The opinion of the court was delivered by: WEINFELD
This case is one of first impression involving the $ 500 limitation of liability provision, § 1304(5) of the Carriage of Goods by Sea Act,
46 U.S.C.A. §§ 1300-1315 (hereinafter called the 'Act').
The facts are stipulated. Libelants sue as endorsees of a bill of lading. On October 8, 1948, the Ford Motor Company delivered to respondent as a common carrier twenty packages containing automobiles and automobile parts for carriage on its vessel, the S.S. Flying Clipper, for delivery at Guam to libelants. Although a clean bill of lading was issued thus obligating the shipowner to stow the packages under deck,
the shipment was stowed on the vessel's deck. The respondent concedes that the stowage on deck constituted a 'deviation' in law. Eight cases of automobiles were damaged to the extent of $ 16,794.25. The damage exceeded $ 500 in respect to each of the eight cases containing automobiles. The causal relation between the deviation and the sea water damage is not in dispute.
Notwithstanding the deviation, respondent contends its liability is limited to $ 500 for each of the damaged cases under § 1304(5) of the Act.
The basic question presented is: Does an unjustifiable deviation by a carrier deprive it of the benefit of the $ 500 per package limitation of liability contained in § 1304(5) of the Act with respect to cargo damaged by reason of the deviation? I am persuaded that it does.
Claimant-respondent concedes that prior to the passage of the Act a stowage on deck contrary to the contrary or custom of underdeck stowage was an unreasonable deviation which displaced the bill of lading and thereby deprived the ship of the benefits of any limitation of exemption contained therein.
The underlying rationale of the controlling cases is that an unjustifiable deviation changes the character of the voyage so essentially as to amount to an entirely different venture from that contemplated by the parties. In consequence, it not only vitiates the contract of carriage but also makes the ship or carrier responsible for the cargo as an insurer. Some text-writers prefer the view that since the ship is on a different voyage from that for which the contract was made 'the contract has no application to that voyage.'
The basic rule is set forth in St. Johns N. F. Shipping Corp. v. S.A. Companhia Geral, etc., 263 U.S. 119, 124, 44 S. Ct. 30, 31, 68 L. Ed. 201, as follows:
'By stowing the goods on deck the vessel broke her contract, exposed them to greater risk than had been agreed and thereby directly caused the loss. She accordingly became liable as for a deviation, cannot escape by reason of the relieving clauses inserted in the bill of lading for her benefit, * * * and must account for the value at destination.'
The claimant-respondent urges that the law enunciated in this and other leading authorities has been changed by the Carriage of Goods by Sea Act. In substance, it argues that these cases involved contractual limitation clauses in a bill of lading, not a statutory limit on liability. The conception is that the Brussels Convention -- Hague Rules of 1924, the basis of both the British Carriage of Goods by Sea Act, 1924, and the United States Carriage of Goods by Sea Act, 1936, reflected a compromise between cargo interests and carriers -- a compromise of rights and liabilities; that the limitation provisions were a part of the compromise; that the valuation limitation is, then, controlling under all circumstances and must be rigidly enforced to carry out congressional intent
and the purpose of the signatories to the Convention.
The distinction suggested between contractual and statutory limitation or exemption clauses is more apparent than real. The fundamental character of the bill of lading is not changed by incorporation of the statutory provisions of the Act.
The bill of lading is the contract between the shipper and the carrier.
It defines the rights, duties, exemptions, and limitations of the parties, whether imposed by statute or the result of voluntary agreement. And when there is such a departure from the contract of carriage as to amount to an unjustifiable deviation, the bill of lading and all its terms go.
So, too, the statutory limitation would be vitiated unless the Act specifically keeps it alive.
The carrier presses hard that according to the language of § 1304(5) the limitation of $ 500 per package is applicable 'in any event' and thus liability may never be imposed beyond that amount. It suggests that in the give and take which led to the enactment of the Act, maximum liability was fixed and is controlling 'in any event' except where the shipper declared the value of the goods and paid an increased freight charge. The purpose of the $ 500 limitation in § 1304(5) was to prevent a stipulated value for cargo in a lesser amount and to do away with the then current limits imposed by carriers, usually $ 100 or even a smaller sum.
Except for this change in amount, the provision of the Act did not represent any basic departure from existing law.
Neither the Convention nor the Act contains any provision concerning the legal result of an unjustifiable deviation. There is nothing in the history of the Act to indicate that Congress by fixing the limitation at $ 500 intended to displace the doctrine of unjustifiable deviation which was so firmly entrenched in maritime law. Such a drastic change in the existing law, with its far-reaching consequences in the commercial and financial world would have been expressed in clear and unmistakable terms.
The carrier's argument that the $ 500 limitation of liability is absolute notwithstanding the unreasonable deviation, overlooks a fundamental reason for the rule. A shipper has the right to assume that the carrier will not deviate and thereby subject the cargo to other than the known risks inherent in a normal route or underdeck stowage. The shipper protects himself by insurance commensurate with such calculated risks. But when the carrier deviates and enters upon 'a different venture from that contemplated',
he exposes the cargo to unanticipated and additional risks against which he has not protected himself. The shipper, in effect, has been lulled into a false sense of security by the carrier's actions.
Also to be considered, and a matter of no little importance, is the nature of a clean bill of lading and its extensive use in the financial and commercial trade world.
Much of the carrier's argument for preserving 'in any event' the limitation of liability rests upon a basic misconception of the nature of its breach in stowing the cargo on deck. It attempts to equate unjustifiable deviation with ordinary breaches of obligations under the Act, such as lack of due diligence to make the vessel seaworthy, or properly and carefully to handle, stow, care for, or deliver her cargo and the like.
But mere negligence with regard to stowage or handling of the cargo has never constituted deviation.
Deck stowage where underdeck stowage is required is more than negligence -- it is a deviation with resulting abrogation of the contract. And in my view it is unnecessary to base the voiding of the contract on the ground that it was the result of the carrier's 'gross' violation of its terms; or his 'misconduct';
or that on deck stowage under a clean bill of lading 'would work a fraud';
or that the carrier 'converted' the cargo.
It is sufficient that the carrier's voluntary action in unjustifiably deviating so changed the essence of the agreement as to effect its abrogation.
To uphold the carrier's contention that the limitation of liability is absolute, regardless of a fundamental breach which goes to the very essence of its undertaking, would permit any carrier with recklessness to violate the terms of the bill of lading, knowing that it cannot be called upon to pay more than $ 500 per package. Such a policy, if upheld, would immunize the carrier against the consequences of its own wilful actions at the expense of an innocent party.
In effect, it would result in granting to the carrier exoneration for all damages in excess of $ 500, even in instances where its conduct in changing the essential nature of the contract caused the damages. There is nothing in the history of the Convention or the Act to warrant such a result. Absent clear congressional purpose, this Court is not prepared to interpret the Act so as to permit the carrier to invoke the defense of valuation limitation in cases of unjustifiable deviation.
Counsel for the cargo and shipping interests acknowledge that no American court has passed upon the precise point at issue in this case. However, the carrier groups stress two decisions
involving the effect of deviation upon the one year limitation period within which to commence suit, specified in § 1303(6) of the Act. I do not consider these determinative of the issue presented under § 1304(5) of the Act or controlling precedent, particularly so, since, as counsel point out, a time limitation clause raises other issues. Moreover, Judge Augustus N. Hand, writing for the Court of Appeals, in a reference to the one year provision contained in the English Carriage of Goods by Sea Act, 1924, which like the United States Act, 1936, was based upon the Brussels Convention -- Hague Rules, stated: 'Nothing resembling a deviation has been shown to deprive the carrier of the benefit of the limitation'.
There are other expressions in later cases, dicta to be sure, as well as the views of authorities, which indicate a view that the doctrine of deviation and its nullification of valuation limitation benefits remained unimpaired by the passage of the Act. In a recent case
involving § 1304(5) and a $ 500 limitation provision, the Court of Appeals for this circuit significantly considered the libelant's contention that there was 'a deviation which ...