Petition of Isbrandtsen Company

• Decision Date: 15 January 1953
• Docket Number: No. 109,Docket 22503.,109
• Parties: Petition of ISBRANDTSEN COMPANY, Inc. ISBRANDTSEN CO., Inc. v. UNITED STATES. The EDMUND FANNING.
• Court: U.S. Court of Appeals — Second Circuit

201 F.2d 281 (1953)

Petition of ISBRANDTSEN COMPANY, Inc. ISBRANDTSEN CO., Inc. v. UNITED STATES The EDMUND FANNING.

No. 109, Docket 22503.

United States Court of Appeals Second Circuit.

Argued December 11, 1952.

Decided January 15, 1953.

COPYRIGHT MATERIAL OMITTED

Lord, Day & Lord, New York City, Thomas F. Daly and Henry C. Blackiston, Jr., New York City, Advocates for Isbrandtsen Co., Inc., petitioner-appellant.

Myles J. Lane, U. S. Atty., New York City, Edward L. Smith, Erwin W. Rossuck and Walter L. Hopkins, Attys. Department of Justice, New York City, Advocates, for United States, appellee.

Before AUGUSTUS N. HAND, CLARK and FRANK, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

In September 1947 Isbrandtsen Company, Inc., a domestic corporation organized under the laws of the State of New York (hereinafter called Isbrandtsen) filed a petition in the United States District Court for the Southern District of New York seeking exoneration under the Fire Statute, 46 U.S.C.A. § 182, from liability for a fire on board the Liberty Vessel S. S. Edmund Fanning, which Isbrandtsen had chartered from its owner, the United States. The petition also asked that if Isbrandtsen should be adjudged liable its liability be limited to the value of its interest in the vessel after the fire in accordance with the Limitation Statute, 46 U.S.C.A. § 183. The district court awarded an interlocutory decree adjudging that the United States recover from Isbrandtsen the full amount of the damages sustained by it through the loss of ten locomotives and tenders as a result of the fire. All other claims filed in the proceeding were settled and withdrawn or were dismissed at the conclusion of the trial.

The ten locomotives and tenders were loaded by the United States Army on The Fanning at Bremen, Germany, for shipment to Korea. Additional cargo, including sulphuric acid, chlorate of potash and sodium peroxide, was later taken on board. The fire occurred while the ship was in port at Genoa, Italy, resulting in the total loss of the ship and damage to the cargo in suit. The trial judge held that the fire resulted from the negligent stowing of the sulphuric acid over the above-mentioned chemicals, finding that the acid corroded the metal drums in which it was stored and leaked down upon the other chemicals, producing a fire and explosion. Isbrandtsen's responsibility for the negligent stowage was held to be established because of the acts of its agent, Captain Praast, who was authorized to, and in fact did, supervise the loading of the cargo. Consequently the Fire Statute, 46 U.S.C.A. § 182, and the Limitation Statute, 46 U.S.C.A. § 183, were held inapplicable.

The parties agreed that the shipment was covered by the government form of bill of lading. By its terms this form was "subject to the same rules and conditions as govern commercial shipments made on the usual forms provided therefor by the carrier." Hence, the trial court concluded that the government form, as modified by the provisions of the usual Isbrandtsen form, established the conditions under which the shipment was made. The latter bill of lading contained language limiting liability, which is set forth below.¹ It also incorporated the provisions of the Carriage of Goods by Sea Act, 46 U.S.C.A. § 1300 et seq., which, in so far as here relevant, are to the same effect as those in the Isbrandtsen form, 46 U.S.C.A. § 1304(5).

Isbrandtsen contends that the government failed to show that the fire was caused by Isbrandtsen's negligence. We think the trial judge was right in holding as he did that, in order to deprive Isbrandtsen of exoneration from liability under the Fire Statute, 46 U.S.C.A. § 182, the United States had the burden of showing that the stowage was improper due to the negligence of Isbrandtsen and that the negligent stowage caused the fire. We also think that he did not err in holding that the government had met this burden. There can be no doubt that the stowage of the acid was such that a fire would result if there was leakage upon the chemicals stored below. The evidence showed that sulphuric acid has a tendency to corrode metal drums. Isbrandtsen argues that, if the drums had been lined with glass or porcelain, corrosion would not have occurred. This, however, was a matter of defense since the evidence was under the control of Isbrandtsen and in the absence of a showing to the contrary the lack of such a lining may fairly be found. Cf. The Eastchester, 2 Cir., 20 F.2d 357, 358. Captain Praast, Isbrandtsen's employee, testified on cross-examination that if the drums were to leak the liquid would come into contact with the chlorate of potash stowed beneath. The chlorate of potash was described in the bill of lading as contained in "barrels" or "kegs." The words "barrels" and "kegs" strongly suggest a wooden composition. Moreover, evidence of what they were composed of again was controlled by Isbrandtsen and the trial court, in the absence of evidence to the contrary, was justified in concluding that they were made of wood. Hence, Isbrandtsen's contention that it was not shown that the leaking acid would come in contact with the chlorate of potash is unfounded.

Isbrandtsen further argues that, since the evidence showed that a mixture of the acid and potassium chlorate would result in an explosion, and smoke was observed before the rumblings and explosion were heard, the fire was not caused by such a mixture. But there could well have been smaller explosions at first which, taking place at the bottom of the hold, were inaudible and hence the ignition of the potassium chlorate before the explosion was heard was not improbable. That the fire might have resulted from a mixture of the leaking acid with the sodium peroxide was also adequately proved. In the light of the evidence of constant vigilance to prevent smoking in the hold Isbrandtsen's contention that the fire resulted from a smouldering cigarette seems implausible. The court below did not believe this and there was no evidence to support the theory that smoking occurred in the hold where the fire started while the ship was at Genoa. In view of the undeniably dangerous situation created by the negligent stowage and the fact that a fire did result, we agree with the trial court that the government sufficiently met its burden of showing that Isbrandtsen's negligence caused the fire. All of the circumstances were proved, see Chicago, M. & St. P. Ry. v. Coogan, 271 U.S. 472, 477, 46 S.Ct. 564, 70 L.Ed. 1041, and it was not unreasonable to hold that fire, danger of which was clearly shown to have existed, did in fact eventuate.

The trial judge held that the Carriage of Goods by Sea Act could not validly be incorporated into the bill of lading covering the locomotives, and that the further provision in the bill of lading limiting liability to an agreed sum, which is identical in so far as here relevant with the effect of incorporating the Carriage of Goods by Sea Act, was contrary to public policy. But clauses so limiting liability have been held not contrary to the public policy preventing carriers from exonerating themselves from liability for negligence when an opportunity to pay a higher rate and secure a higher valuation has been afforded. Hart v. Pennsylvania R. R. Co., 112 U.S. 331, 340-341, 5 S.Ct. 151, 28 L.Ed. 717; Kansas City Southern Ry. Co. v. Carl, 227 U.S. 639, 33 S.Ct. 391, 57 L.Ed. 683; E. Gerli & Co., Inc., v. Cunard S.S. Co., Ltd., 2 Cir., 48 F.2d 115; see The Ansaldo San Giorgio I. v. Rheinstrom Bros. Co., 294 U.S. 494, 497, 55 S.Ct. 483, 79 L.Ed. 1016; The Cayo Mambi, 2 Cir., 62 F.2d 791. Such a contract, enabling a carrier to adjust its rates so as to be commensurate with the risk assumed, is unlike the contracts exonerating a carrier from liability which courts have struck down. E. g., United States v. Farr Sugar Corp., 2 Cir., 191 F.2d 370, affirmed United States v. Atlantic Mutual Ins. Co., 343 U.S. 236, 72 S.Ct. 666. We see no reason why the limitation clause as incorporated from the Carriage of Goods by Sea Act and as set forth in the bill of lading itself is not valid if the government in fact could have secured a higher valuation on paying a greater freight.

The Carriage of Goods by Sea Act is applicable to shipments in foreign trade to and from ports of the United States, but not to shipments such as the locomotives here between foreign ports or to coastal shipping between two United States ports, 46 U.S.C.A. § 1300. Permission has been granted to subject contracts for shipments between United States ports to the Carriage of Goods by Sea Act, 46 U.S.C.A. § 1312. But Congressional silence as to incorporation of the Act in bills of lading covering trade between two foreign ports is not such a declaration of policy as to overcome the long standing rule that such agreed value provisions, the only provision here in issue incorporated from the Act, are valid. Moreover, any policy against the use of such clauses is difficult to find, since they are expressly allowed as to situations covered by the Act, although with a minimum valuation of $500 required.

The government further urges that no opportunity of securing a higher valuation was afforded it. See Union Pacific R. R. v. Burke, 255 U.S. 317, 41 S.Ct. 283, 65 L.Ed. 656. The clause in the Isbrandtsen bill of lading expressly provides that the shipper may avoid the limitation by declaring in writing the nature of the goods and a higher valuation, paying extra freight. Such a provision is prima facie evidence of what it...