Isthmian Steamship Co. v. California Spray-Chemical Corp.

• Decision Date: 02 May 1961
• Docket Number: No. 16812.,16812.
• Citation: 290 F.2d 486
• Parties: ISTHMIAN STEAMSHIP COMPANY, a corporation, Appellant, v. CALIFORNIA SPRAY-CHEMICAL CORPORATION, a corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

290 F.2d 486 (1961)

ISTHMIAN STEAMSHIP COMPANY, a corporation, Appellant, v. CALIFORNIA SPRAY-CHEMICAL CORPORATION, a corporation, Appellee.

No. 16812.

United States Court of Appeals Ninth Circuit.

May 2, 1961.

McCutchen, Doyle, Brown & Enersen and Russell A. Mackey and Bryant K. Zimmerman, San Francisco, Cal., for appellant.

Hall, Henry, Oliver & McReavy and Lyman Henry and Stephen McReavy, San Francisco, Cal., for appellee.

Before POPE, BARNES and HAMLIN, Circuit Judges.

BARNES, Circuit Judge.

This is a suit in admiralty to recover damages for injury to cargo occurring on navigable waters at Alexandria, Egypt. The district court's jurisdiction was based on 28 U.S.C. § 1333. The district court entered an interlocutory decree in favor of libelant and providing for a reference to ascertain the amount of damages. This court has jurisdiction of the appeal taken from the interlocutory decree. 28 U.S.C. § 1292(a) (3).

Libelant-appellee, California Spray-Chemical Corporation, shipped a quantity of an agricultural chemical, known as cotton dust, packed in fiber drums, from Houston, Texas to Alexandria, Egypt in January 1952, on the Steel Architect of appellant Isthmian Steamship Company. On arrival at Alexandria the cargo was discharged into lighters for on-carriage to the quays of Egyptian Petroleum Storage Company. This lighterage was made necessary by Egyptian customs regulations, which required that this commodity be landed only at the "petroleum quays." Since deep draft vessels, such as carrier's, could not come alongside the petroleum quays, further transportation by lighter was required.

The cargo had been shipped under short bills of lading which incorporated the carrier's long bill containing three "lighterage clauses".¹ These clauses provided that the carrier should be considered to act solely as the consignee's agent to arrange for lightering in Alexandria's Harbor and to effect "delivery" of the cargo by discharging it into lighters.

Accordingly the cargo was put aboard lighters which left the ship and were moored alongside a quay. One of the lighters was so moored that she broke loose from her moorings at night during a storm, pounded against a quay and was rendered unseaworthy. The next day the cotton dust was removed from this lighter to a quay. The lighter was then inspected by an agent of the carrier (appellant Isthmian). After the inspection, the dust was reloaded onto the lighter. The following morning the lighter sank at her moorings and the cotton dust was damaged by seawater.

The district court held that the lighterage clauses were invalid to relieve the carrier of responsibility for negligence in the care of the goods while they were being lightered from the ship to the quays. The court further held that the carrier had failed to rebut the prima facie case of negligence established by libelant. Accordingly the court held the carrier to be liable for all damage occurring before delivery to the quays.

Appellant assigned some thirteen specifications of error which may be reduced to four issues:

1. The validity of the exculpatory lighterage clauses.

2. Assuming that the lighterage clauses are not effective to exculpate appellant for the lighterman's negligence, the validity of the finding that the lighterman was negligent.

3. The implied finding that appellee was the real party in interest, and had standing to sue for the loss.

4. The finding that appellant had been given timely notice of the claim.

1. Validity of the lighterage clauses.

The Harter Act, 27 Stat. 445, 46 U.S. C.A. §§ 190-196, governs a carrier's obligations during the period after the goods have been discharged from the ship's tackle and before they have been delivered. The act invalidates (46 U.S. C.A. § 190) any clause inserted in a bill of lading by a shipowner, relieving the owner from liability for failure to make a "proper delivery," either by agreement with shippers or by delegation to others. The district court held that the "proper delivery" contemplated by the act is the type of delivery recognized as proper at common law; viz. a delivery at a fit and customary wharf, in the absence of port customs and regulations to the contrary (Tan Hi v. United States, D.C.N.D.Cal. 1950, 94 F.Supp. 432). This was the basis for the court's refusal to recognize the validity of the lighterage clauses, since such clauses purported to relieve the owner of liability before "proper delivery," as the court defined it, had been made.

Appellant contends, first that the common law rule relied upon by the district court relates only to the carrier's obligation when landing cargo, but does not apply to delivery to a forwarding carrier for necessary on-carriage. In support of this proposition appellant apparently relies exclusively upon Galveston Wharf Company v. Galveston, H. & S. A. Ry. Co., 285 U.S. 127, 52 S.Ct. 342, 76 L.Ed. 659. This case does not parallel the instant case, and therefore does not support the proposition asserted. In Galveston it was held that a common carrier was relieved of liability for negligence when it transferred the cargo to another common carrier for transshipment under a through bill of lading. The carrier had deposited the goods upon a fit wharf for transshipment inland. In the instant case, of course, the carrier did not deposit the goods upon a wharf but transferred them to the lighters, not for transshipment inland, but for carriage to the point nearest the port of discharge where the goods could be legally unloaded. Furthermore, and more importantly, the lighterage clauses in question do not purport by their terms to limit the exculpatory provisions to necessary on-carriage.² Thus, even if the term "proper delivery" permits the inclusion of clauses which authorize lighterage for necessary on-carriage, the clauses here involved do not come within such authorization, nor attempt to do so. Since we think the clauses are in their entirety null and void (see 46 U.S.C.A. § 190), they cannot exculpate appellant from liability even in that small area wherein properly drafted clauses might conceivably be held to so do.

Appellant earnestly asserts that the court erred in striking down the lighterage clauses. It contends that the Harter Act has never been held to deny the shipper and the carrier the right to "agree" that the carrier's liability shall cease upon delivery to a lighter. It claims that the Harter Act was never intended to extend beyond delivery from the ocean vessel.

If this were true, there would be, as appellee asserts, no scope for the application of the Harter Act. And the authorities in the field do not support such a result. The Harter Act was indeed partially superseded by the Carriage of Goods by Sea Act, 46 U.S.C.A. § 1300 et seq., but it is still applicable to the period following discharge from the ship and prior to delivery (1 Benedict, Admiralty, 695; Gilmore and Black, Law of Admiralty, p. 126).

The Harter Act applies, then, as soon as the cargo has left the ship's tackle; and it provides that from that time until proper delivery has been completed no exculpatory clause can save the shipowner from his liability for failure to care properly for the cargo or to make "proper delivery." Now, if "proper delivery" is completed as soon as the cargo leaves the ship's tackle and is received by the lighterman, the provisions of the Harter Act could never become operative. The shipowner would have, in effect, successfully contracted in a manner prohibited by the Act.

We must concede that two of the cases cited by appellant are direct authority for the proposition that lighterage clauses are valid. John Bonura & Co. v. United Fruit Co., 1926, 162 La. 53, 110 So. 86, did indeed sustain a lighterage clause similar to the one in question here. The court, however, did not consider the applicability of the Harter Act. The case supports appellant's position, but not very convincingly. Federal Insurance Co. v. American Export Lines, Inc., D.C. S.D.N.Y.1953, 113 F.Supp. 540, also directly, but weakly supports appellant's case. There the court held that a clause permitting a carrier to discharge the goods into a craft of its selection allowed the carrier to satisfy its contractual obligations by loading onto a lighter at the port of discharge. Under the peculiar circumstances of that case, however, the court had no occasion to consider the applicability of the Harter Act. Austin Nichols & Co. v. Compania Transatlantica, 1926, 218 App.Div. 660, 219 N.Y.S. 86, affirmed without opinion, 245 N.Y. 624, 157 N.E. 884, does not support either side, although it is claimed by both. The case holds only, as appellee asserts, that "the consignee must bear the ordinary risks incident to lighterage which occur without negligence."

The cases cited by appellee are on various grounds distinguishable from the case at bar, but they do reveal a judicial hostility to exculpatory lighterage clauses. Some of these cases are distinguishable only because, as appellant asserts, the lighterage was paid by the ocean carrier and the carrier's transportation undertaking was held to include the lighterage. (In the instant case, the bills of lading provided that appellant could act as agent for consignees in arranging for lightering; and accordingly charges for lightering were billed to the consignees.) These facts distinguish Colton v. New York & Cuba Mail S.S. Co., 2 Cir., 1928, 27 F.2d 671, and Insurance Company of North America v. North German Lloyd Co., D.C.D.Md.1900, 106 F. 973, affirmed, 4 Cir., 110 F. 420. And these same facts are clearly the only basis for a distinction between the case at bar and Morris v. Lamport & Holt, Limited, D.C.S.D.N.Y.1931, 54 F.2d 925, affirmed per curiam 2 Cir., 57 F.2d 1081. There the carrier's deep draft ship could not reach the shallow waters at the docks and hence lighters were used to load the vessel. A clause in the bill of lading purported to relieve the carrier of liability...