Bally, Inc. v. M v. Zim America, Her Engines, Boilers, Etc., Zim Container Service, Zim Israel Navigation Co. Ltd., Shoham Maritime Services Ltd.
Docket: 712
Court: Court of Appeals for the Second Circuit; April 20, 1994; Federal Appellate Court
Bally, Inc. secured a judgment against the defendants-appellants Zim Container Service, Zim Israel Navigation Co. Ltd., and Shoham Maritime Services, Ltd. for $48,819.73 in damages, plus pre-judgment interest, due to a loss of 65 cartons from a shipment of shoes and leather goods that were transported aboard the vessel M.V. ZIM AMERICA. The shipment, consisting of two sealed containers, was sent from Leghorn, Italy to Bally's warehouse in New Rochelle, New York. Upon opening the container, Bally discovered the shortage, leading to claims under the Carriage of Goods by Sea Act (COGSA).
The district court found that Bally proved delivery of the complete shipment to Zim and the subsequent shortage at outturn; however, it determined Bally failed to show that the cartons were missing from the sealed container at the time of outturn. Consequently, the appellate court reversed the district court's decision and remanded the case with instructions to dismiss the complaint.
Key facts include Bally's engagement of Odino-Valperga Italeuropa S.p.A. for freight consolidation and shipment arrangement, the loading of 301 cartons into container ZCSU 241429/4, and the affixing of a high-security steel seal that remained intact until the container was opened at Bally's warehouse. The other container arrived without issue, and the net weight of the cargo was recorded as 4,400 kilos.
The weight of the cargo matched the weight listed by Odino on the bill of lading (4,396.8 kilos), derived from manufacturer invoices and packing lists. After weighing, the container was stored for several days before being loaded onto the ZIM AMERICA on August 30 or 31, 1990, and shipped to New York, arriving on September 17, 1990. Zim issued a bill of lading categorizing the container as "1X40' BOX SAID TO CONTAIN," indicating it was packed by the shipper. Upon arrival, the containers were delivered to Maypo Trucking Corporation without being reweighed, despite available scales at the Maher Terminal. Trucker Anthony Tricarico checked the seals and found them intact, opting not to weigh the containers before taking them to Port Security for the night. The next day, truck driver John Lucatuorto retrieved the containers, which were still sealed, and delivered them to Bally's warehouse. Upon opening, it was discovered that 65 of the 301 cartons were missing. Bally's traffic manager was notified, and the remaining cartons were sorted without any internal shortages. Bally's surveyor later requested an inspection of the container, which confirmed that the door hinges were intact, implying no tampering. Bally submitted a claim to Zim for the loss, which Zim denied, leading to Bally filing a COGSA action in August 1991. Following a bench trial, the district court found Zim liable based on the clean bill of lading and the missing cartons, concluding that Zim failed to prove it was free from negligence. An appeal ensued.
A plaintiff-consignee can establish a prima facie case for recovery under the Carriage of Goods by Sea Act (COGSA) by demonstrating that goods were damaged while in the custody of the carrier. This requires proof of two elements: 1) delivery of the goods to the carrier in good condition and 2) delivery by the carrier in damaged condition. The burden shifts to the carrier to show that the damage falls within COGSA exceptions if the consignee proves its case. The district court found that the plaintiff, Bally, met the first element based on the weight and description of the cargo in the bill of lading, which serves as prima facie proof of the cargo's weight, but not its condition if sealed. Bally needed additional evidence to establish the number of cartons loaded since they did not weigh the cargo at outturn. Testimony indicated that 301 cartons were loaded, correlating with the bill of lading's weight, providing an adequate basis for the court's finding.
However, the second element—damage at outturn—was problematic. The court concluded that Bally demonstrated a shortage based on the stipulation that sixty-five cartons were missing during inventory at New Rochelle. It mistakenly identified the point of outturn, which should have been at the delivery to Bally's agent at the Maher Terminal. Outturn occurs upon delivery at the destination port, and Bally needed to establish loss at that location. Since they only proved the cartons were missing upon inventory at their warehouse, they did not rule out the possibility of theft while in the custody of others or during unloading.
Evidence was presented by Bally indicating that the loss of goods occurred after Maypo received them from Zim, citing Port Security measures. However, substantial evidence indicated that the loss did not happen while Zim controlled the container, primarily because the container remained sealed throughout Zim's custody. While an intact seal does not definitively prove that a loss did not occur during the carrier's possession, there was no evidence of tampering with the high-security seal in this case. The district court found insufficient evidence to support the conclusion that the cartons were missing from the sealed container upon delivery by Zim. Bally argued that Zim had the obligation to weigh the container at the Maher Terminal to demonstrate there was no shortfall in weight, a position the district court seemingly accepted. However, Zim and Ocean Carrier Conferences countered that it is commercially impractical for carriers to weigh inbound containers at such terminals, which typically only weigh outbound containers. Conversely, Bally could have utilized local commercial weigh stations to weigh the containers at minimal cost. Importantly, COGSA does not impose an obligation on either party to weigh containers upon delivery. The precedent from the Westway case was misinterpreted; it emphasized the carrier could rebut claims of shortfall by weighing containers but did not establish an obligation to do so. Ultimately, Bally bore the burden of proof under COGSA to show the cargo was lost while in Zim's custody and would have strengthened its case by weighing the sealed container at delivery to demonstrate a weight discrepancy.
Bally has not met its burden of proof regarding the loss of cargo while in Zim's custody, as it failed to provide timely written notice of the missing goods, contrary to section 3(6) of COGSA (46 U.S.C. App. Sec. 1303(6)). This section mandates that notice of loss or damage must be given in writing to the carrier at the port of discharge before or at the time of delivery; otherwise, the removal of goods is deemed prima facie evidence of proper delivery. Bally did not notify Zim of the missing cartons until three weeks after the loss was discovered, and oral notice was given eight days post-delivery. The district court's conclusion that notice was timely is erroneous, as it did not properly apply section 3(6), which creates a presumption that the carrier delivered the goods in good order if timely notice is lacking. There was insufficient evidence to demonstrate that the 65 missing cartons were damaged or missing prior to delivery. Furthermore, irregularities in the delivery procedure were noted, but they did not overcome the presumption of good delivery. Zim argued that the intact seals on the container indicated it was free from fault. Since Bally failed to establish a prima facie case, the defenses raised by Zim were not addressed. The judgment of the district court is reversed, and the case is remanded with instructions to dismiss the complaint.
