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INGERSOLL MILLING MACH. CO. v. M/V BODENA

September 5, 1985

THE INGERSOLL MILLING MACHINE COMPANY, Plaintiff,
v.
M/V BODENA, her engines, boilers, etc., EXCELLENT MARINE, INC., and TAIWAN INTERNATIONAL LINE LIMITED, Defendants TAIWAN INTERNATIONAL LINE LIMITED, Third-Party Plaintiff, vs. J.E. BERNARD & CO., Third-Party Defendant THE INGERSOLL MILLING MACHINE COMPANY, Plaintiff, vs. J.E. BERNARD & CO. and FIREMAN'S FUND INSURANCE CO., Defendants



The opinion of the court was delivered by: CARTER

CARTER, District Judge.

I

The Facts

 Plaintiff, the Ingersoll Milling Machine Co. ("Ingersoll"), is principally engaged in the business of manufacturing special design machinery. It is privately owned and operates out of Rockford, Illinois. Plaintiff has brought two actions, 80 Civ. 6729, against the M/V Bodena ("the Bodena"), her engines, etc., Excellent Marine, Inc. ("Excellent Marine") and Taiwan International Line Ltd. ("Taiwan"), and 81 Civ. 4744, against J.E. Bernard & Co. ("Bernard") and Fireman's Fund Insurance Co. ("Fireman's Fund"). The cases have been consolidated for all purposes.

 Defendant Excellent Marine is a foreign corporation doing business in Hong Kong and is the owner of the Bodena. Defendant Taiwan is a corporation doing business in Taiwan and has time chartered the Bodena from Excellent Marine pursuant to the terms and conditions of a charter party dated May 9, 1979. Both Excellent Marine and Taiwan are engaged in the business of common carriers of merchandise by water for hire and operated, managed or otherwise controlled the Bodena as a common carrier of merchandise by water for hire between New Orleans and Pusan, Korea, during the period relevant to this litigation. Defendant Bernard is a freight forwarder doing business in Elk Grove Village, Illinois, and other parts of the United States. Defendant Fireman's Fund is a wholly owned subsidiary of the American Express Co., having its principal place of business in San Francisco, California, and doing business throughout the United States.

 In January, 1978, Waldrich Siegen, GmbH. ("Waldrich Siegen") a sister corporation to plaintiff and, like plaintiff, a wholly owned subsidiary of Ingersoll International, contracted to sell heavy specially designed machines to Hyundai International, Inc. ("Hyundai") in Korea. Waldrich Siegen engaged Ingersoll as subcontractor to manufacture Shop Order 24441 ("SO24441"), a ram type, horizontal spindle, traveling column machinery center for Hyundai at a purchase price of $2,108,000 and to arrange for its transportation to Korea.

 Sometime in July or August, 1979, John Mellon of Ingersoll contacted Bernard and Gryphon Shipping Services, Inc. ("Gryphon"), a broker and steamship agent in Chicago. He asked William J. Brokamp of Bernard to shop around for freight rates on shipments of machinery to Korea, and asked Michael Malarski of Gryphon about the type of service available on Jin Yang Line for the shipment of machinery to Korea. He gave Malarski an estimate of the sizes of the expected shipments. Both Brokamp and Malarski made the requested inquiries.

 Malarski spoke to Arnold Larsen, Vice President of Cathay Pacific maritime, Taiwan's General Agent in New York, in about mid-August. Larsen offered space on the Bodena scheduled to leave New Orleans at the end of September for Korea. Larsen advised Malarski that another Taiwan vessel would also be available in early October, and Larsen agreed that if Malarski secured the Ingersoll cargo for shipment by Taiwan, Gryphon would receive a commission from Taiwan of 1.25-2.50% and the freight forwarder would receive a commission of 1.25%.

 Malarski informed Mellon of the availability of the Taiwan Bodena in September and of another vessel in October. Mellon advised Malarski that he accepted the terms quoted for the Bodena, that the shipment would consist of 20 pieces which accorded with his initial estimate and that Bernard would be the freight forwarder. Malarski advised Brokamp that Taiwan would pay Bernard a commission of 1.25%.

 Larsen testified at trial that he told Malarski that the shipment would be on deck since the Bodena had no available cargo space below deck. Malarski disputes being told or agreeing that the cargo was to be shipped on deck, or being advised that space was a problem on the Bodena. No booking notes were made by either Malarski or Larsen. Neither Larsen's noteook [sic], which contained a chronological record of his booking communications, nor his worksheets noted that the Ingersoll cargo had been booked on deck. Moreover, the evidence at trial showed that there was space below deck when the Ingersoll cargo was stowed.

 The shipments of the 20 boxes to New Orleans commenced on August 29, 1979. One box came from Detroit, and the others left Rockford at various dates and were delivered to New Orleans by truck and rail to the custody of the Cooper Stevedoring Company and Julia Street Wharf in New Orleans. The machinery was packed by Ingersoll employees. Bernard was notified when the boxes left Rockford.

 The Ingersoll cargo was loaded on September 26 and 27. 1979. Eighteen of the boxes were stowed on deck when the Bodena left New Orleans on September 27, 1979. When the Bodena left Savannah on October 14, 1979, three boxes of the Ingersoll shipment were stowed below deck.

 By letter dated September 10, 1979, Fred Woywod of Ingersoll asked Bernard to secure three original and four copies of clean on board bills of lading, listing ocean freight prepaid. Georgette Seipler, the documentation clerk at Bernard, pursuant to Ingersoll's letter, prepared a master ditto form and the shipper's export declarations. Bernard by letter requested Taiwan to provide three original clean on board bills of lading and at least 10 copies, and on September 25, Bernard sent one master ditto form for the bills of lading and three export declarations to Mid Gulf, Taiwan's agent in New Orleans, and another master ditto form and a copy of the export declarations to Gryphon.

 Bernard used the master ditto form to prepare its advance notice of shipment, which was sent to Woywod on September 25, 1979. Bernard's advance notice was similar to a bill of lading in format and contained the same shipping information that appears on the top half of a bill of lading. The advance notice which Woywod received on September 26, contained no notation as to stowage. Accompanying the advance notice was the following message: "the shipment described above is scheduled for exportation as indicated above..." Woywod called Bernard to advise that all the data on the advance notice was correct except the port of discharge should be changed to Pusan. As Woywod recalls his conversation with Seipler, she advised him that the port would be changed to Pusan and shipping charges would be added but that otherwise the bill of lading would mirror the advance notice.

 On September 26, Woywod called Brokamp asking for the quickest way to get the bills of lading other than having to wait to have them come by mail. Brokamp suggested that Woywod might pick up the bills of lading at Gryphon in Chicago. On September 28, 1979, Woywod sent a messenger to Gryphon to pick up the documents, but they were not ready. An Ingersoll messenger returned to Chicago on October 1, 1979, picked up the originals and four copies and delivered them to Woywod who saw the documents at the end of the day. Bernard also received copies the same day. The bills of lading contained the words "on deck at shippers risk". Woywod did not know that these words rendered the bills of lading unclean. He did not notice them. However, the phrase was in bold letters for him to see.

 The phrase "on deck at shipper's risk" was added to the bills of lading on September 27, 1979, by Mid Gulf, Taiwan's agent. After the vessel sailed, the master of the Bodena mailed the originals and 13 copies to the Chicago area.

 Woywod sent copies of the bills of lading to Waldrich Siegen. Apparently, no one at Bernard, Gryphon, Ingersoll or Waldrich Siegen who saw the copies of the bills of lading, at least until preparation for this litigation began, took note of or recognized the significance of the "on deck at shipper's risk" legend on the bills of lading.

 The voyage to Korea was beset with storms, heavy seas and wind. The ship experienced heavy rolling and pitching during parts of the voyage, and ocean water was constantly on deck. Some of the boxes on deck were broken. Substantial quantities of water penetrated the boxes, and sometimes the boxes sat in water to their top.

 The Bodena arrived at Pusan on November 29, 1979, and unloaded. Ingersoll's cargo was discharged to Hyundai's stevedore, Kukji Transportation Co. The foreman found one on deck box discolored, some boxes broken and all the bands on the on deck boxes rusty. None of the under deck boxes were in this condition. On November 30, 1979, 17 Ingersoll boxes on deck were entered in the exceptional column on the damage report prepared by the foreman. The cargo was placed on four barges, subsequently discharged and moved to Changwon. K.M. Lee, Hyundai's assistant manager for heavy machinery, observed the discoloration, broken boxes, loose boards and rust on the parts of the machinery he could see. No pictures were taken at that time. At Hyundai's request a survey was taken by H. Lee, a licensed surveyor. The surveyor found discoloration, broken boxes, loose boards, and rust on the bands. He looked inside the boxes and described the surfaces seen as heavily rusted. In his report the surveyor described the damage to the cargo as irreparable because of widespread corrosion from sea water and exposure during the voyage.

 Ronald Humphries was a service manager in the heavy division at Ingersoll at the time of these events. His assignment was to oversee the erecting of the machine at Changwon, and he went to Korea in December for that purpose. He arrived in Changwon on December 14, 1979. The cargo was located in the Hyundai's heavy fabrication shop. The structure of the building was completed, but some windows and doors were missing, and the floors were unfinished. The plant itself was about 500 yards from the river estuary. He found the cargo in similar condition tot that found by the stevedore foreman on inspecting the cargo on discharge at Pusan, by K.M. Lee, Hyundai's assistant manager for heavy machinery on the cargo's arrival at Changwon and by H. Lee, the surveyor, when he inspected the cargo. Humphries returned to Changwon in March, 1980, and found the machinery in the same condition he had noted in December, 1979.

 Plaintiff has an all risk policy with Fireman's Fund. This is an open marine cargo policy which covered all of Ingersoll's shipments. Ingersoll filled out a certificate of insurance for each shipment, indicating the contents of the cargo, its value, destination and the carrier. A particular shipment became covered under the policy when Ingersoll sent Fireman's Fund a copy of the certificate of insurance, or when Ingersoll issued a monthly declaration covering all shipments for that month. All shipments were automatically covered even if the certificate or monthly declaration was sent after a loss had occurred.

 The pertinent provisions of the policy are set out below:

 INSURING CLAUSES

 
PERILS CLAUSE 16. Touching the adventures and perils which this Company is content to bear, and take upon itself in this voyage, they are of the Seas, Fires, Assailing Thieves, Jettisons, Barratry of the Master and Mariners, and all other like perils, losses and misfortunes, that have or shall come to the hurt, detriment or damage of the said goods and merchandise or any part thereof.
 
AVERAGE CLAUSES 17. (a) UNDER DECK shipments - Including containerized shipments under optional On Deck &/or Under Deck bill(s) of lading are insured. Warranted free from Particular Average unless the vessel or craft be stranded, sunk or burnt, but notwithstanding this warranty this Company is to pay any loss of or damage to the interest insured which may reasonably be attributed to fire, collision or contact of the vessel and/or craft and/or conveyance with any external substance (ice included) other than water, or to discharge of cargo at port of distress. The foregoing warranty, however shall not apply where broader terms of Average are provided for hereinafter.
 
BROADER TERMS:
 
Insured against all risks of physical loss or damage from any external cause irrespective of percentage, including theft, pilferage and/or non-delivery, but excluding, nevertheless, the risks of war, strikes, riots, seizure, detainment, confiscation, requisition, nationalization and other risks excluded by the "F.C.&S. and/or S.R. & C.C." warranties in the printed portion of the policy except to the extent that such risks may be specifically covered by endorsement, also warranted ...

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