Margarine Verkaufsunion GmBH v. MTGC BROVIG, 65 AD. 3.

• Decision Date: 29 September 1970
• Docket Number: No. 65 AD. 3.,65 AD. 3.
• Citation: 318 F. Supp. 977
• Parties: MARGARINE VERKAUFSUNION G.m.B.H., Plaintiff, v. M.T. G.C. BROVIG, her engines, boilers, etc., Partrederiet Brovigtank, Th. Brovig, and General Navigation, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

318 F. Supp. 977

MARGARINE VERKAUFSUNION G.m.B.H., Plaintiff, v. M.T. G.C. BROVIG, her engines, boilers, etc., Partrederiet Brovigtank, Th. Brovig, and General Navigation, Inc., Defendants.

No. 65 AD. 3.

United States District Court, S. D. New York.

September 29, 1970.

Donovan, Donovan, Maloof & Walsh, New York City, for plaintiff; James M. Kenny, New York City, of counsel.

Kirlin, Campbell & Keating, New York City, for Partrederiet Brovigtank and Th. Brovig; Edward L. Smith, David W. Martowski, New York City, of counsel.

Katz, Wittenberg & Katz, Garrity, Connolly, Lewis & Grimes, New York City, for General Navigation Inc.; James L. Garrity, William R. Grimes, New York City, of counsel.

OPINION, FINDINGS OF FACT and CONCLUSIONS OF LAW

EDWARD WEINFELD, District Judge.

Margarine Verkaufsunion G.m.B.H. (Margarine), the consignee of a shipment of prime cottonseed oil, seeks to recover damages for short delivery and contamination of part of the shipment. Recovery is sought from the vessel, M. T.G.C. Brovig (the Brovig), which carried the shipment from Houston to Rotterdam; her owner, Partrederiet Brovigtank, a Norwegian corporation; and General Navigation Inc., a domestic corporation and the vessel's charterer under a Tanker Voyage Charter Party entered into with the owner. General Navigation, by a similar charter, subchartered the vessel to Lever Bros. Co., the shipper of the cargo, but Lever Bros. is not named as a defendant.¹ General Navigation, in the event it is held liable, seeks indemnity from Partrederiet Brovigtank for breach of its warranty under the charter party to supply a seaworthy vessel at the start of the voyage.

On May 30 and 31, 1964, at Houston, Texas, the Brovig was loaded with 3,575.11 long tons of prime crude cottonseed oil in her Nos. 4 and 5 port and starboard tanks and No. 7 center tank.² From Houston the vessel proceeded to New Orleans, where an additional cargo of peanut oil and lard was loaded into other tanks. The ship then sailed for Rotterdam on June 4 in weather that remained good until June 7, when heavy weather was encountered, which continued through the next day. After a quieter day on June 9, the weather conditions became very irregular on June 10, with the wind and sea going in different directions. According to the master, the sea was higher than the wind warranted, and the wracking and confused sea caused the vessel to roll, pitch and strain with heavy seas washing over her decks. At 11 a. m., due to the strain on the vessel, the captain was forced to change course and reduce speed. At about 11:30 a. m. a sharp report like a pistol shot was heard. While no investigation was then feasible because of the heavy sea, a cursory examination did not reveal any cracks in the deck plates. The next day, June 11, an oil film in the wake of the ship was observed, but the heavy seas and the rolling of the vessel still precluded thorough inspection until June 12, when the weather finally subsided enough to permit the captain to stop the vessel. An investigation revealed that oil was seeping from the No. 5 port wing tank. Approximately 250 long tons of cottonseed oil that appeared to be above sea level were then shifted to the No. 8 port wing tank, and the balance was pumped into the No. 2 port wing tank. En route to Rotterdam, the No. 5 port wing tank filled to sea level with salt water. At Rotterdam the Brovig discharged the shipment in suit and her other cargo at another port; she was thereafter drydocked at Birkenhead, England, where further inspection revealed that hull plate E8, in the way of the bilge of No. 5 port wing tank, had been cracked vertically over its entire length.

Plaintiff alleges that seawater entered the No. 5 port wing tank and that the portion which had been pumped into the Nos. 2 and 8 tanks was in contaminated³ condition upon discharge at Rotterdam; also, that as a result of the crack, a portion of the cottonseed oil was lost overboard and consequently there was a shortage of discharge. Plaintiff contends that the contamination and shortage were due to the defendants' failure to exercise due diligence to make the No. 5 port wing tank seaworthy when the vessel sailed from Houston and New Orleans,⁴ and to their overloading the Brovig beyond her maximum mean draft, thereby making her, ipso facto, unseaworthy.⁵ The defendants contend that they exercised due diligence to make the vessel seaworthy;⁶ that the plate crack was caused by perils of the sea⁷ or a latent defect not discoverable by due diligence;⁸ and finally, they deny the charge of overloading.

The question of who bears the burden of proof on these issues turns on whether or not the Carriage of Goods by Sea Act⁹ ("COGSA" or the Act) is applicable and controls the rights and liabilities of the parties. Somewhat inconsistently with their pleaded defenses, the defendants dispute that "COGSA" is applicable on the ground that plaintiff, the consignee, and Lever Bros. Co., the shipper, are subsidiaries of Unilever, Inc., and the transaction between them merely involved a transfer between corporate affiliates and accordingly, that the bill of lading never became a document of title sufficient to give the plaintiff the status of a shipper under the Act.¹⁰ The defendants' argument that "COGSA" does not apply, however, is without substance. The mere fact that a transaction is between corporate affiliates does not remove it from the protection of "COGSA", especially when there is no claim, much less no evidence, of an intent to commit a fraud or to violate a statutory duty to justify piercing the corporate veil.¹¹ The evidence indicates an arms-length, commercial transaction between the two subsidiary corporations. The bill of lading in question was a negotiable "on board" freight paid instrument, and was fully negotiated to plaintiff, which made final payment for the shipment on June 10, 1964, ten days before the outturn of the cargo in Rotterdam. Under these circumstances, the bill of lading became a document of title, bringing the plaintiff under the protection of "COGSA".¹²

The law is settled under "COGSA" that the cargo owner in the first instance bears the burden of proof that the shipment was delivered to the vessel in good order and condition and was outturned in damaged condition. Since the plaintiff has established delivery of the cargo of cottonseed oil to the Brovig at New Orleans in good condition and outturn at Rotterdam of a part thereof in contaminated condition, it has made out a prima facie case. The buren then shifts to the carrier defendants, and if they are to be absolved of liability, they must prove that the loss occurred through the operation of an excepted cause under the Act or that they exercised due diligence to avoid and prevent the harm.¹³ Plaintiff, however, contends that defendants cannot avail themselves of the "COGSA" defenses of perils of the sea or latent defect unless they first establish that they exercised due diligence to make the tanks watertight and suitable for the carriage of the cottonseed oil. It is unnecessary to resolve the legal issue posed by plaintiff, which is of doubtful validity,¹⁴ since the court finds, upon all the evidence, (1) that the defendants complied with the statutory requirement of due diligence to make the vessel seaworthy and the tanks fit for the reception and carriage of the shipment of cottonseed oil, and (2) that the cause of the contamination by seawater of a portion of the shipment was a crack in the E8 bilge plate of the No. 5 port wing tank, which developed during heavy weather encountered on the high seas en route to Rotterdam, due to a latent defect not discoverable by due diligence. While the defendants also rely upon a separate defense of perils of the sea to exonerate them from liability, this has not been established as an independent cause of the damage, although the evidence does justify a finding that the heavy weather was a contributing factor in causing the fracture.¹⁵

In September, 1963, nine months before the voyage in suit, the Brovig was drydocked for her annual required inspection at Antwerp. A Lloyd's surveyor inspected the vessel's sides, decks, bottom and rudder. He performed the usual tests for hull seaworthiness, making a visual examination of all plates to see if they were corroded, fractured or had leaking rivets, and hammer testing those plates that showed signs of corrosion, which did not include the No. 5 port wing tank.¹⁶ In terms of his experience, which was considerable and impressive, the Lloyd's surveyor was of the view that the tests applied were adequate to reveal whether or not anything was wrong with the plates; that in fact they were in good condition; and that the vessel was seaworthy. Lloyd's, based upon the surveyor's recommendation, continued the Brovig in class and issued the appropriate certificate. The ship's master, who was present during the inspection, was also of the view that the ship was "completely seaworthy." The examination and testing of the vessel by Lloyd's competent and experienced surveyor constituted due diligence to make the vessel and her tanks seaworthy, and nothing that occurred thereafter until the time she set sail from Houston and New Orleans requires any different finding.¹⁷

Immediately prior to the voyage in suit, the vessel discharged a cargo of molasses on May 22, 1964, at Groton, Connecticut. Thereafter, all tanks were butterworthed and then hand cleaned, since they had to be absolutely clean to receive the oil cargo. The captain personally inspected the tanks and saw no leaks; in his opinion they were completely watertight. Upon arrival of the Brovig at Houston on May 30, the tanks that were designated to carry the cottonseed oil cargo, including the No. 5 port wing tank, were inspected by surveyors appointed by Lever Bros. Co., who found them clean, dry and suitable to receive the shipment. The surveyor's inspection required him to go inside the tanks to...