WR Grace & Co. v. Panama R. Co., 12 F.2d 338 (2d Cir. 1926)

*339 Bigham, Englar & Jones, of New York City (Oscar R. Houston and Ezra G. Benedict Fox, both of New York City, of counsel), for appellant.

Richard Reid Rogers, of New York City, for appellee.

Before HOUGH, MANTON, and HAND, Circuit Judges.

HAND, Circuit Judge (after stating the facts as above).

The first question raised upon this appeal is of the validity of the limitation clause in the bill of lading quoted above. We have in numerous instances sustained such a clause. The Persiana, 185 F. 396, 107 C. C. A. 416; The San Guglielmo, 249 F. 588, 161 C. C. A. 514; The Verdi, *340 282 F. 572; The Gen. G. W. Goethals, 292 F. 935; Anchor Line v. Jackson, 9 F.(2d) 543; The Bencleuch, 10 F.(2d) 49. There would be no reason to consider its reasonableness, were it not for the argument that the recent legislation of Congress requires us to look more narrowly at the periods allowed for claims of damage, South, etc., Co. v. Panama R. R., 237 N.Y. 287, 142 N.E. 666. The argument runs as follows:

The respondent is a carrier by water in interstate commerce, under the Shipping Act (39 Stat. 728 [Comp. St. §§ 8146a-8146r]), being engaged in regular carriage between a state and a possession of the United States. By section 18 of that act bills of lading must be "just and reasonable." Under section 20 of the Interstate Commerce Act, as amended by the Transportation Act of 1920 (41 Stat. 494, § 438 [Comp. St. Ann. Supp. 1923, § 8604a]), the period for notice of damage cannot be cut below 90 days, for claims for damage below 4 months, and for suit below 2 years. The requirement that the bill of lading must be reasonable is to be read with the periods so limited by the Interstate Commerce Act (Comp. St. § 8563 et seq.), not literally, but so far as "to escape flagrant disavowal of the conception of reasonable opportunity reflected in the will of Congress." The periods of limitation in the bill of lading at bar do not answer this test, and are therefore unreasonable. Hence they are invalid.

We have only to say in answer that, taking this doctrine at its face, it does not apply to the facts at bar. Should we assume that the periods limited by the bill of lading were too short, and for this reason invalid, we do not think that the respondent is for that reason to be left without any protection against stale claims. At best, the libelant can ask no more than that the period shall be expanded, so as measurably to correspond with the period fixed by Congress, which for notice of claim is 90 days. In fact, the hides were discharged on April 5 and the first notice of damage was on June 15, 70 days later. Had the limitation clause given 70 days to the shipper, we should not suppose that the disparity would be a "flagrant disavowal" of Congress' conception of reasonable opportunity, but that it would have been reasonable, under section 18 of the Shipping Act. Therefore we find it unnecessary to say anything upon the doctrine of South, etc., Co. v. Panama R. R. Co., supra.

The supposed waiver is in our judgment untenable, though we must own that the contrary was held in Oelbermann v. Toyo Kisen Kabushiki Kaisha, 3 F.(2d) 5 (C. C. A. 9). We cannot see how the respondent's failure to raise the objection can create an obligation, otherwise not existing. Had the libelant acted upon the faith of an implied consent to forego the clause, one made while the period still ran, another question would arise; but when, as here, the period was past, and the libelant could do nothing to mend its position, the respondent would not incur any liability, even by the most explicit recognition. The case in this aspect is ruled by Sou. Pac. Co. v. Stewart, 248 U.S. 446, 39 S. Ct. 139, 63 L. Ed. 350, and is within our own rulings in Lehigh Valley Co. v. Providence-Wash. Ins. Co., 172 F. 364, 97 C. C. A. 62, and The Geo. W. Goethals, supra. Anything to the contrary in Grimwood v. Munson (C. C. A.) 273 F. 166, cannot now be considered as law.

The final question is whether, if the ship was unseaworthy, the respondent may still invoke the clause. The libelant's argument rests upon English law, especially upon Atlantic, etc., Co. v. Dreyfus [1922] 2 A. C. 250. As we understand the English cases, the result is as follows: If the charter party or bill of lading contains an express warranty, or the like, that the ship shall be seaworthy, the clause is treated as applicable in limitation of any liability arising under that undertaking, as well as of any other in the document. Bank of Australia v. Clan Line, [1916] 1 K. B. 39. But if it contains no express warranty, or other similar promise, a fortiori if there be no mention of the matter, the clause is treated (as matter of interpretation) as not limiting the warranty implied by the law. Atlantic, etc., Co. v. Dreyfus, supra. The doctrine does not invalidate the clause at all. The case came up in Morris v. Oceanic S. S. Co., 16 Times L. R. 533, of a bill of lading which, like that at bar, mentioned the liability for unseaworthiness, but only to excuse it, if due diligence was used. The judge construed this as equivalent to a promise to use due diligence, and held that the clause applied. His decision was approved in Bank of Australia v. Clan Line, supra, given that construction of the clause, but it was said that the exception ought not to have been read as implying a promise to use due diligence, and that the result was wrong because, in fact, the only liability was that arising under the implied warranty of the common law.

This language would, if applied literally, result in refusing to apply the clause here, because the only mention of liability for unseaworthiness *341 is by way of exception in case due diligence be used. We must own that, the whole question being but one of interpretation, the reasoning appears to us, with great deference, somewhat over-refined. In Atlantic, etc., Co. v. Dreyfus, supra, where no mention at all was made of seaworthiness, we can see reason for saying that the clause should be limited to liabilities arising from the stipulations of the bill of lading, which is what we understand that decision to mean. But, where the common-law liability is expressly released upon condition that due diligence is used, it seems to us untenable to refuse to give the clause the same effect which it would have had, had its form been an express promise to be liable if due diligence were not used. Regardless of the fact that in such cases there remains, strictly speaking, only the implied warranty, the exception brings it, we think, as much within the scope of the clause as though it had been otherwise framed.

In general, it seems to us regrettable, when it is possible to avoid that result, to introduce such nice distinctions into documents already complicated enough. Without suggesting that we should not follow the case of Atlantic, etc., Co. v. Dreyfus, supra, if the facts at bar were like it, we think that this case is in fact within the rule of Bank of Australia v. Clan Line, supra, in spite of the discussion in that case.

Decree affirmed.