Spartus Corp. v. S/S Yafo

• Decision Date: 07 March 1979
• Docket Number: No. 76-1691,76-1691
• Citation: 590 F.2d 1310
• Parties: SPARTUS CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. The S/S YAFO, her engines, tackle, etc., in rem, and Defendant. ZIM ISRAEL NAVIGATION COMPANY, LTD., in personam, Defendant-Third-Party Plaintiff-Appellant, Cross-Appellee, v. LOUISVILLE & NASHVILLE RAILROAD COMPANY, Third-Party Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1310

590 F.2d 1310

SPARTUS CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. The S/S YAFO, her engines, tackle, etc., in rem, and Defendant.

ZIM ISRAEL NAVIGATION COMPANY, LTD., in personam, Defendant-Third-Party Plaintiff-Appellant, Cross-Appellee, v. LOUISVILLE & NASHVILLE RAILROAD COMPANY, Third-Party

Defendant-Appellee.

No. 76-1691.

United States Court of Appeals, Fifth Circuit.

March 7, 1979.

James L. Schupp, Jr., Benjamin W. Yancey, New Orleans, La., for defendant-third party plaintiff-appellant and S/S Yafo.

Brunswick G. Deutsch, New Orleans, La., for Spartus Corp.

Harry McCall, Jr., Gerald D. Wasserman, New Orleans, La., for Louisville & Nashville Railroad Co. Appeals from the United States District Court for the Eastern District of Louisiana.

Before INGRAHAM, GEE and TJOFLAT, Circuit Judges.

TJOFLAT, Circuit Judge:

In the proceedings below, the district court entered judgment in favor of Spartus Corporation (Spartus) against Zim Israel Navigation Company, Ltd. (Zim) in personam and against Zim's vessel, the S/S Yafo, in rem for $83,939.36 in damages sustained to a shipment of clock movements while in transit from Ashod, Israel, to Louisville, Mississippi. On Zim's third-party indemnity claim against the Louisville and Nashville Railroad (L & N), judgment was entered for L & N. A brief recital of the facts and the proceedings in the district court are necessary to point up the issues now before us.

I

Spartus, a division of L.C.A. Corporation, is engaged in the business of manufacturing clocks. At the time of the transaction that gave rise to this litigation its plant was located in Louisville, Mississippi. Spartus's manufacturing process called for it to ship parts from its Louisville plant to Rolis Electric, Ltd. (Rolis), a subsidiary of L.C.A. in Tel Aviv, Israel, for assembly into functional clock movements. These clock movements were then shipped back to Spartus's Louisville plant via the port of New Orleans, Louisiana, where they were installed in clocks.

On April 22, 1974, Rolis delivered a shipment of clock movements, consigned to Spartus, to Zim at the port of Ashod, Israel. The movements had been placed by Rolis in small cartons and sealed by it in a twenty-foot steel container provided by Zim. Upon receipt of the sealed container, Zim issued Rolis a bill of lading ¹ carrying the following description of the cargo received: "1 CONTAINER STC (said to contain) 385 CARTONS ELECTRIC CLOCK MOVEMENTS." Thereafter the container was loaded upon the S/S Yafo for shipment to the destination called for by the bill of lading New Orleans, Louisiana.

About ten days out of Miami, Florida, the Israeli government instructed Zim to direct the S/S Yafo to proceed to Mobile, Alabama, where it was to unload its cargo, take on certain military supplies, and return to Israel. Zim complied, directing the vessel to proceed to Mobile. The S/S Yafo arrived in Mobile on May 24, 1974. The container of clock movements was offloaded, without notice to Spartus, the consignee, and was left on an unsheltered dock until June 6, 1974. On that date, Zim delivered the container to L & N for transshipment to New Orleans. The container remained in L & N's piggyback yard in Mobile until June 10, 1974. The next day it was transported to New Orleans. There the container remained in L & N's custody until June 18, when it was handed over to a truck line for delivery to a local wharf. The container remained on the wharf, exposed to the elements until July 5, 1974. On that date, United States Customs inspectors broke the seal on the container, opened it and found some of the contents to be wet. The container was closed pending a further survey which was eventually conducted when the cargo arrived at Spartus's plant in Louisville. The survey disclosed some holes in the roof of the container, that the cartons inside were wet or water stained, and that the clock movements were rusted and corroded from exposure to fresh water. The parties stipulated that: 1.87 inches of rain fell in Mobile while the container sat on the open docks there; the same amount fell in New Orleans from June 11 to June 18; and from that date to July 5, when the seal was broken by the customs inspectors, the container was exposed to further rainfall.

Spartus subsequently brought this suit against Zim and the S/S Yafo, and Zim impleaded L & N for indemnity. Following a bench trial, the district court concluded that the offloading of the container of clock movements in Mobile constituted an unreasonable deviation, thereby subjecting Zim to liability for damages to Spartus. Despite the deviation, the court held that the $500 per-package limitation on liability provided by section 4 of the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. § 1304(5) (1970), ² was available to the carrier, Zim. The limitation was of no effect, however, because none of the 385 cartons, each of which the court treated as a separate "package," was worth as much as $500. The court rejected Zim's contention that it was absolved of responsibility under the Limitation of Liability Act, 46 U.S.C. §§ 181-189 (1970), ³ because of Rolis's failure to notify it of the true character and value of the clock movements when the initial bill of lading issued in Israel. The court found alternatively (1) that the statute did not embrace clock movements such as these, (2) that the clock movements were sufficiently described on the bill of lading to satisfy the statute and the separate movements were of such little value as to render de minimus the failure of Rolis to state their value, and (3) that the unreasonable deviation precluded the carrier's invocation of the Limitation of Liability Act. On Zim's third-party indemnity claim, the court found that Zim failed to sustain its burden of proving that it delivered the clock movements to L & N in good condition, an essential element of its cause of action.

In this appeal, Zim questions the court's findings with respect to deviation, the $500 COGSA per-package limitation, and the application of the Limitation of Liability Act. Zim also claims error in the trial court's finding that it failed to prove that it delivered the clock movements to L & N in good condition. Spartus has cross appealed, contending that COGSA's $500 per-package limitation is unavailable in a case of unreasonable deviation. We affirm the judgments on both the main suit and the third-party action.

II

The first question we must decide is whether the district court was correct in concluding that the offloading of the cargo container at Mobile constituted an unreasonable deviation. For guidance we look to the general maritime law and to COGSA. The following is a frequently used definition of deviation:

To deviate, lexicographically, means to stray, to wander. As applied in admiralty law, the term "deviation" was originally and generally employed to express the wandering or straying of a vessel from the customary course of the voyage, but in the course of time it has come to mean any variation in the conduct of a ship in the carriage of goods whereby the risk incident to the shipment will be increased, such as carrying the cargo on the deck of the ship contrary to custom and without the consent of the shipper, delay in carrying the goods, Failure to deliver the goods at the port named in the bill of lading and carrying them farther to another port, or bringing them back to the port of original shipment and reshipping them. Such conduct has been held to be a departure from the course of agreed transit and to constitute a "deviation" whereby the goods have been subjected to greater risks, and, when lost or damaged in consequence thereof, clauses of exceptions in bills of lading limiting liability cease to apply.

G. W. Sheldon & Co. v. Hamburg Amerikanische Packetfahrt A.G., 28 F.2d 249, 251 (3d Cir. 1928) (emphasis added) (citations omitted). To determine whether a carrier's deviation for the purpose of unloading cargo (as occurred here, when the S/S Yafo put in to the Port of Mobile) is Unreasonable, we need look no further than to COGSA. It provides, in relevant part,

Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be deemed to be an infringement or breach of this chapter or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom: Provided, however, That if the deviation is for the purpose of loading or Unloading cargo or passengers It shall, prima facie, be regarded as unreasonable.

46 U.S.C. § 1304(4) (1970) (emphasis after "Provided, however," added).

Zim concedes that the diversion of the ship to Mobile for the offloading of its cargo was not for the benefit of Spartus. In fact, the sole reason for the action was Zim's desire to enhance Israeli military preparedness. As Zim's operations manager, who ordered that the voyage be aborted, explained, the decision to divert to Mobile to offload the commercial cargo and take on military cargo (E. g., tanks and personnel carriers) was motivated solely by "moral pressure" and was in no way occasioned by any war-like emergency in Israel. Record, vol. 3, at 92-93. Thus the narrow question is presented: Is it a defense to the prima facie case of unreasonableness created by COGSA to say that the deviation was accomplished for the purpose stated by Zim. We think not.

We start with the premise that Congress, in deciding that a deviation for the purpose of unloading cargo is prima facie unreasonable, must have concluded that it is against the interests of the shipper, who has contracted to have his cargo delivered to its destination in good condition, for the carrier to alter that contract by offloading the cargo elsewhere. Thus, Congress has declared that a shipper can make out a case of unreasonable deviation simply by proving that his cargo was offloaded at a place other than the stipulated destination. Zim has cited...