Molinelli, Giannusa & Rao, Inc. v. Navigazione Libera Triestina

AUGUSTUS N. HAND Circuit Judge. . These appeals are from interlocutory decrees boldmS steamship Carso liable in- five different libels filed for cargo damage to shipments of cheese. Bach libel alleged the delivery of cheese at Naples destined for New York, that bills of lading were issued by the vessel acknowledging that the merchandise was placed on board the steamship “in apparent good order and condition” and arrived damaged by reason of being covered with “skippers” or maggots and having lost practically all of the butter fat. The answers admitted the receipt of the merchandise by the vessel subject to the .terms and provisions of the bills of lading issued therefor, [376] and, with, the exception of the answer to the libel of Western Sausage & Provision Company, admitted that the merchandise was delivered in the same order and condition in which it was received for shipment. The answers also set forth clauses in the bills of lading to the effect that the carrier was not to be responsible for damage arising from “vermin * ® * leakage, wastage * * * decay, heating, sweating,” and that- notice of claims for damage arising under bills of lading “must be given in writing by the Consignees to the Agents of the Ship at the Port of Destination within 48 hours after the landing of or failure of the Carriers to deliver * *- * goods.” The merchandise was sold f. o. b. Naples, and the payment was to be by sixty-day drafts upon the purchasers. The proof showed that prior to the time of shipment the cheese became infested with maggots. When the consignees accepted the drafts, accompanied in every instance by clean bills of lading, they did not know that the merchandise was damaged, but supposed it to be in “apparent good order and condition” as represented in the documents. Some of the cases of cheese at the time of shipment had stains indicating damaged contents, and other eases showed breakage. The District Court allowed recovery on the ground that a prima facie case was made out by the clean bills of lading and that by the recitals therein the carrier was estopped to deny that the cheese was received in good order and condition. There are 1,050 cases of damaged cheese in question. They are divisible into three groups: The first group consisted of 162 cases which, like the rest, contained cheese that was damaged when shipped. There is. no proof that the bad condition was known to the steamship or that the eases were not in “apparent good order” when they were taken on board. The second group was of 420 cases. The mate’s receipts given for these eases by the vessel contained the notation, “broken — not answerable for contents.” The contents were damaged at that time, but there is nothing to indicate that the breakage contributed to the damage or that the carrier was aware that the cheese in these 420 eases Was not “in good order.” The damage was due to the vermin that infested the cheese and not to any breakage of the containers. The third group was of 468 cases. The mate’s receipts covering these shipments contained the notations, “cases stained by the contents,” or “all the eases show stains originating from the contents.” The cheese in this group was also damaged by vermin before shipment. Bills of lading for 365 out of the 468 eases were issued by the carrier only after securing agreements of indemnity from the shippers. The District Judge did not appear to distinguish the three groups of claims which we have alluded to from one another, but treated all alike, and allowed each libelant an interlocutory decree whether or not there was any proof that the carrier had means of knowing- that the cheese was damaged prior to receipt on board. In respect to the first group of 162 cases, nothing indicates that any of them appeared to be in other than good order when shipped, nor is there evidence that the carrier was aware that any of the cases of this group was damaged when taken on board. The stains appearing upon the 468 cases of the third group, even if indicating damaged contents cannot -be taken as showing that cheese shipped in the 162 eases which bore no stains -Was in the same condition as that in the 468 cases. The recital in the bills of lading was only that the shipments were received in “apparent good order and condition.” So far as the record shows, this re^ eital was true of the 162 eases. Therefore, libelants’ proof failed as to them, and the claims of Molinelli, Giannusa & Rao, Inc., for 15 eases under bill of lading No. 174, and of Bortola Bendin for 66 cases under bill of lading No. 169 (both libelants in libel 1) and of Italian Importing Company (libelant in libel 3) for 81 cases under bill of lading No.,167, must be dismissed. In the second group of 420 eases, clean bills of lading were issued, and the mate’s notations showed that the cases were in defective condition, but there is no proof that the cheese was known to be damaged at the time of shipment, or that its damaged condition was due to breakage of the containers. On the other hand, it appears to nave been due to other causes. Upon whatever theory damages might be awarded, it may be contended that they cannot be allowed upon a mere theory of estoppel as to- the 420 cases because the representation in the bills of lading, though false, was unconnected with the condition of the cheese. The carrier would be estopped to show that these eases were not broken, but not to show that the damage was caused by skippers which had at [377] tacked the cheese before shipment. This the evidence in respect to the 420 eases indicates. Accordingly libelants’ proof as to these 420 cases fails, and the claims of R. Gerber & Co. for 50 cases under bill of lading No. 157, J. S. Hoffman & Co. for 100 cases under bill of lading No. 164,' Antonio Morid & Co. for 50 cases under bill of lading No. 162, Eocco Perretta & Co. for 25 cases under bill of lading No. 155 (all libelants in libel 2), and Italian Importing Company (libelant in libel 3) for 30 eases under bill of lading No. 165, for 50 eases under bill of lading No. 156, and for 45 eases under bill of lading No. 161, and of Western Sausage & Provision Company (libelant in libel 4) for 70 cases under bill of lading No. 163, must be dismissed. But the 468 cases stand in a different category. The mate’s notations say either that these cases were “stained by the contents” or “show stains originating from the contents.” Dr. Eedfield, a consulting food bacteriologist from the Department of Agriculture, said that the words “stained by the contents” indicated “that the butter fat had exuded from the cheese, out on to the eases.” The cheese was in fact infested with “skippers,” and the tests made by claimant’s expert Pozen upon exudations of similar cheese showed proportions of 60 per cent, butter fat from the cheese and 40 per cent, olive oil from the film with which the cheese was coated. The testimony shows that the skippers probably infested the cheese through careless screening at the time of manufacture, or, if not, when it was upon the lighters and prior to the issue of the bills of lading. Whenever they attacked it, they bored into the surface so.that the oil film acted as a solvent and caused the leakage. Heat would promote this disintegration, but with a sound unbroken cheese the effect of solution exerted by the olive oil film would be negligible. The proof indicates (1) that the skippers were present when the cheese was placed on board; (2) that this was the only reasonable explanation of the breaking of the surface of the cheese necessary to make the olive oil act as a solvent; (3) that the exudation of the contents of the eases brought about the stains and was known to the carrier when it issued the bill of lading. The cheese was packed in boxes about 30x 20x12 inches in size, made of unplanod wood and three-fourths of an inch thick with interstices between the joints of from one-thirty-second to three-sixteenths of an inch and bound with iron hoops. It seems reasonable to say that the cheese must have exuded through these small crevices to a marked extent in order to cause the ship’s officers to make such notations as “stained by the contents” and to require agreements of indemnity for 385 out of the 468 cases. The facts somewhat resemble a case of a shipment of cheese in a glass container whore the carrier could see that the interi- or of the cheese was exuding through the rind, and yet issued clean bills of lading reciting that it was in “apparent good order and condition.” In such a situation the carrier would be estopped to show that it was not in actual good order and condition. It appears from the testimony that “skippers” are the insects that commonly infest cheese. They operate by ‘boring holes and breaking down the surface, and the results follow that occasioned the damage in this ease. Exudations sufficient to justify the. mate’s notations and to explain the agreements of indemnity indicated to the carrier that the cheese was infested with this vermin and was in process of decay. The consignees have proved their case by showing that the cheese arrived in a damaged condition and stalled in a good condition, and this in spite of the fact that the admissions in the bills of lading wore only of receipt in “apparent good order and condition.” This is so because the particular defect which the consignees complain of was apparent to the ship by reason of the exudations at the time the clean bills of lading were issued. This decay was progressive, and the damage discovered when the cheese was unloaded was due to it. As soon as the consignee proved that the decay from which the damage ultimately resulted was apparent, he made out his case, for the ship had recited in the bill of lading that it was not apparent and the consignee had a right to rely on this statement as conclusive proof that there was no apparent defect. The consignee could further prove as a fact that there was no decay of which there were not apparent signs. These two elements of proof can be taken together to show that the cheese started out in good condition. The consignee has by the recital in the bill of lading proved that the cheese was in good order and condition though strangely enough he has had to do this by first showing that the ship knew it was not so in fact and notwithstanding issued a clean bill of lading*. It may be argued that estoppel is only a rule of evidence and has no bearing in a [378] situation; where the libelants have themselves shown that the goods were damaged before shipment. But such a doctrine would ordinarily deprive a consignee who had advanced money on a clean bill of lading of a right of action on the document. In cases where he learned only after he had advanced his money that the goods were shipped in bad order he could never make even a prima facie case without proving the true facts and thus showing that the reeitals in the bill of lading were false. An estoppel is not a mere rule of .evidence, but is in effect a rule of law whereby facts in favor of one party which the other party is estopped to deny are absolutely established. As Professor Williston says in his book on Contracts, § 1508: “An estoppel like a conclusive presumption, is a rule of substantive law masquerading as a rule of evidence. To speak of conclusive evidence of something admittedly false may be a useful formula, but it disguises the truth. An estoppel is in effect a conclusive admission of a non-existent fact. This supposed fact may be essential either for a eause of action; for a defense, or for a replication. As the fact is non-existent it is obvious that the admission and nothing else supplies the requirement which would otherwise be lacking. If the admitted nonexistent fact alone creates a eause of action, defense, or replication, the admission or estoppel is the sole foundation, if other facts are needed a partial foundation, of the eause of action, defense or replication. “An estoppel then may be, and frequently is, either the sole or the main foundation of a cause of action. When a warehouseman states to an intending purchaser in answer to an inquiry that the seller has a certain quantity of goods stored in the warehouse, and, relying on that statement, the purchaser completes the bargain, the warehouseman is estopped to deny the truth of his statement. The only essential facts of. the purchaser’s case when he sues the warehouseman are the misrepresentation, his own reliance upon it, and perhaps a demand and refusal. * * ” In Olivier Straw Goods Corporation v. Osaka Shosen Kaisha (C. C. A.) 27 E.(2d) 129, the District Judge, who had dismissed the libel, was reversed and we allowed the libelant to recover under a “shipped on board” bill of lading for goods which had never been shipped but were destroyed in the Japanese earthquake. The bill of lading recited “apparent good order and condition,” and the libelant put in evidence (Exhibit 5 in that suit) a letter from the agents of the carrier stating in substance that libelant’s cargo was never put aboard. To the same effect are Armour v. Mich. Central Ry. Co., 65 N. Y. 111, 22 Am. Rep. 603; Bank of Batavia v. New York, L. E. & W. R. Co., 106 N. Y. 195,12 N. E. 433, 60 Am. Rep. 440; Coventry v. Great Eastern Ry. Co., 11 Q. B. D. 776; Planters’ Rice-Mill Co. v. Merchants’ Nat. Bank, 78 Ga. 574, 3 S. E. 327. Where the Harter Act (section 4, 46 US CA § 193) requires that bills of lading shall state the “apparent order and condition” of merchandise and safe reliance upon the truth of representations in bills of lading is so necessary for business dealings, the carrier should be held bound to the statement he makes wherever it has been acted upon in good faith and the person acting upon it is injured because of the misrepresentation. ' But it may be said that cheese might be infested with “skippers” and not exude so as to stain the cases at the time of shipment and that other cheese involved in these libels turned out to be of this very sort. It may be reasoned from this that the carrier is only estopped to show that the cheese which it received had so far deteriorated that it had begun to exude when shipped and may still prove either that cheese infested with skippers which had not begun to leak would certainly become worthless, or, in any event, would reach a further degree of deterioration; that in answer to this defense the consignee may show that cheese which had not begun to leak would not become as much damaged as cheese which had, and that the difference in valúe of these two kinds of cheese at the port of destination represents the only recoverable damages. But such a theoretical limitation of damages where the carrier knows that -the apparent internal condition of the cheese is bad is not reasonable. His representation that it is in apparent good order and condition is a representation that it is in good order, for its actual condition in such a case is its apparent condition to him. Moreover, while admiralty has not jurisdiction over torts committed on land, the courts have granted similar remedies to consignees against carriers who issue false bills of lading whether they have proceeded in suits upon the bills of lading or in actions at law for deceit. The only difference has been that in the latter form of action recovery has been limited to the amount of the purchase money. It can hardly be supposed that, if the carriers in Higgins v. Anglo-Algerian S. S. Co. (C. C. A.) 248 E. 386; Martineau’s, [379] Ltd., v. Royal Mail Steam Packet Co., Ltd., .17 Com. Cas. 176; Compania Naviera Vascongada v. Churchill & Sim, [1906] 1 K. B. 237; or Brandt v. Liverpool, Brazil & River Plate S. N. Co., [1024] 1 K. B. 575, had proved that other goods might have been affected by wetting which had caused damage, but damage that might so far have disappeared as to leave no external sign, the difference between the value of such goods and those actually loaded would be the limit of recovery. Nor can it he thought that, if a carrier recited that it had received silk in good order and condition, when the silk was known to he rotten, the damages in a suit upon the hill of lading would be limited to the difference in value of the particular silk and rotten silk the damage of which was not apparent. Yet, if such a rule were applied to the present ease, the damages would be limited to the difference in value between decayed goods which started stained, and decayed goods which started unstained. The difficulty of applying estoppel with strict logie is apparent in numerous situations, but the disregard in the decisions of the difficulties involved in the estoppel theory may be taken to indicate that, when a bill of lading has been issued stating that goods known by the carrier to be damaged are in apparent good order and condition, tho recital is one that their condition is in fact good in the respects that were apparent. While any treatment of a case of this kind upon the basis of estoppel involves inconsistencies, the above conclusion seems justified by the trend of the authorities and the necessities of the case. The same results might be reached under -the theory of a warranty which wo invoked in a different situation in Olivier Straw Goods Corporation v. Osaka Shosen Kaisha (C. C. A.) 47 F.(2d) 878. While a recovery might be had upon this theory for the 468 cases of cheese, such a remedy would afford no relief as to the 429 cases where only the boxes showed damage. Damage to the containers was no proof that the cheese itself was not sound. When a carrier has made a false representation about a condition of merchandise taken on board which is likely to involve progressive decay, it should be compelled to abide by the consequences and should not be allowed to invoke the exceptions in the bills of lading relieving it from damage arising from “vermin * * * leakage, wastage, * * * decay,” for these things were all promoted by the condition of the cheese which it has said did not exist. The exception covering “heating” should, for the same reason, be unavailable. If it is suggested that tho consideration paid by the consignees in reliance upon tho false representation made in the bills of lading is recoverable, the answer is that damages based upon the amount of the consideration paid are not the proper measure of damages- in an action for breach of warranty, and can ordinarily only be recovered in an action for deceit. Such an action is open to the consignees of the 429 cases if they can establish the necessary facts. If the foregoing reasoning be sound, nothing stands in the way of recovery except the notice clause. But the provision for giving notice to the carrier “within 48 hours after tho landing” of the goods of any claim arising under the bill of lading ought not to be held effective in circumstances like the present. Where a carrier has issued false bills of lading reciting that merchandise is in “apparent good order and condition” though it is not, it has done affirmative acts calculated to mislead the consignees as to the existence of the very claims they are her© asserting. They had no reason to believe that the cheese was damaged when shipped, and might well have supposed that the exceptions in the bills of lading completely protected the carrier from claims based upon the deterioration of a commodity like cheese and that no valid claims against the steamship existed. At any rate, the knowledge of the true facts was wholly in the possession of the carrier and could not speedily be obtained. The carrier, by issuing false bills of lading, has concealed the true facts from tho consignees and impeded their presentation of proper claims. Under such circumstances, the notice clause was rightly held unenforceable, as was similarly done in Higgins v. Anglo-Algerian S. S. Co., Ltd., (C. C. A.) 248 F. 386. See, also, Olivier Straw Goods Corporation v. Osaka Shosen Kaisha, supra. The decree is affirmed in so far as it relates to the 468 cases. It is reversed in so far as it relates to the 162 and the 420 cases, with directions to dismiss the libels to- the extent that they involve claims outside of the 468 eases.