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July 16, 1981

M.V. MARGARITE, her engines, boilers, etc. v. SOUTHERN CROSS STEAMSHIP CO., INC. and ATLANTIC SHIPPING COMPANY, S.A., Defendants

The opinion of the court was delivered by: LOWE


 MARY JOHNSON LOWE, District Judge.

 This is an admiralty action by American Industries Corp. ("AMI"), an American steel importer, to recover for water damage to 280 coils galvanized steel. *fn1" The steel was allegedly purchased from a German supplier, and shipped by barge FOB Port of Antwerp, Belgium. It was temporarily stored in a dockside warehouse and then loaded onto the M.V. Margarite, owned by defendant Southern Cross Steamship Company, Inc. ("Carrier") then under time charter to defendant Atlantic Shipping Company, Inc. ("Charterer"). The Court, prior to trial, entered judgment of default against the charterer, leaving only the carrier company as defendant. The coils were discharged at Philadelphia and taken by truck to Jersey City where they were found to be extensively water damaged.

 AMI pleads two alternative theories for recovery. First it claims that defendants issued a fraudulent bill of lading upon which plaintiff relied to its detriment. Second it alleges negligent carriage.


 The Pre-Ocean Loading Events At Antwerp.

 The 282 coils of steel were brought into the Port of Antwerp on barges by Socantra, the manufacturer's freight forwarder, under a contract FOB Port of Antwerp. *fn2" Plaintiff had contracted to purchase the coils on terms -- cash against documents. The coils were placed in a dockside shed on October 2, 1974. *fn3" Upon discharge, the Antwerp stevedores noted the condition of the coils as they left the barges as follows: *fn4"

Lighter: "Oldenburg" discharged 10/2/74
92 coils for 665 tons.
Remarks: Packing damaged, various coils for 750 tons. Packing stained with a white powder.
Lighter: "Beppi" discharged 10/2/74
104 coils for 750 tons.
Remarks: Traces of previous handling, stained by a white powder. Some coils packing damaged.
Lighter "Andreas" discharged 10/2/74
86 coils for 662 tons.
Remarks: Stained by a white powder, traces of previous handling, various coils packing damaged.

 On October 8th, Captain Mathieu, the P & I Surveyor, inspected the coils and found 43 stained with a brownish, crystalized powder. *fn5" He tested the stains, received a positive reaction to a silver nitrate test, *fn6" and took a polaroid photo of the coils. *fn7" He determined the condition was serious *fn8" and decided to take exception to all 282 coils. *fn9" Mathieu telephoned Captain Marselias, Socantra's agent, of his intention. Marselias was angered that he had not been informed of the condition previously. *fn10" In order to prevent Mathieu from clausing the mate's receipt *fn11" in accordance with the then present condition of the coils, Marselias said he would manage to get the coils cleaned. *fn12" Marselias telexed the German manufacturer on October 9th, asking for an extra man to clean the dirty deposit on the packing of the coils. Permission was granted. *fn13"

 The date the cleaning began is not clear from the record. The coils were cleaned as they were taken out of the shed to ship's tackle *fn14" and the cleaning took more than one day. The coils were loaded aboard the "Margarite", which sailed on October 13th. *fn15"

 Mathieu testified he was present during the entire time of the cleaning and then claused the mate's receipt only for those coils still having stains. The clause was:

"43 coils (with numbers) showing traces of white oxidation on outer envelopes."

 Mathieu testified he sent a report to Vinke, the carrier's agent, and reported the cleaning to the master or chief mate of the vessel. *fn16"

 Captain Spark, an expert retained by the carrier, reported on his investigation and made this observation:

"After discharge from the barges the coils were subject of a joint survey, when apparently considerable discussion arose concerning the clause under which the goods would be shipped. It was in due course agreed that the packing of a number of coils would be reconditioned before shipment under the supervision of the surveyor appointed by the local P & I correspondents. . . ." *fn17"

 After the coils were loaded aboard the "Margarite" and the bill of lading was claused in conformity with the mate's receipt, *fn18" the captain signed the bill of lading. *fn19" Clement, an employee of Wallco (plaintiff's forwarding agent), presented the loading permit and received the claused bill of lading signed by the master of the vessel. *fn20" Clement sent the original to the German manufacturer and the nonnegotiable copy to plaintiff.

 Plaintiff's vice-president, Resnick, testified he received the copy of the bill of lading and that he considered the clausing -- "traces of white oxidation" -- to represent small or minor exceptions *fn21" that would not affect the condition of the steel. *fn22" He further testified if he had known the actual condition of the coils at Antwerp, or if he had known there was a positive silver nitrate test, he would not have accepted the shipment and would have refused to pay. *fn23" The witness further testified that he had rejected previous shipments which showed a positive silver nitrate reaction. *fn24" In reliance upon the clausing of the bill of lading, he directed his bank to make payment.

 Captain Arthur Sparks of Antwerp, Belgium, a defense witness, testified that he is a marine surveyor and has been in the business for over twenty years. According to the custom of the Port of Antwerp when the cargo, before loading, is found to be damaged, a letter of indemnity is given to the master of the vessel. However, in this case, he found no evidence of such a letter of indemnity. He further testified that in accordance with the interpretation placed upon the Hague rules by cargo interests, if the master knows that the cargo condition has been altered, even if it is done in order to have a clean bill of lading, the only duty of the master, imposed by the custom of the Port, is to clause the "apparent condition" of what he sees at the time the cargo is loaded. Captain Sparks also testified that, in the case of wrapped cargo, all stains found on the cargo should be placed upon the mate's receipt. *fn25" It is considered improper conduct for a vessel's surveyor to call the shipper and have the shipper remove stains on cargo. *fn26"

 When the coils were outturned at Philadelphia they were transferred by truck to New Jersey. There they were inspected by Captain Luard, P & I representative, Mr. Silkiss, a metallurgical engineer, and Captain Farguhar representing cargo interests.

 Captain Farguhar testified that in his opinion the extensive damage found was not caused during ocean carriage since the water within the coils was brackish; as was the water encountered on the barge journey from Germany to Antwerp. *fn27" He further testified that the polaroid photo attached to the Mathieu report, *fn28" showing the condition of one of the coils at Antwerp was similar to the stained condition found on the coils in New Jersey.

 The American Bureau of Shipping examined the vessel shortly after discharge of the cargo and certified that she was watertight. ...

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