DAIDO LINE v. THOMAS P. GONZALEZ, CORPORATION

BROWNING, Circuit Judge.

The Thomas P. Gonzalez Corporation sued the Daido Line in admiralty alleging damage to a shipment of garlic. The District Court found: that the garlic was received by the carrier in good order and condition and outturned at destination badly damaged; that the carrier failed to use due care in keeping and ventilating the cargo during the voyage; that these failures proximately caused the damage to the garlic; and that no part of the damage was caused by act or omission of the shipper or inherent vice of the cargo. On an examination of the whole record we conclude that the findings with respect to liability are not clearly erroneous. However, we vacate the judgment and remand for a recomputation of damages.

I

The libel alleged that the Gonzalez Corporation shipped 4,400 sacks of garlic in good order and condition aboard Daido's vessel, the Korai Maru, then lying at the Port of Los Angeles; and that the cargo was discharged in the Port of Havana badly damaged, impaired in value and slack in weight, in breach of Daido's duty and to the damage of Gonzalez Corporation. Daido's answer denied that the garlic was in good order and condition when shipped, and alleged that the cargo was outturned in Havana in the same condition as received in Los Angeles except for normal deterioration. As affirmative defenses Daido alleged, so far as pertinent, that it exercised due diligence in caring for the cargo aboard the Korai Maru, and that the damage to the cargo, if any, arose from "inherent defect, quality, or vice of the goods."

After trial of these issues, the District Court filed findings of fact and conclusions of law, and entered judgment for Gonzalez Corporation in the sum of $33,996.77, from which Daido appeals.

The action is governed by Cogsa (the Carriage of Goods by Sea Act1). Under Cogsa the shipper makes out his prima facie case, as he did before its enactment, by proving receipt by the carrier in good order and delivery at destination in bad. The burden of explanation falls upon the carrier. However, Cogsa relieves the carrier from liability for damages arising from certain causes, and the carrier may meet the shipper's prima facie case by showing that the damages were attributable to such a cause. But although the carrier demonstrates that the damage is in part attributable to a cause for the effects of which the carrier is exonerated by Cogsa, the shipper may nonetheless recover if it can show that the carrier's negligence contributed to the result. The burden then falls upon the carrier to segregate the portion of the damage due to the excepted cause from that resulting from its negligence, at the risk of responding for all — a burden which may be difficult if not impossible to meet.2

As noted, the carrier's answer in the present case included both a denial that the garlic was in good condition when shipped, and an affirmative assertion that the damages were due to inherent vice, a cause for the effects of which the carrier was relieved of liability by Cogsa.3 In such a case the attempt to establish liability by a step-by-step progression through the accepted scheme of shifting burdens of proof may present difficult problems. Theoretically, both parties have the burden of proof on the same issue — the condition of the cargo. The shipper is obliged to establish that the garlic was in good condition to make its prima facie case, but the carrier is burdened with proving that the garlic suffered from an inherent defect in order to bring itself within the statutory exception from liability.

Thus in the usual cargo-damage case the shipper makes a showing of good condition on shipment sufficient for its prima facie case by introducing a "clean" bill of lading.4 But this is not always true in a case involving inherent vice. It is clear, at least in this circuit, that where there is affirmative evidence that damage was caused by heat resulting from an internal condition of the cargo which could not be observed by external inspection, a clean bill of lading (which establishes only apparent good condition) is not alone enough to support the shipper's prima facie case.5 Beyond this, the questions which may arise in an inherent vice case are many and the answers sometimes obscure.6 However, they are not presented in the circumstances of the present case. Whatever may have been its precise legal obligation, the Gonzalez Corporation undertook to establish at the trial, and to sustain on appeal, the position that the garlic was in fact wholly free of inherent defect when shipped, and that the damage which it sustained arose wholly from the negligence of Daido. The District Court found that the shipper sustained the burden which it undertook.7

The position of carrier is that a legal question on the issue of liability nonetheless remains in the case. The appellant points to no specific ruling of the District Court which it asserts to be erroneous, and we find none. The carrier's argument seems to be that the evidence established that on shipment a substantial portion of the garlic was "generally slightly damp," that the uniform testimony of the expert witnesses was that garlic which is not thoroughly dry will deteriorate under the ordinary conditions of a sea voyage, and that, on this evidence, the defense of inherent vice was so clearly established that judgment for the shipper can be explained only as based upon an erroneous application of the law by the District Court. In the absence of an erroneous legal ruling by the trial court, the argument necessarily returns to an attack upon the findings, and we turn to them to determine whether they are clearly erroneous.8

II

Evidence relating to the origin, processing, and delivery of the garlic to the carrier provided substantial support for the conclusion that the garlic was mature, well cured, and dried at the time of shipment. Although there was contrary testimony, its source and substance was such that the court may well have accorded it little weight, especially since it appeared that, after a deliberate consideration of the available information, the agents of the carrier issued a clean bill of lading.

In addition to this general testimony, the shipper produced inspection certificates reflecting the results of an examination of the garlic shortly before shipment by an inspector of the United States Department of Agriculture. These certificates reflected the results of a thorough examination of the cargo, contemporaneous with the shipment, by a qualified and disinterested person, and both parties properly accorded them great weight. They disagreed as to their meaning.

The carrier emphasized the fact that some of the garlic was not graded "U. S. No. 1," and that other portions of the garlic which were graded "U. S. No. 1" were described in the certificates as "generally slightly damp," or "slightly damp." It pointed to expert testimony that garlic "should be mature, it should be well cured, and if it is well cured it will then be dry and it should be proper for storage." The shipper, on the other hand, relied upon the fact that the portion of the garlic not graded "U. S. No. 1" was deficient because of mechanical damage or other defects unrelated to its maturity or moisture content, and that all of the garlic was either expressly described in the certificates as "well cured and dry" or was graded "U. S. No. 1" which, according to the official grade description, meant that it was "mature and well cured," that is, that it had "reached that stage of development at which the garlic is firm and sufficiently dried so as not to be soft and spongy." This would indicate that the description of a portion of the garlic graded "U. S. No. 1" as "generally slightly damp" referred not to a hidden defect or inherent vice of the garlic, but to surface moisture.9 As to the latter there was testimony that surface moisture gathered readily when garlic was moved from cool storage to warm air, and, though it caused "slight superficial mold," this mold did not damage the garlic, and would disappear with proper ventilation.10 On a careful examination of the inspection certificates and all of the expert testimony, we conclude that the more reasonable interpretation of the certificates is that adopted by the District Court, that the Department of Agriculture inspector found the cargo free of inherent vice, of internal moisture or delay, "waxy breakdown," or similar condition11 which might render it unfit to withstand the contemplated voyage.

Of course the garlic was not perfect. The certificates reflected decay, mechanical damage, and mold, though generally within accepted tolerances for the U. S. No. 1 classification. There was testimony that garlic is inherently perishable and that these defects might in some measure accelerate the natural deterioration through age. But there was also testimony that all garlic was subject to these deficiencies in some degree, and that, properly cared for, this cargo would have survived the trip.12 A higher standard of proof than this would exclude all ordinary perishable cargo from the rule imposing liability on the carrier for unexplained deterioration of goods in its care.

III

The bills of lading were marked "ventilated stowage," and in any event there was a clear duty on the carrier to properly stow and ventilate the cargo in accordance with the need of the particular cargo.13 We have concluded that the District Court's findings that the carrier failed to use due care in ventilating the garlic, and that this failure rather than any inherent defect in the cargo itself caused the damage, are not clearly erroneous.

The thrust of the evidence was that inadequate ventilation in No. 5 Hatch in which the garlic was stowed resulted in heavy "sweating" or condensation of moisture which in turn led to a deterioration of the garlic. Sweat is a common marine hazard, and is a "peril of the sea" for which the carrier is not responsible, provided reasonable precautions are taken to avoid it.14 However, the carrier is liable if negligent handling of the ship's ventilation contributed to the sweat.15

There was evidence from which the trial court might well have concluded that through inadvertence a hatch was selected for the storage of the garlic which was equipped with mushroom ventilators rather than with cowl ventilators, which would have provided better ventilation since they could have been trimmed to the wind. There were two cowl ventilators located over No. 5 Hatch which most of the ship's officers believed ventilated the hold beneath, and these were kept turned to the wind in an effort to improve the draft. There was evidence, however, that the ducts from these cowl ventilators led not to No. 5 Hatch but to the adjacent hatch. Further, the testimony of two of the ship's officers and the entries in the ship's log were to the effect that No. 5 Hatch was kept closed during the night in fair weather as well as in foul.16 This was contrary to the instructions given the ship's officers which, as we read them, were to open No. 5 Hatch at sea except as weather forbade. It was reasonable for the trial court to conclude that the actual ventilation of the garlic was less than had been planned. The shipper also plausibly suggests that opening the hatch in the morning and closing it at night produced sudden changes in the temperature of the air in the hold, causing sweat to form. Finally, during a portion of the voyage the garlic was covered with paper in an effort to protect it from sweat which might drop from the hatch coming. Though the motive was good, the consequences could only have been bad since the paper interfered with the circulation of air through the cargo, and served to retain heat.

The record is clear that sweat did in fact accumulate in No. 5 Hatch. All of the ship's officers so testified, although disagreeing as to the frequency and amount. The placing of a protective layer of paper over the garlic was mute testimony to the same effect. Entries in the log reflect the employment of the crew to wipe off the accumulation of sweat in No. 5 Hatch on two occasions. A Ship's Protest filed by the ship's officers on arrival in Havana admitted the possibility of sweat damage, although attributing it to bad weather.17 In the context of the case, it was reasonable for the District Court to conclude that the admission of sweat damage contained in this document was to be accorded more weight than the self-exculpatory explanation of its origin.

The ship's officers testified that the garlic was outturned in Havana in the same apparent condition as when loaded. However, the shipper's agent who met the incoming cargo found it wet, fermented, and spoiled. The importers for whom it was intended examined the garlic and refused to accept it. The shipper's agent notified Lloyd's and the shipper that the cargo had become wet and suffered extensive damage. A Lloyd's surveyor reported that the general appearance of the shipment "was not good," that a process of decay had set in, and that there was considerable loss in weight. Lloyd's concluded that the damage resulted from excessive heat. An expert produced by the carrier testified that the loss of weight suffered by the garlic was within the normal range, but there was strong testimony to the contrary, and the other, objective circumstances surrounding the event also pointed in the opposite direction. When sold, the garlic realized a total net return far below the apparent market for U. S. No. 1 garlic, and the wide range of prices obtained for various lots indicated a substantial deterioration of parts of the cargo relative to the rest.

On this evidence it was entirely reasonable for the District Court to conclude that the garlic was outturned in a damaged condition and that the events aboard ship provided an ample explanation for the condition in which the garlic was discharged, thus offering further support for the conclusion that the garlic was delivered to the vessel in good order and condition.

The carrier contends that the trial court's finding that no part of the damage aboard ship was caused by inherent vice is necessarily clearly erroneous since garlic is perishable in nature and inherently susceptible to deterioration if shipped damp. To the extent that this argument depends upon the assumption that the surface of the garlic was "generally slightly damp," we have dealt with it earlier. To the extent that it depends upon an unarticulated assumption that the perishability of garlic as such is an inherent internal vice which invariably subjects the cargo owner to the burden of proving that none of the damage incurred in transit resulted from normal decay, it is also clearly untenable. The condition of any perishable commodity will change somewhat over the period of the voyage, and where the perishable commodity is one which is shipped fully matured, as garlic is, the change is likely to involve a degree of deterioration. The findings of the trial court are to be read as determining that damage occurred which exceeded normal deterioration, and that the preponderance of the evidence was that the excessive deterioration resulted not from the cargo's inherent perishability but from the carrier's negligence. The calculation of damages begins with the fair market value of the product at the time and place of intended arrival in the condition in which it would have arrived save for the carrier's negligence.18 This market price necessarily includes an appropriate discount for the normal deterioration of the type of product involved during the course of an ordinary voyage when shipped in good order and condition.

IV

We turn finally to the calculation of damage. The case was tried on the proper theory that damages must be calculated on the market price of undamaged goods at the time and place of delivery. This the carrier does not dispute, but it argues that the trial court decided the case instead upon the erroneous theory that damages were to be calculated on the basis of the invoice price. The only finding with respect to the calculation of damages is a simple lump sum award of $33,996.77. The carrier demonstrates that the trial court apparently arrived at this figure by subtracting the net proceeds of the salvage sale from the invoice prices of the garlic to the Havana buyers. However, there was direct testimony that the invoice prices approximated the market price in Havana in mid-June when the shipment arrived. This testimony was supported by the fact that on the salvage sale at least a portion of the garlic brought prices in the range of the invoice prices. Perhaps the record is not as full and clear as might be hoped, but we are not prepared to hold that the trial court's conclusion that the market price for garlic in good condition in Havana at the time of delivery was the same as the price reflected in the invoices was clearly erroneous.19

Nonetheless, the judgment must be vacated and the case remanded to the District Court for a recomputation of the damages. In addition to two arithmetical errors in the accounting for the salvage sale which we could correct,20 it appears possible that the shipper may have been permitted to recover charges which were for the account of the buyers, and commission expenses which it would have incurred if the sale had been consummated, but did not in fact incur. Since the generalized nature of the finding as to damages makes it impossible to determine whether these errors actually occurred, the judgment must be vacated.21

We have examined the other points urged by the carrier and find them to be without merit.

Vacated and remanded.