TJ STEVENSON & CO., INC. v. 81,193 BAGS OF FLOUR
| Decision Date | 30 December 1976 |
| Docket Number | Civ. A. No. 74-501-T. |
| Citation | 449 F. Supp. 84 |
| Parties | T. J. STEVENSON & CO., INC., Plaintiff & Counterclaimant, v. 81,193 BAGS OF FLOUR, etc., Defendant, v. ADM MILLING CO., INC., Defendant as to Counterclaim. ADM MILLING CO., INC., Defendant, Counterclaimant and Third-Party Plaintiff, v. T. J. STEVENSON & CO., INC. and MV NEDON, etc., Defendants as to Counterclaim of ADM Milling Co., Inc. REPUBLIC OF BOLIVIA, MINISTRY OF INDUSTRY, COMMERCE AND TOURISM, Third-Party Defendant as to Counterclaim of ADM Milling Co., Inc., Republic of Bolivia, etc., Counterclaimant and Cross-Plaintiff, v. ADM MILLING CO., INC., Defendant as to Counterclaim of Republic of Bolivia, etc., T. J. Stevenson & Co., Inc., Cross-Defendant as to Cross-Complaint of Republic of Bolivia, etc. |
| Court | U.S. District Court — Southern District of Alabama |
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George F. Wood and Sidney H. Schell, Mobile, Ala., for plaintiff.
Alex T. Howard, Jr. and Thomas S. Rue, Mobile, Ala., William R. Joyce, Jr., Washington, D. C., for Republic of Bolivia Ministry of Industry, Commerce & Tourism.
Rae M. Crowe and G. V. Parker, Mobile, Ala., Peter D. Trooboff, Covington & Burling, Washington, D. C., for defendant ADM Milling Co.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The above-styled cause was heard by the Court without a jury and taken under submission on the 20th day of July 1976. After hearing the evidence for some twenty-five days, examining the exhibits, pleadings and stipulations, and having considered the arguments and proposed findings of fact and conclusions of law of counsel of all parties, the Court makes the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
1. The plaintiff herein, T. J. Stevenson & Company, Inc. (Stevenson) is a corporation organized under the laws of the State of New York and is engaged generally in the steamship business. Stevenson was, at all material times, the owner of the vessels SOUTHWALL and ARIZONA and was the time charterer of the M/V NEDON.
2. ADM Milling Company, Inc. (ADM), claimant and counter-claimant, in the above-styled cause, is a corporation organized and existing under the laws of the State of Illinois, having its principal place of business in Shawnee Mission, Kansas. ADM was, at all material times, engaged in the business of the milling of wheat into flour.
3. The Ministry of Industry, Commerce and Tourism is an agency or branch of the Government of the Republic of Bolivia (hereinafter referred to as the Ministry of Bolivia) having its principal offices in La Paz, Bolivia.
4. In the spring of 1974, the South American country of Bolivia sought to purchase wheat flour in the American market for the purpose of supplying the bread demand of her population. Therefore, the Bolivian government authorized and funded Heran Landivar, Sub-secretary of the Ministry of Industry, Commerce and Tourism of the Republic of Bolivia to obtain such a purchase. Prior to departing for the United States, Landivar called upon the American Ambassador in La Paz, Bolivia, and asked him for assistance in making the necessary purchase of flour. As a result of the sub-secretary's request, the State Department of the United States provided him with an audience in Washington.
5. Subsequently on his arrival in Washington, Landivar attended the meeting at the State Department with Bolivian Ambassador Valencia wherein Landivar sought to obtain information for purchasing flour, lard and oil. An appointment with the United States Department of Agriculture (USDA) was scheduled for the sub-secretary the following day; however, as Landivar was unable to attend, he delegated the authority to purchase flour for the Ministry to Dr. Juan Loria, at that time a minister with and later Chargé d'Affaires of the Bolivian Embassy in Washington, D. C. Following the instructions of the Ministry, Dr. Loria contacted ADM, one of the milling companies recommended by the USDA wherein Bolivia entered into two contracts of purchase and sale with ADM for the delivery of wheat flour.
6. On April 11, 1974, the first contract of sale was entered into between Bolivia and ADM. (ADM Ex. 26B, Bol. Ex. 10)1 Under such contract 20,000 metric tons of ADM hard winter wheat flour were to be delivered F.A.S. Mobile, Alabama, for export between June 1 and September 10, 1974. The price was $230.88 per ton payable by irrevocable letter of credit. (Bol. Ex. 10) Having entered into this first contract with ADM, Dr. Loria reported this information to Landivar who subsequently authorized the purchase of an additional 8,618 metric tons of flour.
7. On April 15, 1974, a second contract was entered into, (ADM Ex. 26A, Bol. Ex. 11) the terms of which, excluding quantity, price and delivery date, are the same as the first contract. Bolivia required all flour to be shipped in cotton bags. Under the second contract, 8,618 metric tons were to be delivered F.A.S. Mobile, Alabama, for export during April/May, 1974, at a price of $235.95 per metric ton. (ADM Ex. 26A, Bol. Ex. 11)
The total amount of flour purchased by Bolivia in both contracts was to be transported from Mobile in eight shiploads, hereinafter referred to as liftings. With some minor exceptions and notwithstanding the normal torn, wet and short bags of flour which generally occur on ocean voyages, the first five liftings of flour were properly received by Bolivia by September 1, 1974. The heart of this litigation concerns the problems surrounding the sixth, seventh and eighth liftings, caused by insect infestation.
8. Both contracts contained specifications as to protein, ash and moisture content.2 Moreover, on the front page of each contract between ADM and the Ministry, the following provision appears:
Except as provided on the reverse side, SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED, THAT EXTENDS BEYOND THE DESCRIPTION ON THE FACE HEREOF, except that the product sold hereunder shall be of merchantable quality. . . . (Bol. Exs. 10, 11)3
9. Pursuant to its contracts with ADM, Bolivia opened two irrevocable letters of credit through its local bank Banco Central de Bolivia, La Paz, Bolivia, the correspondent bank of which was the First National City Bank, New York, New York. The first letter of credit No. 9090 was opened on April 18, 1974, in the favor of ADM securing the purchase price of the flour for sums not exceeding a total of U.S. $6,651,017.10, F.A.S. Mobile, Alabama. In addition, the letter of credit was payable on sight if accompanied by (1) commercial invoice with a price F.A.S., legalized by Bolivian Consulate, pertaining to 28,618 metric tons of flour; (2) Bolivian Consulate invoice; and (3) a certificate of quality.4
10. This letter of credit was amended several times concerning the percentage of protein, the changing of the shipping schedule and the markings on the bags of flour.
11. In order to transport 28,618 tons of flour to South America, the Bolivian Embassy engaged the services of St. John International, Inc. (St. John), a shipping broker, which had been the agents for the Bolivian Government in the past with regard to U. S. Public Law 480 shipments, commonly referred to as the Agricultural Aid Program. St. John's primary responsibility was to coordinate the shipping program for the arrival of ships in Mobile and to arrange for the vessels to carry the flour to either Arica or Antofagasta, Chile.
12. Bolivia is a land-locked country and therefore, goods imported by sea must come through a neighboring coastal country. Bolivia asserts that she has a treaty5 with Chile governing the Port of Arica and that this treaty allows for the free importation of goods to Bolivia. In the instant case, most of the flour liftings were to be shipped through Arica. Upon arrival in Arica, the flour was to be transported to Bolivia by rail. At times, the port of Arica is subjected to congestion because of the limited rail facilities. Railroad capacity from Arica to La Paz is approximately 300-350 tons per day.
13. St. John, as representative of Bolivia, made several unsuccessful attempts into the liner/conference market to locate a carrier to transport the flour. Consequently, St. John surveyed the tramp steamer market to seek out interested parties. The only tramper to respond to the inquiries of St. John was T. J. Stevenson & Company.
14. Subsequently, on April 27, 1974, Stevenson and St. John entered into a contract of carriage, commonly referred to as a booking note, whereby Stevenson was to transport 28,618 metric tons of flour from Mobile, Alabama, to Bolivia, via Arica/Antofagasta, Chile, ports of entry for Bolivia. (TJS Ex. 2) The shipping dates were 8,618 metric tons between May 15 and June 10, 1974, and 20,000 metric tons between June and October, 1974. The freight rate was $60.00 per ton. (TJS Ex. 2)
15. The booking note anticipated that the total flour cargo would be carried in a series of voyages, initially extending through September 1974. The schedule would be set by Bolivia and in accordance with the instructions from Bolivia, St. John altered the schedule periodically, including a delay of the final shipment to October 31st because of congestion in the Port of Arica. The position maintained by Stevenson throughout these proceedings is that although Bolivia advised ADM of the shipping delays and notwithstanding the fact that ADM consented to at least some of the later schedule changes, ADM was not privy to the Stevenson-Bolivia (St. John) contract.6
16. The second letter of credit No. 9115 was opened by Bolivia on May 7, 1974, in favor of Stevenson in an amount not to exceed U.S. $1,923,120.00. It was payable by sight draft accompanied by (1) commercial invoice and (2) clear "on board" ocean bills of...
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T. J. Stevenson & Co., Inc. v. 81,193 Bags of Flour
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