Waterman Steamship Corporation v. Gay Cottons

• Decision Date: 05 August 1969
• Docket Number: No. 21767.,21767.
• Citation: 414 F.2d 724
• Parties: WATERMAN STEAMSHIP CORPORATION et al., Appellant, v. GAY COTTONS, United States of America and Shalom Baby Wear, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

414 F.2d 724 (1969)

WATERMAN STEAMSHIP CORPORATION et al., Appellant, v. GAY COTTONS, United States of America and Shalom Baby Wear, Appellees.

No. 21767.

United States Court of Appeals Ninth Circuit.

April 24, 1969.

As Amended on Rehearing August 5, 1969.

COPYRIGHT MATERIAL OMITTED

Don A. Proudfott, Jr. (argued), and Leo J. Vander Lans (argued), of Graham & James, Long Beach, Cal., for appellant.

Philip K. Verleger (argued), and Jack D. Fudge, of McCutchen, Black, Verleger & Shea, Los Angeles, Cal., for appellee, Gay Cottons, Inc.

John F. Meadows, San Francisco, Cal., Edwind L. Weisl, Jr., Asst. Atty. Gen., Washington, D. C., Bigham, Englar, Jones & Houston, New York City, Fletcher & Rauch, Los Angeles, Cal., for appellees.

Before JERTBERG and DUNIWAY, Circuit Judges, and TAYLOR, District Judge^*.

DUNIWAY, Circuit Judge:

On February 7, 1962, the S.S. CHICKASAW ran aground on Santa Rosa Island, off the coast of Southern California. The island is 40 miles long and 400 feet high. The ship had left Yokohama for Los Angeles on January 27, 1962. No celestial fixes had been obtained after noon on February 5, because of stormy weather. The crew took several fixes with the radio direction finder, which had no recent compensation card, but obtained "wildly divergent" results. The vessel's mechanical sounding device had been pried off the deck in Japan and sold for scrap. The fathometer was not used because Third Mate Jensen thought it was inoperative. He had last tried to use it while the ship was on Japan's Inland Sea on December 25, 1961, when he obtained red flashes all around the dial. He had told the master, Capt. Patronas, that the fathometer was inoperable, but the master did not have it checked at the next port. And the radar was broken, having stopped operating just before the ship's arrival in Japan. It had not been fixed because the repair company in Yokohama could not obtain the necessary part in Japan.

The stranding resulted in total loss of the vessel and substantial loss of cargo. Waterman Steamship Corp., her owner, petitioned for complete exoneration of liability under the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. § 1300 et seq.,¹ or alternatively, for limitation of liability to the amount of its limitation fund, about $250,000, under the Limitation of Liability Act, 46 U.S.C. § 183(a).² The cargo is claimed to be worth about two million dollars. Determination of the actual damages has been deferred until the question of liability has been resolved.

The District Court entered findings of fact and conclusions of law denying both exoneration and limitation. The court also filed a memorandum opinion which is reported at 265 F.Supp. 595, 1966 A.M.C. 2219. Waterman has appealed pursuant to 28 U.S.C. § 1292(a) (3). See Republic of France v. United States, 5 Cir., 1961, 290 F.2d 395, 397. We affirm.

Although there was substantial evidence that the vessel was unseaworthy because much of its navigational equipment was in poor shape and had not been inspected recently, the District Court rested its denial of exoneration and limitation solely on the ground that Capt. Patronas was negligent in failing to check the fathometer after Jensen had told him it was inoperative, and that Capt. Patronas' negligence was imputed to Waterman because he had been delegated entire managerial responsibility over repairs to the vessel in the Far East. The court specifically rejected findings proposed by appellees³ which would have found "direct fault" by Waterman because of its failure to inspect and maintain the equipment, on the ground that such findings were beyond the scope of its memorandum decision.

1. The use of Jensen's deposition.

Waterman contends that the district court's conclusion was based primarily on Jensen's deposition, which never should have been admitted. The deposition was taken for less than a day when it was postponed by mutual consent of all parties because Jensen complained of feeling ill. Before the deposition could be resumed, and before appellant conducted any cross-examination at all, Jensen died of a heart attack.

Waterman argues that the lack of cross-examination rendered the deposition inadmissible. It contends that it had no opportunity to ask Jensen about his knowledge that the flashing condition which he noted on the fathometer might have been caused by other factors.⁴ However, various experts did testify at the trial that the flashing phenomenon could have been caused by interference from the ship itself, from another ship, from a school of fish, or even from sea turbulence. Besides, it was never contradicted that Jensen did actually think that the fathometer was inoperative. He made an entry in the log to that effect, and Capt. Patronas admitted that Jensen had told him it was not working. Whether or not the fathometer was really in working order was of little consequence; Jensen in fact thought it did not work, and Capt. Patronas did nothing to change Jensen's opinion. Thus, appellant has not shown that cross-examination would have helped it materially. Under these circumstances, the District Court did not err in admitting the deposition,⁵ especially since this case was tried to the court and not a jury.⁶

2. Denial of exoneration under COGSA.

The District Court was unquestionably correct in denying exoneration because of Capt. Patronas' negligence in failing to check the fathometer. Waterman, however, contends that it was entitled to exoneration at least as to all cargo loaded before December 25, 1962, when Capt. Patronas negligently failed to have the fathometer checked. Waterman argues that exoneration is denied under COGSA for failure to exercise due diligence to make a ship seaworthy only where such failure occurs before or at the beginning of a voyage, and that Capt. Patronas' negligence occurred after the beginning of the voyage, as regards the cargo which had already been loaded.⁷ Regardless of the merits of this contention, Waterman is not entitled to such exoneration because it did not raise the point below.⁸ Furthermore, Waterman actually invited the error (if it be error) by drafting the very phrase in the findings of fact of which it now complains.⁹

3. Limitation of liability — negligence of the Captain.

Under COGSA, 46 U.S.C. § 1304, the lack of due diligence of any employee which occurs before or at the beginning of a voyage and results in unseaworthiness is sufficient to preclude complete exoneration of liability. Under the Limitation of Liability Act, 46 U.S.C. § 183 (a), however, a shipowner is permitted to limit its liability to the value of its ship, plus freight charges, if it can prove that the lack of due diligence to make seaworthy was not within its "privity or knowledge."¹⁰

But appellees contend that, because the owner's duty to make a vessel seaworthy is nondelegable, any negligence which results in unseaworthiness is presumed as a matter of law to be within the privity and knowledge of the owner. They rely on statements to that effect in Federazione Italiana Dei Corsorzi Agrari v. Mandask Compania de Vapores, S.A. (THE PERAMA), 2 Cir., 1968, 388 F.2d 434, 439-440, in States S.S. Co. v. United States (THE PENNSYLVANIA), 9 Cir., 1958, 259 F.2d 458, 474, and in Gilmore & Black, Admiralty 696, 701-02 (2d ed. 1957).¹¹ The Perama language, however, is dictum. The court had found that the lack of due diligence was attributable to employees who were "sufficiently high in the managerial hierarchy of the appellant so that their general and detailed knowledge and their close privity to the repair project was imputed to the corporation." 388 F.2d at 439 n. 6. The Perama court cited Gilmore & Black, States S.S. Co., supra, and W. R. Grace & Co. v. Charleston Lighterage & Transfer Co. (THE ONE LIGHTER), 4 Cir., 1952, 193 F.2d 539. The latter case involved an old rotting barge which had not been repaired or properly inspected for a number of years. The court in Perama ignored several of its own recent cases which recognize that COGSA has different standards from those applicable under the Limitation Act.¹²

The States Steamship language was also dictum. The court had found that the negligence was attributable to one Vallet, a "port engineer" who was in charge of maintenance and repair of all the owner's vessels. On a petition for rehearing, we emphasized that we were denying limitation because the lack of due diligence was charged to managing officers of the corporation. We said that we were not holding that "in any case where the Steamship Company fails to use due diligence to make the vessel seaworthy at the inception of her voyage, limitation must be denied." 259 F.2d at 471-472. See Avera v. Florida Towing Co. (THE EILEEN ROSS), 5 Cir., 1963, 322 F.2d 155, 163 n. 13, where the court, in discussing this circuit's opinion in Admiral Towing Co. v. Woolen (THE COMPANION), 9 Cir., 1961, 290 F.2d 641, 646-649, said "The 9th Circuit was especially careful not to adopt the broad view suggested in Gilmore & Black, Admiralty, § 10-24, pp. 701-704 (1957), that privity and knowledge for a corporate shipowner is equated with non-delegable duties. See 290 F.2d 641 at 648, and note 6, p. 649."

The Supreme Court, while discussing the Fire Statute, 46 U.S.C. § 182, in Earle & Stoddart v. Ellerman's Wilson Line, Ltd. (THE GALILEO), 1932, 287 U.S. 420, 427, 53 S.Ct. 200, 201, 77 L.Ed. 403, said, "The courts have been careful not to thwart the purpose of the fire statute by interpreting as `neglect' in the statutory phrase `design or neglect of such owner' of the owners the breach of what in other connections is held to be a nondelegable duty."¹³

Notwithstanding the conclusion of Gilmore & Black, we have found no case which has denied limitation of liability because of the negligence of a non-managerial employee. On the contrary, all cases denying limitation of liability to a corporate shipowner have emphasized that the negligence or lack of due diligence to make...