Nissho-Iwai Co., Ltd. v. M/T Stolt Lion

• Decision Date: 07 April 1980
• Docket Number: D,No. 270,NISSHO-IWAI,270
• Citation: 617 F.2d 907,1980 AMC 867
• Parties: CO., LTD., Plaintiff, v. M/T STOLT LION, her engines, boilers, etc., v. ANGLOMAR SUPERTANKERS, LIMITED, Defendants-Appellees, and Parcel Tankers, Inc., Defendant-Appellant. ocket 79-7381.
• Court: U.S. Court of Appeals — Second Circuit

Page 907

617 F.2d 907

NISSHO-IWAI CO., LTD., Plaintiff, v. M/T STOLT LION, her engines, boilers, etc., v. ANGLOMAR SUPERTANKERS, LIMITED, Defendants-Appellees, and Parcel Tankers, Inc., Defendant-Appellant.

No. 270, Docket 79-7381.

United States Court of Appeals, Second Circuit.

Argued Nov. 8, 1979.

Decided March 3, 1980.

As Amended on Denial of Rehearing April 7, 1980.

Chester D. Hooper, New York City (Keith L. Flicker, M. E. DeOrchis, Haight, Gardner, Poor & Havens, New York City, of counsel), for appellant Parcel Tankers, Inc.

Raymond J. Burke, Jr., New York City (Stephen P. Kyne, Burke & Parsons, New York City, of counsel), for defendants-appellees Anglomar Supertankers, Limited.

Before FEINBERG, MANSFIELD, Circuit Judges, and MISHLER, District Judge. ^*

MANSFIELD, Circuit Judge:

Parcel Tankers, Inc. (Parcel), time charterer of the vessel M/T Stolt Lion, owned by Anglomar Supertankers, Limited (Anglomar), appeals from a judgment of the District Court for the Southern District of New York, entered by Judge Gerard L. Goettel after a bench trial, holding that Anglomar is not liable to Parcel for damage to a cargo shipped on the vessel to Japan by Nissho-Iwai Co., Ltd. (Nissho) as shipper and consignee. The suit was instituted by Nissho against the ship, its owner, Anglomar, and Parcel. Anglomar cross-claimed against Parcel as a defendant, seeking indemnity from it as charterer. Parcel, which interposed a statute of limitations defense, ¹ settled Nissho's claim against it, taking an assignment of Nissho's claim against Anglomar, and cross-claimed against Anglomar, seeking damages as assignee and indemnity as charterer. The district court denied Parcel's claims on the ground that it assumed the burden of proving fault on Anglomar's part, which it had failed to sustain. We reverse.

The suit arises out of the contamination of cargo off the coast of Japan in November, 1973. On September 7, 1973, Nissho had entered into a voyage charter with Parcel, under which Parcel agreed to transport approximately 1,500 metric tons of a liquid substance called styrene monomer from Texas City, Texas, to Yokahama and/or Kobe, Japan. The relations between Parcel and Nissho were governed by the U.S. Carriage of Goods by the Sea Act, 46 U.S.C. § 1300, et seq. (COGSA) which had been incorporated into the voyage charter. Parcel arranged for carriage of the cargo by the vessel M/T Stolt Lion, which was owned and manned by Anglomar and had been time chartered by Parcel on June 19, 1970. The bills of lading issued after the loading of the cargo incorporated COGSA.

On October 3, 1973, the cargo was loaded at Texas City, Texas, into the Stolt Lion in good order and on November 13, 1973, a portion of the cargo was discharged in good condition without incident in Kobe, Japan. On November 16, 1973, the Stolt Lion commenced discharging the remaining cargo into coastal tankers at Yokohama, using the same lines and pumps as those that had been used for the discharge in Kobe. At some point during the process of discharging the cargo into the second of two coastal tankers, either during the discharge itself or as the cargo entered the tanks of the second coastal tanker, the styrene became discolored.

On February 10, 1977, Nissho commenced suit against the ship, Anglomar, and Parcel, leading to the cross-claims and proceedings already mentioned. Just prior to trial Parcel negotiated a settlement with Nissho for the sum of $70,000 and received in return an assignment of Nissho's entire cause of action against Anglomar. As assignee, Parcel then sought recovery from Anglomar of plaintiff's claim, which amounted to $141,147.27, or, in the alternative, reimbursement for the $70,000 settlement sum which Parcel had paid Nissho.

The district court found that the evidence as to the cause of the contamination was inconclusive. The discharge into the first coastal tanker had proceeded without incident or contamination. However, during the discharge of styrene into the second coastal tanker the Stolt Lion developed a list. In addition, pumping problems occurred, which required that pumping be suspended while certain pumps aboard the Stolt Lion were repaired. During the period of suspension it was discovered that some of the styrene just discharged into the second coastal tanker was discolored. Upon resumption of pumping from the Stolt Lion the styrene discharged thereafter appeared to be in good condition.

The discoloration of the styrene therefore occurred during the discharge from the Stolt Lion. Parcel theorized, with the aid of expert testimony, that the listing of the Stolt Lion during discharge caused its pumps to suck up dirty bilge water into the branch lines at a point in the pump room where a defective pump was being repaired and to mix with the styrene. The principal witness in support of this theory was an experienced independent surveyor, Tetsuya Hirayama, hired by the plaintiff Nissho, who was present during the discharge. In rebuttal to this theory Anglomar introduced testimony by the Stolt Lion's Chief Officer to the effect that despite the list, which in his view was normal during discharge, the dirty bilge never reached a high enough level to enter the pipes at the point where the pump was being repaired.

Anglomar theorized that the contamination may have been caused by an unclean condition aboard the second coastal tanker. This was rebutted by testimony by the surveyor that the contamination could not have occurred on board the coastal tanker because the tanker, which had carried styrene exclusively, was extremely clean, based on his inspection of the tanker's tanks, pump room and lines prior to the discharge. Anglomar, in turn, disputed the accuracy of the surveyor's testimony, noting that he could not have conducted an inspection of the coastal tanker in just 20 minutes, as he testified.

The district court, while conceding that the bilge water theory was "not impossible," rejected it, concluding that the cause of the discoloration "would likely remain a mystery." The question as to which party, as between the shipowner, Anglomar, and the charterer of the ship, Parcel, had the burden of proving the cause of the cargo damage thus became determinative. Judge Goettel concluded that, as between a shipowner and a time charterer, the burden of proving fault falls on the time charterer, stating:

"Anglomar contends that, even if COGSA is applied, Parcel was clearly the 'carrier.' 46 U.S.C. § 1301(a), and that therefore the burden of proof would remain on it. This view seems literally correct. More importantly, clause 32 of the charter party provides that the vessel owner shall not be held responsible for contamination of the cargo unless such contamination results from unseaworthiness of the vessel at the time of the loading (discoverable by the exercise of due diligence) or from error or fault on the part of the servants of the owner in the loading, care or discharge of the cargo. The burden of proving such fault on the part of the owner must be borne by the charterer.

". . . Consequently, any liability on the part of the owner must be premised on some error or fault in the discharge of the cargo. The weakness of Parcel's position in this regard, however, is that it assumes that the discoloration existed at the time the cargo was discharged. It has not proved this and, in fact, the evidence was quite clear that no discoloration was noted or any contamination claimed under after the styrene had already been discharged into the tanks of the second coastal tanker at Yokahoma." (App. 502a-503a)

Parcel contends that the district court erred by failing to distinguish between Parcel's rights and duties as assignee of the shipper's claim and those it assumed as charterer, and that if the court had bifurcated its analysis in the light of these rights and duties attaching to these differing capacities, it would have been forced to conclude that the burden was on Anglomar to prove its freedom from fault. ²

DISCUSSION

The Burden of Proof as Between Parcel as Assignee and Anglomar

We do not disagree with the district court's conclusions that the cause of the cargo damage is likely to remain a mystery and that resolution of the basic controversy turns on the proper placement of the burden of proof. Since Parcel sues in two capacities, we must first decide whether Parcel, in its capacity as assignee of the claims of Nissho, the shipper, or the shipowner, Anglomar, must bear the burden of proving the cause of the damage to the cargo.

Nissho's rights against Anglomar are governed by COGSA, which applies to all outbound bills of lading issued by a vessel owner to a shipper such as Nissho, 46 U.S.C. § 1303, and indeed was specifically incorporated into the bills of lading issued by Anglomar, as required by law, § 1303(3). COGSA, enacted by Congress to redress the oppressive edge in bargaining power enjoyed by carriers (defined by the Act to include vessel owners and charterers) over shippers and cargo interests, delineates the responsibilities and liabilities of vessel owners and charterers toward shippers in carrying out the former's duties as carriers, ³ § 1302. See Gilmore & Black, The Law of Admiralty, § 3-25 at 145-49 (2d ed. 1975). As assignee of Nissho's cause of action Parcel was entitled to the benefits of COGSA, including its burden of proof rules. Under COGSA, a shipper or consignee may establish a prima facie case against the "carrier," in this case the vessel owner Anglomar, by showing that the cargo was delivered in good condition to the carrier but was in damaged condition when discharged. Vana Trading Co. v. S. S. "Mette Skow," 556 F.2d 100, 104 (2d Cir.), cert. denied, 434 U.S. 892, 98 S.Ct. 267, 54 L.Ed.2d 177 (1977); Travelers Indem. Co. v. S. S. Polarland, 418 F.Supp. 985, 987 (S.D.N.Y.1976), affd. mem., 562 F.2d 39 (2d Cir. 1977); see Gilmore & Black, supra, § 3-43 at 183. Accordingly, in order to make out its prima...