Elgie & Co. v. S. S. S. A. Nederburg

• Decision Date: 11 June 1979
• Docket Number: Nos. 379,643,D,s. 379
• Parties: ELGIE & COMPANY, Plaintiff-Appellant, v. S. S. "S. A. NEDERBURG", her engines, boilers, etc., and South African Marine Corporation, Ltd., Defendant-Appellee and Third-Party Plaintiff-Appellant, v. INTERNATIONAL TERMINAL OPERATING CO., INC., Third-Party Defendant-Appellee. ockets 76-7510, 76-7562.
• Court: U.S. Court of Appeals — Second Circuit

Page 1177

599 F.2d 1177

ELGIE & COMPANY, Plaintiff-Appellant, v. S. S. "S. A. NEDERBURG", her engines, boilers, etc., and South African Marine Corporation, Ltd., Defendant-Appellee and Third-Party Plaintiff-Appellant, v. INTERNATIONAL TERMINAL OPERATING CO., INC., Third-Party

Defendant-Appellee.

Nos. 379, 643, Dockets 76-7510, 76-7562.

United States Court of Appeals Second Circuit.

Argued Jan. 19, 1979.

Decided June 11, 1979.

John T. Kochendorfer, New York City (Bigham, Englar, Jones & Houston, New York City, of counsel), for plaintiff-appellant.

M. E. DeOrchis, New York City (Haight, Gardner, Poor & Havens, New York City, Brian D. Starer and Nicholas H. Cobbs, New York City, of counsel), for defendant-appellee and third party plaintiff-appellant.

Robert E. Daley, New York City, Hill, Rivkins, Carey, Loesberg & O'Brien, New York City, for third-party defendant-appellee.

Before WATERMAN, FEINBERG and VAN GRAAFEILAND, Circuit Judges.

VAN GRAAFEILAND, Circuit Judge:

On March 24, 1974, the S. A. Nederburg, owned and operated by South African Marine Corporation, Ltd., sailed from New York City bound for South Africa. Several days later, South African issued an on-board order bill of lading indicating that the Nederburg was carrying eleven cartons and one crate of optical machinery and accessories for discharge at Durban, South Africa. The equipment had been sold by the consignor, Shuron Continental, an American manufacturer, to plaintiff, Elgie, a Durban company, and payment was to be made pursuant to a draft against an irrevocable letter of credit established in Shuron's favor by Barclays Bank D.C.O. for Elgie's account. The letter of credit required that the draft be accompanied by a full set of clean on-board bills of lading marked "freight prepaid". On April 16, 1974, Shuron presented its draft, together with South African's bill of lading and other pertinent documents, to Barclays and received payment.

It is now conceded by all parties that the crate, which contained a lens-grinding machine, was never aboard the Nederburg. In fact, the crate has simply disappeared. Elgie instituted suit against South African in the Southern District of New York and established that its total damages resulting from the non-delivery were $10,559.47. However, South African's bill of lading ¹ contained the $500 per package limitation of liability clause permitted by section 4(5) of COGSA (46 U.S.C. § 1304(5)), and the judgment appealed from limited plaintiff's recovery to that amount. The judgment also denied recovery over by South African against International Terminal Operating Co., Inc. (ITO), the terminal company that received the shipment and undertook to load it. Plaintiff appeals from that portion of the judgment limiting its recovery to $500. Defendant appeals from the judgment The appeal has been argued twice. After the first argument, this Court Sua sponte raised the question whether section 22 of the Pomerene Bills of Lading Act (49 U.S.C. § 102) applied to the circumstances of this case and, if so, whether the plaintiff should recover the full amount of its damages, rather than $500. ² We remanded to the district court for further factual findings and a determination of the legal issues thus raised. On remand, none of the parties offered any additional testimony, although given the opportunity to do so. The district judge found, nonetheless, that the missing crate had been loaded on the S. S. Morgenster, another of defendant's ships, which had sailed for Durban from New York on March 16, 1974. ³ He also concluded once again that plaintiff's recovery must be limited to $500. This determination was not based upon the aforementioned factual finding, however, but upon the district judge's interpretation of section 22.

in plaintiff's favor and the dismissal of its third-party complaint against ITO.

The district judge interpreted the term "description", as used in section 22, to cover only the character or nature of the goods referred to in the bill of lading, not their quantity. He concluded, therefore, that the bill of lading's reference to eleven cartons and one crate was not a misdescription of the goods. He held further that, if section 22 were construed to cover misstatements as to quantity, the $500 limitation would nonetheless be applicable, because section 22 of the Pomerene Act was intended only to curb deliberate fraud. Our examination of that section in its historical context convinces us that the able district judge misconstrued it.

In 1916, when Pomerene was enacted, there was already a substantial body of law holding carriers liable to consignees and good faith assignees for value for misrepresentations in their bills of lading. See The Carso, 43 F.2d 736 (S.D.N.Y.1930), Aff'd in part and rev'd in part, 53 F.2d 374 (2d Cir. 1931). However, federal courts limited the application of this rule by holding that a carrier's agent issuing a bill of lading had no implied authority to represent that goods had been received when actually they had not. See Friedlander v. Texas & P. Ry., 130 U.S. 416, 9 S.Ct. 570, 32 L.Ed. 991 (1889). New York law was to the contrary, See, e. g., Bank of Batavia v. New York L.E. and W.R.R., 106 N.Y. 195, 12 N.E. 433 (1887), and section 22 was enacted for the purpose of adopting a rule like that of New York. Gleason v. Seaboard Air Line Ry., 278 U.S. 349, 354-55, 49 S.Ct. 161, 73 L.Ed. 415 (1929); Josephy v. Panhandle and S. F. Ry., 235 N.Y. 306, 310, 139 N.E. 277 (1923). With this purpose in mind, Congress could not have intended the term "description" in section 22 to apply only to the nature of the goods being shipped. Indeed, Congress' expressed intent was to plug the "loophole" represented by the Friedlander line of authorities by providing that a "carrier shall be liable for goods receipted for by its representatives even though they may not actually have been received." See S.Rep. 742, 74th Cong. 1st Sess. (1935).

An examination of section 22 as it was originally enacted makes it quite clear that this was the congressional intent. The original statute made no reference to the date of shipment. It provided that the carrier would be liable to "the holder of an order bill, who has given value in good faith, relying upon the description therein of the On shipments originating outside the United States and thus not covered by the Pomerene Act, a carrier is bound by its representations concerning on-board quantities. General Foods Corp. v. The Felipe Camarao, 172 F.2d 131, 133 (2d Cir.), Cert. denied, 337 U.S. 908, 69 S.Ct. 1047, 93 L.Ed. 1720 (1949); A. L. Holden v. S. S. Kendall Fish, 212 F.Supp. 106, 110 (E.D.La.1962); Insurance Company of North America v. The S. S. Exminster, 127 F.Supp. 541, 542 (S.D.N.Y.1954). ⁵ Congress could not have intended to impose a lesser standard of care by the enactment of section 22. See Portland Fish Co. v. States Steamship Co., 510 F.2d 628, 631-32 (9th Cir. 1974); Pacific Micronesian Line, Inc. v. New Zealand Insurance Co., 397 F.2d 236, 237 (9th Cir. 1968). It follows that defendant did not accurately describe the shipment of eleven cartons by calling it eleven cartons and a crate and that it misrepresented the shipment in so doing. Plata American Trading, Inc. v. Lancashire, 29 Misc.2d 246, 250, 214 N.Y.S.2d 43 (1957), Aff'd, 6 A.D.2d 1036, 178 N.Y.S.2d 1021 (1958), Leave to appeal denied, 7 A.D.2d 838, 182 N.Y.S.2d 295 (1959).

goods, for damages caused by the nonreceipt by the carrier of all or part of the goods or their failure to correspond with the description thereof in the bill at the time of its issue." See 39 Stat. 542 (1916). The only reasonable construction that can be placed upon this language is that "description" of goods includes the quantity involved. ⁴

Contrary to the finding of the district court, there is no indication that Congress intended civil liability to flow from fraudulent misrepresentations only. Cf. 49 U.S.C. § 121 dealing with criminal liability. Section 20 of the Pomerene Act (49 U.S.C. § 100) provides in part that when packaged goods are loaded by a carrier, the carrier shall count the packages. A fair implication of this is that the carrier must state in the bill of lading the number of packages so counted. Leigh Ellis & Co. v. Payne, 274 F. 443, 446 (N.D.Ga.), Aff'd on other grounds, 276 F. 400 (5th Cir. 1921), Aff'd, 260 U.S. 682, 43 S.Ct. 243, 67 L.Ed. 460 (1923); Knauth, Ocean Bills of Lading 405-06 (1953). Section 22 does not require that a misstatement of that count be fraudulent or intentional in order that liability ensue. This is the common law rule. See General Foods Corp. v. The Felipe Camarao, supra, 172 F.2d 131; Bradstreet v. Heran, 2 Blatchf. 116, 3 Fed.Cas. 1183, No. 1792a (1849); Fleck & Hillman v. Wabash Ry., 200 App.Div. 482, 193 N.Y.S. 131, Leave to appeal denied, 202 App.Div. 741, 194 N.Y.S. 934 (1922); Campania Naviera Vasconzada v. Churchill & Sim, 1 K.B. 237, 248 (1906). The Pomerene Act, which was designed to improve the negotiability of bills of lading, did not impose a lesser obligation on issuing carriers. See Chicago & N. W. Ry. v. Stephens Nat. Bank, 75 F.2d 398, 401 (8th Cir.), Cert. denied, 295 U.S. 738, 55 S.Ct. 650, 79 L.Ed. 1685 (1935); Chicago & N. W. Ry. v. Bewsher, 6 F.2d 947, 953 (8th Cir. 1925), Cert. denied, 270 U.S. 641, 46 S.Ct. 205, 70 L.Ed. 775 (1926); Leigh Ellis & Co. v. Payne, supra, 274 F. at 446. ⁶

There can be no question that plaintiff gave value in good faith relying upon defendant's bill of lading. Defendant conceded plaintiff's status as a holder in due course in its answer to plaintiff's interrogatories. Freight for the missing crate was prepaid by the consignor which was reimbursed by plaintiff. The draft by which payment of the freight and purchase price was secured had to be accompanied by a clean bill of lading, and payment was made because defendant's bill was clean. See General Foods Corporation v. The Felipe Camarao, supra, 172...