Oxford Shipping Co., Ltd. v. New Hampshire Trading Corp.
| Decision Date | 20 January 1983 |
| Docket Number | 82-1381,Nos. 82-1336,s. 82-1336 |
| Citation | 697 F.2d 1 |
| Parties | OXFORD SHIPPING CO., LTD., Plaintiff, Appellant, v. NEW HAMPSHIRE TRADING CORP., et al., Defendants, Appellees. OXFORD SHIPPING CO., LTD., Plaintiff, Appellee, v. NEW HAMPSHIRE TRADING CORP., et al., Defendants, Appellees. Avon Trading Corp., Defendant, Appellant. |
| Court | U.S. Court of Appeals — First Circuit |
Frank H. Handy, Jr., Boston, Mass., with whom Kneeland, Kydd & Handy, Boston, Mass., was on brief, for Oxford Shipping Co., Ltd.
John P. Griffith, Nashua, N.H., with whom Hamblett & Kerrigan, Nashua, N.H., was on brief, for appellant Avon Trading Corp.
George J. Basbanes, Lowell, Mass., for New Hampshire Trading Corp. and Frederick W. Gendron.
Richard A. Dempsey, Boston, Mass., with whom Leo F. Glynn and Glynn & Dempsey, Boston, Mass., were on brief, for appellee Tager S.S. Agency.
Before PECK, * Senior Circuit Judge, CAMPBELL and BREYER, Circuit Judges.
Oxford Shipping Co., Ltd. ("Oxford"), is a subsidiary of a large Hong Kong commercial firm. Oxford's assets consist principally of one cargo ship, the "Eastern Saga." Oxford claims that it was hurt when its ship was seized by South Korean authorities as a result of a scheme to cheat a Korean firm, Yulsan. Yulsan had bought about 20,000 tons of scrap metal, which applicable bills of lading represented to be aboard the "Eastern Saga," but the ship actually contained only about 17,000 tons of metal.
Oxford brought suit to recover damages in New Hampshire federal district court. It sued Avon Trading Corporation ("Avon"), the shipper that used the "Eastern Saga" to transport the metal; New Hampshire Trading Corp. ("NHT"), a scrap dealer that sold scrap to Avon; Frederic Gendron, the president of NHT; and Tager Steamship Agency ("Tager"), an agent retained to issue bills of lading and perform other tasks associated with loading and shipping the scrap.
Since Oxford itself seems to have been innocent of wrongdoing (although the captain and crew of its ship may have known of the plot), while several of the defendants seem to have been guilty of conduct ranging from simple breach of fiduciary duty to what approaches criminal behavior, one might believe at first glance that it would be fairly easy for Oxford (the company and its shareholders) to recover for the harms suffered. The record reveals, however, a highly complicated set of legalistic arguments, made by the defendants' lawyers and by Oxford's lawyers in response, that led the district court to conclude that the defendants were entitled to judgment on all counts. Oxford appeals. Our review of the case convinces us that the law should, and does, correspond with one's elementary sense of justice: namely, as between Oxford and most of these defendants, the defendants rather than Oxford and its shareholders should pay for the damage caused.
The complex set of facts underlying this litigation can be simplified as follows. Avon contracted in 1978 to sell roughly 20,000 tons of scrap metal to Yulsan. Avon subchartered the "Eastern Saga" from Transamerica Steamship Corp., which had previously subchartered the vessel from several other firms which in turn had chartered it from Oxford. The evidence before the district court indicated that Avon tried to cheat Yulsan by only loading some 17,000 tons of scrap on board. In particular, after buying an initial quantity of scrap elsewhere, Avon purchased roughly 7,000 tons of scrap from NHT, but represented the amount as over 10,000 tons. Avon used various false documents to conceal the fraud, including bills of lading issued by Tager that overstated the weight of the scrap by several thousand tons. In issuing the bills of lading, Tager relied upon a letter signed by NHT's Gendron concerning the scrap weight, but Gendron testified at trial that the letter was written by Avon officials and signed by him at their behest, and that he was not aware that it misrepresented the amount of scrap sold by NHT to Avon.
The captain and first officer of the "Eastern Saga," who were agents of Oxford, probably knew that the ship was carrying too little scrap, for they were approached by Avon officials at several points with schemes to cover up the shortfall by taking on water ballast and dumping it in South Korea while the ship was being unloaded. They refused to go along with the plot, but they do not appear to have informed either their superiors at Oxford or Yulsan itself of what was going on. When the ship reached South Korea the short-weighting was quickly discovered, and Yulsan had the "Eastern Saga" seized by South Korean port authorities. The fact that Yulsan had accepted the bills of lading, however, apparently triggered automatic payment through letters of credit, so Yulsan appears to have had to pay for the missing metal. Yulsan began litigation in South Korea against Oxford and other parties to recover the value of the shortfall, and Oxford was able to extract its ship in the interim only by posting a security bond worth approximately $200,000.
Oxford began its suit in federal district court to recover for various losses incurred by the seizure of its ship and for the potential liability created by Yulsan's claims against it. Oxford sought to recover from Avon, NHT, Gendron, and Tager for breach of contract, negligence, and fraudulent misrepresentation in connection with Avon's attempted fraud against Yulsan. After a four-day bench trial, the district court entered judgment against Oxford on every claim.
Oxford's claims against Avon rest primarily upon its contention that, in providing false information for the bills of lading, Avon breached its contractual obligations to Oxford. We believe that the district court properly characterized the claim as one arising under the Carriage of Goods by Sea Act, 46 U.S.C. Secs. 1300 et seq. ("COGSA"). COGSA provides in part that
[t]he shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity, and weight [of the cargo], as furnished by him; and the shipper shall indemnify the carrier against all loss, damages, and expenses arising or resulting from inaccuracies in such particulars.
46 U.S.C. Sec. 1303(5). The facts make clear that Avon breached its duty to supply accurate information about the weight of the cargo. In fact, Avon deliberately overstated the weight. Yet the district court held that Avon need not indemnify Oxford for its "loss, damages, and expenses ... resulting from [those] inaccuracies" (other than Oxford's potential liability to Yulsan), because Oxford's officers on the "Eastern Saga" knew about Avon's fraud. This fact, in the court's view, "equitably estopped" Oxford from recovering.
Although the factual findings of the district court concerning the knowledge of Oxford's officers are not clearly erroneous, Fed.R.Civ.P. 52(a), the court erred in its legal conclusion that those facts supported the application of equitable estoppel. As an initial matter, it is far from clear that the doctrine of equitable estoppel applies under Sec. 1303(5); on its face, Sec. 1303(5) imposes absolute liability on a shipper who supplies a carrier with inaccurate information about a cargo, without regard to the carrier's conduct. Moreover, even if it were assumed that the common law defense of equitable estoppel were incorporated into the statutory cause of action created by Sec. 1303(5), the defense simply has no application here. Traditionally, the doctrine of equitable estoppel
operates to preclude a party [who has made representations of fact through his words or conduct] '[f]rom asserting rights which might perhaps have otherwise existed ... as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquired some corresponding right ....'
Precious Metals Associates, Inc. v. Commodity Futures Trading Commission, 620 F.2d 900, 908 (1st Cir.1980), quoting 2 J. Pomeroy, Equity Jurisprudence Sec. 804, at 1421-22 (3d ed. 1905); see, e.g., Lavin v. Marsh, 644 F.2d 1378 (9th Cir.1981). In this case, neither Oxford nor its agents made any representations to Avon concerning the cargo, nor did Avon rely on any representations in pursuing its fraudulent scheme, nor would it have had the requisite good faith had it done so. Insofar as Oxford's agents failed in their duty to inform Oxford (and Yulsan) about Avon's conduct, Avon was helped rather than hindered by their conduct.
The doctrine most on point here is not that of equitable estoppel, which we cannot find to have been applied in a case like this one, but the defense of "acquiescence." That defense bars an indemnitee from obtaining indemnification when the indemnitee knowingly acquiesces in the indemnitor's wrongful conduct. See, e.g., Missouri Pac. R.R. Co. v. Winburn Tile Mfg. Co., 461 F.2d 984, 989 (8th Cir.1972); Missouri Pac. R.R. Co. v. Arkansas Oak Flooring, 434 F.2d 575, 578-79 (8th Cir.1970). As is true of "equitable estoppel," we have found no case implying this defense under COGSA. In any event, we do not believe that the defense bars recovery by an innocent principal-indemnitee against a culpable agent-indemnitor merely because another of the principal's agents has knowledge of the indemnitor's wrongdoing. See Becker v. Central Telephone and Utilities Corp., 365 F.Supp. 984, 988-89 (D.S.D.1973) (), vacated on other grounds sub nom. Becker v. Black & Veatch Consulting Engineers, 509 F.2d 42 (8th Cir.1974); cf. Standard Oil Co. of California v. Intrepid, Inc., 26 Cal.App.3d 135, 139-40, 102 Cal.Rptr. 604, 607-08 (1972) (...
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