Francosteel Corp. v. N. V. Nederlandsch Amerikaansche, Stoomvart-Maatschappij

• Decision Date: 31 March 1967
• Docket Number: STOOMVART-MAATSCHAPPI,D
• Citation: 57 Cal.Rptr. 867,249 Cal.App.2d 880
• Court: California Court of Appeals Court of Appeals
• Parties: FRANCOSTEEL CORPORATION, a corporation, Plaintiff and Appellant, v. N.V. NEDERLANDSCH AMERIKAANSCHE,efendant andRespondent. Civ. 23412.

Page 867

57 Cal.Rptr. 867

249 Cal.App.2d 880

FRANCOSTEEL CORPORATION, a corporation, Plaintiff and Appellant, v. N.V. NEDERLANDSCH AMERIKAANSCHE, STOOMVART-MAATSCHAPPIJ, Defendant andRespondent.

Civ. 23412.

Court of Appeal, First District, Division 1, California.

March 31, 1967.

Rehearing Denied April 28, 1967.

Hearing Denied May 24, 1967.

Stephen McReavy, Ellis J. Adler, Hall, Henry, Oliver & McReavy, San Francisco, for appellant.

R. Frederic Fisher, Lillick, Geary, Wheat, Adams & Charles, San Francisco, for respondent.

SIMS, Associate Justice.

Plaintiff has appealed from a judgment dismissing its complaint following the sustaining of a demurrer thereto, without leave to amend, on the grounds that the action is barred by the one-year limitation contained in subsection (6) of section 3 of the United States Carriage of Goods by Sea Act. (Act, Apr. 16, 1936, § 3(6), 49 Stat. 1208, 46 U.S.C.A. § 1303(6).)

The allegations of the complaint are essentially as follows: that defendant, a common carrier of goods by sea, issued certain bills of lading wherein it agreed to carry steel products under deck from Antwerp to certain United States ports; that in wilful breach of these contracts, defendant carried the goods on deck unprotected and exposed to the elements, thus causing them to be in a badly-rusted condition when delivered in March 1963 to plaintiff, the holder of the bills of lading; that by reason of defendant's breach of the contract plaintiff has suffered damages in the amount of $12,022.11; and that defendant's conduct constituted a deviation so as to make defendant an insurer of the goods and to deprive it of all defenses under the bills of lading and under the United States Carriage of Goods by Sea Act.

The complaint was filed on March 18, 1965, approximately two years after delivery of the damaged goods. The statutory provision upon which defendant relies reads: 'In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods * * *.' ¹

Plaintiff contends that the on-deck storage of the goods in violation of the agreement to carry them underdeck constitutes a deviation under maritime law; and that the effect of the deviation is to displace the provisions of the bill of lading and the statute, and to make the carrier liable as an insurer, subject to suit until such time as action may be barred by laches. It relies on the law governing restrictive provisions in bills of lading as established prior to the adoption of statutory controls, and asserts that the historical background, legislative history and express terms of the Carriage of Goods by Sea Act demonstrate that its provisions are not to be applied where there is an intentional breach of the contract of carriage, of the nature alleged here. It also asserts that it is inequitable and illogical to permit defendant to claim the benefit of the statutory provision to escape liability for an intentional wrong.

Defendant, in support of the applicability of the statute, derives comfort from two trial court decisions which seemingly support its position, and attempts to draw a favorable analogy from decisions construing other provisions of the act. It also appeals to the circumstances underlying the enactment of the statute, and the express provisions embodied therein; and insists that they demonstrate that reason, common sense and sound public policy necessitate application of the statutory limitations to the claim asserted by plaintiff.

So far as can be ascertained, the case is one of first impression insofar as a deviation or breach of the contract of carriage of the nature asserted by plaintiff is concerned. Resort to the various criteria suggested by the parties leads to the conclusion that a policy of international uniformity dictates that the provisions of Rule 6 of Article III of the Hague Rules be applied to an action where the alleged deviation is on-deck storage under a clean bill of lading.

Common Law Principles

The common law liability of the maritime carrier has been summarized as follows:

'Where, then, a shipowner receives goods to be carried for reward, whether in a general ship with goods of other shippers, or in a chartered ship whose services are entirely at the disposal of the one freighter, it is implied in common law, in the absence of express contract--

'That he is to carry and deliver the goods in safety, answering for all loss or damage which may happen to them while they are in his hands as carrier:

'Unless that has been caused by some act of God, or of the King's enemies; or by some defect or infirmity of the goods themselves, or their packages; or through a voluntary sacrifice for the general safety:

'And, that those exceptions are not to excuse him if he had not been reasonably careful to avoid or guard against the cause of loss, or damage; or Has met with it after a departure from the proper course of the voyage; or, if the loss or damage has been due to some unfitness of the ship to receive the cargo, or to unseaworthiness which existed when she commenced her voyage.' (Emphasis added.) (I Carver, Carriage by Sea (11th ed. 1963 (British Shipping Laws, Vol. 2)), par. 20, p. 19; and see Gilmore & Black, The Law of Admiralty (1957) § 3--22, pp. 119--120; and Knauth, Ocean Bills of Lading (1953) p. 116.)

Prior to statutory regulation, the shipowners were free to contract concerning their liability, and 'the carriers developed the 'free' contract to a point where it could be said that the carrier accepted the goods to be carried when he liked, as he liked, and wherever he liked.' (Knauth, op. cit., p. 116; and see Carver, op. cit., par. 100, pp. 87--88; and Gilmore & Black, op. cit., § 3--23, pp. 120--122.)

In the absence of a specific statutory or a valid contractual limitation, courts in maritime cases apply a doctrine of laches. The rule governing the exercise of the court's discretion has been stated as follows: 'It is the sound legal discretion of cultivated reason, in which the circumstances of the parties, of the property, and of the transaction, the wants and convenience of commerce, the demands of public policy, and, most especially, the analogies of the local laws of limitations are fully to be considered and carefully weighed.' (Benedict's Admiralty (4th ed. 1910) § 514, p. 345; and see Conty v. States Marine Lines, Inc. (2d Cir. 1966) 355 F.2d 26, 27; and Gilmore & Black, op. cit., § 9--79, p. 628.)

Deviation has been described as follows: 'To deviate, lexicographically, means to stray, to wander. As applied in admiralty law, the term 'deviation' was originally and generally employed to express the wandering or straying of a vessel from the customary course of the voyage, but in the course of time it has come to mean any variation in the conduct of a ship in the carriage of goods whereby the risk incident to the shipment will be increased, such as carrying the cargo on the deck of the ship contrary to custom and without the consent of the shipper, delay in carrying the goods, failure to deliver the goods at the port named in the bill of lading and carrying them farther to another port, or bringing them back to the port of original shipment and reshipping them. Such conduct has been held to be a departure from the course of agreed transit and to constitute a 'deviation' whereby the goods have been subjected to greater risks, and when lost or damaged in consequence thereof, clauses of exceptions in bills of lading limiting liability cease to apply. (Citations.)' (G. W. Sheldon & Co. v. Hamburg Amer. P.-A.-G. (3d Cir. 1928) 28 F.2d 249, 251; see also Tetley, Marine Cargo Claims (1965) pp. 204--211; I Carver, op. cit., par. 19, p. 19; and II id. (British Shipping Laws, Vol. 3), pars. 705--742, pp. 593--618; Gilmore & Black, op. cit., §§ 3--40/3--42, pp. 156--162; Poor, Charter Parties and Ocean Bills of Lading (4th ed. 1954) § 69, pp. 189--200; Knauth, op. cit., pp. 240--270.)

'By stowing the goods on deck the vessel broke her contract, exposed them to greater risk than had been agreed and thereby directly caused the loss. She accordingly became liable as for a deviation, cannot escape by reason of the relieving clauses inserted in the bill of lading for her benefit, (fn. omitted) and must account for the value at destination.' (St. Johns Corp. v. Companhia Geral, etc. (1923) 263 U.S. 119, 124--125, 44 S.Ct. 30, 68 L.Ed. 201; and see The Delaware (1871) 81 U.S. 579, 598 and 604, 20 L.Ed. 779.)

In St. Johns the issue was whether the shipper had assented to storage on deck. In resolving that issue against the carrier, the court held that provisions of the bill of lading, which purported to relieve the carrier of liability for loss or damage from causes beyond his control, and to limit the liability to $100 per package unless otherwise stated, were rendered inapplicable by the deviation.

The opinion of the Circuit Court of Appeals, which was affirmed, is informative in that it sets forth the reasons for the rule, as follows: 'The cargo was laden on deck contrary to the requirements of the clean bill of lading issued therefor, and by reason thereof the bill of lading and all its clauses were wiped out, and the ship cannot claim the benefits of any limitations therein contained. (Citation.) To so stow the cargo was a deviation which changed the character of the voyage so essentially that the shipowner who has deviated cannot claim the benefits of the terms of the bill of lading. It vitiates and avoids the contract of carriage. (Citations.) The same rule prevails in England. (Citation.) The reason therefor is that the exemption clauses and limitation in the bill of lading are for the benefit of the carrier who has control of the shipments after its delivery to him. By his bill of lading he declares the manner and place of carriage. The shipper, having this notice, understands the reasons...