EAC Timberlane v. Pisces, Ltd.

Decision Date28 September 1984
Docket NumberNo. 83-1555,83-1555
Citation745 F.2d 715
PartiesEAC TIMBERLANE, etc., et al., Plaintiffs, Appellants, v. PISCES, LTD., et al., Defendants, Appellees.
CourtU.S. Court of Appeals — First Circuit

George F. Chandler III, New York City, with whom Antonio M. Bird Jr., San Juan, P.R., Hill, Rivkins, Carey, Loesberg, O'Brien & Mulroy, New York City, and Bird & Bird, San Juan, P.R., were on brief, for plaintiffs, appellants.

Jose Antonio Fuste, Hato Rey, P.R., with whom J. Ramon Rivera Morales, and Jimenez & Fuste, Hato Rey, P.R., were on brief, for defendants, appellees.

Before CAMPBELL, Chief Judge, WISDOM, * Senior Circuit Judge, and BREYER, Circuit Judge.

WISDOM, Senior Circuit Judge.

This action in admiralty raises the question of the applicability of the Limitation of Liability Act (Limitations Act), 46 U.S.C. Secs. 181-189 (1982), of the Carriage of Goods by Sea Act (COGSA), id. Secs. 1300-1315, and of principles of general maritime law in determining the liability of a vessel's owners, charterers, and operators for cargo lost when the vessel carrying the cargo exploded and sank on the high seas. The district court found that the shipowners charterers, and operators had not contributed either by negligent act or by omission to the explosion that sank the vessel. The court therefore held that the defendants were not liable to the cargo owners for the loss. We agree with the district court that all defendants have shown freedom from fault in connection with the loss under any applicable rule of law. We affirm.

I. FACTS

On January 25, 1978, the M/V Eva Maria sank with all cargo on board. The loss of the vessel and her cargo was caused by the explosion of a load of detonator caps in the number of two 'tween deck of the ship. Various cargo interests brought this action under COGSA and under general maritime law, seeking recovery from Pisces, Ltd. (Pisces), the vessel's owner; Transportation Maritima Mexicana, S.A. (TMM), the vessel's time charterer and the parent corporation of Pisces; Laeisz Maritime Trading Co., Ltd. (Laeisz), a contracting firm engaged by Pisces to manage and operate the vessel; and United Kingdom Mutual Steam Ship Owners Assurance Association (Bermuda) Ltd., defendants' insurer. Pisces and TMM then petitioned for exoneration from or limitation of liability under the Limitations Act. Id. Secs. 181-189. These actions were consolidated and tried in the district court without a jury.

The trial judge found that the defendants had shown by a preponderance of the evidence that the loss was occasioned not by any actions or omissions of the defendants, 1 but by the spontaneous heating and combustion of the organic packing material surrounding the detonator caps. The district court rejected the plaintiffs' contention that the defendants should be held strictly liable for the loss as carriers transporting dangerous goods. The court instead analyzed the question of liability under COGSA, stating that "[t]he issues in these proceedings fall squarely upon determining whether defendant-petitioners' relationship to the cause of the explosion is one that, according to the standards of diligence imposed on carriers by COGSA, requires that they be found liable to the cargo interests". EAC Timberlane v. Pisces, Ltd., 1983, D. Puerto Rico, 580 F.Supp. 99, 113.

In its thorough and well-reasoned opinion, the district court reviewed the several bases upon which the defendants claimed exoneration from liability. The court first examined the Fire Statute defense of the Limitations Act 2 and the COGSA fire exemption. 3 The court concluded that the defendants had proved that fire destroyed the cargo and that the fire was caused without their actual fault or privity and were, therefore, exonerated from liability under those statutes. EAC Timberlane, 580 F.Supp. at 117. The court then looked to COGSA's "catch-all" or "q clause" exemption, which exonerates a COGSA carrier and the ship from loss resulting from

"... [a]ny other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage".

46 U.S.C. Sec. 1304(2)(q) (1982). The district court found that the defendants had "demonstrated by a preponderance of the evidence that they provided a seaworthy vessel and that they were free from fault regarding the cause of the damage". The court concluded that "the defendant-petitioners carried their burden complying with the highest standards imposed by COGSA and the general admiralty law". EAC Timberlane, 580 F.Supp. at 118. The court, therefore, found it unnecessary to determine specifically whether defendants would also be exonerated under other statutory exemptions from liability or under general maritime law.

On appeal, the cargo interests contend that the district court's opinion is predicated upon the application of incorrect legal standards in that it exonerates all defendants from liability under the COGSA q clause exemption. The plaintiffs assert that COGSA is not applicable to all of the defendants, 4 and that the erroneous application of the q clause exemption to those defendants not within COGSA requires reversal as a matter of law. The plaintiffs also contend that the trial judge's finding that each defendant had proved freedom from fault in connection with the loss was clearly erroneous. We, however, agree with the district court's conclusion that the COGSA q clause contains the most stringent test for exoneration from liability for cargo loss and that a defendant who has met the burden established by the q clause necessarily has established freedom from fault under general maritime law as well. Further, we cannot say, upon a review of the entire record, that we are "left with the definite and firm conviction that a mistake has been committed". United States v. U.S. Gypsum Co., 1948, 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746. Accordingly, we affirm the decision of the district court.

II. APPLICABLE LAW

The parties agree that the liability of the various defendants is governed by the Limitations Act, by COGSA, or by general maritime law. The parties disagree, however, as to which theory of liability is applicable to which defendants, and as to the correct standard of liability under general maritime law. It is undisputed that TMM, as charterer of the vessel and issuer of the bill of lading for the lost cargo, is a COGSA carrier. Its liability therefore is properly determined under the applicable COGSA exemptions. It is also undisputed that the liability of Laeisz is properly determined under general maritime law. 5 The proper standard of liability as to Pisces, owner of the M/V Eva Maria, is, however, in dispute. Pisces contends that there is privity of contract between it and TMM, so as to place Pisces within the definition of a COGSA "carrier". The plaintiffs allege that Pisces is not a COGSA carrier and that its liability to the cargo interests must be assessed under the Limitations Act and under general maritime law. Plaintiffs further allege that under maritime tort theories Pisces and Laeisz should be held strictly liable for the loss.

A. COGSA

By its terms, COGSA applies "to all contracts for carriage of goods by sea to or from ports in the United States in foreign trade". 46 U.S.C. Sec. 1312 (1982). The term "contract of carriage" includes only those "contracts of carriage covered by a bill of lading or any similar document of title, insofar as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or document of title regulates the relations between a carrier and a holder of the same." Id. Sec. 1301(b). COGSA expressly does not apply to charter parties, except that bills of lading issued under charter party agreements must conform to the terms of COGSA. Id. Sec. 1305; see also Yeramex International v. S.S. Tendo, 4 Cir.1979, 595 F.2d 943, 946. Thus, COGSA is applicable to a shipowner that has chartered its vessel to a COGSA carrier only when the shipowner has entered into a contract of carriage with the shipper or has some privity of contract with the shipper. In re Intercontinental Properties Management, S.A., 4 Cir.1979, 604 F.2d 254, 258.

As noted by the Fourth Circuit, "[a] contract of carriage with an owner may either be direct between the parties, or by virtue of a charterer's authority to bind the owner by signing bills of lading 'for the master'." Intercontinental Properties Management, 604 F.2d at 258 n. 3. Generally, when a bill of lading is signed by the charterer or its agent "for the master" with the authority of the shipowner, this binds the shipowner and places the shipowner within the provisions of COGSA. E.g., Gans S.S. Line v. Wilhelmsen (The Themis), 2 Cir.1921, 275 F. 254, 262; Tube Products of India v. S.S. Rio Grande, 1971, S.D.N.Y., 334 F.Supp. 1039, 1041; see generally Bauer, Responsibilities of Owner and Charterer to Third Parties--Consequences under Time and Voyage Charters, 49 Tul.L.Rev. 995, 997-1001 (1975). When, however, a bill of lading is signed by the charterer or its agent "for the master" but without the authority of the shipowner, the shipowner is not personally bound and does not by virtue of the charterer's signature become a COGSA carrier. E.g., Associated Metals and Minerals Corp. v. S.S. Portoria, 5 Cir.1973, 484 F.2d 460, 462; Demsey & Associates, Inc. v. S.S. Sea Star, 2 Cir.1972, 461 F.2d 1009, 1015.

In the instant case, the district court did not determine whether the bill of lading was signed by the charterer ...

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