Opinion
No. 339.
July 3, 1929.
Appeal from the District Court of the United States for the Southern District of New York.
Libel in admiralty by William H. Stiles and Lynn D. Stiles, copartners composing the firm of Wm. H. Stiles Co., to recover damages against Ocean Steamship Company for injury to libelants' cargo shipped on board respondent's vessel. From a decree dismissing the libel, libelants appeal. Reversed, and cause remanded, with directions.
Libelants sued for damages to 550 cases of rubber shipped on respondent's steamer Ajax by Tan Kah Tee Co. at Penang, Straits Settlements. The merchandise was consigned to Bank of the Manhattan Company of New York under a bill of lading which recited that it was "shipped in good order and condition" and arrived on May 18, 1922. The bill of lading also contained the following clause:
"Neither the carrier, the vessel, nor the agents shall be liable for any claim for loss of or damage to goods in any event unless notice in writing of the claim shall have been presented to the ship's agents at port of discharge before the removal of the goods from the wharf alongside which the ship is discharged." The bill of lading was indorsed by the bank, and the libelants, who had purchased the goods, executed a trust receipt to the bank, which had financed the importation. All indebtedness to the bank was paid by libelants, so they were vested with complete title, and had the right to sue for any damages to the merchandise.
When the rubber arrived at New York, the cases of rubber were examined on the pier by libelants' marine surveyor, who found some of them stained by what appeared to be salt water and wet on the outside. A silver of nitrate test was applied and disclosed the presence of salt water. A number of the cases were opened and were found wet inside, next the wet side of the cases. One hundred and fifty cases stained by salt water had been separated on the pier from the rest of the shipment before the surveyor arrived to make the examination, and he set apart 64 more, making 214 in all as damaged cargo.
On May 25, libelants gave a delivery order to the ship to deliver the cases of rubber to the Pennsylvania Railroad. The respondent offered the depositions of its delivery clerk and checker, which indicated that it delivered 275 of the cases on May 27th to the railroad lighter, and the remaining 275 of the cases on June 7th, and that neither respondent's tally sheets nor the delivery books of the railroad lighters contained any exceptions showing the damage described by libelants' surveyor.
On May 27th, before the removal of the goods from the wharf, libelants notified respondent's agents in writing that their surveyor had reported heavy sea water damage to the rubber and said:
"We would appreciate your notifying your surveyor to get in touch with us, in order that he may also examine this merchandise to ascertain the extent of damage. We hereby notify you that we shall file claim against you when the extent of damage has been properly ascertained."
By letter of June 1st, the ship's agents replied that they repudiated all liability and stated that the steamer had encountered very heavy weather. There was the usual exception in the bill of lading against perils of the sea, but no evidence was introduced by respondent to prove that the weather was unusual, or that the exception relating to perils of the sea was applicable to the case.
Respondent's surveyor Cooks appears to have been with libelants' surveyor when the latter examined the cargo and to have seen the damage (Record, p. 17), but he was never called as a witness.
After the delivery of the cargo, the last of which was put on board the Pennsylvania lighter on June 7, 1922, the respondent heard nothing until August 5, 1925, when libelants' attorneys wrote respondent's agents, presenting a claim for sea water damage to the rubber which was followed in December, 1925, by the filing of the libel to recover damages.
The grounds of defense were:
(1) That libelants failed to establish any right to sue for damages.
(2) That libelants failed to prove that the rubber was not in the same condition on delivery as when shipped.
(3) That libelants failed to prove compliance with the notice of claim clause of the bill of lading.
(4) That the suit was barred by laches.
The trial court dismissed the libel upon the last ground.
Bigham, Engler, Jones Houston, of New York City (James N. Senecal, of New York City, of counsel), for appellants.
Haight, Smith, Griffin Deming, of New York City (Wharton Poor and James McKown, Jr., both of New York City, of counsel), for appellee.
Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
It is contended that libelants have no cause of action, because title was in the bank. While the rubber was consigned to Bank of the Manhattan Company, the bank indorsed the bill of lading, and the merchandise was delivered to the Pennsylvania Railroad on the order of Wm. H. Stiles Co., the indorsee. By the indorsement, when notice thereof had been given to the carrier, libelants became vested with title to the goods and a party to the contract of carriage. New York Personal Property Law (Consol. Laws N.Y. c. 41) § 219; Gubelman v. Panama R.R. Co., 192 App. Div. 165, 182 N YS. 403. If, as was stated at the trial, the bank still held a trust receipt until the money which it had advanced to finance the importation was repaid, such title as it retained was a mere security title, which left no dominant rights of ownership in the bank. Moreover the drafts which accompanied the bill of lading were paid by libelants as they became due during the year 1922, so that libelants' rights became complete in all respects, unhampered by any lien of the bank. In re A.E. Fountain (C.C.A.) 282 F. 816, 25 A.L.R. 319; The Trust Receipt as Security, Columbia Law Review vol. 22, Nos. 5 and 6.
Kleinhans v. Canadian Pacific Ry. Co., 203 App. Div. 715, 196 N YS. 862, is relied on as holding that the libelants cannot sue. But in that case the bill of lading was drawn to order of vendor, who delivered it to a bank with the indorsement thereon: "Deliver goods only on payment of draft." The buyer took up the draft and sued the carrier, because the goods were damaged. The plaintiff was not the indorsee of the bill of lading and was held to have obtained no title until the delivery of the goods, because the bill of lading ran to the seller, who had reserved title until payment. New York Personal Property Law, § 101(2).
Even if the drafts had not been paid by libelants, the bank would have held a mere security title under the trust receipt, and libelants, like a chattel mortgagor in possession, could sue for damages to the cargo, of which they were the equitable owners. Rogers v. King, 66 Barb. (N.Y.) 495; Dahill v. Booker, 140 Mass. 308, 5 N.E. 496, 54 Am. Rep. 465; Luse v. Jones, 39 N.J. Law, 707; Wilkes v. Southern R. Co., 85 S.C. 346, 67 S.E. 292, 137 Am. St. Rep. 890, 21 Ann. Cas. 79. They at least had the remedies of a bailee.
There was abundant proof that the rubber was damaged on the voyage. The receipt for the merchandise in apparent good order and condition, when followed by a delivery of the cases stained and wet with salt water, placed upon the respondent the burden of explaining the damage, and showing that it was occasioned by a peril for which it was not responsible. The Folmina, 212 U.S. 355, 29 S. Ct. 363, 53 L. Ed. 546, 15 Ann. Cas. 748; The Rosalia (C.C.A.) 264 F. 285. No explanation was seriously attempted. Respondent did not even call its own surveyor, who, with libelants' surveyor, had apparently seen the damaged merchandise on the pier, but relied on the absence of notation of salt water damage by the lighterman of the Pennsylvania Railroad and by its own delivery clerk. Damage was sufficiently proved.
It is further contended by respondent that libelants failed to present notice in writing of their claim of loss before the goods were removed, as the bill of lading required. This contention is based on the phraseology of libelants' letter of May 27, which, after giving notice of "heavy sea water damage," says, in the last clause: "We hereby notify you that we shall file claim against you when the extent of damage has been properly ascertained."
All the bill of lading required was a "notice in writing of the claim * * * before the removal of the goods from the wharf." The purpose of the provision was "not to escape liability, but to facilitate prompt investigation." Georgia, Florida Alabama Ry. v. Blish Milling Co., 241 U.S. 190, 36 S. Ct. 541, 60 L. Ed. 948; The Persiana (C.C.A.) 185 F. 396.
Certainly the letter of May 27th gave notice that there was a claim, and requested respondent to have its surveyor examine the merchandise. Apparently he saw the damage with libelants' surveyor, and the respondent thus obtained knowledge of the condition of the goods. It is reasonable to suppose that the surveyor was not called, and no substantial defense upon the merits was made, because such a defense was impossible. In any event, the respondent was given notice that there was a claim for damages. That notice was sufficient compliance with the clause in the bill of lading, even when coupled with the statement that the claim would be filed "when the extent of damage has been * * * ascertained."
Last of all, defendant relies on the defense of laches. It is true that there was great delay in bringing suit, but there is no proof that the respondent was unduly prejudiced. Courts of admiralty apply the state statute of limitations in determining whether a claim is barred, unless some exceptional circumstances exist. Lincoln v. Cunard Steamship Co. (C.C.A.) 221 F. at page 624; David v. Smokeless Fuel Co. (C.C.A.) 196 F. 753, at page 755; The West Aleta (C.C.A.) 12 F.2d 721; F.S. Royster Guano Co. v. U.S. (C.C.A.) 18 F.2d 469. There has been no showing here that witnesses have disappeared. We can discover no reason for holding laches a bar which would not apply to almost any suit that had not been brought for three or four years after the cause of action arose. Respondent may have thought that Stiles Co. had delayed so long that it had dropped its claim, but this circumstance alone cannot limit the latter's right.
The decree is reversed, and the cause remanded, with directions to enter an interlocutory decree for libelants, with the usual reference to report as to damages.