United States v. Farr Sugar Corp.

• Decision Date: 31 August 1951
• Docket Number: No. 252,Docket 21990.,252
• Citation: 191 F.2d 370
• Parties: UNITED STATES v. FARR SUGAR CORP. et al.
• Court: U.S. Court of Appeals — Second Circuit

191 F.2d 370 (1951)

UNITED STATES v. FARR SUGAR CORP. et al.

No. 252, Docket 21990.

United States Court of Appeals Second Circuit.

Argued May 7, 1951.

Decided August 31, 1951.

Leonard J. Matteson, of New York City (Bigham, Englar, Jones & Houston, Oscar R. Houston and Richard F. Shaw, all of New York City, on the brief), for appellants Farr Sugar Corporation and American Spirits Inc.

Roscoe H. Hupper, of New York City (Irving H. Saypol, U. S. Atty., Burlingham, Veeder, Clark & Hupper, and Benjamin E. Haller, all of New York City, on the brief), for the United States, appellee.

Cletus Keating, of New York City (Kirlin, Campbell & Keating, Edwin S. Murphy, and Louis Gusmano, all of New York City, on the brief), for Belgian Overseas Transport S. A., claimant-libellant.

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

CLARK, Circuit Judge.

This appeal presents only a single legal issue, but a vastly important one in its effect on seagoing commerce and the carriage of goods by ships. It is the validity of the "Both-to-Blame" collision clause now commonly inserted in ocean carriers' bills of lading. As is now well known, federal legislation has relieved shipping of the ancient insurer's liability toward cargo and even of its responsibility for negligent navigation; but Supreme Court decisions have held that cargo may recover in full against a non-carrying ship negligently in collision with its carrier, and that the non-carrier may recover in part, under the rule of divided damages, from the also negligent carrier. To correct this asserted "anomaly" the shipowners devised the clause in question, which requires the cargo to return to its carrier the amounts thus "received indirectly." Cargo owners maintain that such a provision violates both the longstanding admiralty and common-law prohibitions against carrier limitations of liability and also specific prohibitions of the federal statutes; while shipowners contend that the clause is in aid of the public policy expressed in the legislation, and merely corrects a manifest paradox.

Such is the background of this case, which arose specifically when the S. S. Nathaniel Bacon, owned by the United States, collided in New York Harbor on November 24, 1942, with the M. V. Esso Belgium, owned by Belgian Overseas Transport, S. A. Both the vessels and the cargo, which was aboard the "Nathaniel Bacon," thereby sustained damage. After the shipowners instituted libels, cargo owners were impleaded in one; and, in the other, insurance companies which had paid for the cargo losses intervened. The parties have stipulated that both vessels were at fault, and that the damage should be divided here one-third against the United States as owner of the "Nathaniel Bacon" and two-thirds against the "Esso Belgium's" owner. The libels were consolidated and the only matter remaining in dispute, before the entry of an interlocutory decree, was the claim for indemnity made by the United States against the cargo owners under the "Both-to-Blame" clause in the bills of lading.¹ The district court held the clause valid, 90 F.Supp. 836, and its interlocutory decree was therefore framed to provide for ultimate indemnity to the United States of any amounts decreed in favor of cargo owners from the "Esso Belgium" and in turn recovered by the latter from the United States. From this decree the cargo owners have appealed.

Quite probably a court has no more delicate problem placed before it than that of deciding whether to fill in an asserted gap in remedial legislation. Surely a court is under some obligation to see that hardwon reforms are workable as the legislature has intended, or, perhaps, would have intended had the specific problem been foreseen. On the other hand, since so much of legislative change is a product of compromise, of the ameliorative and abrasive effects of various pressures, care must be taken lest what is lost in the legislative halls be granted by courts in the guise of "interpretation." No general guide can be stated; it is always a question of how much and how far. Here Judge Medina in the court below was persuaded that an undesired gap existed and ought to be closed — or rather that the shipowners should not be forbidden to close it. There is no doubt that he has stated a persuasive case demonstrating how, under existing law in the absence of the clause, the shippers may recover 100 per cent of their loss when they can trace it back to two negligent navigators rather than simply to one; and he finds a useful analogy in the accepted validity of the "Jason clause" with respect to general average, hereinafter discussed. The question is obviously one of difficulty and no sure answer can be expected until the Supreme Court has passed upon the matter. But on balance we think the decision goes too far; it allows the carriers to be legislators beyond present justification.

The able arguments in this case went into details as to the background and specific content of the legislative enactments. These we shall examine. But before we do so, we may state certain general conclusions. First, the correction of the "anomaly" must often be at most a rough and perhaps uncertain approximation of justice. The formal necessity of three successive suits pressed to conclusion — except as consolidation may somewhat lessen the duplication — makes for uncertainty at the outset; jurisdiction may not be freely obtainable in each instance, and the suits, for lack of legal right or perhaps inclination or determination, may stop before justice is fully assuaged. Then the noncarrier may be in a position to seek a limitation of its liability and may choose to do so. This can lead to various strange situations where advantages and disadvantages to shipper and carrier may turn upon a third party's legal position or choice as to such limitation.² Moreover, the American rule of divided, rather than proportionate, damages may seem as unfair in this connection as it has in others; had the parties not stipulated in our present case, we might well have had a situation where the cargo owners found themselves cut down to half recovery, although one navigator, on the parties' own premise, was twice as negligent as the other. Of course rough justice may be better than none; on the other hand, the role of deus ex machina is not lightly to be assumed by one who lacks official standing for the role.

Second, the prohibition against special contracts limiting liability is one of great strength in our law and survives all but definite and clear restrictions or limitations upon it authorized by the Congress itself. This we point out in some detail below.

Third, the clause in question patently overturns settled principles of our law which have long been the subject of discussion in learned articles and treatises, in the halls of Congress, and in conferences and conventions with other countries. Two such settled principles are the particular subject of sustained and vigorous attack by the shipowners here, as their position necessarily demands; namely, the rule allowing cargo to recover in solido for its full damage against the negligent non-carrier, and the rule in turn allowing the non-carrier to include sums so paid cargo as part of its damage in seeking divided damages against the negligent carrier. These rules, it is true, were expounded by the Supreme Court rather than set by Act of Congress; but they have been well settled for more than half a century, have acquired staunch support, and have survived severe attack aimed at legislative change. The shipowners assert that the clause in question corrects an unfortunate rule peculiar to the United States; as the "Esso Belgium's" brief puts it: "The Both-to-Blame Clause accomplishes, by agreement, in the United States, a somewhat similar distribution of cargo loss which is sic accomplished by the Collision Convention of 1910 in practically every other maritime country of the world."³ This appears, on its face at least, to be a powerful argument in favor of change in the American rule; but the greater the stress upon this argument, the more surely would it seem to follow that correction is for Congress rather than the courts.

One other fact requires special note. The shipowners stress the consensual nature of the clause, arguing that a bill of lading is but a contract. But that is so at most in name only; the clause, as we are told, is now in practically all bills of lading issued by steamship companies doing business to and from the United States. Obviously the individual shipper has no opportunity to repudiate the document agreed upon by the trade, even if he has actually examined it and all of its twenty-eight lengthy paragraphs, of which this clause is No. 9. This lack of equality of bargaining power has long been recognized in our law; and stipulations for unreasonable exemption of the carrier have not been allowed to stand. Liverpool & G. W. Steam Co. v. Phenix Ins. Co., 129 U.S. 397, 441, 9 S.Ct. 469, 32 L.Ed. 788; Inman v. South Carolina R. Co., 129 U.S. 128, 139, 9 S.Ct. 249, 32 L.Ed. 612; Sante Fé, P. & P. R. Co. v. Grant Bros. Const. Co., 228 U.S. 177, 184, 185, 33 S.Ct. 474, 57 L.Ed. 787. Hence so definite a relinquishment of what the law gives the cargo as is found here can hardly be found reasonable without direct authorization of law. Actually the shippers, through official bodies, appear to have registered their opposition where they could and successfully at that, viz., in the halls of legislation.⁴

We now turn directly to the legislative background. Prior to the passage of the Harter Act in 1893, 46 U.S.C.A. § 190 et seq., it was said: "By the settled law, in the absence of some valid agreement to the contrary, the owner of a general ship, carrying goods for hire, whether employed in internal, in coasting, or in foreign commerce, is a common carrier, with the liability of an insurer against all losses, except only from such irresistible...