Sommer Corporation v. Panama Canal Company

• Decision Date: 05 March 1973
• Docket Number: No. 71-3379.,71-3379.
• Citation: 475 F.2d 292
• Parties: SOMMER CORPORATION, Plaintiff-Appellee Cross-Appellant, v. PANAMA CANAL COMPANY, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

475 F.2d 292 (1973)

SOMMER CORPORATION, Plaintiff-Appellee Cross-Appellant, v. PANAMA CANAL COMPANY, Defendant-Appellant, Cross-Appellee.

No. 71-3379.

United States Court of Appeals, Fifth Circuit.

March 5, 1973.

Dwight A. McKabney, John A. Cooper, John L. Haines, Jr., Earl R. McMillin, Office of the Gen. Counsel, Balboa Heights, Canal Zone, for appellant.

Henry L. Newell, Balboa, Canal Zone, for appellee.

Before JOHN R. BROWN, Chief Judge, and GODBOLD and SIMPSON, Circuit Judges.

JOHN R. BROWN, Chief Judge:

What this case presents is whether the failure of a nominal shipper to pay an additional $6.88 for Trans-Isthmian handling charges on equipment directly destined to a Panama Canal Company construction contract limits Canal Company's liability for cargo damage to less than the full stipulated loss of $9,610.85. For reasons peculiar to the relationship involved we answer in the negative and affirm with modification.

Sommer Corporation brought an admiralty action in personam against the Panama Canal Company for cargo damage arising during the shipment of three packages of transformer radiator cooling fins to a Canal Zone construction project. Canal Company appeals from the District Court's $9,610.85 judgment in favor of Sommer, 329 F.Supp. 1187, invoking the $500 per package liability limitation prescribed for cargo handling¹ under Canal Company's published tariff.² Sommer cross appeals from the denial of prejudgment interest. We modify and affirm.

On June 30, 1967, Sommer contracted with Canal Company for the installation of a power transformer at the Miraflores Locks substation in the Canal Zone. In accordance with the contract specifications Sommer provided a detailed breakdown of all materials and equipment to be furnished for the project, including descriptive brochures and literature, and there is no dispute that the Construction Division of Canal Company was aware of the approximate actual value ($11,500) of the transformer radiators as a result of the cost estimates prepared under its standard bid procedures.

The contract itself incorporated by reference the provisions of a booklet entitled "General Conditions for Panama Canal Company and Canal Zone Government Construction Contracts (July 1966)," which included an explanation of an optional procedure by which a contractor could secure free ocean freight and rail service for the shipment of construction materials.³ Since commercial freight service would have increased contractors' costs by approximately 15%, which would have to be passed on to Canal Company by an increased bid, Sommer elected to utilize this procedure and arranged through its New Orleans freight forwarder for delivery of the transformer radiators from the General Electric plant at Rome, Georgia, to Canal Company's New Orleans pier. There the shipment was through billed to Balboa (see GC-13(f)(2) note 3, supra) under Canal Company's standard Short Form Bill of Lading naming Sommer as consignee.⁴ This meant that the goods would have to be discharged at Cristobal, loaded onto Canal Company cars for rail transshipment to Balboa, C.Z. The goods arrived safely at Cristobal, but at some undetermined point in time between discharge on the dock and loading aboard Canal Company's freight cars three of the nine packages in the consignment were crushed, resulting in the damage here in dispute.

Canal Company does not contest the District Court's holding that the statutory $500 per package limitation of liability imposed by COGSA⁵ is inapplicable because the damage occurred after the goods were discharged from the vessel. Likewise, it cannot contend that the contractual limitation contained in Clause 18 of the Long Form Bill of Lading (note 4, supra) is controlling since Canal Company knew of the value far in excess of the $500 limit and the tariff did not prescribe any additional charges for declared excess value.⁶ Canal Company's Water Transportation Division, from two certificates stamped on the face of the shortblading, knew that these nine packages (1100 cubic feet, 13,800 lbs.) were for a specified Canal Company contract. No purpose, therefore, would have been served by a declaration in this unique situation.

But the fact that this was a through shipment from New Orleans to Balboa on a through bill of lading which prescribed that Canal Company's liability would be measured by Clause 18 and COGSA "throughout the entire time the goods are in the custody of the carrier"⁷ means that the handling tariff and its restrictive $500 limitation (notes 1 and 2, supra) were in effect substantially modified, if not altogether supplanted or superseded.

In any event the handling Tariff limitation (note 2, supra) is of no help.⁸ This is so even though the construction contract provides that the "free" transportation of supplies for Canal Company projects does not include "the Isthmian handling charge which will be for the account of the contractor, at the rates stated in the official PCC tariff schedule."⁹ And in this analysis we may assume that the contractor did not know of, but was charged with knowledge of, the local tariff.

Several things lead to this conclusion. First, whether it amounts to supersession or something less, the blading's parenthetical phrase of the Clause Paramount for this through shipment limits departures from COGSA to "(except as may be otherwise specifically provided herein)" (Clause 1, note 4, supra). It does not say "except as provided for herein or in other tariffs of carrier."

Even more important, considering that exculpatory terms of tariffs or contracts of carriage are to be narrowly construed,¹⁰ the provision in the construction contract imposing the costs for port handling on the contractor "at the rates stated in the * * * tariff schedule," (GC-13(f)(1), note 3, supra), does not undertake to impose on this sort of contractor-shipper any burden to do anything except pay the handling charges. There is, for example, no provision in that contract, or in Part One of the Tariff, for declaring value. And this record is completely silent either as to the work-a-day system set up for such action or, even more significant, why a shipper under a through bill of lading should take any action except—and the except is narrowly circumscribed—pay when billed.

And that this ambiguous-amphibious activity's pudding's proof is in the eating, is made clear by the manner in which these handling charges for Canal Company project shipments were handled. On receipt of the bills of lading in the Canal Zone they are sent routinely by the Terminals Division to the Budget and Accounting Division, who in turn sends them to the Construction Division to determine whether that shipment is entitled to free freight. Only then will the shipment be ordered to be released and the consignee notified.¹¹ Handling charges are ordinarily deducted from progress payments and the consignee in such cases in this way pays the amount billed it by Canal Company subsequent to the cargo having been unloaded because the tariff charges are continually being changed.¹¹

There is, thus, (i) no occasion for the consignee to give any instructions to Canal Company for it to effect the agreed shipment to Balboa, (ii) no means prescribed for making a declaration, (iii) no real means of knowing what the handling charges are until billed, and hence (iv) no means of knowing what the "premium" charge might be under tariff § 162.39 for excess of $500 valuation.

For a through bill of lading shipment of goods being carried "free" by Canal Company to destination, if the shipper-consignee is required to declare excess value at all—and the if is a big one because of the peculiar Clause Paramount —it is entitled to do so within a reasonable time after it is billed for the handling charges. That this may ostensibly give shipper-consignee a right after the fact to assure unlimited liability for carrier caused loss is just the result of this structure and its operation in which there is no real relationship between limited and unlimited liability.¹²

The scheme ostensibly affording a choice between limited and unlimited liability was enshrouded in such doubt as to its legal application and an effective means by which to exercise it¹³ in the course of a continuous movement of the freight by Canal Company from New Orleans to the point of ultimate destination, that it cannot be invoked for failure to declare—once the goods were at slings end at Cristobal—an excess value or pay what months later is computed to be $6.88.

This approach minimizes many problems. Naturally, Canal Company stresses the legislatively binding character of a validly promulgated tariff. As an abstract proposition, of course, a valid tariff controls the rights and liabilities of both shipper and carrier with the force of law.¹⁴ But "a tariff is not an abstraction." United States v. Western Pacific Railroad Co., 1956, 352 U.S. 59, 66, 77 S.Ct. 161, 166, 1 L.Ed.2d 126, 133. We have many times applied this. And the notice of the need for a choice and an effective means for exercising it are essential. "Only by granting its customers a fair opportunity to choose between higher or lower liability by paying a correspondingly greater or lesser charge can a carrier lawfully limit recovery to an amount less than the actual loss sustained." New York, New Haven and Hartford Railroad Co. v. Nothnagle, 1953, 346 U.S. 128, 135, 73 S.Ct. 986, 990, 97 L.Ed. 1500, 1507.¹⁵

Likewise, this approach does not bring into the slightest question the validity of "agreed valuation" clauses with a choice of rates.¹⁶ Nor does it remotely suggest that Canal Company either waived the various provisions or was estopped to assert them merely because shipper-consignee was unaware of them.¹⁷

By the structure, as interpreted by us, and the absence of an effective means of exercising a choice Canal Company cannot cast the burden on shipper-consignee for the failure to declare what it knew,...