This action was brought by the shipper against the carrier for breach of a contract of carriage. The shipper, La Territorial De Seguros, turned over 31 rolls of rayon cords to the carrier, Shepard Steamship Co, for shipment on the SS Minute Man from Baltimore, US, to Buenos Aires, Argentina. During the voyage, a fire broke out. On 2 April 1948, the day after the fire was discovered, the vessel called at New York. General average was declared. The carrier appointed general average adjusters who prepared a general average report. After some correspondence, the damaged rolls were sold. The net proceeds of the sale were credited to the shipper’s general average contribution.

Some of the rolls shipped on the vessel were not damaged by fire or water in extinguishing the fire. The shipper made a claim that these rolls should have been delivered to the port of destination, and that the carrier's failure to do so breached of the contract of carriage.

The carrier argued that it was not responsible for loss or damage to the cargo caused by the fire, and that its liability was restricted to USD 500 as provided by the bill of lading.

Held: The carrier is liable for non-delivery of undamaged cargo. The carrier's liability is limited to USD 500.

It is the carrier's burden to prove that the harm to the cargo was due to a cause for which it was not statutorily liable, or that it exercised due diligence to avoid or prevent the harm (American Tobacco Co v The Katingo Hadjipatera DC 81 F Supp 348 (SD NY 1948)).

The shipper is not entitled to compensation for damage caused to the cargo by the fire. The carrier is absolved from liability for such damage by the Fire Statute 46 USCA §182, the US COGSA 46 USCA §1304(2) and r 3 of the York-Antwerp Rules, all incorporated by reference in the bill of lading.

Moreover, the shipper is not entitled to compensation for damage caused by water in extinguishing the fire in any way except for general average compensation as provided by rr 2 and 3 of the York-Antwerp Rules.

The surveyor's testimony showed that no more than 19 rolls were damaged by fire or water. The Court found from the testimony that the surveyor did not make a reasonably careful examination of the rayon rolls at the time they were discharged in the port of New York. The surveyor's conclusion that all of the rolls were damaged was made without reasonable foundation. The surveyor should have segregated those rolls that were in an apparently fit condition for shipment. Therefore, the carrier had failed to establish a defence against its liability for not transporting the undamaged cargo to Buenos Aires.

The damage for non-delivery accrued on the date that the rolls should have arrived in Buenos Aires, and the market value thereof should be established at the appropriate time and place. The carrier’s liability is limited to USD 500 per package. The fact that the rolls were sold many months after the fire did not relieve the carrier of responsibility, other than reducing the amount of damages sustained by the shipper to the extent of the net proceeds received from the eventual sale.