between Shipper and Carrier the bill of lading and the tariff governed, expressly provided that the "parties disagree as to whether relations between the cargo interest and (Stevedore) were governed by said tariff and bill of lading." Building on this, as it properly may, Shipper contends that, at most, all the Himalaya clause does is extend to Stevedore whatever and only such "defences" as Carrier has. This leads to the natural conclusion, with which we agree, that whatever rights Stevedore has to limit liability are necessarily limited to those which Carrier had. The next step is, therefore, that as between Shipper and Carrier the limitation was invalid, and if thus unavailable to Carrier it is automatically unavailable to Stevedore.

We therefore conclude that, in reviewing the judgment as between Shipper and Stevedore, we must necessarily face the question whether, absent the stipulation (see note 7, supra ) Carrier could have validly limited its liability to $500.

This brings us face to face with Shipper's basic contention that Carrier's B/L (and the tariff) are legally deficient because, stated variously, the B/L did not expressly permit Shipper to indicate an increased valuation, there was no prescribed place or blank on the face of the bill of lading in which to indicate increased valuation, and possibly, the operation of the tariff was, in turn, conditioned on the deficient bill of lading.

Finally To The Merits: The Clause Paramount

Because this determines the applicable law, it is important at the outset that by the stipulation Shipper and Carrier agreed that Carrier's usual B/L, which expressly incorporated the typical Clause Paramount 9 provided that the bill of lading should have effect subject to the provisions of COGSA, shall be deemed incorporated with nothing to be deemed a surrender of any rights or immunities or an increase in liabilities under that Act. This is expressly authorized by § 1312 of COGSA. 10

With COGSA so expressly adopted, what does COGSA provide? The answer is simple and direct: $500 per package unless the nature and value of the goods have been declared by the shipper 11 and inserted in the bill of lading.

The Clause Paramount establishes three things of great significance in this case. First, it makes COGSA applicable before the goods are loaded on and at a time when COGSA would not apply of its own force. Second, COGSA is "deemed incorporated" in the bill of lading, and third, nothing in the bill of lading shall be deemed an increase in the carrier's liability under COGSA. More than that, when COGSA applies, it governs and overrules any clause of the bill of lading in conflict with the statute. See, e. g., Shackman v. Cunard White Star, Ltd., 31 F.Supp. 948 (S.D.N.Y.1940). A clause in the bill of lading was apparently in conflict with the statutory limitation. The Court, holding the statute to prevail, stated:

In the instant case, the limitation clause is statutory, but just as much a part of the bill of lading as though physically in it, and just as much a part thereof as though placed therein by agreement of the parties.

31 F.Supp. at 950. 12

Shipper, recognizing the existence and general application of the Clause Paramount and the express provision of § 1304(5) of COGSA, nevertheless contends that the...

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