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BLACK SEA & BALTIC GEN. INS. CO. v. S.S. HELLENIC

December 2, 1983;

BLACK SEA & BALTIC GENERAL INSURANCE COMPANY, LTD., AL NISR INSURANCE COMPANY, ARABIA INSURANCE COMPANY, LTD., and THE TAISHO MARINE & FIRE INSURANCE CO., LTD., and NATIONAL INSURANCE AND REINSURANCE CO., AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, INC., MARITIME INSURANCE CO., LTD., and OMAR AHMED AL SUBEI, Plaintiffs, against S.S. HELLENIC DESTINY, S.S. HELLENIC GLORY, S.S. HELLENIC PIONEER, S.S. HELLENIC SPIRIT, S.S. HELLENIC SAILOR, S.S. HELLENIC LAUREL, S.S. HELLENIC HERO, S.S. HELLENIC LEADER, S.S. HELLENIC TORCH, S.S. HELLENIC STAR, their engines, boilers, tackle, etc., and HELLENIC LINES, LTD., TRANSPACIFIC CARRIERS CORPORATION and UNIVERSAL CARGO CARRIERS, INC., Defendants.


The opinion of the court was delivered by: LASKER

LASKER, D.J.

In this action, defendants ("carrier") move to alter and amend our 1980 decision granting plaintiffs partial summary judgment, *fn1" and have filed objections to Magistrate Kent Sinclair's Findings of Fact and Recommended Conclusions of Law on the Subject of Damages. *fn2" Plaintiffs ("underwriters") also move to modify and confirm Magistrate Sinclair's damage award. For the reasons set forth below, the motions of the carrier are denied and the underwriters' motion is granted in part and denied in part.

 At the outset, it is necessary to consider the carrier's motion to alter and amend the 1980 judgment because granting that motion would moot Magistrate Sinclair's Report and the motions related to it.

 I.

 This action was commenced on October 10, 1973 to recover $53,095 from the carrier for alleged non-delivery or misdelivery of rice, flour, auto parts, car stereos, and insulation from United States ports to ports in Saudi Arabia. The critical issue in this case is when responsibility for lost or damaged cargo passes from the carrier to the consignee.

 A.

 The rights of the parties are governed by the Harter Act, *fn3" which requires carriers to make "proper delivery" in order to terminate their responsibility for ocean-going cargo. *fn4" While "proper delivery" is not defined by statute, the Act has been interpreted as requiring the carrier to deliver goods from wharf to wharf, notify the consignee of the vessel's arrival, and to protect the cargo until the consignee had a reasonable opportunity to remove it unless these obligations are modified by local port law, custom, or regulation. *fn5"

 In our earlier decision, we found that the port regulations of Saudi Arabia modified the Harter Act obligations to establish that "proper delivery according to the law governing Saudi Arabian ports occurs when a "careful inspection of the external condition of the [cargo's] packages' is made." *fn6" This inspection was described as requiring "both an inventory of the total delivery and a segregation and weighing of the damaged cargo." *fn7" In order to fix the time of the transfer of responsibility and to show the extent of their loss, plaintiffs produced Certificates of Imported Goods which issue upon official receipt of cargo by Saudi Arabian Customs officials. *fn8"

 While the earlier decision noted that it was unnecessary to determine when a "careful inspection" actually takes place for the purpose of disposing of the then pending motion, the defendants were nonetheless found prima facie liable for the cargo loss because the Customs Certificates did reflect a "careful inspection." *fn9" The effect of this holding was that defendant remained liable for cargo until the time when Customs officials issued their Certificates. Defendants could, however, rebut this presumption by providing evidence of a "careful inspection" at a point earlier in time than when the cargo entered customs.

 Following the earlier decision, the case was referred to magistrate Kent Sinclair to hear and report on the issues of damages. *fn10" After reviewing the evidence presented, Magistrate Sinclair found, among other things, that defendants "offered no proof rebutting the prima facie impact of the customs certificates." *fn11"

 Meanwhile, the Second Circuit provided further interpretation of the Harter Act requirement of "proper delivery" in Farrell Lines, Inc. v. Highlands Insurance Co., *fn12" Farrell involved loss of cargo and interpretation of the Harter Act requirement of "proper delivery." The Farrell court was asked to decide whether the measure of cargo loss should have been based upon a count made of the goods at the time of delivery to the dock in Monrovia, Liberia, or upon a later count which show a greater loss that was made when the cargo was delivered to the port's transit warehouse. Port regulations in Monrovia extended carrier responsibility, and therefore liability, for cargo until it arrived in a port warehouse. However, local custom provided that carriers relinquished responsibility for cargo at dockside where it was received by the Monrovia port authority agency. Faced with a conflict between port custom and regulation as grounds for modifying the requirement of "proper delivery," the Farrell court held that where the carrier relinquishes control of cargo, the loss should be borne by the consignee because it is in a much better position to protect against cargo loss after delivery. *fn13"

 B.

 The carrier asserts that Farrell requires that we alter and amend our earlier decision because custom and regulation are in conflict in Saudi ports. As a result, according to Farrell, "proper delivery" takes place when the carrier relinquishes control, not, as we have held, when a careful delivery takes place. The carrier relies upon witness testimony allegedly showing a conflict between port customs and regulations.

 The underwriters argue in opposition that port regulations and custom do not conflict and they rely in large part upon the testimony of the carrier's agent in Saudi Arabia to support their claim. They quote the agent's uncontroverted testimony that his company hired and paid the salaries of the tally clerks who made a survey of the ship's cargo at the time of discharge in order to show that the carrier maintains control over cargo even after it leaves the holds of its vessels. This statement is significant because while it may show that "proper delivery" occurs at a moment after the cargo is unloaded, it also reveals that employees under defendant's control conduct a cargo count at a point in time earlier than the preparations of the Customs Certificates.

 The underwriters further assert that even if port regulations do conflict with customs in Saudi Arabia, Farrell's holding does not require amending our earlier decision because even under Farrell, the carrier has not established what constitutes "proper delivery." The underwriters claim "proper delivery" places a burden upon the carrier to show what cargo was actually delivered to Customs and that in this case defendants provided no proof that the relevant ships' bills of lading were discharged in good order and condition. If such proof existed, the underwriters argue, it should have been presented to Magistrate Sinclair to rebut the earlier finding of prima facie liability based on the Customs Certificates. As noted above, however, Magistrate Sinclair found that defendants offered no such proof.

 C.

 An inquiry into whether Saudi port custom conflicts with port regulation would now be appropriate where the only difference between our earlier decision and Farrell that we did not examine the custom in Saudi Arabia ports. However, such an examination is not needed here in light of evidence of cargo loss that the parties have presented or have had the opportunity to present.

 In Farrell, the Second Circuit was asked to fix the measure of damages for lost cargo based upon two different counts of goods -- an initial count that has been made at dockside, and a later count when the cargo was transferred to a transmit warehouse. In this case, on the other hand, the Customs Certificates constitute the only evidence of cargo loss presented. Accordingly, no basis exists for revising our earlier finding of when "proper delivery" takes place in this instance because the carrier has had an opportunity to produce evidence under their control showing what their liability would be were we to find that "proper delivery" occurs when the carrier ...


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