UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT __________________
No. 99-30166 __________________
CROSS EQUIPMENT LTD., WATERMAN SUPPLY CO., INC.,
Plaintiffs-Counter Defendants- Appellees-Cross-Appellants,
versus
HYUNDAI MERCHANT MARINE (AMERICA) INC., HYUNDAI MERCHANT MARINE CO., LTD., HYUNDAI AMERICA SHIPPING AGENCY, TRANSOCEAN TERMINAL OPERATORS INC., In personam,
Defendants-Counter Plaintiffs- Appellants-Cross Appellees. _________________________________________________________________
Appeal from the United States District Court for the Eastern District of Louisiana (97-CV-2569-E) _________________________________________________________________ May 1, 2000
Before BARKSDALE, BENAVIDES, and STEWART, Circuit Judges.
PER CURIAM:*
For this admiralty matter, primarily at issue is whether, and
to what extent, a shipper is liable to a marine terminal operator
for demurrage when: the shipper’s cargo has been offloaded from
the vessel to the operator’s wharf; the shipper and the carrier
dispute, under the bill of lading, responsibility for repairs to
the cargo for offloading by the carrier; as a result, the operator
and carrier refuse to release the cargo to the shipper; the shipper
arrests its cargo; and the carrier and operator assert possessory
* Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. maritime liens against the cargo, continue to refuse to release it,
eventually seize it, and it remains on the wharf, subject to ever
increasing demurrage, until bonded out by the shipper. Also at
issue is whether the costs related to the repairs to the cargo
should be borne by the shipper (necessary to safely offload the
cargo) or by the carrier (offload to be at no cost to shipper). We
AFFIRM.
I.
For its cargo in Thailand, valued in excess of $300,000, Cross
Equipment, Ltd. and Waterman Supply Co., Inc. (Cross), as shipper,
contracted with Hyundai, as carrier, to transport the cargo to New
Orleans, “free in-liner out” (Cross paid loading costs; Hyundai,
unloading costs). Included in the cargo were 12 used winches; each
weighed in excess of 100 tons. The cargo was loaded aboard
Hyundai’s vessel, the M/V CEMRE II. On its bill of lading, Hyundai
did not note any cargo deficiencies. When the vessel arrived in
New Orleans on 6 August 1997, Cross paid Hyundai approximately
$150,000 in freight charges.
The arrival was several days past that scheduled. The vessel
docked at a Port of New Orleans wharf leased by Transocean Terminal
Operators (TTO). Hyundai hired TTO to perform stevedoring.
Originally, Hyundai had contracted for a floating heavy-lift
crane to offload the cargo to a barge. But, because of the
vessel’s late arrival, that crane was not available. As a result,
Hyundai and TTO devised an alternative offloading method using
TTO’s smaller dock-side cranes.
- 2 - As noted, each of the 12 winches in the cargo weighed in
excess of 100 tons. Several were offloaded successfully. But,
when offloading another, one of its vertical lifting pad eyes
broke. The winch fell several inches to the ship’s deck. There
was no damage.
Marine surveyors, hired by Hyundai, inspected the winches and
noted the original pad eyes were one and one-half inches thick;
their replacements, one-half inch. Additionally, some pad eyes
were elongated, and others distorted. The surveyors determined
that, for safe offloading, the lifting pad eyes required repair.
A welding company, hired by Hyundai, repaired/replaced the pad
eyes at a cost of $8,000. While the repairs were being made, the
vessel was delayed in offloading, at a cost to Hyundai of $7,700.
It also incurred approximately $2,300 in standby labor charges.
Offloading was completed on 9 August 1997, three days after
the vessel’s arrival. Therefore, the 30 days of allowed free time
on TTO’s wharf began on 10 August. (No wharf demurrage accumulates
during free time.)
Cross sought possession of its cargo. TTO would not release
it without authorization from Hyundai. And, Hyundai refused
release until Cross paid the repair cost.
Upon expiration of the wharf free time in September 1997,
demurrage began accruing. According to TTO’s tariff, demurrage,
charged per ton per day, was $0.20 for the first seven days; $0.60
for the next seven; and $1.50 for each day thereafter. Demurrage
- 3 - finally reached approximately $216,000, far in excess of the $8,000
repair cost. (Again, each winch weighed in excess of 100 tons.)
Meanwhile, in federal district court on 15 August 1997, Cross
had filed an in personam action against Hyundai and TTO for breach
of maritime contract, and also sought possession of its cargo from
each of them. Pursuant to FED. R. CIV. P. Supplemental Rules For
Certain Admiralty and Maritime Claims D, and in order to gain in
rem jurisdiction, Cross had the cargo arrested. Cross appointed
TTO alternate custodian.
On 5 September, Hyundai and TTO answered, as well as
counterclaiming for the costs related to the repairs. In addition,
they asserted a possessory maritime cargo lien.
The counterclaim was amended on 9 October to add TTO’s
demurrage claim and seek the cargo’s arrest. A week later, Hyundai
and TTO received an order for that purpose. (As discussed infra,
the warrant was not served until 5 December, when Cross released
its 15 August warrant.)
On cross-motions for summary judgment by Cross and Hyundai,
the district court, on 14 November, held Cross liable to Hyundai
for the repair cost. It deferred ruling on the other costs related
to the repairs, and ordered the cargo released, except for that
necessary to secure Hyundai’s lien.
The record does not reflect whether Cross then sought release
of a portion of the cargo and/or whether Hyundai, TTO, or both
refused, such as by claiming the entire cargo was required to
secure their claims. Cross moved to set bond; but that motion was
- 4 - later denied as moot because, before the court ruled on it, Cross
posted bond for the amount claimed by TTO and Hyundai.
On 5 December, Cross released the cargo from arrest. As
noted, Hyundai and TTO then had the cargo arrested. Five days
later, Cross posted bond. It obtained possession of its cargo on
15 December.
In March 1998, the district court granted partial summary
judgment to TTO, holding Cross liable for demurrage. The court
deferred the amount due to the bench trial. (TTO sought
approximately $216,000, based on the charges discussed supra.)
At trial in October 1998, the district court found that “both
sides of the dispute adopted an intractable position”. It held
Cross liable for the other costs related to the repairs. (Earlier,
as discussed, Cross had been held liable for the repair cost.)
And, it held TTO and Hyundai, as well as Cross, had failed to
mitigate damages. In this regard, it ruled that TTO and Hyundai
should have detained only two of the 12 winches.
Therefore, based in part on equitable principles, judgment for
approximately $36,000 was entered against Cross for the demurrage,
two-twelfths of the amount sought. This was in addition to costs
related to the repairs, together with interest and reasonable
attorney’s fees (fees were awarded in March 1999), as provided for
by the bill of lading.
II.
Cross contests liability for the costs related to the repairs.
It maintains that, instead, it should have been awarded its costs
- 5 - related to breach of the bill of lading and being refused delivery
of its cargo.
Cross also contests liability for demurrage. On the other
hand, TTO maintains it should have been awarded the $216,000
demanded.
No authority need be cited for our standards of review. The
summary judgments are reviewed de novo. For the bench trial,
conclusions of law are reviewed de novo and findings of fact for
clear error.
A.
1.
Cross contends that Hyundai, by claiming Cross is responsible
for the repair costs under the bill of lading, is attempting to
avoid its obligation incurred in the bill of lading to discharge
the cargo without cost to Cross. Clause 19(G) of the bill of
lading states:
If in the Carrier’s opinion, the goods are in need of sorting, inspecting, mending, repairing, or reconditioning, ... the Carrier at its discretion may, by itself or through Subcontractors, and as agent for the Merchant, carry out such work at the risk and expense of the Merchant.
(Emphasis added.)
Cross maintains: the repairs were done simply to make
offloading easier for Hyundai; and, had arrival been timely, the
originally intended crane could have offloaded the cargo without
repairs being required. Cross maintains also there were alternate
- 6 - ways to offload without incurring these costs. The district court,
relying on the surveyor’s affidavits, found the winches unsafe to
offload without repair. This finding is not clearly erroneous.
b.
Cross contends that clause 19(G) violates the Carriage of
Goods by Sea Act (COGSA), 46 U.S.C. § 1300 et seq. It relies on §
1303(8), which prohibits the carrier from limiting its duty to the
shipper, except as specifically allowed by statute. In pertinent
part, § 1303(8) provides:
Any clause ... in a contract of carriage relieving the carrier or the ship from liability for loss or damage to ... goods, arising from negligence, fault, or failure in the duties and obligations provided in this section ... shall be null and void.
Analysis of a COGSA damage-to-cargo claim begins with
determining whether the shipper has established a prima facie case
of cargo damage. E.g., Quaker Oats Co. v. M/V Torvanger, 734 F.2d
238, 240 (5th Cir. 1984). The bill of lading is prima facie
evidence the carrier received the cargo in good condition. 46
U.S.C. § 1303(4). As noted, the cargo was accepted on the bill of
lading without notation of defects.
Once the shipper has established a prima facie case, the
carrier can rebut it by establishing one of the exceptions listed
in 46 U.S.C. § 1304 (2)(a)-(p) or the catchall provision of 46
U.S.C. § 1304(2)(q). Hyundai relied on subsections (i), (n), and
(q), which state:
(2) neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from
- 7 - ....
(i) Act or omission of the shipper or owner of the goods
....
(n) Insufficiency of packing;
(q) Any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier.
46 U.S.C. § 1304(2).
In support of this position, Hyundai provided the affidavits
of the marine surveyors that the vertical lifting pad eyes were
insufficient for lifting the cargo. The district court found: the
pad eyes were an integral part of the cargo’s packing for
discharge; they needed repair; and any damage that occurred was
without the fault or neglect of Hyundai. These findings are not
clearly erroneous.
2.
Cross claims entitlement to approximately $12,000 in costs
incurred when, in its view, Hyundai breached the bill of lading and
refused delivery. Consistent with its above-described findings,
the court concluded: Hyundai was not in breach; was justified in
repairing the cargo; and had a valid possessory maritime lien. We
agree.
- 8 - B.
The demurrage disputes arise at the intersection of wharf
demurrage, cargo liens, and storage fees for arrested property.
The cargo was initially detained by Hyundai; then arrested by
Cross; and, finally, arrested by Hyundai and TTO. But, throughout,
it remained on TTO’s wharf.
Wharf demurrage “is the rental charge made for the occupation
of the facility until performance can be completed”. E.g., City of
Galveston v. Kerr Steamship Co., 362 F. Supp. 289, 294 (S.D. Tex.
1973), aff’d, 503 F.2d 1401 (5th Cir. 1974), cert. denied, 420 U.S.
975 (1975). And, the wharf has a maritime lien on the vessel for
wharfage provided. E.g., The Western Wave, 77 F.2d 695, 698 (5th
Cir. 1935).
Cargo liens are possessory by nature, with the lien being lost
if the cargo is delivered unconditionally. E.g., 4,885 Bags of
Linseed, 66 U.S. (1 Black) 108, 109 (1861). The vessel is bound to
the cargo and the cargo to the vessel, and the parties may contract
that the lien survives delivery. E.g., The Bird of Paradise, 72
U.S. (5 Wall.) 545, 555 (1866). Moreover, the vessel is entitled
to retain and store sufficient cargo to secure its lien and to
recover the cost of storing the cargo. E.g., The Asiatic Prince,
103 F. 676, 677 (E.D.N.Y. 1900).
The United States Marshal storing arrested property is
entitled to a reasonable storage fee. See 28 U.S.C. § 1921
(a)(1)(E). The pertinent provision, discussed infra, speaks of
“actual” expenses.
- 9 - Of course, the allowable cost for storing arrested property is
conditioned on it being reasonable. In Morgan Guar. Trust Co. of
N.Y. v. Hellenic Lines, Ltd., 593 F. Supp. 1004, 1012 (S.D.N.Y.
1984), the court deviated from the wharf’s published tariff and
awarded the actual cost of storage. Arauca, 1940 A.M.C. 357, 358
(S.D. Fla. 1940), states that, when a vessel is under arrest and at
a wharf, the court has the power to fix reasonable wharfage.
Additionally, unnecessary or excessive charges incurred by the
Marshal have been disallowed. See The Captain John, 41 F. 147
(E.D.N.Y. 1890); The Perseverance, 22 F. 462 (E.D.N.Y. 1884).
As a result of liens being employed and the cargo being
arrested, TTO was storing the cargo on its wharf on account of
three parties: (1) for Hyundai, initially securing a possessory
maritime cargo lien for repairs, and later under arrest by the
Marshal; (2) for Cross, under arrest by the Marshal in a possessory
action; and (3) for itself, initially securing a possessory
maritime lien for unpaid demurrage, and later, under arrest by the
Marshal.
As discussed, it is reasonable to detain a portion of the
cargo to secure a lien for unpaid freight. See Gilbert Imported
Hardwoods, Inc. v. 245 Packages of Guatambu Squares, More or Less,
508 F.2d 1116, 1122 (5th Cir. 1975) (vessel justified in
withholding 245 of 1081 packages to secure dispute over freight
charges); The Asiatic Prince, 103 F. at 677 (vessel justified in
retaining portion of cargo to secure its lien). As also discussed,
- 10 - the vessel is entitled to recover from the cargo owner reasonable
storage fees for cargo justifiably retained to secure a lien. Id.
The district court determined Hyundai’s lien was initially
$8,000 for the repair cost. With the costs related to the repairs
added, the lien was for $21,000. The bill of lading listed the
value of each winch as $25,000. And, by a July 1997 letter, Cross
informed TTO it estimated the value of each winch as $22,500.
Therefore, the district court held one winch would have secured the
initial lien; but, in the light of Cross’ refusal to bond the cargo
out and prevent demurrage accrual, it held it would have been
reasonable for Hyundai to retain possession of two winches to
secure the lien. Accordingly, the court held Cross liable for
demurrage, calculated according to TTO’s tariff, for only two,
instead of all 12, winches.
Cross contends it was TTO’s fault demurrage was incurred, and,
correspondingly, that TTO is not entitled to collect it from Cross.
TTO was at fault, Cross claims, because it sided with Hyundai in
the repair dispute by refusing to release the cargo without
Hyundai’s authorization.
Discharge of cargo from the vessel to the wharf creates,
however, a bailment relationship, with the vessel (Hyundai) as
bailor and the stevedore (TTO) as bailee. E.g., Leather’s Best,
Inc. v. S.S. Mormaclynx, 451 F.2d 800, 812 (2d Cir. 1971). TTO
could not be expected to deliver to Cross cargo it possessed as
- 11 - bailee for the vessel, without the vessel’s authorization, because
the stevedore is liable for mis-delivery of the cargo. Id.
Therefore, in refusing to release the cargo, TTO was fulfilling its
legal duty to Hyundai, and acting in its own interest as bailee.
It was not siding with Hyundai and, accordingly, is not at fault.
Cross contends TTO was also at fault because it asserted a
possessory maritime lien and later had the cargo arrested.
Demurrage, as defined in TTO’s tariff, is “a charge assessed
against the cargo and/or containers remaining in or on terminal
facilities after expiration of free time”. TTO was within its
tariff to refuse to release the cargo until demurrage was paid.
TTO was also entitled to assert a possessory maritime lien for
services rendered to the cargo. The Western Wave, 77 F.2d at 698.
In sum, TTO was entitled to demurrage. But, the amount due is
at issue here. TTO seeks $216,000; the district court awarded only
$36,000.
When need be, admiralty embraces the resources of equity.
Florida Bahamas Lines, Ltd. v. The Steel Barge “Star 800" of
Nassau, 433 F.2d 1243, 1248-49 (5th Cir. 1970). In this regard,
although “[a] maritime lien has great prestige[,] ... it is not an
instrument of wrong”. Id. at 1250 (emphasis added). Therefore, as
in this case, admiralty courts can render judgments based on
equitable principles. E.g., id.; Merrill-Stevens Dry Dock Co. v.
M/V “Laissez Faire”, 421 F.2d 430, 432 (5th Cir. 1970).
- 12 - The district court invoked such principles when it stated:
awarding demurrage in the amount of $216,000 for refusing to pay
$8,000 for repairs would be “an absurd legal result and would not
comport with this Court’s notion of justice”; and, “after
reflection on this matter the Court finds that a fair amount of
demurrage is” $36,000. (Emphasis added.)
TTO claims $216,000 based on the following language in its
published tariff: “The vessel[] discharging the cargo ... [is]
responsible for the payment of the demurrage charges before the
cargo is removed from the wharf”. (Emphasis added.) According to
its tariff, TTO was entitled to detain the cargo until demurrage
was paid; but, also according to the tariff, the vessel, not the
cargo owner, is responsible for that payment. Recovery of
demurrage from the vessel, however, is not at issue.
In order to circumvent the plain language of its tariff, TTO
maintains Cross consented to its application when it used the
wharf. But, Cross did not elect to offload at the wharf. Hyundai
did. And, Hyundai elected to maintain possession of the cargo on
TTO’s wharf.
In sum, Cross did not expressly consent to the application of
TTO’s tariff; and, according to that tariff, Cross is not liable to
TTO for demurrage. Therefore, the tariff is not a basis for
awarding TTO demurrage against Cross.
TTO maintains this is a distinction without a difference,
asserting that, if Hyundai is liable to TTO for demurrage, the bill
- 13 - of lading requires Cross to reimburse Hyundai. But, again, TTO
does not seek demurrage from Hyundai. And, as noted, whether Cross
must reimburse Hyundai for demurrage is not before us. Instead,
the demurrage issue at hand concerns the amount Cross owes TTO.
TTO next contends that, as alternate custodian for the United
States Marshal, it is entitled to recover storage fees pursuant to
28 U.S.C. § 1921(a)(1)(E): “the United States marshal[] ... shall
routinely collect, and a court may tax as costs, fees for the
following: .... (E) The keeping of attached property ... actual
expenses incurred, such as storage”. (Emphasis added.)
TTO focuses on the words “the marshal shall”, and “taxed as
costs”. However, the word “may” gives the court discretion to tax
such fees as costs. Restated, the statute does not require the
court to do so.
And, courts have disregarded published tariffs to award a
reasonable fee. For example, in Morgan Guaranty, ITO stored
containers for seized vessels. It sought storage fees according to
its published tariff in the amount of $5.00 per day per container.
593 F. Supp. at 1011-12. But, the court found the actual storage
cost, which was only half that rate, was reasonable, and awarded
that amount. Id. See also Arauca, 1940 A.M.C. at 358.
Moreover, Ҥ 1921 solely authorizes the marshal to obtain fees
from the litigants for the costs of its services ... and provides
no basis for authorizing payments to the litigants themselves”.
Midlantic Nat’l Bank v. Sheldon, 751 F. Supp. 26, 30 n.1 (E.D.N.Y.
- 14 - 1990). Additionally, the statute does not instruct the Marshal
from whom to collect the fees, or how to divide them, if the same
property is being stored by two parties. It is for the court to
assess the fees.
c.
Next, TTO contends Cross wrongfully seized the property and
that, therefore, it can receive storage fees from Cross. TTO
maintains: because Cross lost its possessory action, its seizure
was wrongful; and, therefore, it is liable for demurrage. However,
there was no finding that Cross wrongfully seized the cargo.
Instead, as noted, the court ruled, as a matter of equity, that
Hyundai and TTO needed to seize only two winches to adequately
secure their liens.
d.
TTO relies on Marastro Compania Naviera v. Canadian Maritime
Carriers, Ltd., 959 F.2d 49, 53 (5th Cir. 1992), to support its
claim that Cross owes the entire demurrage, even though there is no
contract between them. In Marastro, a third party (neither the
vessel nor cargo owner) seized the cargo while it was aboard
Canadian’s vessel in order to enforce a judgment against the cargo
owner. (The vessel was not seized, but it was unable to depart
because there was no suitable warehouse in which to offload the
cargo. Additionally, because the cargo could not be offloaded,
there was no way to offload only sufficient cargo to secure the
lien.)
- 15 - Canadian intervened, seeking damages for the delay to its
vessel’s operations caused by the arrest. The court determined that
Canadian was entitled to recover actual damages so caused. Id. It
also found that, although the vessel was an expensive storage
facility, there was no alternative location for storing the cargo.
It ruled it would be patently unfair — inequitable — to expect an
innocent third party to bear the cost of such storage. The entire
storage cost was awarded as reasonable. Id. at 53.
Marastro does not totally support TTO’s position. Rather, it
instructs that storage fees — demurrage — can be recovered from a
third party at fault for the delay — an equitable remedy. TTO
contends that Cross is solely responsible for the delay. But,
Hyundai had previously exercised a possessory maritime lien, refused
to release the cargo, and stored it on TTO’s wharf. This does not
include its seeking and receiving an October 16 warrant for the
cargo’s arrest.
Here, three parties were storing the attached cargo on TTO’s
wharf; and two, Hyundai and Cross, were parties to the initial
dispute (the repairs). Marastro, which awarded the storage fees to
the vessel — the innocent storage facility — on an equitable basis,
does not instruct how to divide the storage cost if two parties are
responsible. Logically, a court could use the same principles to
award storage fees here, by assessing the costs equitably, according
to which party was responsible for the fees being incurred. But,
again, whether Hyundai is responsible for demurrage is not at issue.
e.
- 16 - TTO contends Hyundai is under no duty to determine the
reasonable amount of cargo to detain to secure the lien. TTO claims
Hyundai had no way of knowing how much these previously heavily-used
winches would bring at a Marshal’s auction; and, therefore, Hyundai
was justified in retaining the entire cargo. However, both TTO and
Hyundai knew what value Cross placed on the individual cargo items;
Hyundai had the bill of lading; TTO, the July 1997 letter.
f.
Along the same lines, TTO claims Hyundai’s lien applied to all
12 winches, because work was done on all 12, and a cargo lien does
not survive delivery. TTO contends further that, if Hyundai had
delivered ten winches to Cross, its lien on them would have been
lost. (This does not explain why Hyundai would not release the
remainder of the cargo — such as the brake bands.)
As noted, a cargo lien does not survive unconditional delivery
of the cargo. But, the parties can contract otherwise. The bill
of lading (the contract) for Cross and Hyundai states that the cargo
lien survives delivery. Additionally, the parties can agree to have
the cargo delivered to a warehouse for storage awaiting payment,
with the vessel deemed to be in constructive possession. 4,885 Bags
of Linseed, 66 U.S. (1 Black) at 114-15.
TTO then contends it was necessary to retain the entire cargo
by drawing an analogy to the seizure of a vessel under a maritime
lien. TTO states that, when so seized, the entire vessel is
justifiably detained and the same rule should apply to the cargo.
- 17 - It claims the vessel cannot detach only a portion of itself, such
as a railing, and give it to the lienholder to secure the lien.
This position misses one basic difference between a vessel lien
and a cargo lien, especially a cargo which included 12 large and
easily divisible winches. Each had independent value.
Finally, the district court found Hyundai was not maintaining
possession of the entire cargo in good faith, but was instead using
possession as leverage to force Cross to pay for the repairs. That
finding is not clearly erroneous.
In sum, the district court did not err in holding Cross
responsible for only two of the 12 winches being detained, and
correspondingly, liable for only two-twelfths of the demurrage.
III.
For the foregoing reasons, the judgment is
AFFIRMED.
- 18 -