THE CARSO

• Decision Date: 17 July 1930
• Parties: THE CARSO (five cases).
• Court: U.S. District Court — Southern District of New York

43 F.2d 736 (1930)

THE CARSO (five cases).

District Court, S. D. New York.

July 17, 1930.

Single & Single, of New York City (Gregory S. Rivkins, of New York City, of counsel), for libelants, Mollinelli, Giannusa & Rao, Inc., et al.

Harry D. Thirkield, of New York City, for libelant Kurtz.

Loomis & Ruebush, of New York City (Homer L. Loomis, of New York City, of counsel), for the Carso and owner.

WOOLSEY, District Judge.

My decision in these cases is for the libelants.

I. The five cases are similar in their facts and were tried together.

The libels are all based on contracts of carriage arising from the shipment of cases of cheese on the steamship Carso at Naples in September and October, 1926, and the issuance of bills of lading by the respondent therefor agreeing to transport the several shipments from Naples to New York.

Seventeen of the bills of lading here involved were straight bills of lading with named consignees providing for delivery to them or their assigns; three were order bills of lading. For the reasons hereinafter set forth, however, I think this difference is immaterial.

Eight of the bills of lading were dated September 29, 1926, and twelve were dated October 2, 1926. Some of the bills of lading were dated before the goods got on shipboard, presumably to enable the shippers to comply with their sales contracts. Owing to the view I take of these cases it is, however, unnecessary for me to discuss that question.

The cheese originated in the Island of Sardinia, and was transported thence to Naples by a coastwise steamer, put on board lighters at Naples, and, taken from the lighters, was shipped by the sellers on board the Carso.

Each bill of lading contains the recital that the cases of cheese involved were "shipped in apparent good order and condition."

The cases of cheese were purchased through a commodity broker, Henry Scaramelli-Bianco-Capolino Corporation, which had an office in New York and also an office in Naples.

The contracts of sale, after naming the buyer and seller and the brand and amount of cheese, provide the terms of the sales material here as follows:

"F. O. B. — Naples

"Shipment — to New York. If possible 3 shipments of 25cs. each; otherwise 2 shipments, beginning and end of September 1926.

"Terms — Drafts at 60 days from date of B/L, subject to ruling of the Italian Treasury Dep. referring to omission of time drafts in lire, or sight letter of credit lire at the option of the buyer.

"Insurance — Covered by the buyer

"Special Instructions: Shipment via New York.

"Conditions — The responsibility of the seller, ceases after obtaining clean receipt from carrier, subject to rules and conditions of the bill of lading issued by said carrier. * * *"

The contracts of sale were similar, for present purposes, to the contract involved in the case of J. Aron & Co. v. Steamship Kerlew (D. C.) 43 F.(2d) 732, 1924 A. M. C. 560, 563, hereinafter discussed, where the sugar involved was bought f. o. b. Hamburg.

The shipowner took depositions in an attempt to show that the damage suffered by the cheese occurred on shipboard, and was due to causes within some of the exceptions of the bills of lading. The depositions, however, did not bring the damage within any of the bill of lading exceptions. All the boat notes were produced during the taking of the depositions and all but two of them show that the cases were in bad condition when received. Some of the cases were noted as "stained by contents," others as "flimsy," and others as "old and recoopered," and some as "broken."

Furthermore, the evidence taken on the trial, including the expert evidence, points conclusively to damage which must have occurred before shipment.

It has not been proved in this case, however, although it was suggested, that the shippers gave the steamship company letters of indemnity, and in that respect the case differs from some of the other reported cases.

The evidence satisfies me, and I find, that the damage was what is known as "country damage" and occurred before the cheese was shipped at Naples. I am also satisfied and find that the cases of cheese, with the slight exception of those covered by the two boat notes above mentioned, were not "in apparent good order and condition" at the time of the shipment and, consequently, that the receipt in the bills of lading for those cases as "in apparent good order and condition" was not a true statement of their condition as known both to the seller-shipper and to the shipowner or its agents at the time of shipment.

When they accepted the drafts provided for in the sales contracts, the buyer-consignees, libelants here, did not know that the representations as to condition were false, but relied on the fact that clean bills of lading were presented to them with the drafts and accepted the drafts on that footing. When the drafts were paid, on their due dates, however, the damage was known to the consignees.

The question to be determined here, therefore, is:

Whether, if the shipowner gives a clean bill of lading for cargo which it knows is not in good condition, and the buyer-consignees, acting in reliance on that bill of lading and without knowledge of the condition of the cargo, accept drafts to cover the purchase price of the cargo, the buyer-consignees are entitled to recover in an action against the steamship and its owner when they have paid the drafts after learning of the damage.

II. Summarized, the situation is that the libelants, by showing a receipt by the shipowner for the goods as in apparent good order and condition and by proving a delivery in damaged condition, have made out a prima facie case for a recovery of the damages both in rem against the steamship and in personam against its owners.

From this case the shipowner seeks to escape thus:

First, it claims that the damage fell within the exceptions of the bills of lading. In this it failed, and that disposes of the cases of cheese covered by the two boat notes above mentioned which did not show damage.

Second, it claims that the goods were not damaged whilst in its custody. It is precluded from establishing this defense by the doctrine of estoppel hereinafter discussed.

Third, it says that there is not any jurisdiction in admiralty if the case turns on false representations. The answer to this is that the suits are on maritime contracts and the only effect of the misrepresentations is to preclude a defense, not to found a cause of action.

Lastly, it says the libelants have not complied with the notice clause. It fails here under the authorities hereinafter mentioned which control my decision, and also because, for reasons to be given, the notice of claim clause in these bills is unreasonable in its initial provision which is an integral part of it.

III. The application of the doctrine of estoppel to bills of lading and warehouse receipts in cases where courts have found that injustice was being perpetrated by false statements contained in them is not very ancient.

In Bradstreet v. Heran, 2 Blatchf. 116, 3 Fed. Cas. page 1183, No. 1792a, Mr. Justice Nelson, sitting on circuit here, dealt with the doctrine in a case of "country damage" to cotton which had developed and showed itself on the shipment of the cotton at New Orleans.

In affirming the decree of the District Court allowing an offset for the damage to the cotton against a claim for freight, Mr. Justice Nelson, in connection apparently with a straight bill of lading, said at page 1184:

"What is termed `country damage' arises, in many instances, out of the condition of the cotton at the time it is baled, being wet, or not properly fitted for transportation, and is invisible to the eye on inspection at the time of shipment. But, in this case, the weight of the evidence shows satisfactorily that the effects of the `country damage' upon the external state of the cotton were developed at New Orleans before the cargo was put on board, and that the master was negligent and inattentive to its shipping order in this respect or he would not have accepted it as `in good order and well-conditioned.' * * * "The consignees made large advances upon the cotton, on the faith of the representation in the bill of lading that it was shipped in good order. They were justified in doing so, and their security should not be lessened or impaired by permitting the master to contradict his own representation in that instrument. It might be otherwise if the question arose between the master and the owner of the cotton."

The next case in order of time seems to have been Sears v. Wingate, 85 Mass. (3 Allen) 103 (1861), which involved a straight bill of lading, the relevant parts of which read as follows: "Shipped in good order, by N. Sturtevant & Co., in and upon the schooner called the Sylvanus Allen, of Dennis, whereof Grafton Sears, Jr. is master, now lying in the River * * * of Philadelphia, and bound for Boston, Mass., Four Hundred and Three Tons Peach Mountain Coal (as per margin) which I promise to deliver in like good order at the aforesaid port of Boston (the dangers of the sea only excepted), unto Wm. A. Wingate, or to his assigns, he or they paying freight for the same, at the rate of 1 86/100 dollars per ton."

On August 2, 1859, the defendant Wingate negotiated for a cargo of coal from Sturtevant & Company, of Philadelphia, who shipped it to him on board the plaintiff's vessel. The bill of lading was dated August 5th and was received by Wingate on August 8th, when he paid for the 403 tons of coal by a four months note.

The captain did not weigh the coal in Philadelphia but delivered all the coal he had on board. When the vessel arrived at Boston on August 18th, it was found that the coal consisted of slightly upwards of 391 tons.

The defendant, having pledged his credit to his seller in Philadelphia for 403 tons, deducted the shortage in the tonnage from the freight and paid the freight less the amount of such shortage. The...