First Nat'l Bank & Trust Co. of Crushing v. Hess Oil Virgin Islands Corp.

• Decision Date: 23 August 1984
• Docket Number: Civil No. 80/337
• Citation: 21 V.I. 104
• Court: U.S. District Court — Virgin Islands
• Parties: FIRST NATIONAL BANK & TRUST COMPANY OF CRUSHING, OKLAHOMA (formerly the First National Bank of Cushing, Oklahoma), Plaintiff v. HESS OIL VIRGIN ISLANDS CORP., Defendant

21 V.I. 104

FIRST NATIONAL BANK & TRUST COMPANY

OF CRUSHING, OKLAHOMA (formerly the First National Bank

of Cushing, Oklahoma), Plaintiff v. HESS OIL VIRGIN ISLANDS CORP., Defendant

Civil No. 80/337

District Court of the Virgin Islands Div. of St. Thomas and St. John

August 23, 1984

Motion for summary judgment by plaintiff, who held title to accounts receivable of carrier, where shipper offset claimed damages to three tank trailers which occurred somewhere en route, and plaintiff claimed that provision of Carriage of Goods by Sea Act limited liability of carrier for the damages to $500 per package. The District Court, Christian, Chief Judge, held that clause in the carrier's bill of lading imparted sufficient notice to the shipper that it had the opportunity to increase the liability of the carrier by declaring a higher value and inserting it on the bill of lading, and therefore $500 per package limitation under the Carriage of Goods by Sea Act was applicable, but issue of whether tank trailers were "packages" within the meaning of the Act could not be determined on the evidence before the Court, and therefore the motion for summary judgment was granted in part and denied without prejudice in part.FREDERICK G. WATTS, ESQ. (LOUD, WATTS & MURNAN), St. Thomas, V.I., for plaintiff

JAMES H. HINDELS, ESQ. (BIRCH, DEJONGH & FARRELLY), St. Thomas, V.I., for defendant

CHRISTIAN, Chief Judge

MEMORANDUM AND ORDER

Before the Court is the motion of plaintiff for summary judgment. Plaintiff Bank seeks a limitation of liability pursuant to the Carriage of Goods by Sea Act, 46 U.S.C §§ 1301-1315 (COGSA).

Plaintiff holds title to the accounts receivable of International Marine Transport Service, Inc. (IMTS), a Virgin Islands corporation engaged in the business of carrying goods by sea to, from, and between the Virgin Islands. Defendant hired IMTS to carry 3 tank trailers aboard the M/V INAGUA SOUND from San Juan, Puerto Rico, to St. Croix, Virgin Islands. Somewhere en route, the 3 tank trailers were damaged. Defendant offset its claimed damages against sums due IMTS. Plaintiff now sues to recover this account receivable.

THE CONTRACT OF CARRIAGE

Defendant, as shipper, was issued three short form bills of lading from IMTS, as carrier, one for each of the tank trailers. Printed on each short form bill of lading was a provision which stated in part,

This short form Bill of Lading is issued subject to the provisions of the United States Carriage of Goods by Sea Act of 1936 and carrier's freight tariff. All of the terms of the carrier's regular long form bill of lading are incorporated with like force and effect as if they were written at length herein. The long form Bill of Lading is filed with the Federal Maritime Commission and a copy of such long form Bill of Lading may be obtainedupon request from the carrier, its agents or the Master. The attention of the shipper is called to the fact that the carrier's regular long form Bill of Lading contains certain clauses which differ from the provisions of the United States Carriage of Goods by Sea Act of 1936.

COGSA contains, at section 1304(5), the following limitation of liability clause:

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier . . . .¹

Rule 308 of IMTS's tariff on file with the Federal Maritime Commission states:

APPLICATION OF RATES ON SHIPMENTS EXCEEDING LIMITATION OF LIABILITY STIPULATED IN CARRIER'S BILL OF LADING.

A. The liability of the carrier as to the value of shipments at the rates herein provided shall be determined in accordance with the Provisions of Carriers Bill of Lading.

B. If the shipper desires to be covered for a valuation in excess of that allowed under the Provisions of carriers Bill of Lading, the shipper must so stipulate in Carrier's Bill of Lading covering such shipments and such additional liability only will be assumed by the carrier at the request of the shipper and upon payment of an additional charge of two (2%) percent of the total declared valuation in addition to the stipulated rates applying on the commodities shipped as specified herein.

Clause 22 of IMTS's long form bill of lading (also known as a regular form bill of lading) reads in part:

VALUATION

In the event of any loss, damage or delay to or in connection with goods exceeding in an actual value $500 per package, lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, freight unit, as the case may be, and the carrier's liability, if any, shall be determined on the basis of a value of $500 per package or customary Freight unit, unless the nature and a higher value shall be declared by the shipper in writing before shipment and inserted in this Bill of Lading.

If value higher than $500 shall have been declared in writing by the shipper upon delivery to the carrier and inserted in the Bill of Lading and extra freight paid, if required, and in such case if the actual value of the goods per package or per customary freight unit shall exceed such declared value, the value shall nevertheless be deemed to be the declared value and the carrier's liability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted prorata on the basis of such declared value.

The word "package" shall include any container, vehicle, pieces and all articles except goods shipped in bulk. Where goods are shipped in bulk, the trailer or other container in which said bulk goods are transported shall be deemed to be the "package".

Plaintiff, citing the above provisions, argues that the tank trailers involved herein are "packages" within the meaning of COGSA and that the liability of IMTS for damages to the tank trailers and their contents is limited to $500 per package. Defendant, on the other hand, contends that plaintiff is not entitled to assert the COGSA limitation of liability provision nor the similar provisions contained in the IMTS tariff and regular bill of lading. Further, Defendant maintains that the tank trailers are not COGSA packages.

DISCUSSION

[1-4] The underlying purposes of COGSA were to achieve a balancing of the interests of the carrier, on the one hand, and the shipper, on the other, and to effectuate a standard and uniform set of provisions for ocean bills of lading. See Robert C Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297 (1959). As part of that bal-ance, 46 U.S.C. § 1304(5) (above quoted) limits a carrier's liability to $500 per package unless the shipper declares the value of the goods and inserts it in the bill of lading. However, as an important restriction on the carrier's right to so limit its liability, and to guarantee that carriers respect the statutory option to declare a higher value, the carrier is required to give the shipper a "fair opportunity" to choose between a higher or lower liability by paying a correspondingly greater or lesser freight charge. New York, New Haven & Hartford Railroad Co. v. Nothnagle, 346 U.S. 128 (1953); Komatsu, Ltd. v. States Steamship Co., 674 F.2d 806 (9th Cir. 1982); Sommer Corporation v. Panama Canal Co., 475 F.2d 292 (5th Cir. 1973). Express recitation in a bill of lading of the limitation of liability provision of COGSA, or similar language, is prima facie evidence that the shipper was given a fair opportunity to choose a higher liability. Komatsu, supra, 674 F.2d at 809. Pan Am World Airways v. California Stevedore and Ballast Co., 559 F.2d 1173 (9th Cir. 1977). Some courts have held that no express recitation of COGSA is necessary, but that a bill of lading need only incorporate COGSA by reference. Wverttembergische and Badische Versicherungs-Ak-tiengesellschaft v. M/V STUTTGART EXPRESS, 711 F.2d 621 (5th Cir. 1983); Brown & Root v. M/V PEISANDER (5th Cir. 1981); Shackman v. Cunard White Star, Ltd., 31 F.Supp. 948 (S.D.N.Y. 1940). See also Petition of Isbrandtsen Co., 201 F.2d 281 (2d Cir. 1953) (where one bill of lading incorporated a second bill of lading by reference, and only second bill of lading contained COGSA-style limitation provision, held that first bill of lading gave required notice of "fair opportunity" to declare higher value).² Such a prima facie showing then shifts the burden to the shipper to demonstrate that no choice of rates was actually available. Komatsu, supra, 674 F.2d at 809; Tessler Bros. (B.C.) Ltd. v. Italpacific Line, 494 F.2d 438, 443 (9th Cir. 1974); M/V STUTTGART EXPRESS, supra, 711 F.2d at 622. Even relying on the stricter test resorted to by the Ninth Circuit Court of Appeals in Pan Am World Airways and Komatsu, we hold that Clause 22 of the IMTS regular bill of lading imparts sufficient notice to a shipper that it has the opportunity to increase the liability of the carrier by declaring a higher value and inserting same on the bill of lading. The provision is similar in terms to COGSA's limitation of liability provision.

[5] Defendant argues that the limitation of liability clause, to be effective, must be in the short form bill of lading, citing Pan Am World Airways, supra, 559 F.2d at 1173; Encyclopedia Britannica, Inc. v. S.S. HONG KONG PRODUCER, 422 F.2d 7 (9th Cir. 1969), and Caribbean Produce Exchange, Inc. v. Sea Land Service, Inc., 415 F.Supp. 88 (D.P.R. 1976). In Caribbean Produce Exchange, the carrier had in its tariff a provision which exonerated it...