UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
June 10, 1985
AUSTRACAN (U.S.A.) INC., Plaintiff, against NEPTUNE ORIENT LINES, LTD., Defendant and Third-Party Plaintiff, - against - CONSOLIDATED RAIL CORP., Third-Party Defendant
The opinion of the court was delivered by: HAIGHT
MEMORANDUM OPINION AND ORDER
HAIGHT, District Judge:
In a Memorandum Opinion and Order dated April 23, 1985, familiarity with which is assumed, the Court granted Austracan's motion for summary judgment and directed the entry of judgment against NOL in a stated amount. The Clerk complied on May 2, 1985. Defendants NOL and Conrail now move for reargument of the opinion and order of April 23, 1985. Austracan moves pursuant to Rule 59(e), F.R.Civ.P., to amend the judgment so as to make it enforceable against NOL and Conrail jointly and severally. This opinion resolves those motions.
On the motion of NOL and Conrail to reargue, oral argument is denied. Upon consideration, I adhere to the prior opinion and order, except as modified in response to Austracan's motion under Rule 59(e).
I reject Conrail's argument that the reasonableness of the acceptance of the bill of lading in this case presents a triable issue of fact. Still less does it require as a matter of law, as Conrail also contends, a judgment in favor of NOL and Conrail.
I accept in principle the contention that reliance upon the descriptions contained in a bill of lading must be "reasonable." In practice, what is "reasonable" depends upon the circumstances of each case.
In the case at bar, the party which accepted the bill of lading and caused payment to be made to the consignor was not the plaintiff consignee. Rather, it was the Hong Kong & Shanghai Banking Corp., with whom plaintiff had established a letter of credit in favor of the seller-consignor, Judric. Thus the reasonableness of the reliance to be evaluated is that of the bank. The distinction is important because a considerable body of law has grown up concerning the rights and obligations of banks which participate in that important facilitator of commercial transactions, the letter of credit. In Marino Industries v. Chase Manhattan Bank, N.A., 686 F.2d 112, 115 (2d Cir. 1982), the Second Circuit said generally:
"The parties to the commercial contract being in a third party -- the bank -- to finance the transaction for them. The bank's sole function is the financing; it is not concerned with or involved in the commercial transaction. This restriction simplifies the bank's role and enables it to act quickly and surely. Because the bank is not involved in the commercial transaction, however, all its rights and duties are set out in and defined by the letter of credit. The bank is not expected or required to be familiar with or to consider the customs of, or the special meaning or effect given to particular terms in, the trade. " (emphasis added).
The bank's obligation under the letter of credit is to pay out if the documents presented comply strictly with the specification in the letter of credit. The letter of credit at bar specified a number of documents. I am concerned with what the letter said about the bill of lading. On that subject, the letter of credit said this:
"Shipment to be effected in 20 foot pier to house containers onboard ocean bladings our order notify accountee indicating the number of this credit freight prepaid special instructions forming integral part this instrument partshipments not permitted palletized shipment prohibited."
The bill of lading presented to the bank complied with these requirements. It recited that the cargo had been shipped in a 20 foot, pier to house container. It was an onboard bill of lading. The notify party was correct. Freight was marked prepaid. There were no partial or palletized shipments.
Conrail and NOL make much of the point that, through the error of NOL's agent, the bill of lading also included the phrases "said to contain" and "shipper's load count and seal." This is said to be inconsistent with the meaning of the required phrase "pier to house." So it is. See April 23, 1985 opinion at slip op. 13-16. But it does not follow that this inconsistency, created by NOL's own fault, brands the bank's acceptance of the bill of lading as unreasonable. The bill of lading conformed to the letter of credit, in the sense that it said what the letter required. The bill of lading can be said to be non-conforming only by reason of the additional language inserted by NOL. The bank acted unreasonably only if it was required in law to consider and understand the inconsistencies inherent in these particular ocean transportation terms, and, on the basis of such consideration and understanding, to decline payment under the letter of credit. I decline to reach such a conclusion because, as Marino Industries instructs, the bank issuing a letter of credit "is not expected or required to be familiar with or to consider the customs of, or the special meaning or effect given to particular terms in, the trade."
I need not reach a contrary result because the letter of credit was made subject to the Uniform Customs and Practices for Documentary Credits (1974 revision). It is true that Article 17 of the UCP provides:
"Shipping documents which bear a clause on the face thereof such as 'shipper's load and count' or 'said by shipper to contain' or words of similar effect, will be accepted unless otherwise specified in the credit."
I construe this provision to mean that, absent any relevant prohibition in the credit, such phrases in shipping documents do not in and of themselves render the documents unworthy of acceptance. Defendants stretch that principle far beyond its apparent purpose when they argue that a bank, confronted by a bill of lading which conforms with the specific requirements of the credit, is nonetheless obligated to perceive and be paralyzed by inconsistencies arising out of the erroneous inclusion by the ocean carrier of particular trade terms.
Finally on this subject, it is the doctrine of estoppel which forecloses NOL from denying the contents of the bill of lading it prepared. Estoppel is an equitable doctrine. If the loss must fall upon one of the parties to the commercial transaction, it is fair that it fall upon the party whose error created the problem.
The other contentions made on the motion for reargument do not require discussion.
Plaintiff's motion to amend the judgment is granted. The record evidence compels the conclusion that the loss occurred while the shipment was in Conrail's custody. Therefore plaintiff need not rely on the "last carrier" doctrine, although I agree that the doctrine is applicable under the cases cited by Austracan in its brief at 6-7 and its letter of May 2, 1985 at 2-3.
There is no substance to the argument of NOL and Conrail that the Jefferson affidavit, dealt with in the prior opinion at slip op. 18, creates a triable issue on this aspect of the case. Accepting arguendo that the documents referred to by Jefferson in his affidavit constitute non-hearsay business records, they fail to establish the fact at issue: whether or not the examining inspector made a sufficiently accurate count to determine if any of the cartons that had been shipped in the container were missing. The inspector could tell us whether or not he did that, but there is no statement from him. The documents referred to by Jefferson do not state explicitly that the inspector made such a count of the cartons. Nor may so precise a count be inferred from the documents and the customs procedures which apparently underlie them. The regulation upon which defendants particularly rely, 19 C.F.R. § 151.2(a)(1), says only that "(d)istrict directors are specially authorized to examine less than one package of every invoice . . . ." In the context of the present question -- whether the inspector counted every single one of the cartons in the container -- that regulation hurts defendants more than it helps them.
For the foregoing reasons, the motion of NOL and Conrail for reargument is denied.
The motion of plaintiff Austracan to amend the judgment is granted. The Clerk of Court is directed to enter judgment in favor of plaintiff Austracan (U.S.A.) Inc. and against defendant and third-party plaintiff Neptune Orient Lines, Ltd. and third-party defendant Consolidated Rail Corporation, jointly and severally, in the amount of $11,868.00, with interest from December 2, 1980 at nine (9) percent per annum, and costs, exclusive of attorney's fees, in an amount to be taxed by the Clerk.
It is SO ORDERED.