Orient Overseas Line v. Globemaster Baltimore, Inc.

Moylan, J., delivered the opinion of the Court. Globemaster Baltimore, Inc. (Globemaster), consignee of cargo listed in two ocean bills of lading and assignee of cargo ³⁷⁴ listed in four others, filed a suit in the Superior Court of Baltimore City against Orient Overseas Line and Overseas Maritime Company (Overseas), owners and operators of the S.S. Hongkong Merchant (Merchant) and the S.S. Hongkong Mariner (Mariner)-, John T. Clark & Son of Maryland, Inc. (Clark), discharging stevedore; and the Cottman Company (Cottman), the operator of a terminal at Pier 8, Canton Railroad, seeking damages for shortages in the cargo, consisting of handtools, shipped on Overseas’ two ocean-plying vessels from Kobe, Japan, to the Port of Baltimore. Overseas, in turn, filed cross-claims against Clark and Cottman seeking indemnity. After a three-day non-jury trial, Judge Solomon Liss issued an oral opinion on March 14, 1975, finding all three defendants failed to use reasonable care in the handling of the cargo and entered a verdict in favor of Globemaster in the amount of $16,795.02, representing the value of the lost cargo and a proportionate share of the shipping costs and brokerage charges.

Judge Liss, however, denied certain other items of damages claimed by Globemaster, including a $5,000 pre-judgment interest claim. Judge Liss also denied Overseas’ cross-claims for indemnity against Clark and Cottman, holding that “each of the defendants had been negligent in the handling of the cargo and that, therefore, they were not entitled to. recover against each other.” The defendants were held jointly and severally liable under. Maryland law, with no apportionment of damages based on degrees of negligence. Overseas and Clark appeal the judgments entered against them.

Overseas also appeals the denial of its cross-claims. Globemaster appeals on the issue of damages. Cottman has filed no appeal. In May of 4970, Globemaster entered into a contract with Overseas, through six ocean bills of lading issued in Japan, to have shipped, from Japan to Baltimore, 10,888 cardboard cartons of handtools.

The first shipment of 7,316 cartons was loaded aboard the Merchant, which arrived at Pier 8 in the Lower Canton section of the Port of Baltimore on June 26, 1970. The cargo was discharged immediately and the ship resumed her voyage. Several weeks later, the Mariner arrived with the remaining 3,572 cartons. The cargo was ³⁷⁵ discharged on July 15, 1970, and the ship departed immediately.

Both vessels had made stops at other ports before arriving in Baltimore. Longshoremen in those ports, while discharging other cargo, had worked in the same holds where the Globemaster cargo was stored. There was no partition separating the Globemaster cargo from other cargo. The Mate’s Receipts for the Merchant, which were prepared by a member of the crew of the Merchant at the time the cargo was loaded aboard to check the number of cartons and their condition, contain either the partially handwritten and partially stamped notation in the exceptions portion: “Ship’s N/R (not responsible) for cover torn, loss, shortage and/or Condition of Contents” or the stamped notation: “Ship N/R for breakage and/or condition of contents.” The several receipts for the Mariner which were introduced into evidence contain no notation in the exceptions portion.

Overseas sought to explain that the notations were general disclaimers of responsibility for the contents and the sufficiency of the packaging to withstand normal handling and did not admit any shortage or damage to the inside of the cartons. Clean bills of lading, containing no notations or disclaimers as to shortage, were issued by Overseas on both shipments. Overseas’ local agent in Baltimore, Thor Eckert Maritime Agencies, Inc. (Eckert), retained Cottman, which operated a transit shed at Pier 8, to perform terminal operations for Overseas’ vessels and their cargoes. Eckert paid Cottman a dockage charge which permitted the vessels to tie up at the pier and a wharfage charge which permitted the cargo to be unloaded onto the pier and remain warehoused within the transit shed for five days following a discharge, after which time Cottman received demurrage charges from the cargo receiver, Globemaster, for pier storage and retained a lien on the goods until the charges were paid.

Eckert also retained Clark to perform the stevedoring services on the two shipments, which entailed unloading the cargo, tallying it, and then placing it within Cottman’s shed. ³⁷⁶ Longshoremen employed by Clark unloaded the cartons of handtools from the Merchant and the Mariner on June 26, 1970, and July 15, 1970, respectively. On each occasion, the cartons were stacked by the longshoremen on pallets, or drafts, removed from the vessel and placed on the pier apron adjacent to the vessel for checking by “checkers” or “tallymen” employed by Clark. The checkers were to tally the cargo and take exception to any damage or shortage in the cargo before the longshoremen placed the cargo in Cottman’s shed. Based on freight lists, or “manifests,” which Overseas had forwarded to Eckert of all cargo aboard the vessels, Eckert had prepared Tally Records for use by Clark in checking the cargo upon arrival.

These records contained the name of the vessel and its arrival date. They also identified the Globemaster cargo by bill of lading, commodity, markings, number of cartons and weight. Clark’s checkers indicated the number of cartons removed from the vessels on “ditto sheets,” which were copies of the freight lists or “manifests,” and the sections in Cottman’s shed where these cartons were placed. These notations were then transferred in Clark’s office to the official Tally Records.

The testimony revealed, however, that Clark’s count was actually an estimate rather than an actual count. Because union rules prohibited the checkers from handling the cargo, they had to rely on a visual estimate of the number of cartons on a pallet. Thomas E. Hughes, one of Clark’s checkers, testified that, from an external inspection, a checker can only see approximately 44 of the 64 cartons on an average draft. No exceptions were, furthermore, taken on the Tally Records as to the condition and number of cartons of Globemaster cargo removed from the vessels.

A copy of the completed Tally Records was forwarded to Eckert and to Cottman. Eckert would have transferred any notations on the Tally Records to the freight lists. The only notations that appear on the freight lists as to the Globemaster cargo are “Nil” and “All acc for.” Cottman made no independent tally or inspection of the cargo when it was unloaded from the vessels and stored in the transit shed. ³⁷⁷ Edward Yealdhall was the pier superintendent for Cottman in 1970, at the time the Globemaster cargo arrived. He was present when the cargo was discharged from both the Merchant and the Mariner and stored in the transit shed.

He testified that when the Merchant arrived, the cargo that was unloaded was in “very bad order” with loose tools lying in the middle of the pallets. Yealdhall testified that he went on board the Merchant to see if the cargo was being handled and stored properly. There he saw loose tools and broken cartons in the hatch. Other cargo had been stored on top of the Globemaster cargo.

Yealdhall stated that when the pallet-loads of cardboard cartons were stacked three or four high on the pier, more cartons fell and broke open. As a result, Yealdhall testified that he complained to “Sailor,” Edward Wos, Clark’s stevedoring superintendent. “Sailor” told him to get in touch with Steven Byan, who was then the Vice-President of Clark. Yealdhall stated, however, that even after he reached Steven Byan, nothing was ever done to remedy the situation. When the Mariner arrived, the cargo was in the same condition.

Yealdhall testified that he again complained to his superiors. Yealdhall described the Cottman shed as a long, enclosed shed, approximately 500 by 130 or 140 feet, with three doors on the west or land side and a big opening at the head of the pier for trucks to enter and exit. The east side was the loading side, and the west side was the delivery side. His office was on the northwest side of the pier.

The shed was not partitioned on the inside with the exception of a galvanized wire cage, approximately 75 by 150 feet at the south side of the pier for securing “hot” or highly pilferable cargo. The cage had a lock on its only entrance and was covered on the top with barbed wire. It was in this cage that Yealdhall testified he placed some of the very badly broken cartons for safekeeping. Other broken cartons, however, were not placed in the cage until the truckers, who arrived on numerous occasions sometime later to pick up the cargo, rejected the broken cartons.

The cargo from the Merchant, which was discharged on June 26, was picked up intermittently from July 9 through ³⁷⁸ July 20. The cargo from the Mariner, which was discharged on July 15, was picked up intermittently from July 22 through August 5. During this time, 10,190 of the 10,888 cartons shipped were picked up for Globemaster by Phillips Brothers Trucking Company. The remaining cartons were either rejected by the truckers or were missing.

Between August 14 and August 24, Globemaster submitted formal written claims to Overseas based on shortages in the cargo of the two vessels. Sanford Disney, the Assistant Vice-President of Cottman in charge of terminal operations, testified that 698 cartons of the Globemaster cargo were either rejected by the truckers or were found missing. When a final pickup was made of these cartons from Cottman’s security cage on September 30, 1970, 398 cartons were picked up, 65 of which were entirely empty; 300 cartons were missing completely. Disney testified that the Globemaster cargo he saw in the “cage,” as is true of much cargo from the Orient, was “flimsily” packed and that he had contacted the vessels’ agent, Eckert, and notified Eckert of the poor condition of the cargo.

Disney testified that, as a general practice, Cottman does not count cargo being unloaded from a ship, that this would entail duplicating the efforts of the longshoremen. Instead, Cottman relied on the longshoremen’s tally and on the figures furnished it by the steamship company. A count of the Globemaster cargo was made, however, by Cottman’s checkers when the truckers arrived. Gerhard Widderich, who was the manager for Eckert in June and July, 1970, testified that no exceptions were taken on the tally records as to the Globemaster cargo.

Nor did the mates on the ships, who would normally call him when there was some trouble with cargo, do so in this case. Not until July 28, in a telephone call from Cottman, did Widderich learn of the damage to the Globemaster cargo. He then went down to the pier and looked at the cargo. He saw loose tools on the ground and cartons ripped open.

As a result, he ordered an independent survey by the firm of Edward F. Carter & Associates, Inc. Widderich testified that had Eckert known sooner that the cargo was damaged on the ³⁷⁹ vessels, it would have attempted to recooper. He admitted, however, that in June and July, 1970, Eckert was partly owned by Clark and was, in fact, located in the same downtown Baltimore offices. Steven By an, then Vice-President of Clark, was, in fact, Executive Vice-President of Eckert. Edward H. Mester, the Vice-President and Secretary of the Cottman Company, reiterated that the terminal operator does not count palletized cargo at the time of the unloading because of the expense involved but that a count is made when delivery takes place to either trailers or to trucks.

He said that it is the stevedores’ responsibility to inform the ship if they find damaged cargo in the ship. He stated that it is the responsibility of the terminal operator to maintain a safe and reasonable place of storage. If cargo comes off a ship in torn cartons, the terminal operator will notify the stevedores so that they can recooper the cargo. If the cartons that need retaping are few, however, the terminal operator will many times do it himself.

If there are many cartons that need retaping, however, it is, he testified, the ultimate responsibility of the shipper. The stevedores recooper at their own expense, however, where the cargo is damaged while being discharged. Mester testified that several days after the discharge of the cargo from the Merchant he received a phone call from Yealdhall informing him of the damaged condition of the cargo unloaded from the ship. He told Yealdhall to contact Clark to recooper the cargo.

He testified, however, that Clark did nothing about the situation. As a result of the phone call from Yealdhall, Mester personally went down to the pier to inspect the cargo. He testified that although a majority of the cartons were in good condition, a considerable amount, however, was not. He had already previously instructed Yealdhall, he testified, to put the damaged cartons in the cage.

He took photographs, which were introduced into evidence, of these damaged cartons in the cage. Mester saw similar cartons outside the cage. There were broken and loose cartons in the middle of pallets. As a result, he told Yealdhall to put the balance of the damaged ³⁸⁰ cartons in the cage.

He could only speculate that this was not done in the first place because many of the broken cartons must have been surrounded by other good cargo and, therefore, were difficult to reach. He did not initiate a survey of the cargo, however, nor did he call the Customs Service to investigate whether or not there was a theft of any of the cargo. Other than the phone calls to Clark, Mester testified that, to his knowledge, no written complaint was made to Clark. Thomas E. Hughes, who was relief clerk for Clark (relieving the checkers for brief periods of time) on the day the cargo from the Merchant was discharged, testified that the two or three last drafts of Globemaster cargo contained loose handtools in the centers.

He testified, however, that the damage was slight. He stated that no exceptions were taken, furthermore, because the damage “wasn’t that bad.” When asked by the court whether the photographs taken by Mester of the cartons in the cage were a fair representation of the condition of some of the cartons that came out of the ship, he answered, “No” — none of the cartons that came off the ship looked that way. He testified that had the cartons been in that condition Eckert would have been notified immediately and a survey initiated. He stated that the ship personnel saw the unloading of the ships.

If the cartons had been in that condition, the ship personnel would have seen them. Steven Byan, then Vice-President of Clark, testified that, from what he could recall in visits to the Merchant and the Mariner, most of the cargo was in generally good condition. He testified that his ship foreman called him when the Merchant arrived and told him that “Things are in a hell of a mess.” He said, however, that when he saw the cargo, it wasn’t “in a hell of a mess.” Although there was some minor damage, it was not enough to warrant calling a surveyor or instructing the Cottman Company or notifying Globemaster or its agent. He testified, however, that exceptions should have been taken to the cargo.

Since Cottman has not appealed from the judgment below, its liability to Globemaster is not contested here. Only the ³⁸¹ judgments holding Overseas and Clark also liable to Globemaster are in issue. In deciding whether the trial court was correct in its judgment, we must look at all of the court’s factual findings, unless clearly erroneous, in the light of the applicable law. As to Overseas and Clark, federal substantive maritime law governs.

Globemaster’s claims against Overseas were based upon the six ocean bills of lading. The bill of lading serves as a contract of carriage between a cargo shipper and an ocean carrier and, therefore, being maritime in nature, falls within the admiralty jurisdiction of the United‘States district courts, conferred by the Judiciary Article of the Constitution, U.S.C. Const. Art. Ill, § 2, Cl. 1, and by the provisions of § 9 of the Judiciary Act of 1789, 1 Stat. 76 -77, 28 U.S.C., § 1333 . David Crystal, Inc. v. Cunard S.S. Co., 223 F. Supp. 273, 284 (S.D.N.Y. 1963), aff'd. 339 F. 2d 295 (2nd Cir. 1964); Eutectic Corp. v. M/V Gudmundra, 367 F. Supp. 681, 685 (S.D.N.Y. 1973).

Globemaster’s claims against Clark for negligence in the discharge of the cargo are also clearly within admiralty jurisdiction. See Herd & Co. v. Krawill Machinery Corp., 359 U. S. 297 , 79 S. Ct. 766 , 3 L.Ed.2d 820 . If an action which is cognizable in admiralty is brought in a state court under the “saving to suitors” clause, 28 U.S.C., § 1333 (l),* 1 the state must apply substantive maritime law. ³⁸² Kermarec v. Compagnie Generale Transatlantique, 358 U. S. 625, 628 , 79 S. Ct. 406 , 3 L.Ed.2d 550 ; Pope & Talbot, Inc. v. Hawn, 346 U. S. 406, 409 , 74 S. Ct. 202 , 98 L. Ed. 143 ; Farrell Lines, Inc. v. Devline, 211 Md. 404, 415 ; Frazier v. Waterman S.S. Corp., 206 Md. 434, 448 ; Pine Street Trading Corp. v. Farrell Lines, Inc., 278 Md. 363 (1976). Globemaster v. Overseas Overseas’s obligation in relation to the care, custody, and discharge of the cargo “from the time when the goods [were] loaded on to the time when they [were] discharged from the ship” was governed by the provisions of the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. §§ 1300 et seq 2 46 U.S.C. § 1301 (e).

Under the provisions of this act, Overseas was obligated to “properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.” 46 U.S.C. § 1303 (2). Upon arrival of the vessels at the contractual port of delivery, Overseas was obligated to effect “proper delivery” under the provisions of the Harter Act, 46 U.S.C. §§ 190 et seq.* 2 3 “Proper delivery” within the ³⁸³ provisions of this act means either actual or constructive delivery. Actual delivery consists in completely transferring the possession and control of goods from the vessel to the consignee or his agent. Constructive delivery occurs where the goods are discharged from the ship upon a fit wharf and the consignee receives due and reasonable notice that the goods have been discharged and has a reasonable opportunity to remove the goods or put them under proper care and custody.

J. Kinderman and Sons v. Nippon Yusen Kaisha Lines, 322 F. Supp. 939 (E.D. Pa. 1971); National Packaging Corp. v. Nippon Yusen Kaisha, 354 F. Supp. 986 (N.D. Cal. 1972). Upon “proper delivery” the Harter Act ceases to govern the relationship between the parties, and a sea carrier’s strict liability, as such, terminates. Calcot, Ltd. v. Isbrandtsen Co., 318 F. 2d 669, 673 (1st Cir. 1963). See also Pine Street Trading Corp. v. Farrell Lines, Inc., supra.

Thereafter, the carrier’s responsibilities are those of a bailee or warehouseman to take ordinary care of the property and not to abandon it or negligently expose it to injury. Consolidated Cork Corp. v. Jugoslavenska Linijska Plovidba, 318 F. Supp. 1209 (S.D.N.Y. 1970); Louis Furth, Inc. v. S.S. Srbija, 330 F. Supp. 305 (S.D.N.Y. 1970); H. Longley, Common Carriage of Cargo, § 11.09, at 100 (1967). Although under the Harter Act, the carrier cannot, by the terms of its bill of lading, terminate all responsibility for the cargo upon discharge before “proper delivery,” the shipper and the carrier, however, may stipulate in their bills of lading that the carrier may fulfill its strict responsibilities ³⁸⁴ as carrier upon delivery of the cargo from the ship’s tackle onto the pier. See W. Poor, Charter Parties and Ocean Bills of Lading, § 61, at 142 (5th ed. 1968) and 1974 Supplement, § 61, at 34; 70 Am.Jur.2d, Shipping, § 493.

When they do so, the carrier’s status upon discharge of the cargo becomes that of á bailee. Leather’s Best, Inc. v. S.S. Mormaclynx, 451 F. 2d 800 , 807 n. 5 (2d Cir. 1971); David Crystal, Inc. v. Cunard S.S. Co., 339 F. 2d 295 (2d Cir. 1964), 297-298. The carrier’s general duties regarding delivery, nevertheless, remain the same. Absent the consignee, to constitute a “proper delivery” due and reasonable notice must be given to the consignee of the intended delivery and the goods must be placed in a suitable place and under proper care and custody.

Constable v. National S.S. Co., 154 U. S. 51 , 14 S. Ct. 1062 , 38 L. Ed. 903 (1894). Overseas contends that “proper delivery” was effected “within a very few days of discharging Globemaster cartons to Cottman’s Pier, since Arrival Notices had earlier been sent to Globemaster, thereby affording a fair and reasonable opportunity to remove the goods.” Overseas contends that it became a bailee upon discharge of the cargo and that its responsibilities as a bailee ended completely upon the expiration of the “free time” when Cottman’s agency relationship with Overseas ceased and Cottman’s obligations, as bailee for hire, became those of a warehouseman responsible only to Globemaster. See Grover-Ferguson Company, Inc. v. A/S Ivarans Rederi, 171 F. Supp. 766 (E.D. Pa. 1959). It is unnecessary, however, to decide when “proper delivery” was effected or when Overseas’ status as a carrier and bailee terminated, since it is clear, as will hereinafter appear, that the trial court’s judgment that Overseas is liable to Globemaster was based on conduct which occurred prior to discharge of the cargo.

Judge Liss imposed liability on Overseas, Clark, and Cottman on the basis that all three failed to use reasonable care in the handling of the cargo. As to Overseas, Judge Liss found specifically: “[T]he bill of lading clearly indicates there was no ³⁸⁵ exception taken to the delivery of merchandise by Globemaster in Kobe, Japan. Now the merchandise is then delivered here in Baltimore, and the Court finds as a fact that the merchandise was delivered to Baltimore in a severely damaged condition. While the Court recognizes that Mr. Yealdhall, obviously, is going to put the best possible face on his testimony so as to absolve himself, if it’s possible to do so, even allowing for exaggeration, the Court finds there’s no question that a number of the cartons that were in the hold of that ship were in a broken condition; and that the merchandise was loose; that there were tools strewn about in the hold, or in various holds, and that there was substantial damage to the merchandise received, in the Port of Baltimore. . . . the indication is that at least six percent of the cargo was not ultimately delivered, and I would think that figure is reasonably correct so far as the damage is concerned.

Now what is the effect assuming that the merchandise was, in fact, delivered to Baltimore in this condition? Then it seems to me that the ship was under an obligation to so note on its records, and to have the person who was in charge of the unloading or who, at least, was observing the unloading of the ship, take the necessary precautions to see that there was no further loss and to make the necessary notification, both to Globemaster and/or to Clark Company, and to The Cottman Company that there was a possibility that there would be some claim arising out of the condition of the merchandise. The ship failed to do so. I do accept as a fact that the ship does not have someone watching the unloading of material from its holds.

Common sense indicates to me that if only to prevent merchandise that should not be unloaded stolen and/or unloaded by mistake, that ³⁸⁶ the ship either has or should have had someone on the premises to supervise what is going on. The Court believes that there was, and that apparently nothing was done about it, and that that is a failure to use reasonable care under the circumstances.” Overseas argues that the finding of the trial court that the cargo arrived in Baltimore in a severely damaged condition was clearly erroneous and that, in any event, the trial court did not find a shortage of handtools upon discharge or while the cargo was in Clark’s possession before transfer to Cottman, nor could such a finding arise merely because of damage to the cardboard cartons. Overseas maintains that it fulfilled its duties both as carrier before discharge of the cargo and later as bailee during the five days “free time” following discharge of the cargo. It argues that it accounted for all of the cargo by means of the tally records compiled by Clark in the ordinary course of business and that Cottman, which made no independent tally, should have been estopped at the trial from questioning the accuracy of those records.

Overseas states that Globemaster’s showing of a shortage in cargo many weeks after discharge did not amount to a showing that a shortage occurred during the time Overseas was responsible. It relies on the .presumption that where goods pass through the hands of successive custodians, in apparent good order, any loss is presumed to have occurred while they were under the control of the last custodian. Julius Klugman’s Sons v. Oceanic Steam Nav. Co., 42 F. 2d 461 (S.D.N.Y. 1930), citing Chicago & N.W. Ry. v. Whitnack Produce Co., 258 U. S. 369, 372 (1922).

It contends further that under this presumption, which also applies under Maryland law 4 (N.Y. & Balto. Trans. Line v. Baer, 118 Md. ³⁸⁷ 73, 80), Gottman, which did not rebut the presumption, must bear the entire loss. In deciding whether the trial court was clearly erroneous in its findings that the cargo arrived in Baltimore in a severely damaged condition and that Overseas did not use reasonable care in the handling of the cargo, we are, of course, guided by the “clearly erroneous” principle. “[T]he judgment of the lower court will not be set aside on the evidence unless clearly erroneous and due regard will be given to the opportunity of the lower court to judge the credibility of the witnesses.” Md. Rule 1086.

The Second Circuit United States Court of Appeals, in applying in an admiralty case the “clearly erroneous” principle embodied in Federal Rule of Civil Procedure 52 (a), 5 which is essentially the same as our Maryland rule, stated well the scope of our power of review: “A fair