Appeal from an October 4, 1988 judgment after a bench trial before the United States District Court for the Southern District of New York (Carter, J.), holding defendants liable for damages in the amount of $95,276.01 plus costs. Affirmed.
Kaufman, Cardamone, and Pratt Circuit Judges. Judge Pratt dissents in a separate opinion.
Defendant Amilla Compania Naviera, S.A. (Amilla) and defendants Astramar Cansac B.S. A.S. and Canadian Forest Navigation Company, Ltd. (collectively Canadian) appeal from the October 4, 1988 judgment after a bench trial before the United States District Court for the Southern District of New York (Carter, J.), finding Amilla liable for damages to goods in transport, and further regarding Canadian to indemnify Amilla for 50 percent of the damages. We affirm.
Amilla is the owner of the M/V Amilla (the Ship), a bulk carrier sailing under the Greek flag, that was chartered on August 4, 1983 to Canadian pursuant to a New York Produce Exchange form time charter party. The charter party provided that Amilla would ensure that the ship was "in every way fitted for ordinary cargo service," and that Canadian would "pay for all provisions, wages and consular shipping and discharging fees of the crew."
Through defendant Astramar, whose performance was guaranteed by defendant Canadian, the ship was then voyage-chartered to plaintiff Siderius for the transport of rolled steel sheets from Buitrago, Argentina to Detroit, Michigan and Chicago, Illinois. This cargo, encased in metal envelopes, was inspected by Siderius' surveyor before it was loaded aboard the ship in Buitrago, and the coils destined for Detroit were then reinspected upon arrival.
Because the metal envelopes were not opened, the steel sheets themselves could not be inspected. Several weeks later, the cargo inside the envelopes was inspected when one of Siderius' customers rejected some of the sheets due to water damage. Siderius then examined the sheets remaining in storage and found significant rust. It issued a credit to the customer who had complained and then brought this action against Canadian and Amilla, claiming that the rust damage was caused by defendants during the transport from Argentina to Detroit.
At a bench trial, the district court examined the charter agreements, and heard evidence on the inspection of the steel during loading in Argentina, on the events that occurred during the ship's voyage -- including the ventilation of the holds where the steel was stored -- and on the inspection and storage of the sheets upon arrival in Detroit on September 18, 1983. It made the following determinations. First, the United States Carriage of Goods by Sea Act (COGSA), 46 U.S.C. § 1300-1315 (1982 & Supp. IV 1986), governed the dispute, and under the definitions set forth in the Act, Amilla was the ship's owner and Canadian was its charterer. Second, Siderius, by showing delivery of the steel to the carrier in good condition and damage to the steel on outturn, had made out a prima facie case, thereby shifting the burden to defendants to prove that the rust damage did not occur during the ocean voyage. Third, defendants did not meet this burden; therefore, they were liable for the damage to the steel. Fourth, because the ship carried no equipment for measuring the condensation level or humidity in its holds, and in light of substantial evidence showing significant condensation in the holds, the ship was unseaworthy to carry the steel cargo safely.
After hearing evidence on the value of the steel before and after the rust damage, the district court awarded Siderius $95,276.01 with interest plus costs to be taxed. In determining how the payment of these damages should be apportioned between defendants, the court looked to the New York Produce Exchange Interclub Agreement (Inter-club Agreement or Agreement), a well-known, long-established agreement specifically identified in the charter party as the document that would govern the settlement of any disputed cargo claims. The district court applied the clause of this Agreement which specified that payment of "condensation damage" should be apportioned 50 percent to the owner of the vessel and 50 percent to the charterer, and ordered Canadian to indemnify Amilla for half of the $95,276.01 awarded to Siderius, or $47,638.00 plus costs. Both Amilla and Canadian have appealed.
We consider each appellants' arguments separately.
Amilla contends principally, first, that plaintiff Siderius failed to make out a prima facie case; second, that the district court's finding that the ship was unseaworthy is clearly erroneous; and third, that the district court erred in holding it liable as a vessel owner under the COGSA. Each of these claims lacks merit.
We hold at the outset that Siderius did make out a prima facie case. As Judge Carter properly recognized, Siderius could meet its initial burden by showing either through circumstantial or direct evidence "that the damage was caused by the carrier's negligence and not by any inherent vice of the cargo." Elia Salzman Tobacco Co. v. S.S. Mormacwind, 371 F.2d 537, 539 (2d Cir. 1967); see also Philippine Sugar Cents. Agency v. Kokusai Kisen Kabushiki Kaisha, 106 F.2d 32, 37 (2d Cir. 1939). Here, there is sufficient evidence of such negligence, including the indications of drip down on the cargo, testimony by the chief mate that he could not specifically list or document the number of times when the ship's holds were ventilated during the voyage, and the discovery of rust when the hatches were opened in Detroit. The burden then shifted to the defendants, and we agree with the district court that defendants failed to present credible evidence that rust was present initially.
Next, we cannot conclude that the district court's finding that the ship was unseaworthy was clearly erroneous. The court's determination was supported by ample evidence, including the fact that the ship had no hygrometer or similar moisture measuring device aboard, that its ventilation system was hand activated, and that significant "drip down" occurred during the voyage, resulting in substantial rust damage. We therefore adopt the court's finding that "the vessel was not adequately equipped to safely carry the cargo in question."
Finally, we agree with the district court's determination that Siderius may recover directly from Amilla, given that the ship was unseaworthy. We have long held that "when the charterer of a ship is liable to a cargo owner," and that liability results because the vessel owner has violated its warranty of seaworthiness, the "cargo owner may hold the shipowner on his warranty to the charterer." New York Cent. R.R. v. New York, N.H. & H. R.R., 275 F.2d 865, 866 (2d Cir. 1960). Here Amilla warranted to Canadian that the ship would be "in every way fitted for ordinary cargo service," that is, that it would be seaworthy. See Nichimen Co. v. M.V. Farland, 462 F.2d 319, 332 (2d Cir. 1972) ("One essential aspect of seaworthiness is that the vessel must be fit for the purpose intended under the charter party."); Demsey & Assocs. v. S.S. Sea Star, 461 F.2d 1009, 1016 (2d Cir. 1972) (stating that vessel owner, in agreeing to provide ship that was "tight, staunch, strong and in every way fitted for the service" made implied warranty of seaworthiness to charterer). But Amilla then breached that warranty by providing an unseaworthy ship. Consequently, well-established rules of ...