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distinguishing Pere based on the fact that the carrier's failure to require presentation of the bill of lading caused the plaintiff's loss, because the person who took the cargo did not have any right to the cargo, and received the goods without paying for them
Summary of this case from SAT INTERNATIONAL CORP. v. GREAT WHITE FLEETOpinion
No. 98 Civ. 6904 (JSM).
October 25, 2000.
For Plaintiffs: Stephen A. Frank New York, New York.
For Defendant: Kenneth N. Wolf New York, New York.
For Third-Party Defendants: Oliver W. Williams New York, New York.
MEMORANDUM OPINION AND ORDER
Plaintiffs Datas Industries Limited ("Datas"), Hong Kong Knitters Limited ("Hong Kong Knitters"), Unimix Limited ("Unimix"), and Yangtzekiang Garment Manufacturing Company Limited ("Yangtzekiang") (collectively, "Plaintiffs") bring this action to recover the value of shipments transported under the bills of lading of Defendant OEC Freight (HK) Ltd. ("OEC"). In turn, OEC brings a third-party complaint against Third-party Defendant Corporate Express Delivery Systems, Inc. ("CODSI") on the grounds that CODSI released the goods covered by three of the bills of lading without authorization from OEC.
Defendant OEC also brought the third-party complaint against Third-party Defendant Wilmington Shipping Co., Inc., d/b/a Southern Overseas ("Wilmington"). Third-party Defendant Wilmington then impleaded Star Asia International, Inc. ("Star") By stipulation, Defendant OEC dismissed its third-party complaint against Wilmington, and Wilmington dismissed its third-party impleader complaint against Star.
This case is presently before the Court on Plaintiffs' and OEC's cross-motions for summary judgment and OEC's motion for partial summary judgment against CODSI. For the reasons set forth below, Plaintiffs' motion for summary judgment is granted and OEC's motions for summary judgment and partial summary judgment are denied.
BACKGROUND
In 1997, the firm of Ruff Hewn Incorporated (Ruff) placed orders for nine shipments of apparel with Plaintiffs to be manufactured in Hong Kong and shipped to North Carolina. The Plaintiffs engaged the services of OEC, a Non-Vessel Operator Common Carrier of goods ("NVOCC"), for the transportation of the nine shipments of goods from Hong Kong to North Carolina under nine bills of lading issued by OEC. Each bill of lading identified one of the Plaintiffs as the shipper and Star Asia International ("Star") as the party for the consignee to contact to obtain delivery of the goods shipped under those bills of lading. Star handled the logistical point-of-destination tasks involving the transportation and release of the goods shipped pursuant to the OEC bills of lading.
Three of the bills of lading were consigned to Ruff and the remaining six bills of lading were consigned "to the order of" Ruff. OEC issued a set of three original bills of lading for each of the shipments with the following statement printed on the face side of the bill in the lower right-hand corner: "In WITNESS WHEREOF the master or agent of said vessel has signed 3 (THREE) original bills of lading, all of the same tenor and date, ONE of which being accomplished, the others stand void." Pls.' Mem. Supp. Pls.' Mot. Summ. J. at 5.
After obtaining the original bills of lading from OEC, Plaintiffs sent one or more originals of each bill of lading to their bank, Hong Kong and Shanghai Banking Corporation ("HSBC"). Plaintiffs also sent to HSBC drafts drawn on Chase Manhattan Bank NA in New York for the amount of each invoice payable to HSBC together with originals and copies of other necessary documents, including invoices and packing lists for each shipment. Ordinarily, in letter of credit transactions, Ruff would obtain an original bill of lading issued by OEC for each shipment after Ruff's bank, issuing the respective letter of credit, paid the draft presented by HSBC and negotiated original bills of lading to Ruff. Ruff would then surrender the original bill of lading to obtain delivery of the goods.
Ruff obtained delivery of each of the nine shipments without surrendering an original bill of lading to OEC or to OEC's representative. Seven of the shipments were released by OEC or its representative to Ruff. Two of the shipments were stored at an independent warehouse owned and operated by CODSI, and the merchandise was released to Ruff from that warehouse. Plaintiffs have never been paid for their goods by Ruff or anyone else.
Plaintiffs contend that if OEC had fulfilled its contractual duty to require Ruff to surrender an original bill of lading for each shipment prior to making delivery, then Ruff could not have obtained the goods without its bank paying for the shipments and negotiating the necessary bills of lading to Ruff. Therefore, Plaintiffs seek damages from OEC for the breach of that contractual duty to the extent of the invoice price of its shipments that were not paid for by Ruff.
DISCUSSION
I. OEC's Liability
Plaintiffs claim that OEC is liable for the misdelivery of the nine shipments as a breach of contract for shipment of the goods, pursuant to the bills of lading because all nine shipments were delivered without Ruff surrendering the bills of lading. OEC argues that neither the law nor the bills of lading imposes a duty on OEC to take up original bills of lading before delivery.
OEC relies on Pere Marquette v. J.F. French Co., 254 U.S. 538, 41 S.Ct. 195 (1921), in which the Supreme Court held that there was nothing in the Federal Bills of Lading Act (formerly the Pomerene Act) that obliged the carrier "to make delivery except upon production and surrender of the bill of lading; but it is not prohibited from doing so."Id. at 546, 41 S.Ct. at 198. However, the Court continued:
If instead of insisting upon the production and surrender of the bill it chooses to deliver in reliance upon the assurance that the deliveree has it, so far as the duty to the shipper is concerned, the only risk it runs is that the person who says that he has the bill may not have it. If such proves to be the case the carrier is liable for conversion and must, of course, indemnify the shipper for any loss which results. Such liability arises, not from the statute, but from the obligation which the carrier assumes under the bill of lading.Id., 41 S.Ct. at 198-99 (emphasis added). Thus, a carrier is liable under a bill of lading when delivery is made to someone who does not have the original bill of lading. In this case, delivery was made to a party, Ruff, that did not have the original bills of lading because they had not paid for the goods.
In Pere Marquette, the carrier was not liable because the delivery was made to someone who had the bill of lading, and the failure to require the surrender of the bill did not cause the shipper's loss. See id. at 547, 41 S.Ct. at 199. However, the Court stated that "[w]here the failure to require the presentation and surrender of the bill is the cause of the shipper losing his goods, a delivery without requiring it constitutes a conversion." Id. at 546, 41 S.Ct. at 199. In this case, the carrier's failure to require the surrender of the original bills of lading allowed Ruff to obtain the goods without paying for them.
OEC also cites Chilewich Partners v. M.V. Alligator Fortune, 853 F. Supp. 744 (S.D.N.Y. 1994) in support of its argument. However,Chilewich is clearly distinguishable. The carriers in that case were not liable because the shipper encouraged the carriers to deliver the goods without obtaining the original bills of lading. See Chilewhich, 853 F. Supp. at 752.
The Second Circuit has held that "bills of lading are contracts of adhesion and, as such, are strictly construed against the carrier." Allied Chemical Int'l Corp. v. Companhia de Navegacao Lloyd Brasileiro, 775 F.2d 476, 482 (2d Cir. 1985). "Absent a valid agreement to the contrary, the carrier, the issuer of the bill of lading, is responsible for releasing the cargo only to the party who presents the original bill of lading. . . If the carrier delivers the goods to one other than the authorized holder of the bill of lading, the carrier is liable for misdelivery," unless the shipper "induced" the misdelivery. Id. at 481-83. In this case, there was no agreement relieving OEC of the responsibility to release the goods to someone holding an original bill of lading. There is also no allegation that Plaintiffs induced or encouraged OEC to release the goods without requiring the surrender of original bills of lading.
OEC attempts to distinguish Allied Chemical by arguing that the present case is not covered by the Federal Bills of Lading Act. See 49 U.S.C. § 80102. It is true that this case is not governed by the Federal Bills of Lading Act because the shipments originated in a foreign port. See id. However, the principles set out in Allied Chemical that are applicable to this case relate to a carrier's obligations under the bill of lading as a contract regardless of the application of the Federal Bills of Lading Act.
Because this is a contract dispute, "a motion for summary judgment may be granted only where the agreement's language is unambiguous and conveys a definite meaning." John Hancock Mut. Life Ins. Co. v. Amerford Int'l Corp., 22 F.3d 458, 461 (2d Cir. 1994) (citing Seiden Assoc., Inc. v. ANC Holdings. Inc., 959 F.2d 425, 428 (2d Cir. 1992)). The Second Circuit recently clarified this standard "to emphasize that ambiguity itself is not enough to preclude summary judgment. Rather, in order for the parties' actual intent to become an issue of fact barring summary judgment, there must also exist relevant extrinsic evidence of the parties' actual intent." Mellon Bank, N.A. v. United Bank Corp., 31 F.3d 113, 116 (2d Cir. 1994)
There is only one possible ambiguity in the bills of lading at issue in this case. Each of the nine bills of lading includes the following statement: "In WITNESS WHEREOF the master or agent of said vessel has signed 3 (THREE) original bills of lading, all of the same tenor and date, ONE of which being accomplished, the others stand void." Plaintiffs argue that the term "accomplished" is a term of art when used in a bill of lading which requires the surrender of the bill of lading prior to delivery of goods. Plaintiffs cite Alcoa S.S. Co. v. United States, 338 U.S. 421, 70 S.Ct. 190 (1949), which recognized "`Accomplishment' . . . to be a technical term of ancient use in the law of the sea signifying no more than surrender of the bill to the carrier by the consignee or other authorized holder." Id. at 426, 70 S.Ct. at 193. OEC argues that Alcoa is inapplicable because the circumstances of the case did not involve misdelivery and that the clause only serves to protect the shipper from liability on the remaining two bills of lading once one has been "accomplished."
OEC's argument fails, however, because, as noted above, bills of lading must be strictly construed against the carrier. Allied Chemical, 775 F.2d at 482. OEC has offered no relevant extrinsic evidence to support its interpretation of the clause in question.
Nothing in these contracts relieved OEC of the responsibility to release the goods to the holder of an original bill of lading. OEC contends that sections 14.2 and 6 of the bills of lading limit its delivery obligations by specifying that "[c]arrier's responsibility shall cease when delivery has been made" to the consignee. Def.'s Mem. Opp'n Pls.' Mot. Summ. J. at 13. However, the Second Circuit has held such clauses null and void "under the Harter Act's proscriptions against certain limitations on carriers' liability." Allied Chemical, 775 F.2d at 482 (citing 46 U.S.C. § 190). Unlike the Federal Bills of Lading Act, the Harter Act does apply to shipments that originate in a foreign port. See 46 U.S.C. § 193; see also James Knott v. Botany Worsted Mills, 179 U.S. 69, 74-75, 21 S.Ct. 30, 32 (1900) Therefore, these clauses are null and void under the Harter Act.
OEC attempts to avoid liability on the three the bills of lading that are consigned to Ruff rather than "to the order of" Ruff. OEC argues that these bills are straight bills of lading, and therefore the obligation to deliver the goods is complete upon delivery to the consignee. However, "whether the bills were negotiable or nonnegotiable is relevant to a statutory claim for conversion under the Pomerene Act, but not relevant to a breach of contract claim." Porky Prod. Inc. v. Nippon Express U.S.A. Inc., 1 F. Supp.2d 227, 232 (S.D.N.Y. 1997), aff'd, 152 F.3d 920 (2d Cir. 1998). As stated above, this is a breach of contract claim and therefore the characterization of three of the bills as straight bills is irrelevant.
Thus the Defendant OEC was contractually obligated to obtain an original bill of lading before delivering the shippers' goods. This contractual obligation applies to all nine bills of lading regardless of their negotiability. OEC breached the contracts at issue and is therefore liable for the misdelivery of the goods.
II. Damages
Plaintiffs also assert that they are entitled to summary judgment on the issue of damages in the amount of the invoice value of the shipments in all but three instances in which they concede that under the package limitation in the bills of lading OEC's liability is limited to $500 per package. OEC argues that Plaintiffs are not entitled to the invoice price as a matter of law because the invoice price may not accurately reflect the loss suffered by Plaintiffs.
Section 7.3 of the bills of lading provides: "If the value of the goods is less than $500 per package or customary freight unit their actual value for compensation purposes shall be deemed to be the invoice value, plus freight and insurance, if paid." Pls.' Mem. Opp'n Def.'s Cross-Mot. at 21.
In the case of cargo loss, the measure of damages is usually "[t]he market price of the cargo at the place of destination, in like condition as when it was shipped, on the date when it should have arrived." Holden v. S/S/ Kendall Fish, 262 F. Supp. 862, 864 (E.D. La. 1966) (citingAnsaldo San Giorgio I. v. Rheinstrom Bros. Co., 294 U.S. 494, 496, 55 S.Ct. 483 (1935); St. Johns N.F. Shipping Corp. v. S.A. Companhia Geral Commercial Do Rio De Janeiro, 263 U.S. 119, 125, 44 S.Ct. 30, 31 (1923)), aff'd, 395 F.2d 910 (5th Cir. 1968); accord Texaco Export, Inc. v. Overseas Tankship Corp., 477 F. Supp. 289, 293 (S.D.N.Y. 1979), aff'd without op., 614 F.2d 1291 (2d Cir. 1979), and aff'd without op. sub nom., United S.S. Corp. v. Getty Oil Co., 614 F.2d 1291 (2d Cir. 1979). However, as the Court observed in Santiago v. Sea-Land Serv., Inc., 366 F. Supp. 1309 (D.P.R. 1973)
The assessment of damages in particular situations . . call[s] for . . . the use of common sense and the creation of exceptions, all to the end that the shipper whose property has been affected be made whole.Id. at 1314.
Courts have used the invoice price of the cargo to determine value when the fair market value at destination was uncertain or not proved. See C. Itoh Co. v. Hellenic Lines, Ltd., 470 F. Supp. 594, 598 (S.D.N.Y. 1979);Tatlow Pledger, Ltd. v. Hermann Forwarding Co., 456 F. Supp. 351, 355 (S.D.N.Y. 1978); Pacol (Canada) Ltd. v. M/V Minerva, 523 F. Supp. 579, 582 (S.D.N.Y. 1981)
Since fair market value is what a willing buyer would pay a willing seller, it is not unreasonable to assume, in the absence of evidence to the contrary, that what the buyer and seller agreed to in this case, as reflected in the invoice, was in fact the fair market value. Here, discovery has been completed and OEC offers only speculation to suggest that the fair market value is in fact something other that the invoice price of the goods. Such speculation is not sufficient to overcome the strong inference that what the parties agreed to as the purchase price was in fact the fair market value of the goods in question.
III. OEC's Motion for Partial Summary Judgment
OEC seeks partial summary judgment on its third-party claim against CODSI. OEC argues that CODSI should be liable, rather than OEC, for the misdelivery of two of the shipments because the goods were stored at and released from a warehouse owned and operated by CODSI. The main thrust of OEC's argument is that CODSI should be liable because it had possession and control over the goods and was in the best position to prevent the misdelivery to Ruff.
This claim cannot be based on the bills of lading contracts themselves because CODSI was not a party to those contracts and therefore cannot be bound by them. See Stein Hall Co., Inc. v. S.S. Concordia Viking, 494 F.2d 287, 291 (2d Cir. 1974). Rather, the only relevant theory upon which OEC can rely is that CODSI was a bailee of the two shipments. However, OEC has failed to demonstrate the absence of a genuine issue of material fact regarding CODSI's status as a bailee of the shipments.
In general, a carrier's agent becomes a bailee for the mutual benefit of the carrier and shipper when it takes custody of the goods covered by a bill of lading and arranges for their delivery. See Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800, 813 (2d Cir. 1971); Electro Magnetic (S) Ltd. v. Sea Cargo Int'l, Inc., 90 Civ. 6335, 1992 WL 47970, at *3 (S.D.N.Y. Mar. 4, 1992). However, in this case it is unclear what relationship existed between OEC and CODSI. OEC argues that CODSI was an independent contractor. CODSI argues that it was either a subcontractor of OEC or an agent of OEC's broker from whom it received instructions to release the goods in question. However, OEC maintains that the broker in question was the consignee's customs broker.
OEC's motion for summary judgment never explains why these two shipments were deposited at this independent warehouse nor provides any documents or contracts detailing the parties relationship. There is nothing printed on the bills of lading at issue that would suggest that these shipments were any different from the other seven shipments. Therefore, there is no evidence, other than OEC's assertions, that CODSI had both control and possession of the goods in question, which would suggest that a bailment existed. See Moore-McCormack Lines, Inc. v. Int'l Terminal Operating Co., 619 F. Supp. 1406, 1411 (S.D.N.Y. 1985).
In short, there appears to be a genuine issue of material fact concerning the nature of the relationship that existed between OEC, CODSI, and the consignee Ruff. The lack of supporting documentation makes it impossible to find that CODSI was a bailee of the goods in question. Therefore OEC's motion for partial summary judgment against CODSI must be denied.
CONCLUSION
For the foregoing reasons, Plaintiffs' motion for summary judgment is granted. OEC's motions for summary judgment and for partial summary judgment against CODSI are denied.
SO ORDERED.