The vessel, Marine Sulphur Queen, was lost at sea on a voyage from Beaumont, Texas, US, to Norfolk, Virginia, US. A claim was brought by the subrogated insurer of the shipper against the shipowner, Marine Sulphur Transport Corp (MSTC), and the demise charterer, Marine Transport Lines Inc (MTL), under the Carriage of Goods by Sea Act 46 USC ss 1300 ff (COGSA), .

The District Court found that the vessel was unseaworthy, and that MSTC and MTL were thus liable to the subrogated insurer. The District Court also denied MSTC and MTL's claims for exoneration or limitation of liability. MSTC and MTL appealed to the Second Circuit Court of Appeals.

Held: The District Court’s decision is reversed.

Because no cause for the loss of the vessel has been found, the burden of proof rule determines the issue. The burden lay on the claimant, the subrogated insurer, to show that the cargo was lost due to some fault of the carrier. The claimant argues that TGS and MTL agreed to make COGSA, and its burden of proof rules, applicable to this carriage. While they certainly could have made such an agreement, it is clear that they did not. The claimant first contends that the charterparty specifically incorporated COGSA in paras 1, 6, 23, and 28. The first three cited paragraphs, however, make no mention of COGSA whatsoever, but simply use the phrase that the owner 'shall exercise due diligence' to keep the vessel in a seaworthy condition. This language roughly reproduces s 4(1) of COGSA. This mere similarity of common phrases does not invoke the entirety of COGSA or its burden of proof rules.

The bill of lading provided for in the charterparty, and issued upon the receipt of the cargo, incorporated COGSA only in certain limited circumstances. Even if those circumstances had occurred, COGSA would still not have regulated the terms of the contract of carriage. A bill of lading may serve three functions: as a receipt, as a document of title, and as a contract for the carriage of goods. However, it does not perform this third function for the shipper and the carrier when there is a charterparty containing the terms of the carriage contract: see The Fri 210 US 431 (1908). The fact that the parties intended this result is borne out quite clearly by para 29 of the charterparty, which provides that any bill of lading 'shall be without prejudice to the terms, conditions and exceptions of this Charter Party'. Therefore, in light of the fact that the ordinary burden of proof between a shipper and carrier was not altered either by statute or contract, the burden of proving a breach of the private carriage contract or of negligence by the bailee carrier was on the shipper.

There is no doubt that the subrogated insurer of the shipper has failed in its burden of proof. Under the general exceptions clause of the charterparty, para 23, the owner or carrier was not to be held liable for the loss of cargo on any account, unless it failed to exercise due diligence to make the ship seaworthy before it broke ground. Here, some of the possible causes of the loss are particularly exempted from owner liability, eg fire, explosion, danger or accident of the sea, or neglect in the navigation of the vessel. Moreover, by retaining authority to approve the design, plans and specifications of the vessel, to inspect all steps in the work of conversion and to reject any equipment or components of the ship, and finally by accepting the vessel as delivered from Bethlehem Steel Corp, the shipper is estopped from recovery on any theory of improper design or structural failure or collapse. Where the shipper is unable to prove that its loss was occasioned by some cause for which the carrier was liable, there can be no recovery.