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ILIGAN INTL. CORP. v. S.S. JOHN WEYERHAEUSER

March 14, 1974

ILIGAN INTERNATIONAL CORP. and Iligan Integrated Steel Mills, Inc., Plaintiffs,
v.
S.S. JOHN WEYERHAEUSER, her engines, boilers, etc., et al., Defendants


Robert J. Ward, District Judge.


The opinion of the court was delivered by: WARD

ROBERT J. WARD, District Judge.

In this admiralty action, Iligan Integrated Steel Mills, Inc. *fn1" ("Iligan") seeks to recover approximately $2,200,000 representing the full amount of damage to cargo sustained during a voyage to Iligan City, Republic of the Philippines, in December, 1966. *fn2"

 In July of 1966 Iligan negotiated a contract with defendant New York Navigation Company, Inc. ("New York Navigation") by which the latter agreed to provide ships for the transport of machinery and parts for a steel mill which Iligan was then building in the Philippines. New York Navigation in turn signed a charter party with defendant Weyerhaeuser Company ("Weyerhaeuser") using the New York Produce Exchange Time Charter form, with certain modifications and fifteen added clauses. In this charter party New York Navigation hired Weyerhaeuser's vessel, the defendant ship S. S. JOHN WEYERHAEUSER, for a single voyage from the East Coast of the United States to the Far East. The ship was delivered to New York Navigation at Baltimore, Maryland on December 12, 1966, and the Iligan cargo loaded during the next several days. On December 16, 1966, New York Navigation as agent for the master signed a bill of lading which constitutes the contract between Iligan as shipper and Weyerhaeuser as carrier of the goods.

 The steel mill cargo arrived in the Philippines virtually destroyed. Seawater had entered the ship through a leaking clapper valve in an adjacent hold and mixed with a cargo of fertilizer stowed there to form a slurry, which then penetrated the bulkhead separating the two cargoes and inundated Iligan's cargo. Iligan contends that the failure of the owner to discover and repair the unseaworthy condition of the ship prior to this voyage constitutes gross negligence or wilful and wanton misconduct and entitles plaintiff to recover the full value of the destroyed cargo. Plaintiff also seeks to recover the full value of the cargo from the charterer, alleging that New York Navigation breached both an express and an implied absolute warranty of seaworthiness and is not entitled to the benefit of its contract terms limiting the amount of its liability to $500 per package. New York Navigation claims that, if it is found liable to Iligan, Weyerhaeuser is liable over to it, because the charter party contains an express absolute warranty of seaworthiness. Weyerhaeuser defends on two major grounds. First, it contends that it exercised due diligence to provide a seaworthy vessel, and is therefore not liable to Iligan for any damage caused by unseaworthiness of the vessel, under the provisions of the Carriage of Goods by Sea Act, 46 U.S.C. § 1300 et seq., ("Cogsa"). Second, it claims that if it is found liable, this liability is limited in amount to $500 per package, as to Iligan by virtue of Cogsa's provisions, and as to New York Navigation by virtue of express contract terms.

 The Facts

 Certain facts are not in dispute. The vessel is a reconstructed Liberty ship, built in 1944, which Weyerhaeuser, primarily a lumber company, acquired after World War II together with five others, for the purpose of transporting lumber from the West Coast of the United States to the East Coast. Weyerhaeuser commonly chartered these vessels for voyages from the East Coast to the Far East and back to the West Coast, continuing to transport its own lumber aboard them on the coastal voyages. The ship was substantially remodeled and reconditioned by Weyerhaeuser in 1961, at which time it completely rebuilt the crew's quarters, and also removed the permanent, watertight bulkhead separating the # 2 and # 3 holds, so that lumber could be more conveniently carried. A single set of port and starboard bilge tanks, located in the after end of # 3 hold, still served the common hold.

 In # 3 hold, about twenty-two feet above the bilge tanks on either side, there is a pipe called a sanitary or soil line which drains from the crew's toilets, exits the ship through an opening in the hull, and permits waste to be discharged outside the ship. When the ship is not heavily laden this opening is above the level of the sea; when the ship is loaded it is under water. At the point it exits the ship the pipe makes a sharp right angle. There is a cover plate over the opening of the pipe, called a clapper valve; this rests on lugs and is designed to swing open to allow discharge of waste, but to resist the pressure of the sea and to keep seawater out. The entire apparatus is also referred to in the record as a sanitary valve.

 On the voyage in question, New York Navigation constructed a temporary bulkhead of boards and burlap to divide # 2 and #3 holds, since it planned to load the Iligan cargo in one and fertilizer in the other. The Iligan cargo was loaded into #2 hold in Baltimore between December 12 and December 16, 1966, in good condition. The ship proceeded to Tampa, Florida, where a cargo of chemical fertilizer was loaded into #3 hold in such a way as to fill the hold completely. The vessel stopped once more, in Cristobal, Panama Canal Zone, for bunkers and engine repairs, before proceeding on the trans-Pacific voyage in mid-January.

 Upon the ship's arrival in Moji, Japan, on February 22, 1967, to take on fresh water, it was discovered to be riding much lower in the water than anticipated, so that no additional water could be safely taken on. This led the master to suspect massive abnormal water entry into the ship. His investigation revealed that the entire #2 hold containing the Iligan cargo was flooded. (Two days earlier, he claims, the cargo had been intact.) Further investigation revealed that the port sanitary valve in #3 hold was leaking, and the master directed that the pipe at this juncture be covered with a cement box. A cement box was installed on the starboard valve as well. The vessel proceeded to Mokpo, Korea, where the fertilizer was unloaded and the cement box on the port valve replaced, and thence to Iligan, where the crew dismantled the sanitary valve. The clapper valve lugs were found to be completely corroded with rust, so that the valve was frozen in an open position, and the sanitary line pipe was corroded through, with a hole approximately 2" by 1/4". This condition had clearly developed over time. The combined openings had apparently permitted a massive entry of seawater into the #3 hold, which slowly permeated the fertilizer, formed a slurry, and finally burst through the non-watertight bulkhead into the #2 hold, inundating and destroying the Iligan cargo.

 The evidence crucial to plaintiff's case is contained in the deck and engine room logs of the Iligan voyage and those immediately prior to it. The ship had carried a cargo of fertilizer from Virginia to Madras, India in July and August of 1966 ("the Madras voyage"), then had sailed to Portland, Oregon ("the return Pacific voyage") in ballast, and had carried lumber from Oregon to Rhode Island in October and November ("the coastal voyage"). On these voyages the crew usually recorded both the bilge readings and the frequency of pumping on a daily basis.

 The bilge wells in #3 hold are eighteen inches deep. Plaintiff's expert considered any reading above seven inches to be noteworthy, and pointed out that any reading above eighteen inches meant that there was water in the cargo. Weyerhaeuser's operations manager, whose deposition testimony was introduced at trial, considered consistent readings of as much as thirteen to fifteen inches to indicate a serious problem of water entry.

 On the Madras voyage the soundings in the #3 bilges ranged from insignificant levels to fifteen inches. The logs reflect pumping of the #3 bilges on a daily basis. On the return Pacific voyage no soundings were taken, as the ship was proceeding with water ballast in two other holds. The #3 bilges were, however, pumped daily. On the coastal voyage the #3 bilge readings ranged consistently above nine inches, and frequently as high as fifteen to twenty-four inches, but there were no engine room log entries during the latter part of the voyage to reflect the frequency of pumping. (The chief engineer, who apparently was deficient in several respects, left the ship and was replaced in Baltimore.) In Baltimore for several days the bilge readings were abnormally high, as high as eighteen inches, and the bilges were pumped once.

 In Tampa, as noted above, a large load of fertilizer was put aboard the ship, completely filling the #3 hold, and making the sanitary valve inaccessible for inspection or repair from that time forward. En route to the Panama Canal the ship experienced engine difficulties which caused it to put in to Cristobal for repairs. At that time it also took on fresh water. In Cristobal, for the first time, the #3 bilge readings consistently exceeded fourteen inches, and frequently reached over twenty inches. The crew then pumped the bilges on an almost daily basis. Iligan charges that from this data the master and the owner had to know that the ship was leaking and unseaworthy.

 Weyerhaeuser rebuts this evidence in two ways. It offers specific explanations for each of the instances of high readings which Iligan notes, and points to specific steps the master took to locate and solve the problem. Beyond this, Weyerhaeuser claims that the ship was routinely and thoroughly inspected and maintained in class, and that the owner cannot be charged with notice of an unseaworthy condition. These facts combined, it claims, demonstrate that it fulfilled its obligation to exercise due diligence to provide a seaworthy vessel.

 The master testified that he regarded the bilge readings on the Madras voyage as a problem, and associated the abnormal readings with taking on fresh water. On his return to Portland he claims he reported the difficulty to Weyerhaeuser's marine superintendent. He also consulted with the chief engineer, who assured him, after checking, that there was no possibility of water entry into the bilges from the fresh water system. On the coastal voyage he was accustomed to high bilge readings and did not attribute them to water entry, since lumber typically "sweats" as it is carried from a cold to a warm climate and back. He explained the high readings in Baltimore on the basis of a heavy snow which made it impossible to close the hatch cover and also delayed loading of the cargo. A single pumping sufficed to empty the bilge well at that time.

 When the master began to note abnormal bilge levels in Cristobal, he once again attributed this to taking on fresh water, despite the chief engineer's assurance that this was not possible. At this time he did not report the problem to the owner. He made what limited inspection was available to him in view of the nature of the cargo in #3 hold; he attempted to taste the water on the end of the bilge sounding rod to determine whether it was fresh. He claims he tasted fresh water, and judged it safe to proceed with the voyage. Thus, he claims that he first recognized a serious problem when he arrived in Moji and found the ship down, inexplicably, to its summer marks.

 Weyerhaeuser proved that the ship was inspected thoroughly by the Coast Guard in 1962, and less thoroughly annually. In 1962, the clapper valves were opened and visually inspected and found to be in good condition. Each year thereafter, and particularly in Portland just prior to the coastal voyage, the ship was routinely inspected for the purpose of being maintained in class. It was maintained in class, and indeed was eligible for more favorable insurance rates than other Liberty type vessels, because of its generally good condition. While the routine inspections did not include opening the clapper valves, they did include as a matter of course, hammer testing the valves for soundness. The written reports of these inspections indicate no problem with the valves. Weyerhaeuser did not, however, introduce testimony from anyone actually present at the inspections who could report that they were in fact properly conducted. One special inspection of #3 hold was made in Tampa, by a National Cargo Bureau surveyor, to certify that the hold was dry before fertilizer was loaded. Although concededly the hold was dark, and the valve high above eye level, the inspector did not report any leaking on the skin of the ship, and did permit the fertilizer to be loaded.

 The obligation to furnish a seaworthy vessel rests in the first instance with the owner of the vessel, Weyerhaeuser. Plaintiff contends that Weyerhaeuser had actual knowledge, prior to the Iligan voyage, that the ship was unseaworthy, and loaded the cargo and sent the ship to sea in wilful disregard of this condition. In plaintiff's view, such gross negligence or wilful and wanton misconduct constitutes a deviation abrogating all limitations of liability either under Cogsa or in the contracts. Weyerhaeuser claims that it exercised due diligence to provide a seaworthy vessel and is therefore not liable for any damage to cargo resulting from the unseaworthy condition of the ship.

 In the judgment of this Court, plaintiff has not proved that Weyerhaeuser knew or must have known of the unseaworthy condition of the ship. Nor has Weyerhaeuser proved the exercise of due diligence to provide a seaworthy vessel.

 The ship was clearly unseaworthy in Cristobal, because of a corroded clapper valve which deteriorated over time. At Cristobal the clapper valve was below water and the ship was taking on significant quantities of water which were at that time confined to the #3 hold. But the master did not, in Cristobal, have knowledge of the actual defect in the ship. And at that time the valve was inaccessible for his inspection. Although he had received earlier signals, none had clearly pointed to the clapper valve. His explanations of the high bilge readings were not wholly implausible, until the "taste test" in Cristobal.

 On the other hand, the signals were sufficiently clear to put the owner on notice that there was some problem with water entry. The master had reported the problem in Portland, and after each voyage the marine superintendent read the logs. A sufficiently thorough inspection of possible sources of this water entry would, in all likelihood, have revealed the deteriorating valve. Weyerhaeuser's failure to locate the problem was want of due diligence to provide a seaworthy vessel. The burden is on the shipowner to prove the exercise of due diligence; Weyerhaeuser's evidence of routine inspections, in the context of an unusual problem, does not suffice to carry this burden.

 After a complete review of the evidence, this Court finds that Weyerhaeuser failed to exercise due diligence to provide a seaworthy vessel, but did not have actual knowledge of the unseaworthy condition of the ship prior to the trans-Pacific voyage in question. Weyerhaeuser is therefore liable to plaintiff in the amount of $500 per package plus interest in ...


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