Olympic Mentor

1997 AMC 1140

ASSOCIATED METALS & MINERALS CORP. v. M/V OLYMPICMENTOR, ET AL.

Opinion

DENISE L. COTE, D.J. (orally):

This action arises out of a shipment of water-sensitive steel coils purchased by plaintiff and shipped aboard the Olympic Mentor in June and July of 1992 from Rio de Janeiro, Brazil to Philadelphia, Pennsylvania. Plaintiff Associated Metals & Minerals Corporation, which I will refer to as Associated Metals, alleges that the coils were damaged by “ship sweat” while being transported by defendant Olympic Mentor. A nonjury trial was held in this action on December 18, 19, and 20, 1995.

Prior to trial, the parties submitted direct testimony by affidavit.

Based on the testimony provided at trial and the exhibits admitted into evidence, the following are the Court’s findings of fact and conclusions of law issued pursuant to Rule 52 of the Federal Rules of Civil Procedure.

Plaintiff Associated Metals, a New York corporation now known as Metallon Holding Corporation, is engaged in the trading and importation of steel products into the United States for resale. Defendant Olympic Mentor is a general ship, or bulk carrier, and is a merchant vessel for hire in the international carriage of goods by sea. Mirastar Maritime was at all times relevant the owner of the vessel. Olympic Maritime was an agent of the owner.

In June and July of 1992, Associated Metals imported a cargo of 402 water-sensitive steel coils (cold rolled, galvanized and hot rolled, pickled and oiled) into the Port of Philadelphia for resale to various customers.

The government-owned mill at which the coils were manufactured and packaged is Companhia Siderurgica Nacional, which I will refer to as CSN, which is located 65 miles from the loading port used here. The mill uses an oxygen-free oven treatment to ensure that the coils are dry before they are packed. They then coat the hot rolled and galvanized steel with oil, add a layer of water-resistant paper to all the coils, and finally surround all the coils with galvanized waster wrappers, consisting of an internal diameter piece, an outer diameter piece, and two end discs and outer diameter and inner diameter sleeves. The wrappers are secured by steel bands. The packing process used here is standard for steel coils shipped from Brazil. The majority of coils shipped around the world are covered with a wrapping of galvanized steel held by bands as was used here.

Once the coils are prepared, they are placed on rail cars which run inside the mills. The rail cars are then covered, and the train carries the cargo to the warehouse at the port, which, again, is unloaded in covered space.

The exterior of the coils was inspected at the Port of Rio at the time that the coils were loaded onto the vessel. There was no evidence of any rust or dampness on the coils at that time, as is evidenced also by the photographs that are in evidence. The bills of lading for the coils note various kinds of damage to the steel casing for the coils, all minor in nature, and make no reference to any rust or water damage. Defendant points out, however, the rust clause in the bill of lading. Plaintiff counters by pointing out the mate’s receipts, which also list no evidence of any water damage to the coils.

The coils at issue here were loaded into cargo holds 2 and 4 along with steel products destined for other customers.

The vessel had arrived in Rio on June 12 following a voyage to Argentina, where, it being winter, the weather had been much colder. The coils were loaded onto the ship on June 18. On June 19, a day when the hatches were open, it rained for approximately one half hour. The log notes that the hatches were covered while it was raining.

From June 22 to June 23, the ship visited the Brazilian port of Praiai Mole, or Mole. The ship then traveled to Philadelphia where she arrived on July 7.

The voyage was made in relatively good weather. The log noted no readings for relative humidity, dew point, or temperatures in the hold, and one of the ship’s officers admitted when the vessel arrived in Philadelphia that no temperature or humidity readings had been taken in the hold. That same officer admitted that he had observed ship sweat and condensation in the hold, but that the ship’s ventilation system hadn’t been sufficient to deal adequately with the problem. There were from June 21 to July 6 one to five air temperature readings taken per day. The air temperature fluctuated between a low of 21 degrees and a high of 32 degrees. Sea temperature was taken either not at all, or once per day. The sea temperature readings were usually within one degree of the air temperature, although there were some greater variations, including June 29 when the sea was four degrees warmer than the air temperature. On seven of the eleven times a sea temperature was noted, it was colder than the air temperature.

The log noted that the holds were ventilated on June 28, June 29, July 1, July 2, and July 6. From the chief officer’s statements to the defendant’s surveyor, Mr. Esfahani, the ship was ventilated when the chief officer saw condensation accumulated on the cargo, and therefore we can assume that he saw such condensation on these dates.

The ship used a natural ventilation system, which means that a system of two mushroom ventilators–that is, two per hold–stood above the main deck and were opened by hand. The ship relied then on normal air flow under those conditions to ventilate the holds. The ship was built in 1984, but did not have any fans or mechanical ventilating devices.

Under certain conditions, if there is no adequate ventilation, it is possible for there to be, in effect, a “rain forest” environment created anew each day in a hold; or, as the defendants’ expert Sparks noted in his book, Steel Carriage By Sea, ship sweat is often troublesome because in some instances it can reach such proportions that free moisture rains down upon the cargo. As described in the book Marine Cargo Operations, moisture or sweat damage probably ruins more cargo each year than any other form of oceanic shipping hazard because it is so prevalent a condition in cargo holds and so many cargoes are sensitive to moisture. Ship’s sweat, the most common source of moisture damage to cargo, is from dripping overhead condensation. It is the result of steel of the ship’s structure becoming cooled to below the dew point of the air in the holds through contact with cold air, rain or sea water. The air in the hold then releases its moisture.

Most ships built today are equipped with fans for ventilating purposes. Natural ventilation cannot be relied on to prevent ship sweat since a reduction in wind velocity, a change in wind direction, a change in the ship’s course, spray, fog or rain may impede or stop ventilation. As a result, natural ventilation cannot be relied on unless the cargo is not sensitive to moisture.

The publication of the Nautical Institute of London book called Bulk Carrier Practice notes that most steel products are liable to damage from rust and must be treated with great care. Cold-rolled steel products in particular can be damaged easily by moisture. The book notes that condensation is damaging to finished steels even when they are wrapped in moisture-proof packaging. Consequently, ventilation must be controlled to ensure they are not exposed to sweat. Hot-rolled steel, while not as susceptible to such damage, nonetheless should not be allowed to stand in water.

The book advises that ventilation should be operated at all times except when the external air’s humidity is high and its dew point is higher than that in the hold. The logbook for voyages carrying finished steel should have temperature and dew point readings every watch for the outside and cargo temperature daily. Every instance of opening and closing ventilation and hatches should be logged.

As Sparks notes in Steel Carriage By Sea, ship masters must keep wet and dry bulb atmospheric temperatures to monitor the situation. When a ship has only two ventilation shafts per hold, however, and no fans, a ship is probably “incapable” of dealing with ship sweat if it develops in the holds.

The vessel here arrived in Penn Terminals in Philadelphia early on July 7. When the hatches for cargo holds 2 and 4 were opened, a heavy, mist-like, dense fog rose from the holds and gallons of water poured into the cargo holds from the hatch covers. Water sat in places on the floor, or what is called the tank tops, of the cargo hold. It was immediately apparent that the cargo of coils was wet due to heavy ship’s sweat. There were patches of orange rust on some of the coils, and many coils had a covering of white rust. There was also some evidence of a drip-down pattern in the rusting, suggesting that water from the underside of the hatch covers had fallen on the coils underneath them. Since only the exteriors of the coils were visible, however, the interior of the coils had to be examined to determine if the damage had reached the interior and, if so, how extensive it was.

There were three witnesses in particular for the plaintiffs who testified about their observations when the ship hatches were opened or shortly thereafter on July 7. I found Captain McGowan’s testimony on this particularly important. He was there on behalf of the stevedores.

Numerous silver nitrate tests were conducted immediately after discharge, or even before discharge. Only a few showed positive reactions.

On July 10, 1992, the coils were inspected at Penn Terminal, into which they had been unloaded. Sixteen randomly-selected coils were opened. Of the three hot-rolled pickled and oiled coils, two had water under the wrappers and the coil edges were brown with rust. Of the eight cold-rolled coils, all were wet with rust. Of three galvanized coils, all showed evidence of internal rust.

On July 13, 1992 and July 16, 1992, the bottoms of the waster sheets were pried open on a number of coils by plaintiff’s surveyor, who saw evidence of rust water coming from the interior surfaces. He concluded that many of the coils had rust damage. Surveyors from the plaintiffs and defendants thereafter conducted joint surveys of the coils going to four purchasers.

It had purchased 64 galvanized coils for $ 294,000, and 65 cold-rolled coils for $ 268,000, all told, 129 coils for $ 562,000.

Turning for a moment to the findings of the joint survey which was conducted for each of the purchasers who bought in quantity from the plaintiff, both surveyors for the plaintiff and for the defendant concluded that the water damage was from water that penetrated the coils from the exterior. Both found it to be of fresh water in origin. Both had agreed on which coils would be examined and on the number of coils to be examined. Roughly, 20 percent of the coils were decanned, and roughly five percent were run over a slitter.

I now turn to the law that will apply in this case.

As a general matter, the duties of a carrier are governed by the bill of lading, which sets forth the contract of carriage. Bills of lading are contracts of adhesion and therefore they are strictly construed against the carrier. In addition to the bill of lading, the Carriage of Goods by Sea Act, otherwise known as COGSA, is applicable to this action.

COGSA imposes on ocean carriers a duty to “properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.” The statute applies “from the time when the goods are loaded on to the time when they are discharged from the ship.”

To assert a prima facie case under COGSA, the plaintiff must demonstrate that the cargo was damaged while in custody of the vessel. Thyssen v. Eurounity, 1994 AMC 1638, 1643, 21 F.3d 533, 538 (2 Cir. 1994). “This burden can be met by proving ‘(1) delivery of the goods to the carrier in good condition, and (2) outturn by the carrier in damaged condition.'”Bally, Inc. v. M.V. Zim America, 1994 AMC 2762, at 2766, 22 F.3d 65, at 69 (2 Cir. 1994).Outturn occurs at the time of discharge of the cargo. In meeting its initial burden of showing “that the damage was caused by the” defendants’ “negligence and not by any inherent vice of the cargo,” the plaintiff may make its showing through direct or circumstantial evidence.Siderius v. M.V. Amilla, 1989 AMC 2533, 2536, 880 F.2d 662, 664 (2 Cir. 1989). An “inherent vice” is “any existing defect, disease, decay or the inherent nature of the commodity which will cause it to deteriorate with a lapse of time.”

The carrier’s bill of lading often plays a large role in establishing delivery of the goods to the carrier in good condition. “A clean bill of lading is ordinarily prima facie evidence of delivery in good condition.” Caemint Food (2 Cir. 1981) 1981 AMC 1801, 1807, 647 F.2d 347, 352. A carrier is presumed to have confirmed any attribute indicated on the bill of lading, and to the extent that the carrier is unable to confirm an attribute of the goods, the carrier may by statute refuse to list that attribute on the bill of lading.

A bill of lading, however, is only prima facie evidence of the condition of so much of the goods as is visible to the carrier. Thus, a clean bill of lading does not carry its usual probative force where “the goods are shipped in packages that would have prevented the carrier from observing the damaged condition had it existed when the goods were loaded.”Caemint Food, 1981 AMC at 1808, 647 F.2d at 352, Bally, 1994 AMC at 2766, 22 F.3d at 69.

Where cargo damage may have resulted from a hidden defect, the burden is on the plaintiff to establish that the cargo was delivered in good condition. Caemint Food, 1981 AMC at 1810, 647 F.2d at 353-54 note 5.

One way for plaintiff to establish that the cargo was delivered in good condition is to show that the damaged condition discovered at outturn would have affected the way the package appeared on delivery had such conditions existed at that time. Another would be to show that the cargo was packaged and transported to the load port in such a manner and under such conditions that should have prevented damage from occurring en route. Caemint Food, 1981 AMC at 1811, 647 F.2d at 354 note 6.

The rationale for imposing on the plaintiff the burden of showing delivery in good condition is that the shipper has superior access to information about the condition of the goods prior to loading, just as the carrier has superior knowledge about their condition afterwards.Caemint Food, 1981 AMC at 1812, 647 F.2d at 354.

Moreover, when the defendant introduces evidence that tends to show that the damage occurred due to an “inherent vice” that the carrier could not have observed externally, the burden shifts back to the plaintiff to disprove the existence of the internal defect as part of its prima facie case. Caemint Food, 1981 AMC at 1815, 647 F.2d at 356, note 9.

A plaintiff may also meet its prima facie burden by proving that the damaged condition was due not to inherent vice but due to the carrier’s negligence. Caemint Food, 1981 AMC at 1813, 647 F.2d at 355.

If the plaintiff meets its prima facie burden, the burden shifts to the carrier to show that the loss or claim falls within one of COGSA’s exceptions, such as inherent vice. If the defendant does come forward with evidence of inherent vice, the burden is on the plaintiff to prove by a preponderance of the evidence that the goods were delivered in good order and condition.Caemint Food, 1981 AMC at 1812, 647 F.2d at 354.

Under this standard, plaintiff has met its burden of establishing a prima facie case. There is no evidence whatsoever that there was any harm or damage to the goods when they were delivered. In contrast, there was, as I noted before, a heavy, mist-like, dense fog that rose from the cargo hold when the hatch covers were opened, and heavy ship’s sweat and numerous puddles of water on the tank tops in the holds 2 and 4 where the plaintiff’s cargo was stowed.

The defendant points out that the testimony regarding the preparation of the packages of this cargo and its transportation from the mill to the dock in Rio, or to the warehouse in Rio, was primarily evidence of a practice that took place several years before the actual shipment of the goods here, and, therefore, there was no firsthand testimony with respect to the preparation of the packaging of these goods at the mill or their transportation to the port.

Nonetheless, when I put together all the other circumstantial evidence, I find that there is sufficient evidence that the goods were delivered in good condition. I am relying for that on the surveys, on the condition of the cargo as noted in the photographs, on the testimony about the cargo’s packaging that was observed later after discharge, and, of course, I’m also relying independently on the evidence that the plaintiff produced that the damage here was caused during the voyage by the ship’s sweat.

Turning to that point, again, I note that the ship possessed only a “natural” ventilation system, with no mechanical forced-air system, or fans or dehumidifiers. The ship’s officers had seen sweat and condensation in the holds during the voyage, but admitted that they had been unable to prevent it using only the natural ventilation system. They had not taken any temperature or humidity readings in the holds, which would be essential in determining exactly when they should even use the natural ventilation system they had. The ship’s log confirms these admissions. An examination of the ship’s log shows that no entries were ever made of temperature or humidity readings taken in the hold during the voyage.

All of the coils had suffered some form of wetting in various degrees. Further examination of the interior of the coils showed that there was damage to many of them on the interior due to wetting of the coils from an external source.

Based on the foregoing, the plaintiff has more than met its initial burden of showing that “the damage was caused by the carrier’s negligence and not by any inherent vice of the cargo.” Siderius, 1989 AMC at 2536, 880 F.2d at 664.

Once the plaintiff has made out a prima facie case, the burden shifts to the defendants to prove that the rust damage did not occur on board the vessel. In opposition to plaintiff’s prima facie case, defendants have offered several arguments in an attempt to show inherent vice of the cargo and lack of negligence on their part.

Defendants have alluded to an alleged lack of claims for damage on other steel cargo transported contemporaneously particularly in Hold 4, when it comes to coils, thereby suggesting that any damage to the plaintiff’s cargo must therefore be due to something other than ship sweat. They have presented no evidence of the conditions of the coils, though, that were actually received by these customers, relying instead entirely on a lack of a claim put forward by these customers.

Without more, this defense is impossible to evaluate. I note in passing, however, that all of the coils transported aboard the Olympic Mentor came from the same mill in Brazil. Therefore, proof of a lack of other claims would require defendants to meet the additional burden of explaining why plaintiff’s coils were contaminated at the mill while others from the same mill were not.

In addition, other consignees may have found damage and chosen not to file claims with the defendants for a variety of reasons, and to determine that really would require us to engage in speculation. For instance, other consignees may have insured their goods, aware of COGSA’s damage limit; their coils may have been subjected to rain during discharge and stevedores may have settled with them with respect to claims they might have had with respect to water damage. We really have no evidence about this in order to really evaluate the significance of the lack of claims.

Second, plaintiffs have offered evidence that prior to loading the ship was washed out with salt water, which leaves some quantity of salt crystal adhering to the metal parts of the ship. As a consequence, any ship sweat may contain salt that could be ascertained by a silver nitrate test. A few tests at discharge did indicate salt on the exterior of the coils, but the majority of such tests did not. Visual observation of the exterior and the interior of the coils did not disclose to those experienced in looking for salt water damage, which is far more corrosive, it would appear, based on the testimony, than fresh water damage, that salt water damage was present. There has been a lack of evidence from the defendants as to the amount of salt which would normally appear in ship sweat from a hold washed with salt water. In contrast, there is overwhelming evidence of ship sweat and water damage to coils immediately upon discharge. This was not salt water damage. The weight of the evidence, by a strong margin, is that this damage was from ship sweat.

Third, the defendants rely on Saeed Esfani, a marine surveyor, who testified as to the coil damage he observed in photographs taken after the coils were decanned. He testified that the damage depicted in the photographs was not consistent with external contamination. He therefore concluded that the damage was caused by improper packing conditions giving rise to internal sweating, not by external contamination due to ship sweat.

His testimony is unpersuasive because he did not observe the interior of the coils firsthand. Both very experienced surveyors who did make such firsthand observations, including the defendant’s own surveyor, concluded that the water damage came from an external source. Also, my own observations of the photographs confirmed this pattern. Repeatedly, one can trace the water movements from the outside to the inside of a coil by following a series of photographs or even by looking at one photograph in which enough of the packing material was also shown in the photograph.

Fourth, defendants contend that, had the plaintiff properly packed the coils, they could have withstood the light amount of ship sweating that they contend occurred. This contention is inconsistent with other, more persuasive evidence in the record. Specifically the packaging methods utilized for the coils at issue were standard methods in Brazil. The paper customarily employed in the packaging of steel coils is not intended to be completely waterproof; coils must therefore be protected from rain and heavy wetting at all times, as each of the texts referred to earlier indicates. Although some mills in Germany and elsewhere now use more sophisticated packaging materials that are more water resistant, the packing used by the Brazilian mill in this case was entirely “typical and normal” for these coils and adequate to protect the cargo from expected rigors of transit.

Fifth, the defendants point to the surveys of the damage to the interior, and argue that these were not begun until August, and while most were done in August and September, one, of six coils, was not done until December. Defendants argue that the damage could have come from rain falling on the coils since the time of discharge, or that a condition that had existed at the time of discharge could have worsened in the long interval.

The presence of some droplets in the interior of the coils in an August survey bolster defendants’ arguments. There was an abundance of evidence of ship sweat and water damage at the time of discharge. No direct evidence that any of the cargo was exposed to rain following discharge has been presented whatsoever. The condition of the coils delivered to the five different customers was generally the same. It is unreasonable to assume that all five customers would have been so negligent as to have allowed water-sensitive coils in their possession to become exposed to rain.

The plaintiff carried the burden that the damage was due to ship sweat.

Finally, defendants offered testimony that there is no reason to ventilate a cargo of properly packaged steel coils for transit from Rio  de Janeiro to Philadelphia in the summer months. This testimony is in direct opposition to the more compelling evidence in this case, that ventilation and condensation were serious problems on this voyage.

In sum, plaintiff has also carried its burden of establishing by a preponderance of the evidence that a valid COGSA claim exists.

Notice of claim was made, as COGSA requires, in order to prevent the presumption in favor of the carrier from arising, under § 1303(6), within three days of the delivery.

COGSA, which codified the principle that a carrier is liable for damage due to its negligence, thereby overturning the historic principle that a carrier had absolute liability for goods under its care, also provides a ceiling for liability unless the shipper declares a higher value.General Electric Co. v. M.V. Nedlloyd, 1987 AMC 1817, 1819, 817 F.2d 1022, 1024 (2 Cir.)cert. denied, 484 U.S. 1011, 1988 AMC 2399 (1988).

COGSA provides that: “Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $ 500 per package . . . or . . . customary freight unit.” Thus, unless the shipper declares a higher value for its goods, it is limited to the $ 500 per package recovery ceiling. A carrier is required, however, to provide the shipper with a “fair opportunity” to declare a higher value. General Electric, 1987 AMC at 1825, 817 F.2d at 1028.

“Fair opportunity” requires adequate notice of the limitation of liability and the availability of a reasonable ad valorem charge for any declaration of higher value. General Electric, and also Stolt Tank Containers, Inc. v. Evergreen Marine Corp., 1992 AMC 2015, 2019, 962 F.2d 276, 279 (2 Cir. 1992).

If the shipper fails to provide such fair opportunity, it loses the benefit of any limitation of liability to which it might otherwise be entitled. General Electric, 1987 AMC at 1825-26, 817 F.2d at 1028. Bills of lading, therefore, usually contain on their face a space for declaring such “excess value.” General Electric, 1987 AMC at 1819, 817 F.2d at 1024.

The burden is initially on the carrier to prove fair opportunity. General Electric, 1987 AMC at 1827, 817 F.2d at 1029. When opportunity can be “gleaned from the language contained in the bill of lading,” the carrier has met its prima facie burden, and the burden then shifts to the shipper to establish that a fair opportunity did not exist. General Electric, 1987 AMC at 1827, 817 F.2d at 1029.

In General Electric, the Court held that a bill of lading that contained a space for declaring excess value on the front and a provision on the back indicating that the bill of lading incorporated COGSA was sufficient to constitute adequate notice and therefore fair opportunity. General Electric, 1987 AMC at 1028, 817 F.2d at 1029. Although, as noted above, a space on the front of the bill of lading to declare the excess value is usually provided, the absence of such a space is not dispositive of whether the shipper had fair opportunity.

In Union Carbide Corp. v. M.V. Michele, 1992 AMC 63, 764 F.Supp. 783 (S.D.N.Y. 1990), the bill of lading both incorporated COGSA and explicitly stated that liability would be limited to $ 500 per package unless an excess value was declared, but did not provide a space on its front for declaring excess value. Finding that the plaintiff was “an experienced shipper which should have known that excess value must be declared in any standard bill of lading,” JudgeSand rejected the plaintiff’s argument that it was not afforded a fair opportunity to declare excess value.

In E.M.S. Industrie S.A. v. Pulskie Towarzystwo, 1986 AMC 217, 218, 608 F.Supp. 1133, 1135 (E.D.N.Y. 1985), Judge Nickerson held that a bill of lading which merely incorporated COGSA provided prima facie evidence of fair opportunity to declare excess value.

Similar facts are presented in the instant case. Here, the front of each bill of lading contained the statement: “Particulars of sales contracts and/or letters of credit inserted by shippers are not to be regarded as declarations of value of the goods shipped.” In addition, there was a space on the front which was labeled, “Freight Details, charges.” On the back of each bill of lading appeared the declaration, “For voyages to and from ports of the United States of America, the United States Carriage of Goods by Sea Act of 16 April, 1936 shall apply.”

Here also, the plaintiff accepted the shipment of goods knowing that there was a booking note and knowing that it did not have a copy of the booking note. Therefore, at the time it accepted shipment of these goods, it did not know what arrangements had been made in connection with the carrier pursuant to the booking note. It was still willing to take the goods without any knowledge of such arrangements.

Putting all these facts together, and relying on the law of the Second Circuit, I find that the bill of lading incorporated COGSA sufficiently to give a fair opportunity here to declare an excess value, if that was the desire of those who were engaged in shipping of these goods.

Here, of course, the plaintiff is not the shipper, but a consignee of the shipper. I find this distinction, however, inconsequential for the following reasons:

In Stolt Tank Containers, the Second Circuit confronted, and rejected, the argument that COGSA’s liability limitations applied only to the signatories of bills of lading. “Where a party is aware that another is shipping its packages aboard a vessel and has at least constructive notice that liability limitations might apply, that party is bound by the liability limitations agreed to by the shipper.” Stolt Tank Containers, 1992 AMC at 2020, 962 F.2d at 280.

As an experienced importer of steel products with knowledge that the mill was arranging for the shipment of the coils, Associated Metals had constructive notice that COGSA applied and therefore should not be relieved of the liability limitation based upon its status as a consignee in this case. General Electric, 1987 AMC at 1027-28, 817 F.2d at 1029.

Defendant, having borne its burden of providing prima facie evidence of fair opportunity by the incorporation of COGSA on the bill of lading, the burden of proof having shifted to the plaintiff to demonstrate that fair opportunity did not exist, and plaintiff having presented no evidence that it did not exist, I find that the $ 500 limitation does apply in this case.

I note, for instance, that Associated Metals could have taken any number of measures to protect itself from the application of the COGSA damage limitations, including contracting with the shipper to have the value of the goods declared to the carrier or purchasing insurance for additional coverage. See Stolt, 1992 AMC at 2020, 962 F.2d at 280.

I turn now, then, to the damage limitation as it applies to the number of coils that were damaged.

Plaintiff received four damage survey reports from Hugh Fowley and one from M.B. Ward. The number of coils damaged was established by examining a representative sampling of all the coils and then extrapolating the total damage figure from the sample surveyed.

Defendants’ surveyor, who participated in the selection of most of the coils for inspection and did not ask that different coils be examined or that a larger number be examined or that a larger number be run over the slitter, basically confirmed the conclusions of damage here. Defendants conducted no separate survey.

I find, under all the circumstances, that the survey method employed here was reliable and reasonable in order to assess and project the amount of damage to the coils involved.

Plaintiff has settled claims with five separate customers to whom it sold damaged goods. I have described the percentage of the coils of each customer which were damaged, and it is on that basis that I will assess a $ 500 damage amount for each of the damaged coils.

Defendants have admitted that it would be difficult, if not impossible, to identify coils that were damaged to an extent less than $ 500, but phrase that as an issue and have pointed to at least one instance where there is some evidence in the record that the damage was less than $ 500. However, I find that the totality of the evidence, when considered together, shows that the damage was more often far in excess of $ 500, and that the defendants have not shown, in a way that the Court is able to apply, to which coils it would be less than $ 500. I note, in this regard, that running a coil over a slitter, just for the mere sake of examining it alone, costs $ 250.

Let me turn then to mitigation of damages.

“For over half a century, the rule regarding apportionment of damages between shipper and carrier has been that the carrier must bear the entire loss unless he can show what portion of the damages is attributable to some cause for which he is not responsible.” Here the defendant points to the plaintiff’s failure to survey the damaged goods promptly.

There is some evidence in the record that the plaintiff’s surveyor began his efforts to reach the defendants’ surveyor several days before they actually spoke and made their first arrangements to begin a survey. I find, however, that this small lapse of time is not really significant. Joint surveys are to be encouraged and have been of enormous assistance to the Court in this case. I found Mr. Koelbel’s testimony extraordinarily helpful. Both he and defendants’ counsel are to be commended for dealing forthrightly with what were, in the context of this case, significant admissions.

Here it is important to note that rust damage does not disappear over time, and at the same time it doesn’t spread over time. What it will do, based on the evidence in this case, is corrode areas that are already affected more severely.

Given the $ 500 damage limitation here, though, that I am going to apply, I find it unnecessary to decide if the delays in the survey worsened the damage, since I have no hesitation in concluding that the damage at the time of discharge amounted to $ 500 for those coils that were damaged at all.

Turning to the issue of prejudgment interest, awarding prejudgment interest is the rule rather than the exception in admiralty cases. The rate of interest is, as I understand it, in the discretion of the Court. I find that the New York State rate of 9 percent per annum is appropriate in this case for an award of prejudgment interest, relying on New York CPLR §§ 5001 and 5004. I am not prepared to address the issue of compounding interest without hearing from both counsel on that issue.

I now address the question of whether the vessel was seaworthy. Seaworthiness is “the ability of a vessel adequately to perform the particular services required of her on the voyage she undertakes.” GTS Industries, 1996 AMC 232, 68 F.3d 1551 (2 Cir. 1995).

I find by a preponderance of the evidence that the ship was unseaworthy for purposes of carrying the steel coil cargo, because she relied entirely on a natural ventilation system which on this vessel was inadequate to deal with the ship sweat. Independently, I find that the ship was not seaworthy because the ship did not contain equipment for measuring relative humidity and temperature within the holds. I’m relying on Siderius, 1989 AMC at 2536 to 2537, 880 F.2d at 664 to 665.

Where a vessel owner promises, usually in the charter, to provide a ship that is “in every way fitted for ordinary cargo use,” that owner has warranted that the vessel is seaworthy. This, or language which is substantially similar in substance, can establish a warranty of seaworthiness, the breach of which will result in personal liability of the shipowner or any ship agent for any damage to the shipper’s or consignee’s cargo.

In the instant case, the charter contains a specific warranty of seaworthiness that promised the vessel would be, “tight, staunch, strong and in every way fitted for ordinary cargo service …” The vessel owner then breached this warranty by providing a ship that was not seaworthy for the goods it undertook to carry. Although the plaintiff in this case is the cargo owner and not the charterer, this Circuit has long held that “when the charterer of a ship is liable to the cargo owner, and that liability results because the vessel owner has violated its warranty of seaworthiness, the cargo owner may hold the ship owner on his warranty to the charterer.” Siderius, again.

Therefore, in light of my holding that the vessel was unseaworthy for purposes of carrying the plaintiff’s cargo, I find that the plaintiff is entitled to a judgment against the owner of the vessel, Mirastar Maritime, in personam, in addition to a judgment against the vessel in rem. I also find the agent of the owner liable in personam under the same theory.

 The parties have discussed in letter briefs the recent Second Circuit case ofCentral Hudson issued by the Second Circuit on May 17, 1995, in connection with this issue and whether the “Club letter of undertaking” issued in connection with the in rem action against the Olympic Mentor precludes a personal judgment against the ship’s owner. The Court in that case clearly recognized that a district court sitting in admiralty jurisdiction exercises powers akin to those in equity and as such may properly enter a judgment in excess of the value of a letter of undertaking. Although the facts in Central Hudson are not on all fours with those presented here, nothing in that case suggests that this court may not enter a personal judgment against the vessel owner and its agent in this case in an amount that exceeds the letter of undertaking.

 


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Kingsley & Kingsley
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