Encyclopaedia Britannica, Inc. v. SS Hong Kong Producer

• Decision Date: 30 October 1969
• Docket Number: No. 10,Docket 33495.,10
• Citation: 422 F.2d 7
• Parties: ENCYCLOPAEDIA BRITANNICA, INC., Plaintiff-Appellant, v. SS HONG KONG PRODUCER, her engines, etc., and Universal Marine Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

422 F.2d 7 (1969)

ENCYCLOPAEDIA BRITANNICA, INC., Plaintiff-Appellant, v. SS HONG KONG PRODUCER, her engines, etc., and Universal Marine Corporation, Defendant-Appellee.

No. 10, Docket 33495.

United States Court of Appeals Second Circuit.

Argued September 15, 1969.

Decided October 30, 1969.

COPYRIGHT MATERIAL OMITTED

F. Herbert Prem, New York City (Bigham, Englar, Jones & Houston, New York City, on the brief), for appellant.

John J. Sullivan, New York City (Mendes & Mount, New York City, on the brief), for appellee.

Before MOORE, HAYS and ANDERSON, Circuit Judges.

ANDERSON, Circuit Judge:

This case concerns a claim for damage by breakage and sea water to approximately 1300 cartons of encyclopedias shipped by the appellant, Britannica, from New York to its affiliate in Yokohama, Japan. The damaged cartons were a part of a shipment of 4080 cartons of books, sent by appellant from its Chicago plant to its agent in New York, United Cargo Corp., which packed the cartons into seven separately numbered, metal containers, 17' × 8' × 8', and one smaller metal pallet container, also numbered. On December 2, 1964 United delivered the containers to S.S. Hong Kong Producer, owned and operated by appellee, Universal Marine Corporation, which received the shipment on board in "apparent good order and condition" and issued a "short form" bill of lading. Unknown to Britannica and United only two of the containers were stowed below deck while six were stowed on the weather deck. The short form bill in itself contained no notice or statement that the containers were to be carried as deck cargo or that they might be so carried, but it incorporated by reference¹ all of the terms of the carrier's regular form of bill of lading. Of this regular form the portion which is at the center of the controversy in this case, is Clause 13, of which Britannica claims to have been wholly unaware but which reads, in full, as follows:

"13. STOWAGE ON DECK, ETC. — Goods stowed in poop, forecastle, deckhouse, shelter deck, passenger space, storeroom, bunker space, or any other covered-in space shall be deemed to be stowed under deck for all purposes, including General Average.

The shipper represents that the goods covered by this bill of lading need not be stowed under deck and it is agreed that it is proper to and they may be stowed on deck unless the shipper informs the carrier in writing before delivery of the goods to the carrier that under deck stowage is required.

With respect to goods carried on deck, all risk of loss or damage by perils inherent in or to incidental sic such carriage shall be borne by the shipper and the carrier shall have the benefit of all the terms of this bill of lading not inconsistent with the provisions of this clause and shall have the benefit of all and the same rights, immunities, exemptions, and limitations as provided for in Act 4 of the Hague rules or the corresponding provision of any Act that may be applicable, excepting subdivisions (1), (2) (j), (2) (q), (3) and (4) thereof. In no event shall the carrier be liable for any loss or damage to goods so carried on deck arising or resulting from any cause whatsoever, including unseaworthiness, unless affirmatively proved to be due to lack of due diligence or to the fault or the neglect of the carrier or those for whom it may otherwise be responsible, but the carrier shall not in any event be liable for any act, neglect or default in the navigation or the management of the ship."

Universal delivered the original short form bill of lading, duly signed by its agent, but no copy of the long form bill was attached to or issued with it, though the short form stated where the regular form could be obtained. Neither the shipper nor its agent asked for one. The short form bill was issued after the delivery of the containers to Universal, and there was no opportunity for Britannica or United to inform Universal "in writing before the delivery of the goods to the carrier" that the containers should be stowed under deck. There was no evidence of any oral understanding or agreement by the parties regarding on deck stowage nor was there any evidence of notice by Universal to the appellant prior to the receiving of the containers on board that Universal had the option under Clause 13 to stow the containers above deck, nor was there any evidence that the appellant had any actual notice or knowledge that above deck stowage might be made. Moreover there was no proof that the appellant had ever had any past dealings with Universal although United had dealt with Orient Lines. There was no evidence that either Britannica or United had previously been issued a bill of lading containing Clause 13 nor does it appear when Universal adopted and began using that clause in its regular long form bill of lading. The goods were loaded and stowed on December 2, 1964 at 1300, and the ship departed the Port of New York at 2230 of the same day.

In the course of its winter crossing of the Pacific the Hong Kong Producer ran into what was described as "boisterous" weather. The abstract from the ship's log showed two days, January 11 and 12, 1965, when the wind velocity reached force 7-8 (28-40 knots) on the Beaufort scale and one day, January 13, when it reached 8-9 (34-47 knots), but it made no references to the condition of the sea nor any record of damage to the ship. The trial court found that "a considerable amount of sea-water passed over its weather decks on numerous occasions." The parties stipulated, and the court also found, that the shipment sustained some damage by breakage and sea water. The appellee's surveyors, on arrival at Yokohama, reported specific damage to two of the containers. The findings below state that over 1300 cartons had come in contact with sea water. Of these, 420 cartons containing volumes 1-12 of the encyclopedia and 236 cartons containing volumes 13-24, had sustained damage so extensive that the books were unmerchantable. The remaining volumes were only slightly damaged, and no claim has been made with regard to them. The two containers were also found to have been damaged.

The central issue of this case, as the trial court noted, is Britannica's claim that Universal issued to it what appeared to be a clean bill of lading which imported below deck stowage, and that Universal deviated therefrom by stowing six of the containers on deck. The district court held, in support of Universal's contention, that it did not issue a clean bill because Clause 13 of the bill of lading itself "specifically addresses itself to the question of ondeck stowage, stating that `* * * it is agreed it is proper to and they the goods may be stowed on deck * * *.'" Under the terms of Clause 13 the carrier had the option to stow the containers above or below decks, unless the shipper notified it in writing, before delivery of the goods to the carrier, that under deck stowage was required. The district court concluded that the issue was a simple matter of contract; the shipper did not give written notice to the carrier that under deck stowage was required and, therefore, the carrier had the right to stow the goods on deck if it elected to do so.

We do not view this case as one of simple contract between completely free contracting parties. Universal is a common carrier and its legal relations may be affected by public interest. Congress has recognized this, with regard to shipment of cargoes out of the ports of this country in ocean going vessels, through enactment of The Harter Act, 46 U.S.C. § 190 et seq., and the Carriage of Goods By Sea Act (COGSA), 46 U.S.C. § 1301 et seq.

During the century or so preceding COGSA the laws governing liability for loss of or damage to ship-borne cargoes, which occurred in the course of their shipment overseas to foreign ports ran through wide swinging extremes from almost absolute responsibility of the carrier under the general maritime law to almost absolute immunity from such liability when the carriers, exercising their vastly superior bargaining powers, compelled shippers to submit to the insertion of innumerable, all embracing exceptions to liability in bills of lading which the carriers drafted. The courts of this country took steps to redress the balance by declaring some of these exceptions invalid. In some other countries, notably England, the courts upheld the exceptions. In 1893 by enacting The Harter Act, Congress sought to provide a statutory solution which would be fair to the competing interests. The Hague Rules, which leaned heavily on The Harter Act, were promulgated in 1921 and amended by the Brussels Convention in 1924, under the sponsorship of maritime nations and representatives of ocean shipping, to provide a set of uniform provisions for ocean bills of lading. This country joined the Brussels convention in 1936, and, to make its adherence effective, passed COGSA, which duplicates the Hague Rules practically word for word.

The purposes behind Harter, the Hague Rules and COGSA were to achieve a fair balancing of the interests of the carrier, on the one hand, and the shipper, on the other, and also to effectuate a standard and uniform set of provisions for ocean bills of lading. In Robert C. Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297, 301, 79 S.Ct. 766, 769, 3 L.Ed.2d 820 (1959), the Supreme Court, speaking of the history of COGSA said:

"The legislative history of the Act shows that it was lifted almost bodily from the Hague Rules of 1921, as amended by the Brussels Convention of 1924, 51 Stat. 233.5 The effort of those Rules was to establish uniform ocean bills of lading to govern the rights and liabilities of carriers and shippers inter se in international trade."

"5. The Hague Rules as amended by the Brussels Convention were, in turn, based in part upon the pioneering Harter Act of 1893, 27 Stat. 445, 46 U.S.C. §§ 190-196. See H.R.Rep. No. 2218, 74th Cong., 2d Sess. 7."

See Pan-Am Trade & Credit Corp. v....