Cavcar Co. v. M/V Suzdal
723 F.2d 1096, 1984 A.M.C. 609 (1983)
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Rule of Law:
A vessel is liable in rem for a breach of the contract of carriage when it commences a voyage with cargo on board, thereby implicitly ratifying the bill of lading issued by the vessel's operator or charterer, even if the vessel's owner is not a party to the contract and not personally liable for the breach.
Facts:
- Sherkate Sahami Khass Auto Pars (“Auto Pars”) purchased 200 Ford Bronco trucks, financed by Iranian banks.
- The vessel M/Y Finn Amer was owned by Amer Sea O/Y but operated by Marine Transport Services (MTS).
- In Philadelphia, MTS loaded 49 of the Broncos onto the Finn Amer for shipment to Bandar Shahpour, Iran.
- MTS issued a negotiable bill of lading for the cargo, listing Auto Pars as the 'notify party,' but the vessel owner, Amer Sea, was not a party to this contract.
- The Finn Amer arrived at Bandar Shahpour, and MTS requested Auto Pars to 'preclear' the vehicles through customs, which Auto Pars did not do.
- After discharging all other cargo, MTS, without notice to Auto Pars, ordered the Finn Amer to depart Iran with the 49 Broncos still on board.
- The ship returned the Broncos to Philadelphia as directed by MTS.
- Upon their return, the Broncos were impounded and eventually sold by United States Customs, resulting in a total loss for Auto Pars.
Procedural Posture:
- MTS sued Auto Pars in federal district court in New Jersey for losses related to the non-delivery of the vehicles.
- Auto Pars counterclaimed against MTS for failure to deliver.
- Auto Pars also filed a separate suit in federal district court against the M/Y Finn Amer (in rem) and its owner, Amer Sea (in personam), for damages.
- The various actions were consolidated for trial.
- After a bench trial, the district court held MTS liable to Auto Pars but found that neither the shipowner Amer Sea nor the vessel Finn Amer were liable.
- Auto Pars appealed the district court's judgment to the U.S. Court of Appeals for the Third Circuit, challenging only the finding that the vessel could not be held liable in rem.
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Issue:
May a vessel be held liable in rem for a breach of the contract of carriage, committed by the vessel's operator, when the vessel's owner is not personally liable for the breach?
Opinions:
Majority - Pollak, Louis H.
Yes. A vessel may be held liable in rem for a breach of the contract of carriage committed by its operator, even when the vessel's owner is not personally liable. The court adopted the 'ratification principle' long established in the Second Circuit, which holds that when a vessel begins a voyage with cargo on board, the ship itself is deemed to have ratified the bill of lading. This ratification binds the vessel in rem to the obligations within that contract, including the duty of proper delivery. The court found that the departure of the Finn Amer from Philadelphia with the Broncos aboard constituted an implied ratification of the bill of lading issued by MTS. Therefore, the vessel itself became liable for the subsequent failure to deliver the cargo to the designated port, irrespective of the owner's lack of personal contractual liability. This doctrine ensures that shippers have a remedy against the vessel, which they rely on as security for the carriage of their goods.
Analysis:
This decision adopts and solidifies the 'ratification by sailing' doctrine in the Third Circuit, promoting uniformity in American maritime law. It affirms the legal personification of the vessel, establishing that a ship can incur contractual liability independent of its owner. This precedent significantly protects shippers by ensuring they have a maritime lien and an in rem cause of action against the vessel itself, even when complex chartering or operating agreements obscure who is the responsible 'carrier.' The ruling strengthens the bill of lading as the primary measure of the ship's duty once a voyage commences, providing shippers with a more secure and predictable remedy for non-delivery or cargo damage.
