Hellenic Lines, Ltd. v. U.S.

• Decision Date: 07 March 1975
• Docket Number: D,Nos. 186,901,s. 186
• Parties: HELLENIC LINES, LTD., Plaintiff-Appellant Cross-Appellee, v. UNITED STATES of America, and Commodity Credit Corporation, Defendants-Appellees Cross-Appellants. ockets 73-1474, 73-1974.
• Court: U.S. Court of Appeals — Second Circuit

Page 1196

512 F.2d 1196

HELLENIC LINES, LTD., Plaintiff-Appellant Cross-Appellee, v. UNITED STATES of America, and Commodity Credit Corporation,

Defendants-Appellees Cross-Appellants.

Nos. 186, 901, Dockets 73-1474, 73-1974.

United States Court of Appeals, Second Circuit.

Argued Dec. 20, 1974.

Decided March 7, 1975.

John S. Rogers, New York City (Burlingham, Underwood & Lord, New York City, of counsel), for appellant-cross-appellee.

Gilbert Fleischer, Dept. of Justice, New York City (Carla A. Hills, Asst. Atty. Gen., Paul J. Curran, U. S. Atty., S.D.N.Y. and Warren A. Schneider, Dept. of Justice, Admiralty & Shipping Section, of counsel), for appellee-cross-appellant United States.

Before FRIENDLY, TIMBERS and GURFEIN, Circuit Judges.

FRIENDLY, Circuit Judge:

This Odyssey concerns a large government shipment of bagged flour from various Gulf ports to United Nations Relief and Works Agency (UNRWA), on plaintiff's vessle, MV Italia, intended to arrive at Aqaba, Jordan, around May 20, 1967. After various delays and peregrinations hereafter described, the shipment finally reached Ashdod, Israel, on July 17, 1967. However tortuous was the voyage, the course of this suit in admiralty to determine the rights of shipowner and cargo has equalled it.

I. The Facts.

The background is recounted in Judge Tyler's findings of fact, which the following summary supplements in some degree:

Defendant Commodity Credit Corporation (CCC) is a Government agency within the Department of Agriculture (DA). Among many other duties it arranges, as agent for the Agency for International Development, transportation of shipments, authorized by 7 U.S.C. § 1721 et seq., to UNRWA for distribution to Palestinian refugees. Early in 1967 CCC called for offers to transport a quantity of bagged flour (some 5449 metric tons ultimately were shipped) from specified Gulf ports to Aqaba, Jordan. Since no United States-flag vessel then available was offered for shipment of the entire cargo, see 15 U.S.C. § 616a, 46 U.S.C. § 1241, Part VI infra, CCC entered into two booking agreements with Marine Chartering and Brokerage Corporation (Marine), agent for plaintiff Hellenic Lines, Inc. (Hellenic). The first agreement called for a lifting date of April 22 at Corpus Christi, Texas, aboard the Hellenic Spirit or substitute with an estimated time of arrival (ETA) of May 18 at Aqaba. When Hellenic opted to exercise its right of substitution, a second agreement, evidenced by two separate booking notes dated March 31, was entered into whereby the vessel Hellenic Sky would carry the cargo, which was augmented in size by the amount of similar grain cargo previously agreed to be carried by the Hellenic Sky and was to be lifted at additional Gulf ports; the loading date at the additional ports was to be April 7 (the April 22 date was retained for the Corpus Christi loading) and the ETA was to be May 25. Under either agreement, there was sufficient time to allow the vessels to stop at ports in the eastern United States to pick up other cargo. The freight rate was $20.95 per long ton, full berth terms, and the total freight was $114,301.51, which was to be and was paid shortly after loading. The first rift in the lute occurred when the Hellenic Sky developed mechanical difficulties and was unable to make the voyage. On April 13, K. E. Stewart, president of Marine, took this up with J. M. Cushing of the Department of Agriculture. Stewart proposed substitution of the Italia ¹ to carry the entire shipment, which could take up 80% of the Italia's capacity. Cushing's contemporaneous notes indicate that Stewart promised a sailing from the Gulf ports direct to Aqaba, at a speed of 15 knots and with an ETA of May 20, 1967.

On the next day, after consulting with others in the Department of Agriculture, Cushing decided to accept the substitute "since ETA Aqaba 5 days earlier than originally booked" if Hellenic would pick up any Gulf port charges against the cargo resulting from the delay in shipment. According to his testimony and notes, Cushing called Stewart to inform him that the Department would accept the substitution of the Italia upon the following four terms: (1) Hellenic is responsible for charges against the cargo as a result of later loading dates; (2) The ETA "is at least as good as originally booked"; (3) North Vietnamese and Cuban ports were to be avoided; (4) Clause 12 of the Hellenic bill of lading would not apply. ² Cushing then entered in his notes the indication "Stewart agrees." ³ While Cushing and Stewart talked on April 13 about a shipment direct to Aqaba, the conditions to which Stewart agreed on April 14 did not expressly include this, doubtless because both parties knew that the May 20 ETA at Aqaba could be met only by a direct sailing or, at least, without loss of port time at mid-Atlantic United States ports. ⁴

The Department and Marine then entered into new booking notes to supersede the preceding ones. These called for loading on the Italia at Corpus Christi, Texas; Lake Charles, Louisiana; Pascagoula, Mississippi; and Mobile, Alabama, on April 24, 27, and 30 and May 1, respectively, with an ETA of May 20 at Aqaba. A typewritten insert excluded application of Clause 12 of Hellenic's bill of lading. Nothing was said about the first or third condition in Cushing's conversation with Stewart.

The Italia did not meet the dates agreed for loading. She departed Corpus Christi on May 5 and did not leave Pascagoula, which became the last of loading ports, until May 13. Although this twelve-day delay made it apparent that even a sailing direct to Aqaba would not meet the ETA of May 20, the promise of which had been an inducement to the Government's acceptance of her substitution, ⁵ the Italia stopped at Norfolk, Virginia, and at Brooklyn, New York, for additional non-Government cargo. On May 23 she sailed from Brooklyn not for Aqaba but for Piraeus, Greece, where most of the added cargo was to be discharged. While the distance added by these calls at Norfolk and Brooklyn was only about 375 nautical miles, or about 25 hours in sailing time at a 15 knot speed, the vessel spent 13 hours in Norfolk and more than four days in Brooklyn.

One day out of Brooklyn, while the Italia was experiencing heavy weather, a crack was discovered in the deck plating and water was found in a nearby reefer chamber. Thereafter in heavy weather the vessel travelled at a reduced speed to help avert the onruch of waves on the deck. The Italia also experienced excessive fresh water consumption. In consequence she was instructed by Hellenic's New York office to put into the Azores to take on additional water and was in port there for more than six hours. She proceeded thereafter without further mechanical difficulty but continued to travel at slower than normal speed whenever the weather so required.

None of the above facts might have been seriously consequential save for an occurrence that no one anticipated. On June 5, 1967, shortly after the Italia passed Gibraltar, the Six Day War broke out between Israel and a number of Arab nations. The Suez Canal was immediately closed to traffic. On June 10 major hostilities ceased, pursuant to a resolution of the United Nations Security Council.

Various telephone conversations were had between the parties concerning the disposition of the flour, without an agreement being reached. In the afternoon of June 7 Hellenic sent a telex to J. A. Ryan of the DA, stating that the Italia had arrived at Piraeus and that, in view of the hostilities in the Middle East, "we are left no other alternative but to discharge the cargo at Piraeus, in which case the respective conference rate of freight is applicable"-a rather shocking position since the conference rate to Piraeus was $216,053.74, or 89% more than the agreed rate to Aqaba, a port which the Italia should have reached a fortnight before the war began. ⁶ In fact that Italia had neither arrived at Piraeus as stated in the telex nor was "close by" as Pericles Callimanopulos, Hellenic's president and general manager, testified; her log showed that at 0820 she passed Cape Sarrat in Algeria and she did not pass Cabo Passero until early on June 8. ⁷ In accordance with instructions from AID, Ryan asked Callimanopulos to secure discharge of the flour at Beirut, Lebanon; Callimanopulos declined, properly enough at the time, on the ground that Beirut was in the war zone. Ryan then requested discharge in Turkey as an alternative; ⁸ Callimanopulos refused this also, saying that he was going to discharge at Piraeus.

The Italia reached Piraeus at 1645 on June 9. On the same day Stewart addressed two self-serving telexes to Ryan. One purported to "confirm your statement that the cargo of flour on board MV Italia for Aqaba ... should be discharged at Piraeus." The other said, "Hellenic Lines agree discharge cargo Piraeus." Both took a more moderate stance on the freight, saying that this would be referred to the conference. Ryan, who was preoccupied with the many transportation problems arising from the war, did not answer either telex. He claimed to have found them confusing in that they were sent by Stewart while he had been negotiating with Callimanopulos. In any event, he deemed Callimanopulos' mind to be closed. Apparently there was no discussion about the Italia's simply remaining at Piraeus for a few days and awaiting developments. ⁹ The Government's failure to suggest this could well have been due to the belief induced by Hellenic that the Italia had reached Piraeus on June 7. The district judge found, and we entirely accept his finding, that the Government never agreed to a discharge at Piraeus but simply bowed to Callimanopulos' determination to do this whatever it might say. ¹⁰ Discharge of the flour began on June 10 and was completed on June 26, the cargo being received by the Piraeus Port Authority.

Subsequently the Government advertised the bids to move the flour from Piraeus to...