(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of
the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity,
portions of any opinion may not have been summarized).
Argued January 18, 2000 -- Decided June 29, 2000
O'HERN, J., writing for a majority of the Court.
In this appeal, the Court considers the extent of a marine terminal operator's liability for damage caused to a
shipper's plastic injection molding machine while it was being stored in a marine terminal following carriage overseas.
M.C. Machinery, a shipper, hired Dia International Traffic Co., Ltd. (Dia International), a non-vessel owning
common carrier, to transport a forty-one-ton plastic injection molding machine from Japan to Illinois. Dia International
arranged with an ocean carrier, Hapag-Lloyd America, Inc. (Hapag) to carry the cargo overseas to the Port of New York
New Jersey located at Port Elizabeth, N.J. Hapag issued a bill of lading for the cargo to be shipped aboard its ocean vessel,
the California Saturn.
Maher Terminals, Inc. (Maher) was hired by Hapag to discharge the cargo from the vessel when it docked at Port
Elizabeth, and to store the machine in its terminal until a freight forwarder hired by M.C. Machinery arrived to pick it up.
Maher had a terminal operating and stevedoring contract with Hapag pursuant to which Maher agreed to discharge cargo
from Hapag's vessels and provide storage for the cargo until the consignee came to retrieve it.
On November 7, 1995, the California Saturn docked at Port Elizabeth. Maher discharged the cargo from the vessel
by a crane to the stringpiece, a section of the pier extending alongside the vessel. The machinery was then placed onto a
low-bed trailer, known as a mafi, and hauled from the stringpiece to a storage area in Maher's terminal where the cargo was
stored. Six days after the cargo arrived, one of Maher's crane operators was lifting the molding machine off the mafi to
place it on the ground in preparation for M.C. Machinery's trucker's pickup, when a cable slipped, causing the cargo to fall
to the ground.
Subsequently, M.C. Machinery filed a complaint against Maher terminals in the Law Division for damages to the
machinery in the amount of almost $370,000. Maher raised defenses under the bill of lading, including a limitation on
liability. M.C. Machinery moved to strike the defense on summary judgment, and Maher made a cross-motion for partial
summary judgment to limit its liability to $500 under the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. §§1300 to
15. That Act, which limits a carrier's liability for damage to cargo to $500 per package unless the shipper declares a higher
value in the bill of lading, applies from the time of loading the goods until their discharge from the ship, unless the parties
contractually extend the coverage of COGSA after discharge until delivery occurs. The bill of lading in this case contained
such an extension.
The Law Division denied M.C. Machinery's motion for summary judgment and granted Maher's cross-motion
limiting its liability to $500. In its written opinion, the Law Division reasoned that the $500 limitation applied because
M.C. Machinery did not declare the value of the cargo in the bill of lading. In addition, the court ruled that the Harter Act
extended the period by which the bill of lading governs so that any third parties enjoying the protection of the Himalaya
clause (which would extend the $500 limitation to non-carriers) would continue to be protected until proper delivery of the
goods. The court found that stripping the cargo from the mafi did not constitute “proper delivery” under the Harter Act. In
an unreported opinion, the Appellate Division affirmed the Law Division's decision for essentially the same reasons set
forth in the Law Division's opinion.
The Supreme Court granted M.C. Machinery's petition for certification.
HELD: Because the bill of lading covering the overseas cargo extended the application of the Carriage of Goods by Sea
Act beyond discharge from the vessel, and proper delivery under the Harter Act had not occurred at the time the subject
cargo was damaged, and because the parties did not declare the value of the subject cargo in the bill of lading, the $500 per
package limitation of liability provision of COGSA applied to limit the terminal operator's liability.
1. Because of the integral relationship between the carrier and stevedore, federal courts have determined that federal law
should govern the rights and liabilities of the parties in cases arising from disputes between the shipper and stevedore.
(pp. 11-12)
2. So long as COGSA or the Harter Act applies to the bill of lading, a claim for damage against the carrier or its agent is
governed by federal maritime law. (pp. 12-13)
3. COGSA, which governs all contracts (evidenced by a bill of lading or similar document of title) for the carriage of goods
by sea to or from ports of the United States and foreign trade, defines the rights and duties of the parties from the time when
the goods are loaded on to the time when they are discharged from the ship. Thereafter, the Harter Act obligates the carrier
to provide “proper delivery,” which has been defined to mean discharge of the cargo upon a fit and customary wharf.
(pp. 13-14)
4. Although COGSA applicability ends when the ship's loading and unloading equipment is removed from the cargo, a
carrier and shipper are allowed to enter into a special agreement to extend COGSA's coverage to the period before loading
and after discharge of the goods. Because certain clauses of the bill of lading in this case extended the $500 limitation to
the period after discharge of the cargo, the liability limits of Maher are expressly limited by COGSA. (pp. 15-17)
5. The Himalaya clause in Hapag's bill of lading extends all of the benefits of COGSA to Maher as a sub-contractor.
(pp. 17-18)
6. COGSA benefits may extend to parties who are unnamed in the bill of lading so long as the terms of the bill of lading are
simply expressed to a well-defined class of readily identifiable persons. (pp. 18-20)
7. Although COGSA provides that the parties may enter into a special agreement extending COGSA's benefits to the
period before loading and after discharge of the goods, any such special agreement is governed by the Harter Act, which
extends the period by which the bill of lading governs so that any third parties enjoying the protection of a Himalaya clause
will continue to be protected until “proper delivery.” Once proper delivery occurs, the Harter Act ceases to apply and the
carrier's responsibilities are those of a bailee or warehouseman. (pp. 20-21)
8. The Harter Act requires that risk of loss remain with the carrier until “proper delivery” of the cargo, which generally has
been held to require discharge of the cargo upon a “fit and customary wharf.” Proper delivery in this case did not occur
immediately upon discharge of the goods onto Maher's stringpiece. (pp. 21-23)
9. At the time of the damage to the cargo, delivery had not occurred because Maher had neither loaded the goods onto
consignee's vehicles for inland transport nor finished preparing the goods for loading onto consignee's vehicles. Thus, the
bill of lading was still in effect, and the COGSA extensions and Himalaya clause applied at the time of the damage, thereby
limiting Maher's liability to $500 per package. (pp. 23-25)
Judgment of the Appellate Division is AFFIRMED.
JUSTICE STEIN filed a separate dissenting opinion in which JUSTICE LONG joins. Justice Stein believes that
proper delivery occurred where the cargo had been discharged onto a fit and proper pier, notice was properly given to the
consignee, and the cargo was made available for pickup for six days after discharge from the vessel. Thus, Justice Stein
concluded that the Harter Act and COGSA's $500 liability limitation were inapplicable to this matter. He would reverse
and remand the case to the Law Division for trial to determine the amount of damages Maher was liable for as bailee of the
cargo.
CHIEF JUSTICE PORITZ and JUSTICES GARIBALDI, COLEMAN, and VERNIERO join in JUSTICE
O'HERN's opinion. JUSTICE STEIN filed a separate dissenting opinion in which JUSTICE LONG joins.
SUPREME COURT OF NEW JERSEY
A-
117 September Term 1998
M.C. MACHINERY SYSTEMS, INC.,
Plaintiff-Appellant,
v.
MAHER TERMINALS, INC.,
Defendant-Respondent.
Argued January 18, 2000-- Decided June 29, 2000
On certification to the Superior Court,
Appellate Division.
Anthony J. Pruzinsky argued the cause for
appellant (Hill Rivkins & Hayden, attorneys;
Mr. Pruzinsky, John J. Sullivan and Laura R.
Landau, of counsel; Mr. Sullivan, on the
brief).
James M. Kenny argued the cause for
respondent (Kenny & Stearns, attorneys;
Michael C. Mulé, on letter brief).
The opinion of the Court was delivered by
O'Hern, J.
If a strained metaphor may be forgiven, we hesitate to dip
our toes into the waters of admiralty law. Fortunately, we need
not deal here with such quaint notions as that a ship is a
person, The Osceola,
189 U.S. 158,
23 S. Ct. 483,
47 L. Ed. 760
(1903), or that when cargo and vessel come together, they are
“married at transport.” Farrell Ocean Services, Inc. v. United
States,
524 F. Supp. 211, 214 (1981). These subtleties have
appealed to ones such as Messrs. Gilbert and Sullivan who
described this law as the “monarch of the sea.” De Sole v.
United States,
947 F.2d 1169, 1176 n.11 (4th Cir. 1991). And
rightly so. The law of the sea, with other institutions of
antiquity, helped to shape the civilizations with which we are
most familiar. Its unifying principles are as necessary to the
world of commerce today as then. The issue in this case is a
recurring one -- when ceases the liability of a ship owner for
the goods of a merchant consigned to the vessel?
A cursory review of history helps to put the issue in
perspective. For this purpose, we draw on Samuel Robert
Mandelbaum, International Ocean Shipping and Risk Allocation for
Cargo Loss, Damage, and Delay: A U.S. Approach to COGSA, Hague
Visby, Hamburg, and the Multimodal Rules, 5 J. Transnat'l L. &
Pol'y 1 (1995). For convenience, we shall eliminate formal
citations to the various laws mentioned therein, referring to the
laws or conventions by their familiar names.See footnote 11
The rights and liabilities of the carrier and shipper in
maritime law predate the present era. Under Roman law, the
carrier insured the safety of the goods delivered and therefore
was liable for all loss or damage. In time, losses due to
shipwreck and piracy were excepted from this strict liability
rule. By the 1500s, European carriers were legally excused for
the non-delivery or damage to cargo, resulting from bad weather,
perils of the sea, or robbery. Bills of ladingSee footnote 22 of that time
included those defenses, while still holding the carrier liable
for any loss due to its negligence. As of the early nineteenth
century, a marine carrier was described as an “insurer of the
goods.” Unless the carrier could prove one of four excepted
causes or that its negligence had not contributed to the loss of
goods, the carrier was held strictly liable.
By the end of the century, however, carriers promoted a
different risk allocation. To avoid liability for any cargo
damage and loss, carriers began to include broad exculpatory
clauses in the bills of lading. As a result, the carriers' bills
of lading became “so unreasonable and unjust in their terms as to
exempt [the carrier] from almost every conceivable risk and
responsibility as carrier of the goods.” Hearings before the
Committee on Merchant Marine and Fisheries House of
Representatives, 74th Cong., 2d Sess. 8 (1936), reprinted in 3
The Legislative History of the Carriage of Goods by Sea Act
(Michael F. Sturley ed. & Caroline Boyer trans., 1990) Bills of
lading also were so long and complex that it became impossible
for shippers to read the bills of lading in the ordinary course
of business. The carriers' continual addition of newer and
stricter conditions in the bills of lading aggravated this
problem. To redress the inequitable bargaining positions,
American courts invalidated many of these conditions on public
policy grounds. Furthermore, Congress enacted the Harter Act in
1893 to counteract the carriers' superior bargaining power. In
other countries however, such as the United Kingdom, courts
upheld many of the carriers' terms. Because the law governing
shipments from the United States differed from most parts of the
world, a movement for international uniformity developed using
Harter Act theory.
In 1924, twenty-six nations adopted an international
convention, commonly called the Hague Rules, which established
bases for shipowner liability for cargo loss or damage. Among
its many provisions, the Hague Rules provide shipowners with
seventeen defenses and limited liability to $500 per package or
customary freight unit. The United States domestically
implemented the Hague Rules by enacting the Carriage of Goods by
Sea Act (COGSA), 46 U.S.C. §§ 1300 to -15, in 1936 and ratifying
the convention in the following year.
COGSA provides international uniformity and balances the
power between shippers and owners. The Act applies from “tackle
to tackle,” i.e., the time from loading of the goods until their
discharge from the ship.
46 U.S.C. §1301(e). However, the
parties may contractually extend the coverage of COGSA after
discharge until delivery occurs, at which point the contract of
carriage terminates. B. Elliott (Canada) Ltd. v. John T. Clark &
Son,
704 F.2d 1305, 1307 (4th Cir. 1983); see also Leather's Best
v. Mormaclynx,
451 F.2d 800, 807 (2d Cir. 1971) (“[T]he contract
continues to govern the relationship between a shipper and a
carrier after discharge but before delivery.”). Although COGSA
did not completely supersede the Harter Act, it does contain
significant changes.See footnote 33 Most importantly, COGSA provides the
carrier and the ship a $500 per package liability limitation in
the event of damage to cargo.
46 U.S.C. §1304(5). This
limitation applies unless the shipper declares the value of the
cargo in the bill of lading. Ibid.
This appeal requires the Court to decide the amount of a
marine terminal operator's liability for damage caused to a
shipper's plastic injection molding machine while it was being
stored in a marine terminal following carriage overseas. The
Court must resolve whether defendant's liability is limited to
$500 pursuant to an alleged extension of COGSA contained in the
bill of lading, or whether defendant is liable for approximately
$370,000, the full amount of damages claimed by plaintiff,
pursuant to New Jersey bailment law.
Defendant Maher Terminals, Inc. (“Maher” or “terminal operator”) was hired by Hapag-Lloyd to discharge the cargo from the vessel when it docked at Port Elizabeth, and to store the machine in its terminal until a freight forwarder hired by plaintiff arrived to pick it up. Maher had a terminal operating and stevedoring contract with Hapag-Lloyd pursuant to which it agreed to discharge cargo from Hapag-Lloyd's vessels, including the California Saturn, and provide storage for the cargo until the consignee came to retrieve it.
On November 7, 1995, the California Saturn docked at Port Elizabeth, and Maher discharged the cargo from the vessel by a crane to the stringpiece, a section of the pier extending alongside the vessel. The machinery was then placed onto a low bed trailer, known as a mafi, and hauled from the stringpiece to a storage area in Maher's terminal, called the Breakbulk/Ro-Ro yard, where the cargo was stored until plaintiff's trucker arrived. The storage area was on property leased from the Port Authority of New York and New Jersey and was several hundred yards from the pier. Six days after the cargo arrived, one of Maher's crane operators was lifting the molding machine off the mafi to place it on the ground in preparation for plaintiff's trucker's pickup, when a cable slipped, causing the cargo to fall to the ground.
On August 1, 1996, plaintiff filed a complaint against defendant in the Law Division for damages to the machinery in the amount of $369,932. Maher raised defenses under the bill of lading, including a limitation on liability. Plaintiff moved to strike the defense on summary judgment, and defendant made a cross motion for partial summary judgment to limit its liability to $500 under COGSA. The parties stipulated that if the court found that liability was limited to $500 per package, then judgment was to be entered in that amount. The Law Division denied plaintiff's motion for summary judgment and granted defendant's motion limiting its liability to $500. In its written opinion, the Law Division reasoned that the $500 limitation applied because M.C. Machinery did not declare the value of the cargo in the bill of lading. Additionally, the court ruled that the Harter Act extended the period by which the bill of lading governs so that any third parties enjoying protection of the Himalaya clauseSee footnote 44 would continue to be protected until proper delivery of the goods. The court found that defendant's stringpiece was not “a fit and customary wharf” and that stripping cargo from the mafi occurs before proper delivery under the Harter Act. In an unreported opinion, the Appellate Division affirmed the Law Division's decision for essentially the same reasons stated in the Law Division's opinion. This Court granted plaintiff's petition for certification. 161 N.J. 334 (1999).
A. Does State or Federal Law Govern the Liability of a Marine Terminal Operator's Handling of Cargo that has been Discharged from an Ocean Vessel?
Unfortunately, it is not quite that simple. As noted, the marine terminal was located on the Port Authority's property. The marine terminal appears to be a functional part of the complex system of ocean carriage of goods. The stringpiece, as its name implies, is often or normally a narrow pier immediately alongside the vessel. If the vessel were to stack all the discharged goods on the stringpiece until delivery were accomplished, a bottleneck would be inevitable. Because a merchant cannot always be immediately present to remove the goods from the pier, a workable system has evolved under which the carrier arranges with another (the stevedore) to hold the cargo in a secure place (the marine terminal) for a reasonable time. The carrier pays the stevedore to carry out this function on its behalf until the merchant picks up the cargo at the specified time. If the merchant does not pick up the goods by the specified time, the stevedore may impose demurrage charges (a charge or rent for the storage of the cargo).
Because of this integral relationship between the carrier and stevedore, federal courts have determined that federal law should govern the rights and liabilities of the parties in cases arising from disputes between the shipper and stevedore.
The Fourth and Eleventh Circuits have held that an action against a marine terminal operator for damage to cargo is within federal maritime jurisdiction, not state law. Wemhoener Pressen v. Ceres Marine Terminals, Inc., 5 F.3d 734 (4th Cir. 1993); B. Elliott, supra, 704 F. 2d at 1307 (applying federal law to suit in district court against stevedore/terminal operator when provisions of COGSA contractually extended to post-discharge period); Koppers Co., Inc. v. S/S Defiance, 704 F.2d 1309, 1312 (4th Cir. 1983). Wemhoener stated: “so long as the bill of lading is still covered by COGSA or the Harter Act, which includes the period after the discharge of the goods but prior to delivery, the rights and obligations of third party beneficiaries under a Himalaya clause, should be determined with reference to the bill of lading, not state law, even if state law is inconsistent.” Id. at 740. The court reasoned that a contract of carriage embodied by a bill of lading represents the parties' intentions at the time the contract was made, and therefore should be interpreted according to its terms, “without reference to the varying state laws of this nation's many ports.” Ibid.
The Eleventh Circuit has also upheld the application of federal law to claims against third-party agents of the carrier for damage to cargo. See Hiram Walker & Sons v. Kirk Line, 877 F.2d 1508, 1516 (11th Cir. 1989), cert. denied, 514 U.S 1018 (1995) (holding that stevedore would be protected by contractual COGSA provision against suit by the owner for damage to cargo occurring two days after discharge but during storage at the terminal); Generali v. D'Amico, 766 F.2d 485 (11th Cir. 1985) (affirming the district court's exercise of admiralty jurisdiction over a suit against the carrier and stevedore for cargo damage at the terminal eighteen days after discharge from the vessel); Certain Underwriters of Lloyd's v. Barber Blue Sea Line, 675 F.2d 266, 268 (11th Cir. 1982) (affirming decision of district court sitting in admiralty that terminal operator was protected by contractual COGSA limitation).
In Jagenberg, Inc. v. Georgia Ports Authority, 882 F. Supp. 1065, 1071 (S.D.Ga. 1995), the court held that federal maritime law, not state law, applies to the shipper's claims against the terminal operator for damage to the goods while in storage. The Jagenberg Court recognized the importance reviewing the overall context of a carriage of goods contract:
Admittedly, in the instant case, there was simply damage to property “that happened to occur on a dock,” but that damage occurred in the context of fulfilling a contract for the delivery of goods. COGSA and the Harter Act were thus implicated, and these bodies of law pre-empt state law whenever they are applicable.
So long as COGSA or the Harter Act applies to the bill of lading, the claim against the carrier or its agent is governed by federal maritime law. The other side of the coin is that a claim for conversion must be brought under state law when delivery of the cargo was in accordance with COGSA and the Harter Act. Metropolitan Wholesale Supply, Inc. v. M/V Royal Rainbow, 12 F.3d 58 (5th Cir. 1994). This approach promotes uniformity in the law's treatment of such claims.
B. Are the Liabilities of the Marine Terminal Operator Limited
to the Amount of $500 Set Forth as the Value of the Cargo in the
Bill of Lading?
As noted, COGSA generally provides the carrier with a $500 per package liability limitation for cargo damage between the time cargo is loaded onto the ship to the time it is discharged. 46 U.S.C. §1304(5). This limitation applies unless the merchant/shipper declares the value of the cargo in the bill of lading. Ibid. In this case, the shipper failed to declare the value of the cargo in the bill of lading.See footnote 55 It is without question that if the carrier had negligently damaged the cargo during sea voyage, the $500 limitation would have applied.
The question presented however, is whether federal law similarly limits the non-party stevedore's liability to $500. Although COGSA applicability ends when the ship's tackle, i.e., loading and unloading equipment, is removed from the cargo, a carrier and shipper are allowed to enter into a special agreement to extend COGSA's coverage to the period before loading and after discharge of the goods. See 46 U.S.C. § 1307 (“nothing contained in this chapter shall prevent a carrier or a shipper from entering into any agreement ... as to the responsibility and liability of the carrier or the ship for the loss or damage to or in connection with the custody ... of goods prior to the loading on and subsequent to the discharge from the ship on which the goods are carried by sea”); Mori Seiki U.S.A., Inc. v. M/V Alligator Triumph, 990 F.2d 444, 477 (9th Cir. 1993) (extension of COGSA's $500 liability limitation to period before loading and after discharge is “precisely the kind of extension ... contemplated and authorized by 46 U.S.C. §1307").
The limits of the stevedore in this case are expressly governed by COGSA because clauses 5 and 6 of the bill of lading extend the $500 limitation to the period after discharge. Clause 5 of the Bill of lading, entitled, “Carrier's Responsibility, Port-to-Port,” states in pertinent part:
The Carrier shall be under no liability whatsoever for loss or damage to the Goods howsoever occurring if such loss or damage arises prior to loading onto or subsequent to discharge from the vessel. Notwithstanding the above, in case and to the extent any applicable compulsory law provides to the contrary, the Carrier shall have the benefit of every right, defence [sic], limitation and liberty in the Hague Rules as applied by this clause during such additional compulsory period of responsibility, notwithstanding that the loss or damage did not occur at sea. The US COGSA shall govern while the Goods are in the custody of the Carrier or his Sub Contractor at the sea-terminal in the United States of America before loading onto the Vessel or after discharge therefrom as the case may be....
Clause 6 of the bill of lading, entitled “Carrier's
Responsibility, Multimodal Transport,” states, in relevant part:
“Carrier undertakes to perform and/or in his own name to procure
performance of the Carriage from the Place of Receipt or the Port
of Loading, whichever is applicable, to the Port of Discharge or
Place of Delivery, whichever is applicable.” Clause 6 subsection
(2)(b) stated, in relevant part, the liability of the carrier
will be determined: “In case of shipments to or from North
America by the provisions of [COGSA] if the loss or damage is
known to have occurred during sea-carriage to or from the USA or
during Carrier's custody of the Goods before loading or after
discharge in ports of the USA ....”
The reverse side of the bill of lading also contains a so
called “Himalaya clause” in paragraph 4(2),See footnote 66 extending any of
Hapag-Lloyd's defenses to its “Sub-Contractors.” The bill of
lading defined “Sub-Contractor” to include “owners and operators
of vessels (other than the Carrier), stevedores, terminal and
groupage operators . . . and any independent contractor employed
by the Carrier in performance of the Carriage.”
The plain language of Hapag-Lloyd's bill of lading therefore
extends COGSA to the period while the cargo is in the carrier's
custody (through its agent, the stevedore) after discharge. The
Himalaya clause also extends all the benefits available to Hapag
Lloyd to Maher, as a sub-contractor, including the $500 liability
limitation. Various courts have upheld the use of a Himalaya
clause in a bill of lading to limit the liability of stevedores,
terminal operators, and other independent contractors during the
period between discharge and delivery. Baretto Peat, Inc. v.
Louis Ayala Colon Sucrs., Inc.,
896 F.2d 656, 659-60 (1st Cir.
1990); DeLaval Turbine Inc., v. West India Industries, Inc.,
502 F.2d 259, 264 (3d Cir. 1974); Barber Blue, supra.
Some courts require that the party seeking COGSA's refuge be
expressly enumerated in the Himalaya clause. DeLaval Turbine,
supra; Cabot Corp. v. S.S. Mormacscan,
441 F.2d 476 (2d Cir.
1971). These courts relied on Herd & Co. v. Krawill Machinery
Corp., 359 U.S. 297, 305,
79 S. Ct. 766, 771,
3 L. Ed 2d 820, 825
(1959), that held that such clauses be strictly construed against
the party seeking protection. In Herd, the Court refused to
imply an extension of COGSA to limit the liability of a negligent
stevedore when the bill of lading contained no indication that
the contracting parties had intended to limit liability of
stevedores or other agents of carrier for damage caused by their
negligence. The clear import of Herd was that a Himalaya clause
is enforceable when a bill of lading demonstrates a clear intent
to extend benefits to the party seeking protection. Marva Jo
Wyatt, Contract Terms in Intermodal Transport: COGSA Comes
Ashore,
16 Tul. Mar. L.J. 177, 179-180 (1991). Thus, COGSA
benefits may extend to parties who are unnamed in the bill of
lading. Baretto Peat, supra, 896 F.
2d at 660; Barber Blue,
supra, 675 F.
2d at 270. The terms must simply be expressed to a
“well-defined class of readily identifiable persons,” for the
benefits to be extended. Baretto Peat, supra, 896 F.
2d at 660.
(quoting Barber Blue, supra, 675 F.
2d at 270). “When a bill
refers to a class of persons such as 'agents' and 'independent
contractors' it is clear that the contract includes all those
persons engaged by the carrier to perform the functions and
duties of the carrier within the scope of the carriage contract.”
Barber Blue, supra, 675 F.
2d at 270.
In this case, the Himalaya clause specifies that all sub
contractors of the carrier shall have the carrier's benefits and
defenses available to it. Maher, the marine terminal operator,
is unequivocally a “sub-contractor” of Hapag-Lloyd. Both
“stevedores” and “terminal operators” are expressly named in the
bill of lading's definition of “Sub-Contractors.” Therefore, we
are convinced that the parties contemplated in the bill of lading
that Hapag-Lloyd's agents would be covered by COGSA's benefit of
the $500 liability limitation.
Plaintiff argues that the Himalaya clause cannot protect Maher because the bill of lading no longer governed at the time the cargo was damaged because proper delivery of the goods had already occurred. Plaintiff claims that the provision on the front of the bill of lading indicating that the place of delivery is “New York, NY Alongside” means that the bill of lading terminated upon discharge and delivery of the goods on the pier. Alternatively, plaintiff asserts that for purposes of the Harter Act, proper delivery occurred when the cargo reached a safe and suitable wharf, specifically when the machinery was delivered to defendant's storage yard.
Although COGSA applies from the time the goods are loaded on to the ship until the time of discharge, the Harter Act, 46 U.S.C. §§ 190 to -95, covers the period when the carrier or its agent accepts custody of the goods before loading, and the period between discharge of the goods from the ship until proper delivery. Tapco Nigeria, supra, 702 F. 2d at 1255. Although COGSA provides that the parties can enter into a special agreement extending COGSA's benefits to the period before loading and after discharge of the goods, 46 U.S.C. §1307, any special agreement is governed by the Harter Act, which voids any provision in the bill of lading relieving the carrier “from liability for loss or damage arising from negligence, fault or failure on proper loading, stowage, custody care, or proper delivery of any and all lawful merchandise or property committed to its . . . charge.” 46 U.S.C. § 190. The Harter Act also extends the period by which the bill of lading governs so that any third parties enjoying the protection of a Himalaya clause will continue to be protected until proper delivery. Once proper delivery occurs, the Harter Act ceases to apply and the carrier's responsibilities are those of a bailee or warehouseman. Goya Foods Inc. v. S.S. Italica, S.S., 561 F. Supp 1077, 1086 (S.D.N.Y. 1983), aff'd, 742 F.2d 1434 (2d Cir. 1983).
Therefore, the Harter Act requires that risk of loss remain with the carrier until “proper delivery” of the cargo. Although the Act itself does not define proper delivery, proper delivery has generally been held to require discharge of the cargo on “a fit and customary wharf.” Allstate Ins. Co., supra, 648 F.2d at 168. Proper delivery may be either actual or constructive. Actual delivery is the transfer of full possession and control to the consignee or its agent. B. Elliott, supra, 704 F. 2d at 1308. Constructive delivery means, generally, that the goods must be unloaded from the vessel onto a dock, wharf, pier or terminal, segregated by bill of lading, and put it in a secure and suitable place, accessible to the consignee. Tapco Nigeria, supra, 702 F. 2d at 1255. The consignee must also be given proper notice and a reasonable time to pick up the goods. B. Elliott, supra, 704 F. 2d at 1308.
Plaintiff's argument that proper delivery is satisfied by merely unloading the goods from a ship onto a wharf or pier has been frequently rejected. See United States Fire Ins. Co. v. S.S. Mee May, 1 990 WL 154696 (S.D.N.Y. Apr. 13, 1990) (holding that stevedore and marine terminal operator were protected for damage to plastic injection molding machine by a $500 liability limitation in the bill of lading because proper delivery had not yet occurred when cargo was damaged while being hauled on chassis from a stringpiece). Conversely, a carrier may not relieve itself of the responsibility to make proper delivery. David Crystal, supra, 339 F.2d. at 297 (invalidating clauses in the bill of lading that indicated that the carrier's responsibility would cease when delivery was made from the ship's deck and that the carrier could abandon the goods if the consignee did not immediately retrieve them under the Harter Act).
Similarly, we do not construe “New York, NY Alongside” as terminating the contract when the goods were discharged at the pier. Case law indicates that a contract for carriage does not expire until proper delivery is made, and the facts of this case support the conclusion that proper delivery did not occur immediately upon discharge of the goods onto defendant's stringpiece. The Law Division observed:
The Court finds as a matter of fact from Stevedore's undisputed affidavit, from a review of the numerous cases involving cargo damage, and from common sense that Stevedore's stringpiece is not [a] fit and customary wharf. Reasonable minds cannot disagree that Stevedore's operations on the stringpiece are ordinarily too concentrated and massive to permit delivery there.
Simply put, we believe that stripping cargo from a mafi occurs before proper delivery under the Harter Act. See Wemhoener Pressen, supra, 5 F. 3d at 742 (finding that proper delivery of goods had not occurred because cargo was damaged while being stripped from a mafi and not “at the disposal” of the consignee or ready to be received by the inland carrier); Jagenberg, supra, 882 F. Supp. at 1077 (holding that proper delivery of goods stored at stevedore's yard for five days would have occurred when the goods were loaded onto vehicles of an inland trucker, whether hired by the shipper or the carrier). Jagenberg recognized that the stevedore has several duties to perform before the shipper's consignee can take custody of the goods. The court noted:
Just as goods are not available to the inland carrier before the mafi is stripped by the terminal operator, nor are they available before they are physically moved out of storage by agents of the sea carrier and prepared for the trucker to be able to actually receive them .... Increasing efficiency and integration in cargo transport continues to blur the lines separating sea carriers responsibilities from those of others. The Court finds it advisable to keep sea carriers to the standards imposed by the Harter Act until goods are in the hands of land carriers and actually leaving the maritime area.
In this case, no delivery occurred because Maher had neither loaded the goods onto consignee's vehicles for inland transport nor finished preparing the goods for loading onto consignee's vehicles. Moreover, consignee had not taken physical control of the property when the goods were damaged.
Therefore, we agree with the courts below that delivery had not yet occurred when the goods were damaged. The bill of lading was still in effect, and the COGSA extensions and Himalaya clause applied at the time the damage occurred, thereby limiting the marine terminal's liability to $500 per package. We simply point out that if the shipper had valued the goods at $370,000, Maher would have been obligated to pay that sum if at fault. The freight charges would have been higher, but perhaps insurance premiums would have been lower. We also point out that if the shipper had valued the goods at $370,000, it would undoubtedly have sought to impose liability on the carrier, Hapag-Lloyd. We sense that these are rather sophisticated parties involved in the ocean carriage of goods and knew how to allocate the risks of commerce.
We affirm the judgment of the Appellate Division.
CHIEF JUSTICE PORITZ and JUSTICES GARIBALDI, COLEMAN, and VERNIERO join in JUSTICE O'HERN's opinion. JUSTICE STEIN filed a separate dissenting opinion in which JUSTICE LONG joins.
SUPREME COURT OF NEW JERSEY
A-
117 September Term 1998
M.C. MACHINERY SYSTEMS, INC.,
Plaintiff-Appellant,
v.
MAHER TERMINALS, INC.,
Defendant-Respondent.
STEIN, J., dissenting.
The Court meticulously has described the relevant history of
maritime law and the events that led to the enactment of the
Harter Act,
46 U.S.C.A.
§§190 to -96, and the Carriage of Goods
by Sea Act (COGSA),
46 U.S.C.A.
§§1300 to -15. The Court
correctly notes that those federal laws should govern a liability
dispute between a stevedore hired by an ocean carrier and a
shipper of goods damaged by that stevedore before delivery
occurs. The Court also concludes that COGSA's limitation on
liability provision may be extended to the ocean carrier's sub
contractors until delivery occurs. The Court accurately
recapitulates the facts that detail the relationship between the
parties, correctly concluding that COGSA's limitation on
liability provision was extended by the parties to the period
covered by the Harter Act.
I differ only with the majority's conclusion that “proper
delivery” did not occur. The Harter Act applies to a stevedore
responsible for unloading cargo if the unloading function is
sufficiently related to the transport of the cargo to the place
of delivery. Obviously, that statute does not intend that the
stevedore retain COGSA's limited liability protection after
unloading is completed and the goods are safely stored awaiting
pickup by the consignee. On this record, it appears that
unloading was completed and that the stevedore held the goods in
its own storage area for six days. The record also indicates
that notice that the goods were ready to be picked up had been
given to the consignee.
The Court holds, however, that “proper delivery” of the
goods had not occurred because the cargo remained on a mafi and
therefore was not ready to be picked up by the consignee. Thus,
the majority concludes that the applicability of the Harter Act
and the limitation of liability provision of COGSA may turn on
whether the cargo remains on a mafi. Based on that analysis the
majority finds that the Harter Act and COGSA apply to plaintiff's
claim and that defendant is liable only for $500 of the
approximate $370,000 in damages caused by defendant's mishandling
of the cargo. Because it is evident that the goods had been
delivered in this case and that “stripping cargo from a mafi,”
ante at __ (slip op. at 25), is not required to effectuate
“proper delivery” under the Harter Act, I respectfully dissent.
I
Plaintiff is a subrogated underwriter suing in the name of
its insured, M.C. Machinery Systems, Inc. (M.C. Machinery). Dia
International Traffic Co., Ltd (Dia International), a non-vessel
owning common carrier, contracted with M.C. Machinery to
transport a 42 kilogram plastic injection molding machine from
Japan to Glendale Heights, Illinois. Hapag-Lloyd America, Inc.
(Hapag-Lloyd), an ocean carrier, was hired by Dia International
to transport the machine overseas from Japan to the Port of New
York-New Jersey, located at Port Elizabeth, N.J., before it was
to be picked up by plaintiff for transport by truck to Illinois.
On arrival of the cargo at Port Elizabeth, defendant Maher
Terminals, Inc. (Maher) discharged the machine by crane from the
ocean carrier to Maher's stringpiece, part of the pier that
extended alongside the ship. The machine was then placed on
Maher's mafi and hauled from the stringpiece to a separate
storage area. A mafi is a wheeled, non-motorized flatbed trailer
on which cargo can be transported from one place to another on
terminal premises. The cargo stayed in storage for six days on
Maher's mafi until Maher apparently needed the mafi for other
cargo. Maher's superintendent of the storage facility stated
that “Maher lifted the cargo from the mafi and intended to ground
the cargo at a place in the terminal so that consignee's trucker,
who had not yet come, would have an opportunity to take delivery
of the cargo.” As one of Maher's crane operators was lifting the
machine off the mafi, a cable slipped and the cargo fell to the
ground. That event resulted in approximately $370,000 in damages
to the machine.
Maher had a terminal operating and stevedoring contract with
Hapag-Lloyd, pursuant to which it was to discharge cargo from
Hapag-Lloyd's vessels and provide storage for the cargo until the
consignee arrived to retrieve it. Maher damaged M.C. Machinery's
cargo while removing the machine from its own mafi that was then
needed for other cargo. Maher now seeks to limit its potential
liability for mishandling the cargo to only $500, relying on its
contract with Hapag-Lloyd and the limited liability provision
afforded to ocean carriers under COGSA.
II
The Harter Act was enacted in 1893 in response to the
practices of ocean carriers that inserted release-from-negligence
provisions into their bills of lading in an attempt to limit
their liability as carriers of goods. Pan American World
Airways, Inc. v. California Stevedore & Ballast Co.,
559 F.2d 1173, 1175 n.1 (9th Cir. 1977). Under the Harter Act, carriers
could no longer relieve themselves “from liability for loss or
damage arising from negligence, fault or failure in proper
loading, stowage, custody, care, or proper delivery of any and
all lawful merchandise or property committed to . . . their
charge” by adding broad protective language into the carriage
contract.
46 U.S.C.A.
§190. The Harter Act encompassed the
vessel owner's entire period of liability, beginning from the
time when the carrier or its agent accepted custody of the goods
before loading, through the unloading of the goods from the
vessel, and continuing until delivery to a common carrier
occurred. Tapco Nigeria, Ltd. v. M/V Westwind,
702 F.2d 1252,
1255 (5th Cir. 1983). The Harter Act was successful in striking
a balance between the dominant British merchant marine that
sought to avoid responsibility for any claims based on negligent
handling of cargo, and shippers that sought to hold ocean
carriers liable for all damages resulting from negligence during
transport of the goods. Sunkist Growers, Inc. v. Adelaide
Shipping Lines, Ltd.,
603 F.2d 1327, 1333 (9th Cir. 1979), cert.
denied
444 U.S. 1012,
100 S. Ct. 659,
62 L. Ed.2d 640 (1980).
The Harter Act was for the most part superseded by the
Carriage of Goods by Sea Act (COGSA) that codified the Hague
Rules in 1936. Wemhoener Pressen v. Ceres Marine Terminals,
Inc.,
5 F.3d 734, 741 (4th Cir. 1993). The purpose of the Harter
Act, COGSA, and the Hague Rules was to achieve a “fair balancing
of the interests” between ocean carriers and shippers, and also
“to effectuate a standard and uniform set of provisions for ocean
bills of lading.” Encyclopaedia Britannica, Inc. v. S.S. Hong
Kong Producer,
422 F.2d 7, 11 (2nd Cir. 1969). See also 2 Thomas
J. Schoenbaum, Admiralty and Maritime Law § 10-15 at 75 (2d ed.
1994) (noting that COGSA's goal was “to achieve international
uniformity and to redress the edge in bargaining power enjoyed by
carriers over shipper and cargo interests by setting out certain
duties and responsibilities of carriers that cannot be avoided
even by express contractual provision”). To effectuate that
balance COGSA limits liability for cargo damage to $500 if damage
occurs between the time cargo is loaded onto the ship to the time
it is discharged.
46 U.S.C.A.
§1304(5). That limitation does
not apply, however, if the shipper declares the value of the
cargo in the bill of lading. Ibid. In contrast, the Harter Act
contains no provision limiting the carrier's responsibility for
negligence to a specific dollar amount.
46 U.S.C.A.
§§190 to
96. Further, COGSA defers to the Harter Act in dealing with
questions of liability that pertain to post-discharge negligence:
Nothing in this chapter shall be construed
as superseding any part of sections 190 to 196
of this title, or of any other law which would
be applicable in the absence of this chapter,
insofar as they relate to the duties,
responsibilities, and liabilities of the ship or
carrier prior to the time when the goods are
loaded on or after the time they are discharged
from the ship.
[
46 U.S.C.A.
§1311 (emphasis added).]
Notwithstanding those provisions, COGSA allows an ocean
carrier and shipper to enter into a special agreement concerning
“responsibility and liability” that extends the coverage of COGSA
to the periods before loading and after discharge of the goods.
46 U.S.C.A.
§1307. In the absence of such an agreement, the
Harter Act applies to damage that occurred prior to loading or
after discharge of cargo until proper delivery is made because
those periods are not covered by COGSA. Wemhoener Pressen,
supra, 5 F.
3d at 739; Allied Chemical Int'l Corp. v. Companhia de
Navegacao Lloyd Brasileiro,
775 F.2d 476, 482 (2nd Cir. 1985),
cert. denied,
475 U.S. 1099,
106 S. Ct. 1502,
89 L. Ed.2d 903
(1986).
Neither the Harter Act nor COGSA apply after “proper
delivery” of the goods by the carrier is effectuated. Wemhoener
Pressen, supra, 5 F.
3d at 741; B. Elliott (Canada) Ltd. v. John
T. Clark & Son,
704 F.2d 1305, 1307 (4th Cir. 1983). Although
“proper delivery” is not defined in the Harter Act, that term has
been interpreted to include both actual and constructive
delivery:
Actual delivery consists [of] 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 to put them
under proper care and custody. Upon 'proper
delivery' the Harter Act ceases to govern the
relationship between the parties, and a sea
carrier's strict liability, as such,
terminates. 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.
[Orient Overseas Line v. Globemaster
Baltimore, Inc.,
365 A.2d 325, 335
(Md. Ct. Spec. App. 1976) (citations
omitted) (emphasis added).]
That interpretation has been adopted in cases that
considered whether delivery had occurred prior to the occurrence
of damage. Jagenberg, Inc. v. Georgia Ports Auth.,
882 F. Supp. 1065, 1076-77 (S.D. Ga. 1995); Wemhoener Pressen, supra, 5 F.
3d
at 741-42; B. Elliott, supra, 704 F.
2d at 1308. See also Tapco
Nigeria, supra, 702 F.
2d at 1255 (noting that proper delivery
requires discharge of cargo “upon a fit and customary wharf”);
Allstate Ins. Co. v. Imparca Lines,
646 F.2d 166, 168 (5th Cir.
1981) (same); Union Steel America Co. v. M/V Sanko Spruce,
14 F.
Supp.2d 682, 694 (D.N.J. 1998) (holding that Harter Act
“imposes a duty on carriers to deliver the goods from wharf to
wharf, to notify the consignee of the vessel's arrival, and to
protect the cargo until the consignee has a reasonable
opportunity to remove it”); Morse Electro Products Corp. v. S.S.
Great Peace,
437 F. Supp. 474, 486 (D.N.J. 1977) (defining proper
delivery “as the discharge of . . . cargo to a fit and proper
pier”).
Courts also have distinguished the liability of a carrier
from the liability of a warehouser of delivered cargo. In Goya
Foods, Inc. v. S.S. Italica,
561 F. Supp. 1077, 1086 (S.D.N.Y.
1983), a federal district court held that
proper delivery thus ends '(t)he liability of
the carrier as carrier,' [but] it does not
negate the carrier's responsibility safely to
store the cargo until the consignee comes to
remove it. Instead, a 'carrier in possession
of goods not yet called for is liable as a
bailee for negligence in the storage of the
goods,' and must answer for damage caused by
its own negligence or that of a stevedore
acting as its agent.
[Citations omitted (emphasis added).]
That court has held that a carrier that merely offloads cargo
does not satisfy the requirements of “proper delivery” and that
“[i]n order to satisfy [a carrier's] obligations under the Harter
Act, the carrier must, at least, place the goods in a secure and
suitably sheltered place accessible to the consignee, giving the
consignee notice and a reasonable opportunity to pick up the
goods.” United States Fire Insurance Co. v. S.S. Mee May, 1
990 WL 154696 at *3 (S.D.N.Y. 1990).
III
The correctness of the majority's conclusion that COGSA and
the Harter Act would govern Maher's liability if the goods had
been damaged during discharge but before delivery is not
disputed. Maher was a sub-contractor as defined in Hapag-Lloyd's
bill of lading, and the bill of lading extended COGSA so that its
provisions applied “while the Goods are in the custody of the
Carrier or his Sub-contractor at the sea-terminal in the United
States of America before loading onto the Vessel or after
discharge therefrom as the case may be.” However, once proper
delivery occurs applicability of the Harter Act and COGSA ceases
and the stevedore then becomes responsible for the goods under
the law of bailments. Goya Foods, supra, 561 F. Supp. at 1086.
Several cases have absolved carriers from liability after
proper delivery has occurred on the basis that the Harter Act no
longer applies to the shipment. Hillcrest Sales, Inc. v. Chilean
Line, Inc., 1
998 WL 961894, *5 (E.D. Pa. 1998) (finding that
cargo was properly delivered when carrier “placed [goods] in the
sheds pursuant to normal practice at the port to await . . .
pick-up by plaintiff's contractors and/or agents”); J. Kinderman
& Sons v. Nippon Yusen Kaisha Lines,
322 F. Supp. 939, 941-42
(E.D. Pa. 1971) (concluding that proper delivery occurred with
discharge to a fit and customary wharf, reasonable notice given
to the consignee, and fair opportunity for removal of goods from
the pier). The majority relies on two Fourth Circuit cases to
conclude “that proper delivery has not occurred even though a
consignee had notice of the cargo's arrival and the cargo had
been discharged onto a fit and proper pier and later placed in
storage.” Ante at __ (slip op. at 24). However, in those cases
the carrier was required to perform additional duties beyond
discharging the cargo properly. Koppers Co., Inc. v. S/S
Defiance,
704 F.2d 1309, 1312 (4th Cir. 1983) (noting that “bill
of lading required [carrier] to load the cargo on one or more
trucks for delivery”); B. Elliott, supra, 704 F.
2d at 1308
(finding that carrier's stevedore was obligated “to have the
cargo removed from the container and placed in or on the overland
truck”).
The majority's conclusion that proper delivery under the
Harter Act had not occurred until the cargo was stripped from the
mafi and prepared for pickup is unpersuasive. Surely a stevedore
cannot avoid liability as a bailee simply by refusing to remove
goods from a mafi, irrespective of the period of retention. The
record reveals that the cargo had been held on a mafi owned by
Maher for six days. If that period had been six weeks, the Court
would be hard pressed to conclude that proper delivery had not
occurred. In my view, retention of the goods on a mafi, while
relevant, should not determine time of delivery. The more
relevant inquiry is whether, as a practical matter, the unloading
process has been completed and the cargo has been placed by the
stevedore in storage on a fit pier. That standard clearly has
been satisfied here.
The majority correctly notes that M.C. Machinery had not
assumed actual physical control of the goods when they were
damaged. Ante at __ (slip op. at 26). However, assumption of
physical control of the machinery by the consignee is not
required in determining whether proper delivery had occurred.
Orient Overseas Line, supra, 365 A.
2d at 335 (stating that proper
delivery includes both actual or constructive delivery); Morse,
supra, 437 F. Supp. at 486. The Harter Act, who