Pine Street Trading Corp. v. Farrell Lines, Inc.

Eldridge, J., delivered the opinion of the Court. This case, arising from damages allegedly sustained to the plaintiffs cargo of sugar, involves claims under both federal maritime law and state law. In October 1969, Pine Street Trading Corporation contracted to purchase a large quantity of beet sugar located in Ireland from the Irish Sugar Company. The Irish Sugar Company arranged with Irish Shipping, Ltd., to transport the sugar to the port of Baltimore pursuant to the terms of Irish Shipping’s short form bill of lading, which incorporated by reference the carrier’s long form bill of lading and the provisions of the Merchant Shipping Act of Ireland (No. 40 of 1947).

The bill of lading was endorsed over to Pine Street as consignee. Upon the cargo’s arrival in Baltimore, the sugar was to be unloaded and “stacked man high on pier” by Chesapeake Operating Company, with whom Irish Shipping had a stevedoring agreement. Pine Street also entered into an agreement with Chesapeake whereby Chesapeake would store all sugar not removed from the marine terminal during the 5 day “free time” period — the time allowed for removing cargo from the pier ³⁶⁷ before assessment of demurrage charges. By so doing, Pine Street could store its cargo at Chesapeake’s pier shed at a rate charged for warehousing, which would be considerably less than that charged for demurrage.

Chesapeake also agreed to deliver quantities of sugar to various purchasers according to Pine Street’s directions. During late March 1970, the Irish Poplar, a vessel operated by Irish Shipping, arrived in Baltimore and discharged 17,476 one hundred pound bags of the sugar onto the pier “apron” — the outer portion of the pier. On May 13, 1970, an additional 10,089 one hundred pound bags of sugar were unloaded from the Irish Spruce, another Irish Shipping vessel, and also stacked on the pier. Subsequent to discharge of the cargo from both ships, Chesapeake removed the cargo to a shed occupying the center position of the pier.

The bags in which the sugar was transported were constructed of two tar laminated outer layers of paper, and three inner layers of paper. On May 7, 1970, subsequent to the arrival of the Irish Poplar but prior to the arrival of the Irish Spruce, a vessel owned by Farrell Lines, Inc., the African Dawn, arrived at Chesapeake’s pier. Chesapeake discharged from the African Dawn roughly 500 tons of antimony ore which were contained in bags. During the evening of May 7, 1970, after the discharge of the cargo from the African Dawn was completed, the vessel left the pier.

On May 18, 1970, Mallory W. Lawrence, an inspector for the United States Food and Drug Administration (FDA), visited the Chesapeake pier and found antimony dust on the bags of sugar stored inside the pier shed. Subsequently, a condemnation action was brought by the United States against the bags of sugar remaining on the pier which had been discharged from the Irish Poplar, and also against the sugar received by purchasers of the Irish Poplar shipments, as well as the finished products manufactured by those purchasers using the sugar. The sugar which was discharged from the Irish Spruce was also detained, but since it was still on “import status,” no condemnation action was necessary. In the condemnation proceedings, the ³⁶⁸ government alleged that the sugar was “adulterated” because it contained “an added poisonous and deleterious substance, namely, antimony dust, which may render” the sugar “injurious to health,” and that it was held under insanitary conditions, in violation of 21 U.S.C. 342(aXl) and (4).

Pine Street did not contest the condemnation actions; rather, it signed consent decrees of condemnation. Subsequently, Pine Street brought this action in the Baltimore City Court alleging (1) that Chesapeake was negligent in permitting the sugar bags to be contaminated with antimony ore; (2) that Irish Shipping breached its contract of carriage (the bill of lading) with respect to the shipment of the sugar cargo aboard the Irish Spruce which was discharged while the antimony was still on the pier; and (3) that Farrell Lines was negligent in discharging its cargo of antimony ore which it knew or should have known would contaminate the sugar which was already on the pier. Cross claims were filed by Chesapeake against Farrell Lines, by Irish Shipping against Farrell Lines and Chesapeake, and by Farrell Lines against Chesapeake, all seeking indemnification for any judgments that may be awarded against the cross-claimants in favor of Pine Street, and seeking also recovery of attorney fees and court costs. The cross claims were submitted for determination by the court.

The trial court awarded summary judgment in favor of Irish Shipping against Pine Street; subsequently Irish Shipping dismissed its cross claim against Chesapeake. A jury trial then ensued on Pine Street’s claims against Farrell Lines and Chesapeake. Chesapeake produced expert testimony to the effect that antimony ore is not, in fact, a poisonous substance. Chesapeake argued, therefore, that Pine Street, by failing to contest the condemnation proceedings, had failed to mitigate any damages that may have resulted from Chesapeake’s negligence in permitting the antimony dust to come near the sugar caigo.

Evidence was also produced tending to show that because of the construction and manner of storage of the bags of sugar, antimony dust could not have contaminated the vast ³⁶⁹ majority of the bags, and that any danger of contamination could have been obviated by vacuuming the bags. At the dose of the plaintiffs evidence, the trial court granted a directed verdict in favor of Farrell Lines against Pine Street. The jury thereafter returned a verdict for Pine Street against Chesapeake in the amount of $1.00. The remaining cross claims were denied by the trial court.

Pine Street appealed to the Court of Special Appeals, contesting, on several grounds, the jury’s award of $1.00 in damages in its favor, and contesting also the granting of summary judgment in favor of Irish Shipping, and the granting of the directed verdict against it in favor of Farrell. Farrell appealed the denial of its cross claim against Chesapeake in which it sought attorney’s fees and expenses. Chesapeake has not appealed either from the jury’s verdict of liability against it in favor of Pine Street, or from the trial court’s denial of its cross claim against Farrell. We issued a writ of certiorari prior to a decision by the Court of Special Appeals.

I. Pine Street v. Chesapeake The claim of Pine Street against Chesapeake is based upon (1) Chesapeake’s failure “to perform properly its duty as warehouseman to care for, store and protect” the sugar cargo which had arrived on board the vessel Irish Poplar, (2) Chesapeake’s failure to properly “store, care for and protect” the sugar cargo which had arrived on board the vessel Irish Spruce, and (3) Chesapeake’s negligence in permitting the cargo of antimony ore from the vessel African Dawn to contaminate the sugar cargo of the plaintiff. Preliminarily, we note that Pine Street’s claims against Chesapeake are controlled by state law rather than by federal maritime law. The only contractual relationship alleged between Pine Street and Chesapeake involved Chesapeake’s agreement to store the sugar cargo as warehouseman. Such a contract “is nonmaritime in nature and does not fall within maritime jurisdiction.” Howmet Corporation v. Tokyo Shipping Co., 320 F. Supp. 975, 977 (D. ³⁷⁰ Del. 1971).

See Pillsbury Flour Mills Co. v. Interlake S.S. Co., 40 F. 2d 439 (2d Cir. 1930). Moreover, no maritime tort seems to have been alleged. The activities of Chesapeake which were alleged by Pine Street to constitute negligence all appear to have occurred on Chesapeake’s pier. It is well settled that a pier is, for purposes of maritime jurisdiction, an extension of land.

See Victory Carriers, Inc. v. Law, 404 U. S. 202, 206-207 , 92 S. Ct. 418 , 30 L.Ed.2d 383 (1971). On this appeal, Pine Street raises several contentions relating “principally to whether the issue of plaintiffs duty to mitigate damages or avoid the consequences of defendant’s negligence was improperly presented to the jury as a result of certain of the trial court’s rulings on evidence and instructions.” While we do not agree with all of the contentions raised by Pine Street, we do believe that the trial court committed reversible error in connection with its instructions to the jury on the issue of mitigation of damages. Pine Street argues that the trial court erred in refusing to instruct the jury, as requested by Pine Street, that “in considering the reasonableness of plaintiffs decision not to contest the government’s forfeiture proceedings by a full trial of the issues,” the jury should consider that the FDA, in such proceedings, “is not required to establish that a product it seeks to condemn of certainty will affect the public health but only that it may affect it....” Under 21 U.S.C. 334, the government may condemn any article of food which is found to be adulterated. Section 342 of Title 21 provides that “A food shall be deemed to be adulterated “a(l) If it bears or contains any poisonous or deleterious substance which may render it injurious to health;... * * * “(4) if it has been prepared, packed, or held under insanitary conditions whereby it may have become contaminated with filth, or whereby it may have been rendered injurious to health.” ³⁷¹ In United States v. Lexington Mill Co., 232 U. S. 399, 411 , 34 S. Ct. 337 , 58 L. Ed. 658 (1914), the Supreme Court held that under this section: ‘‘It is not required that the article of food containing added poisonous or other added deleterious ingredients must affect the public health, and it is not incumbent upon the Government in order to make out a case to establish that fact.

The act has placed upon the Government the burden of establishing, in order to secure a verdict of condemnation under this statute, that the added poisonous or deleterious substances must be such as may render such article injurious to health. The word ‘may’ is here used in its ordinary and usual signification, there being nothing to show the intention of Congress to affix to it any other meaning. ... In thus describing the offense Congress doubtless took into consideration that flour may be used in many ways, in bread, cake, gravy, broth, etc. It may be consumed, when prepared as a food, by the strong and the weak, the old and the young, the well and the sick; and it is intended that if any flour, because of any added poisonous or other deleterious ingredient, may possibly injure the health of any of these, it shall come within the ban of the statute. If it cannot by any possibility, when the facts are reasonably considered, injure the health of any consumer, such flour, though having a small addition of poisonous or deleterious ingredients, may not be condemned under the act.

This is the plain meaning of the words and in our view needs no additional support....” (Emphasis supplied.) Thus, in order to secure condemnation of a food under 21 U.S.C. 342, the government must prove, by a preponderance of the evidence, that there is a “possibility” that the articles of food may be injurious to health. United States v. International Exterminator Corp., 294 F. 2d 270 (5th Cir. ³⁷² 1961); Golden Grain Macaroni Co. v. United States, 209 F. 2d 166 (9th Cir. 1953); United States v. 1,200 Cans, Pasteurized Whole Eggs, Etc., 339 F. Supp. 131, 141 (N.D. Ga. 1972). We believe Pine Street was entitled to the benefit of an instruction pertaining to the standards employed in a condemnation proceeding. Certainly, Pine Street’s actions in failing to contest the condemnation action, in order to minimize their losses, was a crucial aspect of the case.

The jury was instructed that the plaintiff “is not required to take action which may be unwise or impractical; the test is whether the Plaintiff did what an ordinarily prudent person would have been expected to do under the same or similar circumstances.” However, nowhere was the jury instructed with regard to the legal requirements faced by Pine Street in attempting to challenge the FDA’s action. Such an instruction, we believe, was necessary in order for the jury properly to determine the issue of the reasonableness of Pine Street’s decision not to contest the condemnation actions. We therefore believe that refusal of such an instruction was reversible error. Several other contentions are raised by Pine Street with respect to the admissibility of certain evidence and the refusal of certain other requested instructions.

Since this case will be remanded for a new trial, and the proceedings in the new trial may follow a different course than in the original, we find it unnecessary to decide all of these issues. However, in the interests of justice and judicial expediency, we shall comment upon several of these points which are likely to arise at the new trial. Pine Street argues that the trial court erred in excluding several reports of the Food and Drug Administration which analyzed samples of food products which allegedly contained the adulterated sugar from Chesapeake’s pier. Five such reports were offered by Pine Street through the testimony of Thomas Dols, a chemist who had analyzed the food samples for the Food and Drug Administration.

The admission of the reports into evidence was objected to on the ground that no testimony was presented linking the sugar contained in the food samples to the allegedly contaminated sugar involved ³⁷³ in the case. The trial court sustained the objection to the admission of the reports, stating that there was no “evidence to show that the samples that this gentleman analyzed actually came from the same sugar that was in discussion.” The court rejected notations on the documents themselves indicating that the samples contained the adulterated sugar from Chesapeake’s pier, stating that such information was hearsay. Pine Street contends that the reports were admissible under the business records statute, Maryland Code (1974), § 10-101 of the Courts and Judicial Proceedings Article, not to show that the sugar was in fact contaminated, but to show “what was, in fact, done by the Government with respect to the sugar which rendered it unavailable to the plaintiff and plaintiffs customers, which resulted in the damage that was suffered.” Chesapeake, on the other hand, claims that an insufficient foundation was laid for the admission of the reports. A document, to be admissible under the statutory exception to the hearsay rule for business records, must be “made in the regular course of business as a memorandum or record of an act, transaction, occurrence, or event,” and the “practice of the business must be to make such written records of its acts at the time they are done or within a reasonable time afterwards.” Sec. 10-101 (b) and (c) of the Courts and Judicial Proceedings Article.

While a foundation must be laid for the introduction of evidence under this statute, the foundation need not always consist of testimonial evidence, and in some cases the court may properly conclude from the circumstances and the nature of the document involved that it was made in the regular course of business. Tellez v. Canton Railroad Co., 212 Md. 423, 432 , 129 A. 2d 809 (1957); Morrow v. State, 190 Md. 559, 562-563 , 59 A. 2d 325 (1948); Thomas v. Owens, 28 Md. App. 442, 447-448 , 346 A. 2d 662 (1975). In Tellez v. Canton Railroad Co., supra, the Court held admissible an ocean bill of lading under the business records statute despite the apparent lack of testimonial evidence to provide a foundation for such admission, and the Court stated that certain notations on the bill of lading were admissible to prove certain facts, pointing out that the opposing party was ³⁷⁴ still entitled to dispute the correctness of the notations. 212 Md. at 434 . In our view the proffered FDA reports were encompassed within the business records act.

As stated by the Court in Morrow v. State, supra, 190 Md. at 562 , “no elaborate foundation” is necessary to prove that such documents are made by the FDA in the regular course of business. That the reports are hearsay is of course no valid objection if they are admissible under the statute, as the statute creates an exception to the rule excluding hearsay evidence. A further problem pointed out by Chesapeake, however, is that not all of the proffered reports contain notations that the sugar was in fact delivered from Chesapeake’s pier, or that it was delivered from the pier subsequent to the arrival of the antimony. We believe that those reports without such notations, absent other proof linking the sugar involved in the reports to the contaminated sugar on the pier, were insufficiently relevant to the issues involved in this case.

Consequently, it would appear that some of the FDA reports were admissible and some were properly excluded on relevancy grounds. Pine Street also contests the exclusion at the trial of several copies of condemnation proceedings in which bags of “Irish Pure Granulated Beet Sugar” and products made from that sugar, all of which were seized at places other than Chesapeake’s pier, were condemned. The trial court excluded the exhibits on the ground that no connection was shown between the allegedly contaminated sugar at issue and the sugar, or products derived from the sugar, involved in the condemnation proceedings. Pine Street contends that those exhibits were admissible to show the action taken by the FDA, and thus the reasonableness of Pine Street’s mitigation efforts.

It further argues that a sufficient relationship between the sugar at issue and the condemned products was shown by Chesapeake’s admission that it delivered sugar to at least some of the customers from whom the sugar was seized. In our view, an insufficient relationship was shown between the sugar and sugar products involved in the ³⁷⁵ condemnation proceedings described in the excluded exhibits and the sugar allegedly contaminated by the antimony. As Chesapeake points out, the only identification that Pine Street offered was that the seizures were made at locations to which part of the sugar cargo had been delivered from Chesapeake’s pier. As the trial court pointed out, however, two of the proceedings involved sugar or sugar products which were seized from purchasers to whom Chesapeake had no record of delivery.

With regard to three other proceedings, seizures were made from companies that had received sugar from Chesapeake’s pier both before and after the antimony had arrived at the pier. Absent a better foundation linking the condemned goods to the sugar that was allegedly contaminated after the arrival of the antimony ore on Chesapeake’s pier, we believe that the copies of the condemnation proceedings were properly excluded. Pine Street further insists that the trial court erred in failing to instruct the jury with respect to the condemnation actions “that there is a strong legal presumption that actions taken by public officers, in this instance the FDA, are regular and proper and that there attaches to an administrative act ... a presumption of the existence of facts justifying the action taken.” In an action seeking condemnation of food articles under 21 U.S.C. 334, 342, the government has the burden of establishing that the article may be injurious to health. United States v. Lexington Mill Co., supra, 232 U. S. at 411 ; United States v. 5 Cases, Etc., 179 F. 2d 519, 522 (2d Cir. 1950).

Even assuming arguendo the applicability of the requested instruction to the instant case, but see Applestein v. Baltimore, 156 Md. 40, 48 , 143 A. 666 (1928), the effect of such an instruction might have been to confuse the jury and to suggest incorrectly that Pine Street had the burden of proof in the condemnation action. Therefore the instruction was properly denied. See Hartman v. Meadows, 243 Md. 158, 163 , 220 A, 2d 555 (1966); Wintrobe v. Hart, 178 Md. 289 , 13 A. 2d 365 (1940). Pine Street also argues that the trial court erred in instructing the jury that, in considering the reasonableness ³⁷⁶ of plaintiffs decision not to contest the government’s condemnation proceedings, there was no evidence that the antimony dust was poisonous.

Preliminarily, we note that Pine Street did not object either to the trial court’s instruction that antimony ore is not poisonous, to the court’s repetition of that instruction on at least one later occasion, or to the failure of the trial court to instruct that the sugar may have been condemned under 21 U.S.C. 342(a)(4) if it became contaminated with “filth.” Therefore, it is barred from raising those issues on this appeal. Maryland Rule 554 e; Federalsburg v. Allied Con., 275 Md. 151, 163-164 , 338 A. 2d 275 (1975); Gray-Will Constr. Co. v. Gunther, 256 Md. 740, 741 , 261 A. 2d 730 (1970); Klavens v. Siegel, 256 Md. 476, 478-480 , 260 A. 2d 637 (1970); Rockville Corp. v. Rogan, 246 Md. 482, 484-485 , 229 A. 2d 76 (1967). However, since there is to be a re-trial, we note that there seemed to be evidence that antimony, once soluble, may be toxic to human beings, and that it may become soluble if introduced into a food product, such as pickle juice, containing a certain concentration of acid.

Pine Street also urges that the trial court erred in denying its requested instruction that the Food and Drug Administration sought to condemn the sugar as a poisonous or deleterious substance. See 21 U.S.C. 342(a)(1). By failing to include the word “deleterious,” Pine Street argues, the court failed to give the jury any frame of reference by which the jury could judge the reasonableness of its actions in not contesting the condemnation proceedings, including the applicable standard for contesting the FDA action. We agree.

As previously noted, the reasonableness of Pine Street’s actions when faced with the condemnation suits was a central aspect of the case. Clearly, the sugar could have been condemned upon a showing that it contained a deleterious substance. 21 U.S.C. 342(a)(1); United States v. 1232 Cases American Beauty B. Oysters, 43 F. Supp. 749 (W.D. Mo. 1942). There was evidence indicating that Pine Street could have reasonably believed that the sugar would have been detained by the FDA as a result of contamination of the sugar cargo by antimony even if antimony was not a ³⁷⁷ poisonous substance. Thus, the denial of the requested instruction was error.

Finally, Pine Street contends that the trial court was in error “in refusing to instruct the jury that if it found the defendant liable to the plaintiff it may, in its discretion, award interest on the sum at the rate of six percent per annum from May 20, 1970, until the date of the verdict.” This instruction should have been given. In Robert C. Herd & Company v. Krawhill Machinery Corp., 256 F. 2d 946, 952 (4th Cir. 1958), Chief Judge Sobeloff wrote for the court that “it is now almost universally recognized that interest is recoverable upon the value of chattels tortiously converted, destroyed, or damaged.” In that case the court examined whether, under Maryland law, interest would be awarded a shipper for damages to his property