United States v. United States Steel Products Co. ( 1928 )

THACHER, District Judge

(after stating the facts as above). The goods having been delivered to the consignees without collection of the charges in question, each party questions the right of the other to sue, and these questions may be determined before considering the merits.

As to the right of the United States, as owner of the vessel, to sue the United States Steel Products Company, as shipper of the steel, for the charges incurred and claimed to be owing under the terms of the bills of lading, it may be said that a bill of lading accepted by a shipper upon delivery of goods to a carrier constitutes the contract of carriage between them. If the shipper delivers the bill of lading to another, and thereby transfers title to1 the goods, he is not relieved from the contractual obligations evidenced by the bill of lading. Nor does the carrier’s delivery of the goods to the consignee necessarily have that effect. If, under the terms of the bill of lading, the shipper is primarily obligated to pay freight, demurrage, or other charges, the carrier may look to him alone, and need not enforce his lien on the goods, or seek payment from the consignee upon the latter’s promise, inferred from his acceptance of the goods. Main Island Creek Coal Co. v. C. & O. Ry., 23 F.(2d) 248 (C. C. A. 6th); Davis v. Smokeless Fuel Co. (C. C. A.) 196 F. 753; Tweedie Trading Co. v. Pitch Pine Lumber Co., 146 F. 612 (D. C. S. D. N. Y.). The obligation of the shipper to pay such charges after delivery of the goods to the consignee is purely contractual, and in each case depends upon the proper construction of the bill of lading. L. & N. R. Co. v. Central Iron Co., 265 U. S. 59, 44 S. Ct. 441, 68 L. Ed. 900.

As to the right of the consignor to recover from the carrier damages flowing from injury to the goods after he has parted with title, the authorities agree that there can be no recovery based upon the tort if the consignor’s property interest in the goods ceased prior to the injury. In an action founded upon the contract of carriage (i. e., the bill of lading), the Circuit Court of Appeals of this circuit recently said arguendo that the buyer consignee, “and he alone,” can sue when the consignor has parted with title to the goods. Transmarine Corp’n v. Levitt & Co., Inc. (C. C. A.) 25 F.(2d) 275. In that case it was held that a consignor, who had parted with title, and had later retaken the goods upon the consignee’s refusal to accept them, could sue the carrier. There was no occasion for the court to consider whether the consignor, after parting with title, might sue, not in his own right, but in the consignee’s behalf, and in order to protect the consignee’s interest. Such suits of a representative character are often allowed in admiralty, because of the absence of the real parties in interest abroad. Thus, for example, in a situation analogous to that presented at bar, the consignees of a cargo, part of which belonged to them and the balance to the consignor, were allowed to sue to recover, not only that part of the cargo which belonged to them, but that which belonged to the consignor as well. The North Carolina, 15 Pet. 40, 49, 10 L. Ed. 653. It is a matter of some commercial importance that 'such practice be allowed in the administration of the maritime law. The case at bar presents a peculiarly pertinent illustration of the great inconvenience which may result from denial of the right thus to proceed. Here it is asserted that by special agreement the consignor is liable for special charges incurred by the carrier in reconditioning goods damaged without fault chargeable to it. The question for determination is whether or not, under the terms of the bills of lading, the carrier is responsible for this damage. Unless by cross-bill, and upon proof that the fault lay with the carrier, the consignor may recover in behalf of the consignee, the judgment may not finally determine the rights and obligations arising out of the contract. Situations will often arise where, by virtue of special agreements contained in bills of lading, the carrier may have a right to recover against the consignor, while the consignee may have a right to recover against the carrier. If by a strict enforcement of the common-law rule stated in Krulder v. Ellison, 47 N. Y. 36, 7 Am. Rep. 402, where it was held that a vendor who had parted with title could not sue for the loss of another’s goods, the right of the consignor to sue in admiralty in behalf of the consignee is destroyed, great confusion and inconvenience will attend the enforcement of rights and obligations constantly arising in the daily conduct of international trade. I do not believe that what was said in Transmarine Corp’n v. Levitt & Co., supra, can properly be pushed to such a conclusion.

In Northern Commercial Co. v. Lindblom, 162 F. 250 (C. C. A. 9th), it was held that a consignor, after having parted with title upon delivery to the carrier, was entitled to maintain an action against the carrier for breach of the contract of carriage as the trustee of an express trust, and for the benefit of the consignee. This rule should be applied, at least to the extent of holding that the consignor may, if sued by the carrier upon the special contract of carriage, by cross-bill, sue the carrier for any breach of the contract by the carrier, provided, of course, that the consignee does not object to the assertion of claim in his behalf. Certainly the libelant, who has sued upon the special contract, should not be heard to object to the counter-suit for its own breach, provided it will not be subjected to a second suit by the consignee. In the case' at bar such possibility may be eliminated by requiring the consignor to file, before entry of any decree in its favor upon the cross-libel, an instrument ratifying the suit against the carrier, executed by the consignees. The North Carolina, supra.

Coming to the merits, the carrier’s right to recover its contribution to the expenses of reconditioning the steel is predicated upon the clause already quoted from the bill of lading. Disregarding the obvious printer’s error in using an apostrophe instead of a comma after the word “shippers,” the clause clearly imposes a primary obligation upon the shippers to pay the charges under the conditions recited. One of these conditions, however, is that the owners shall have exercised due diligence to make the steamer in all respects seaworthy, arid to have her properly manned, equipped, and supplied. In so far as the original defect in the steam pipe is concerned, this duty was fully performed. But it is entirely clear, I think, that little, if any, damage would have been suffered, had the leak in the pipe been promptly dis'covered. Failure to discover it promptly was unquestionably due to the inattention and neglect of the watchmen, who in their rounds on deck should have discovered steam escaping from the ventilator. The failure to call either of these men, or the roundsmen whose duty it was to see that they were active in the performance of their duty, coupled with the failure to make any adequate investigation of their competence, and the fact that a competent watchman would certainly have discovered the trouble, justifies the finding that the owners did not exercise due diligence to have the vessel properly manned.

Under these circumstances, there ean be no recovery by the libelant under the clause in question, and the respondent is entitled to a decree on its cross-libel for breach of the contract of carriage, upon filing proof that the consignees have ratified its suit upon the cross-libel. If the parties are unable to agree upon the amount of the recovery, the decree may contain the usual provision for reference.

The original libel will be dismissed, with costs.