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July 28, 1972

M/V KULMERLAND, her engines, etc., and Hamburg-Amerika Linie, Defendant. HAPAG/LLOYD A.G. (sued herein as Hamburg-Amerika Linie), Defendant and Third-Party Plaintiff, v. PIONEER TERMINAL CORPORATION et al., Third-Party Defendants

Tyler, District Judge.

The opinion of the court was delivered by: TYLER

TYLER, District Judge.

This is a suit in admiralty *fn1" to recover damages for the loss of 350 adding machines transported by defendant Hapag/Lloyd A.G. (hereinafter "Lloyd") vessel, the SS KULMERLAND, from Hamburg to the Port of New York. As will be seen, the known facts of the shipment as adduced at trial are relatively simple and, in substantial part, typical of cargo losses in modern times within the Port of New York. Nevertheless, as will also be seen, this case raises, among others, a crucial package limitation issue which can be said to amount to an extension of the similar question discussed and ruled upon in Leather's Best, Inc. v. S.S. Mormaclynx, 313 F. Supp 1373 (E.D.N.Y., 1970), affirmed in part, reversed in part, 451 F.2d 800 (2d Cir. 1971).


 According to the complaint and the evidence, the plaintiff ordered and paid for a quantity of adding machines manufactured and shipped by rail and ocean carrier by Willi Feiler, G.m.b.H. ("Feiler"), a manufacturing concern in Berlin, West Germany. Plaintiff is a New York corporation and, of course, the ultimate consignee and owner of the cargo which is the subject of this dispute. Defendant and third-party plaintiff, Hapag/Lloyd A.G. ("Lloyd"), is a West German corporation which is the successor to the well-known shipping company, Hamburg-Amerika Linie.

 At all times here relevant, third-party defendant Pioneer Terminal Corporation ("Pioneer") was a New York corporation which had a contract with Lloyd to provide terminal and stevedoring services and facilities in connection with loading and discharging vessels of Lloyd in the Port of New York. Pioneer, in turn, had a subcontract with third-party defendant International Terminal Operating Co., Inc. ("ITO"), by the terms of which ITO agreed to furnish certain terminal and stevedoring services and facilities at the now closed terminal at the foot of 17th Street in Brooklyn. Finally, third-party defendant Sullivan Security Services, Inc. ("Sullivan"), also a New York corporation, had a contractual arrangement with ITO to guard and protect cargo at the 17th Street pier complex.


 Pursuant to order of plaintiff, Feiler, on December 1, 1967, in Berlin, delivered to a truck operated by Kuhne & Nagel, an international freight forwarder acting as Feiler's agent, 350 adding machines. Each machine was within a corrugated cardboard box. In turn, all 350 boxes were loaded by Kuhne & Nagel at its West Berlin warehouse into a single container for railroad transportation from West Berlin to Hamburg and delivery there to Lloyd for ocean transportation.

 At the Kuhne & Nagel warehouse, the separate cartons of adding machines were counted and checked upon loading into the container. The container bore the number 7255589 ("the container" or "container 89"). It was loaded into a railway car, the doors of which were sealed. Each carton within the container weighed approximately 12 1/4 pounds; thus, the total container weighed in excess of two tons. The container left by rail from Kuhne & Nagel's Berlin warehouse on December 5, 1967. The doors of the container itself were sealed; otherwise it would not have been accepted by the railway. Parenthetically, but of some importance to note, two other containers each holding 350 adding machines were shipped out by rail at the same time. The three containers, including container 89, which is the subject of this suit, arrived at the Port of Hamburg and received the seals of that port. All three containers were loaded aboard Lloyd's vessel, SS KULMERLAND. At the time of loading, container 89 was checked at least twice for its outward appearance and the condition of its seal. The container was received aboard the vessel without exception being noted. The onboard bill of lading, dated December 9, 1967 in Hamburg, was clean and, of course, acknowledged receipt of container 89. The bill provided for transportation of the container to the Port of New York where it was to be delivered to plaintiff's customs' broker. The hatches of the KULMERLAND were closed and locked during the voyage from Hamburg to New York, and it is not contested that container 89 was stowed below decks in one of the hatches.

 The KULMERLAND arrived and started discharging cargo in New York on December 22 and finished on December 30, 1967. There is evidence that container 89 was out-turned on December 30 in apparent good order and condition. Interestingly, the tally sheets covering discharge of the KULMERLAND contain notations of the absence or breaking of seals on several other containers but not so in regard to container 89. There is also evidence that after it came off the KULMERLAND, container 89 was immediately placed in an open (i.e. out-of-doors) "farm area" within the 17th Street pier complex. Almost two weeks later, on January 12, 1968, a watchman employed by Sullivan, while making his rounds, saw that container 89 was broken open with its contents missing. Sullivan's guard immediately notified his office of what he had found, and reports were made to appropriate law enforcement agencies within the Port of New York. At about the same time, investigation revealed that the two other containers of adding machines consigned to plaintiff were intact and containing their full quotas of 350 cartons per container. There is no substantial dispute but that in the area where container 89 was stowed, there was no guard assigned or stationed, either on a full-time basis or on a regularly scheduled occasional basis.

 Parenthetically, the 17th Street terminal has become familiar ground to at least a number of judges of this court in recent years. Although this complex is now closed, during the period relevant to this dispute it was a rather large and busy terminal covering approximately three city blocks, possessing four piers for servicing ocean carriers and including a number of warehouses, other buildings and open or "farm" areas. Although the pier complex was sealed off by fencing, mostly chain-link but partly wood, there were four gates. Two of these gates were either boarded up or locked at all times; the third gate was open on a 24 hour basis and guarded by a gateman or guard at all times. The fourth gate was open from 0800 to 1600 each day. While the latter gate was open, it was also in charge of a gatemen or guard.

 In December, 1967 and January, 1968, only one guard was assigned to patrol the entire terminal, including the piers, the open or farm areas and the warehouses. *fn2" Thus, it is not surprising that the one Sullivan guard on duty could not and did not inspect specific cargo pieces or containers to ascertain whether or not they were sealed and unbroken. Indeed, the chief operating officer of Sullivan testified that in his opinion the security personnel assigned within the pier complex at the relevant time in question were inadequate. Shortly before the disappearance of plaintiff's container of adding machines, in fact, Sullivan had advised ITO of its view that there were inadequate security measures at the pier complex. *fn3"

 At trial, plaintiff offered evidence of replacement costs of the 350 machines contained in container 89 to be the sum of $28,959.61. Plaintiff also produced evidence indicating, alternatively, that the reasonable market value at New York of the 350 machines would come to $29,400.00. On the other side of the coin, Lloyd has stoutly argued that under the facts of this case and because of the undeniable application of the provisions of the United States Carriage of Goods at Sea Act, 46 U.S.C. § 1300 et seq. ("COGSA"), the familiar "package limitation" of $500 must apply to the container in the event that liability is determined in favor of plaintiff. 46 U.S.C. § 1304(5). Lloyd also argues that plaintiff has failed to prove that the contents of container 89 were lost or stolen during the period of the ocean voyage or when the container was stored at the terminal or pier complex at 17th Street.


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