UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
July 18, 1984
BOSUNG INDUSTRIAL CO. and DONG BO SANGSA CO., LTD., Plaintiffs, against M.V. "AEGIS SONIC", her engines, boilers, etc., MARITIME TRANSPORT OVERSEAS, INC., ATLANTA SHIPPING CORPORATION, ALKIVIDES SHIPPING ENTERPRISES, INC. and AEGIS SHIPPING CO., LTD., Defendants. and MARITIME TRANSPORT OVERSEAS, INC., and ATLANTA SHIPPING CORPORATION, Defendants and Third-Party Plaintiffs, against UNITED TERMINALS, INC., Third-Party Defendant.
The opinion of the court was delivered by: SPRIZZO
OPINION & ORDER
Plaintiffs, Bosung Industrial Company, Ltd. (now known as Woochang Construction Company) and Dong Bo Sangsa Company, Ltd., commenced this action pursuant to this Court's admiralty and maritime jurisdiction, 28 U.S.C. § 1333 (1982), seeking to recover under the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. §§ 1300-1315 (1976), for damage to a cargo of concrete pipe. The pipe was shipped on March 14, 1979 from Port Newark, New Jersey to Dammam, Saudi Arabia aboard the vessel "Aegis Sonic." Defendants are the charterer of the vessel, Atlanta Shipping Corporation, and its agent, Maritime Transport Overseas, Inc. (now known as Atlanta Maritime Corporation) (collectively referred to as "Atlanta").
The action was tried before this Court, and the parties have submitted post-trial briefs and proposed findings of fact and conclusions of law.
On March 1, 1979, Bosung purchased reinforced and non-reinforced concrete pipe of varying lengths and diameters from Kerr Concrete Pipe Company ("Kerr") at a cost of $91,616.65. Exhs. 5, 27.
It was to be used as drainage pipe for a state guest house project in Riyadh, Saudi Arabia. Also on March 1, 1979, Bosung and Atlanta entered into a booking note, which provided for the shipment of Bosung's pipe from Newark, New Jersey to Dammam, Saudi Arabia on board the "Aegis Sonic."
Kerr trucked the pipe from its factory in Hammonton, New Jersey to Port Newark. Bosung's representatives inspected the pipe at the pier and discovered that some of it was missing or damaged. Kerr replaced the damaged and short-delivered pieces at no cost to plaintiffs. United Terminals then loaded the pipe on board the vessel between March 12 and March 14, 1979 under the supervision of Captain Jorg Remy, Atlanta's Port Captain. On March 14, Atlanta issued a clean bill of lading for the carriage of "818 pcs. concrete pipe."
Exhs. 3, 3a.
On March 14, 1979, the "Aegis Sonic" departed from Port Newark and proceeded to Port Hamilton, Bermuda where, from March 17 through March 29, other cargo destined for the Middle East was loaded on board.
The "Aegis Sonic" left Bermuda on March 29 and then sailed past Dammam, Saudi Arabia (the destination of plaintiffs' pipe) to Basrah, Iraq, in order to discharge the cargo that had been loaded in Bermuda. It arrived in Basrah on April 27; however, due to port congestion, unloading was not completed until May 23. The ship finally arrived at Dammam on May 23 and proceeded to discharge plaintiffs' shipment of concrete pipe. On May 24, the Dammam Port Authority halted the discharge with approximately fifty percent of the pipe discharged and on the pier.
Bosung was not notified of the vessel's arrival until after port officials had stopped the discharge of its cargo.
Bosung's representative, Mr. Ku Hyung Chang, then informed Atlanta that he would not consider accepting delivery of the cargo until it was inspected. Exh. 6. Mr. Chang arrived from Riyadh on May 25 with an independent surveyor from Lloyd's of London, Captain Habib Ali Al-Aidroos, defendants' representative, Mr. Pierre Duchemin, and two other Bosung employees. A survey performed by Captain Al-Aidroos showed that eighty-five to ninety percent of the pipe was damaged by chipping at the ends, cracking, and crushing, and that only a small portion of the smaller diameter pipe had escaped damage. Exh. 9.
After inspecting both the pipe on the pier and that on the vessel, and after consulting with the project engineers, Mr. Chang informed defendants that the pipes were totally damaged and useless to plaintiffs and that he would therefore not accept delivery. The parties thereafter entered into several days of negotiations, during which Bosung unsuccessfully sought to obtain from defendants an adequate guarantee.
Pursuant to those negotiations, a joint committee was formed and met on May 30 to inspect the cargo on the pier; however, it was unable to resolve the dispute.
On June 2, defendants reloaded the pipe on board the "Aegis Sonic" and sailed to Sharjah, United Arab Emerates, where it was ultimately abandoned on June 5. A survey performed in Sharjah, at Atlanta's request, found eight-five to ninety percent of the pipe to be damaged at the time of its discharge in Sharjeh.
Nine months later, plaintiffs purchased asbestos cement pipe in Saudi Arabia as a substitute for the consignment of concrete pipe. Plaintiffs then commenced this action to recover the cost of the replacement pipe. Atlanta counterclaimed for $81,654.84 to compensate it for the expenses it incurred as a result of Bosung's refusal to accept the pipe and for $4,282.01 in deadfreight.
The case is governed by COGSA since a bill of lading was issued as part of the contract of carriage.
See 46 U.S.C. §§ 1300, 1301(b). Under COGSA, the shipper establishes a prima facie case by showing that the carrier received the cargo in good condition and that the cargo was in a damaged condition when discharged from the vessel. Westway Coffee Corp. v. M.V. Netuno, 675 F.2d 30, 32 (2d Cir. 1982); see Caemint Food, Inc, v. Brasileiro, 647 F.2d 347, 351-52 (2d Cir. 1981). The burden then shifts to the carrier to prove that the loss or damage falls within one of the exceptions to COGSA set forth in 46 U.S.C. 1304(2).Westway Coffee Corp. v. M.V. Netuno, supra, 675 F.2d at 32.; Vana Trading Co. v. S.S. "Mette Skou, 556 F.2d 100, 105 (2d Cir.), cert. denied, 434 U.S. 892, 54 L. Ed. 2d 177, 98 S. Ct. 267 (1977).
The Condition of the Cargo When Delivered to the Carrier
Atlanta issued a clean bill of lading for the cargo.Exhs. 3, 3a. The issuance of a clean bill of lading is prima facie evidence, subject to rebuttal, of delivery of the cargo to the carrier in good condition. Caemint Food, Inc. v. Brasileiro, supra, 647 F.2d at 352; Madow Co. v. S.S. Liberty Exporter, 569 F.2d 1183, 1185 (2d Cir. 1978). Furthermore, Bosung presented evidence that the pipe was inspected at Port Newark and that any damaged pieces that were discovered were replaced with pieces in good condition. In addition, the supervisor of the stevedores at Port Newark testified that he inspected the pipe and saw no damage after the replacement.
The only evidence presented that the pipe was not in good condition was the testimony of Captain Remy that forty percent of the pipe had suffered "minor" damage, i.e., chips and scratches, and that seventeen large pieces were badly damaged. However, that alleged damage was not referred to in Captain Remy's original report, dated March 30, 1979.
Indeed, this testimony was based on a supplemental report written at the request of Atlanta after Bosung had rejected the delivery in Dammam and after a litigation motive existed. Exh. FFF. Moreover, the supplemental report was prepared from notes which were discarded by Captain Remy and were not available either at trial or at his deposition. As a consequence, the Court finds that Captain Remy's testimony is not sufficient to rebut plaintiffs' showing that the cargo was delivered in good condition.
The Condition of the Cargo in Saudi Arabia
It is clear that the pipe was damaged when it arrived at Dammam. Bosung's surveyor at Dammam, Atlanta's surveyor at Sharjeh, and both experts at trial found the pipe to be damaged.
It follows that plaintiffs have established their prima facie case. Defendants have introduced no evidence to show that the damage resulted from an excepted cause under COGSA.
Bosung is therefore entitled to recover for its loss.
Defendants, however, assert that the cargo was not damaged to such an extent that Bosung had the right to refuse to accept delivery.
Atlanta further argues that since Bosung should have accepted the cargo and pursued its rights against the carrier for any alleged damages, Bosung's wrongful refusal to take delivery entitles it to recover on its counterclaim for $81,654.84.
The duty of the consignee of goods transported by a carrier to accept delivery thereof is not ordinarily excused by the fact that the goods are damaged, unless such damage renders the property practically valueless, having regard to the expense of acceptance and use, and to the purpose for which it was intended.
J. Miller, Law of Freight Loss and Damage Claims § 506.1 (2d ed. 1961); see also Fraser-Smith Co. v. Chicago, Rock Island & Pacific Railroad Co., 435 F.2d 1396, 1399 (8th Cir. 1971); T.J. Stevenson & Co. v. 81,193 Bags of Flour, 449 F. Supp. 84, 124 (S.D. Ala. 1976), aff'd in part and rev'd in part, 629 F.2d 338 (5th Cir. 1980); Cargill, Inc. v. S/S Nasugbu, 404 F. Supp. 342, 349 (M.D. La. 1975); Compagnia Di Navigazione Mauritius Rome v. Kulukundis, 182 F. Supp. 258, 263 (E.D.N.Y. 1959).
Applying the above standard, the Court finds that plaintiffs were not obliged to accept the pipe because it was "practically valueless." The surveys conducted at Dammam and Sharjeh revealed nearly total damage to the pipe. Exhs. 9, BBB. Furthermore, Mr. Duchemin, Atlanta's representative in Saudi Arabia, admitted that the "complete shipment" was damaged. Exh. H.
Bosung's representative, Mr. Chang, after speaking to the engineers at the jobsite, determined that the cost involved in accepting and then trucking the damaged pipe to Riyadh, amounting to approximately $40,000.00, far outweighed the value of the pipe in its damaged condition. That condition was entirely correct. Moreover, an entire set of uniform pipe was required for the construction project and the approximately ten to fifteen percent of pipe that was undamaged was therefore useless to Bosung.
The only evidence presented by Atlanta to show that the pipe was not totally useless was the testimony of its expert, Alfred E. Pagan. Mr. Pagan testified that, although some of the pipes were damaged, they could easily be repaired at the jobsite with mortar.
That testimony, however, was rebutted by Bosung's expert, Robert E. Bald. Mr. Bald testified that the repair operation suggested by Mr. Pagan would be expensive and time-consuming, and would require careful preparation of surfaces by constant soaking and watering during the repair process. He also testified that those difficulties would be compounded by the unusually dry environment in Saudi Arabia, which would cause dry shrinkage and increase the difficulty of obtaining a solid bond between the old and the new concrete. The Court finds that the testimony of plaintiffs' expert is more reasonable and more persuasive, and therefore rejects the testimony of defendants' expert.
Having considered the extremely high percentage of damage, the cost of having to transport the pipe to the jobsite, and the expense and difficulty, if not impossibility, of repairing it, the Court finds that Bosung acted reasonably in refusing to accept delivery of the pipe. Plaintiffs are therefore entitled to recover damages for the total loss of the consignment of the pipe.
Ordinarily, the measures of damages under COGSA is the difference between the market value of the shipment at destination had it arrived in good condition and its market value as damaged. Pacol (Canada) Ltd. v. M/V Minerva, 523 F. Supp. 579, 581-82 (S.D.N.Y. 1981); C. Itoh & Co. (America), Inc. v. Hellenic Lines, Inc., 470 F. Supp. 594, 598 (S.D.N.Y. 1979); see Encyclopaedia Britannica, Inc. v. S.S. Hong Kong Producer, 422 F.2d 7, 18 (2d Cir. 1969), cert. denied, 397 U.S. 964, 90 S. Ct. 998, 25 L. Ed. 2d 255 (1970). The fair market value rule, however, is not the sole method for computing damages, and alternative methods may be used in order to adequately compensate a plaintiff for its loss. Pacol (Canada) Ltd. v. M/V Minerva, supra, 532 F. Supp. at 582; Interstate Steel Corp. v. S.S. "Crystal Gem," 317 F. Supp. 112, 121 (S.D.N.Y. 1970); see Internatio, Inc. v. M.S. Taimyr, 602 F.2d 49, 50 (2d Cir. 1979).
Since the concrete pipe was totally useless as delivered, plaintiffs are entitled to recover its replacement cost. Cf. Waterman S.S. Corp. v. United States Smelting, Refining & Mining Co., 155 F.2d 687, 694 (5th Cir. 1946); Kerr-McGee Refining corp. v. M/V La Libertad, 529 F. Supp. 78, 85 (S.D.N.Y. 1981). That cost is the price of the asbestos cement pipe purchased in Saudi Arabia as a substitute for the damaged concrete pipe.
The fact that the replacement pipe was more expensive and of higher quality than the original pipe is of no consequence. The cost to Bosung of purchasing concrete pipe in the United States and then shipping it to Saudi Arabia would have exceeded the cost of the replacement pipe. Therefore, plaintiffs acted in a commercially reasonable manner in choosing the least expensive means of obtaining a replacement for the damaged pipe.
It follows from the Court's finding that Bosung was justified in refusing to accept delivery of the pipe that Atlanta'a counterclaim for $81,654.84 in delay and other expenses must be dismissed. Defendants may, however, recover $4,282.01 plus interest on their counterclaim for deadfreight. Since Bosung shipped 3,512 cubic feet less than it booked, it breached the contract of carriage and is liable for the shortage.
The Court is not persuaded by plaintiff's argument that the fact that the ship was loaded to capacity in Bermuda defeats defendants' claim for deadfreight. The burden of showing that defendants suffered no deadfreight loss is on the plaintiffs, and Bosung failed to elicit any evidence that Atlanta recovered sufficient revenues from the other cargo loaded to offset its claim for deadfreight.
Third Party Claim
The only evidence that Atlanta has introduced to support its claim against United Terminals, the stevedore, is the testimony of Captain Remy that seventeen pieces were badly damaged during the loading operation. As the Court has already indicated, supra at 5, that testimony is not persuasive.While Captain Remy's initial report refers to some forklift damage, it is clear that that damage was negligible. See Exhs. EEE, FFF. The third party claim against United Terminals must therefore be dismissed.
Plaintiffs are entitled to judgment against defendants in the amount of $177,864.83. Pre-judgment interest is awarded from the date the replacement pipe was purchased at a rate of ten percent. Defendants' counterclaim for $81,654.84 in expenses incurred as a result of plaintiffs' refusal to take delivery is dismissed. Defendants are entitled to judgment in the amount of $4,282.01, plus interest at ten percent from March 14, 1979, on their counterclaim for deadfreight. Defendants' third party claim against United Terminals is dismissed.
The foregoing shall constitute the Court's findings of fact and conclusions of law as required by Fed. R. Civ. P. 52(a). The parties are directed to prepare and submit a joint proposed judgment to the Court within fifteen days of the date of this decision.
It is SO ORDERED.