Croft & Scully Co. v. M/V Skulptor Vuchetich

• Decision Date: 04 January 1982
• Docket Number: No. 81-2060,81-2060
• Citation: 664 F.2d 1277
• Parties: CROFT & SCULLY CO., Plaintiff-Appellant, v. M/V SKULPTOR VUCHETICH, Etc., et al., Defendants-Appellees. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1277

664 F.2d 1277

CROFT & SCULLY CO., Plaintiff-Appellant, v. M/V SKULPTOR VUCHETICH, Etc., et al., Defendants-Appellees.

No. 81-2060

Summary Calendar.

United States Court of Appeals Fifth Circuit.

Jan. 4, 1982.

Sharpe & Kajander, R. M. Sharpe, Jr., and Stuart B. Collins, Houston, Tex., for plaintiff-appellant.

Royston, Rayzor, Vickery & Williams, Gus A. Schill, Jr., Robert H. Entnyre, Jr., John M. Elsley, Houston, Tex., for defendants-appellees.

Vinson & Elkins, Henry S. Morgan, Jr., Houston, Tex., for M/V Skulptor Vuchetich & Baltic.

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

Before BROWN, POLITZ and WILLIAMS, Circuit Judges.

JOHN R. BROWN, Circuit Judge:

Appellant Croft & Scully Co. appeals from a decision by the District Court limiting to $500 its recovery in an incident where the parties stipulated negligence. Finding that the District Court applied an incorrect standard in determining what constitutes a "package" for purposes of the Carriage of Goods by Sea Act (COGSA), 46 U.S.C.A. § 1300 et seq., we reverse and remand. 508 F.Supp. 670.

Things Go Better With Coke

Croft & Scully contracted to ship 1755 cases of soft drinks from Houston, Texas to the middle eastern country of Kuwait. Apparently Kuwaitis would like to be Peppers, too. Croft & Scully arranged to ship the soft drinks on board M/V SKULPTOR VUCHETICH, which would arrive in Houston on December 8, 1977. Baltic Shipping Co., owner of SKULPTOR, dispatched a 20-foot steel container to Croft & Scully's supplier in Wharton, Texas. Employees of the supplier loaded the 1755 cases, each containing 4 "6-packs" or 24 cans, into the container, closed and sealed it-a real Teem effort. The supplier then trucked the container to Goodpasture's yard, near the Houston Ship Channel, which Baltic had selected as a convenient storage facility pending arrival of SKULPTOR.

During the Refreshing Pause between arrival of the container and arrival of SKULPTOR, the vessel's agent prepared a Bill of Lading ¹ and hired Shippers Stevedoring, Inc., to load the soft drink container on board SKULPTOR.

Pepsi Cola Hits the Spot-On the Pavement

As one of the Stevedore's employees was lifting the container, with the use of a forklift, he negligently dropped it. ² By our calculations, 42,120 cans of soft drinks crashed to the ground, never a thirst to quench. In the Crush, the cans were damaged. The stevedore, no doubt, was in no mood to have a Coke and a smile.

Dr. Pepper at 10, 2 and § 1304

Croft & Scully sued Goodpasture, Shippers Stevedoring, and SKULPTOR and her owners to pick up the Tab for its damages. The District Court dismissed the suit as to Goodpasture because it had no agency relationship with Shippers Stevedoring. Relying upon a so-called Himalaya Clause in the Bill of Lading ³, it granted the remaining defendants' motion for summary judgment and, finding that the container constituted a "package" within the meaning of § 4(5) of COGSA, ⁴ limited Shippers Stevedoring's liability to $500. Croft & Scully appeals. Things Go Better on appeal, and we reverse and remand.

A Peek at the Himalaya Clause

Croft & Scully asserts that the Himalaya Clause limiting recovery to $500 violates public policy. That claim fails to make the grade, given our decision in Brown & Root v. M/V PEISANDER, 648 F.2d 415, ---- A.M.C. ---- (5th Cir. 1981), upholding such a clause. Indeed, the conflict which we surmounted there does not even arise in this case. ⁵ Clause 17 of the Bill of Lading makes clear provision for an increased valuation at a higher freight rate. ⁶ A more unequivocal declaration, in fact, one could not find. As Croft & Scully could have availed itself of extra loss or damage protection but chose not to, the District Court correctly ruled that the Himalaya Clause applied.

Don't Judge The Package By Its Appearance

Even if liability is limited to $500 per package, Croft & Scully argues, the cardboard cases of soft drinks rather than the 20-foot container should constitute the relevant "package". Shippers Stevedoring responds with equal fervor that the container is the "package". Their argument, we think, given the recent decision in Allstate Insurance Co. v. Inversiones Navieras Imparca, 646 F.2d 169, ---- A.M.C. ---- (5th Cir. 1981), holds no water, carbonated or otherwise.

We begin by pointing out that COGSA does not apply by its own force and effect, since the incident occurred in the yard and not on the vessel. ⁷ Rather, the Bill of Lading incorporates COGSA. ⁸ Thus, its provisions are merely terms of the contract of carriage which, like any other contractual terms, call out for judicial interpretation in case of dispute. Commonwealth Petrochemicals, Inc. v. S/S Puerto Rico, 607 F.2d 322, 1979 A.M.C. 2772 (4th Cir. 1979):

We have held that when COGSA does not apply of its own force but is incorporated into a maritime contract by reference, it does not have 'statute rank'; rather, it is merely part of the contract, a term like any other.... In Pannell v. United States Lines Co., 263 F.2d 497, 498 (2nd Cir.), cert. denied, 359 U.S. 1013 (, 79 S.Ct. 1151, 3 L.Ed.2d 1037) (1959), the ... Second Circuit held that when COGSA does not apply ex proprio vigore, effect should be given to the parties' definition of package even if that definition is contrary to that which would control if COGSA were directly applicable.

607 F.2d at 325, 1979 A.M.C. at 2776. In Pannell, the Court explained: "Where a statute is incorporated by reference its provisions are merely terms of the contract evidenced by the bill of lading." 263 F.2d at 498, 1959 A.M.C. at 936; see also General Motors Corp. v. Pennsylvania Railroad Co., 357 F.Supp. 646, 651 n.6 (S.D.N.Y.1973); U. S. v. Central Gulf Steamship Co., 340 F.Supp. 473, 479 (E.D.La.), aff'd., 456 F.2d 1281 (5th Cir. 1972).

The District Court further observed that the Fifth Circuit had not established a test to determine what constitutes a "package" under COGSA. Since the date of its order, this Court has formulated such a test in whose good hands the parties-and the District Court-must rest.

Allstate involved the loss of 341 cartons of stereo equipment. The shipper loaded the cartons inside a container, sealed it, and had its agent deliver it to the carrier. The carrier issued a Bill of Lading which described the contents both in number and in kind. ⁹ When the container arrived in Venezuela, it was as empty as a can of soda on a hot summer day. The shipper sought recovery for its full damages, but the carrier, relying on COGSA, sought shelter in the $500 limitation. Although the District Court concluded that the container was the COGSA package, the winds of judicial change Schwepped away the $500 shelter and exposed the carrier to full liability.

Judge Anderson, writing for the Court, after reviewing the history of COGSA and decisions in other Circuits, found that each stereo carton was a discrete "package". He based his decision on a case in the Second Circuit, Mitsui & Co. v. American Export Lines, 636 F.2d 807, ---- A.M.C. ---- (2nd Cir. 1981). There Judge Friendly expressly rejected as unworkable and unsound the old "functional economics" test, ¹⁰ propounded in Royal Typewriter Co., Division of Litton Business Systems Inc. v. M/V Kulmerland, 483 F.2d 645, 1974 A.M.C. 1784 (2nd Cir. 1973). Instead, relying on dicta in Leather's Best, Inc. v. SS Mormaclynx, 451 F.2d 800, 815, 1971 A.M.C. 2383, 2402 (2nd Cir. 1971), he looked to see whether the carrier had clear, unequivocal notice of the container's contents:

Clearly the goal of international uniformity is better served by the approach in Leather's Best that generally a container supplied by the carrier is not a COGSA package if its contents and the number of packages or units are disclosed.

636 F.2d at 821, ---- A.M.C. at ----.

We find nothing in the Bill of Lading to indicate that the contracting parties intended some special meaning of the term "package". Since Croft & Scully included information about the contents of the container and their number, Allstate governs. Therefore, the District Court erred in granting summary judgment on the "package" issue.

Customary Freight Unit

Even if the container was not a COGSA "package", Shippers Stevedoring contends, the Court should uphold the $500 award because the container was a "customary freight unit" within the ambit of § 4(5) of COGSA, and thus the Himalaya Clause still applies. At the outset, we reject Croft & Scully's argument that Shippers Stevedoring waived this point in the trial below. ¹¹ The District Court, of course, never considered the issue, given its conclusion that the container was a "package", but in the light of our decision that Allstate supercedes the District Court's finding, we must necessarily address this claim.

Turning to other Courts' interpretations of this clause, we find few cases but a fairly definite rule. In Waterman S.S. Corp. v. United States S. R. & M. Co., 155 F.2d 687, 1946 A.M.C. 997 (5th Cir.), cert. denied, 329 U.S. 761, 67 S.Ct. 115, 91 L.Ed. 656 (1946), the earliest case in this Circuit, the Court, citing The Bill, 55 F.Supp. 780, 783, 1944 A.M.C. 883 (D.Md.1944), aff'd., Lorentzen v. Brazil Oiticica, Inc., 145 F.2d 470 (4th Cir. 1944), held:

(T)he phrase 'per customary freight unit' in this context in the light of its legislative history, refers to the unit of quantity, weight or measurement of the cargo customarily used as the basis for the calculation of the freight rate to be charged. Generally, in marine contracts, the word 'freight' is used to denote remuneration or reward for carriage of goods by ship, rather than the goods themselves....

155 F.2d at 693, 1944 A.M.C. at 887 (citations omitted and emphasis supplied).

Caterpillar Americas Co. v. S/S Sea Roads, 231 F.Supp. 647, 1964 A.M.C. 2646 (S.D.Fla.1964), aff'd., 364 F.2d 829 (5th Cir. 1966), held that the "customary freight unit" was a tractor and its parts rather than...