Wong Wing Fai Co., S.A. v. U.S., 86-2515

• Decision Date: 29 February 1988
• Docket Number: No. 86-2515,86-2515
• Citation: 840 F.2d 1462
• Parties: WONG WING FAI COMPANY, S.A., Plaintiff/Appellant, v. UNITED STATES of America, Defendant/Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1462

840 F.2d 1462

WONG WING FAI COMPANY, S.A., Plaintiff/Appellant, v. UNITED STATES of America, Defendant/Appellee.

No. 86-2515.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Aug. 11, 1987.

Decided Feb. 29, 1988.

Mattaniah Eytan, Kaplan, Russin, Vecchi, Eytan & Collins, San Francisco, Cal., for plaintiff/appellant.

Paul Gary Sterling, Dept. of Justice, Civ. Div., Torts Branch, San Francisco, Cal., for defendant/appellee.

Appeal from the United States District Court for the Northern District of California.

Before NORRIS and NOONAN, Circuit Judges, and STEPHENS, Jr., ^* District Judge.

STEPHENS, Senior District Judge:

This appeal involves a time charter between the plaintiff, Wong Wing Fai Company, owner and operator of the oil tanker VIRA 8, and the defendant, the Military Sealift Command of the United States Navy (hereinafter usually referred to as "the Navy"). The district court had jurisdiction under the Suits in Admiralty Act, 46 U.S.C. Secs. 741-752. We have jurisdiction under 28 U.S.C. Secs. 1291 and 1294(1).

BACKGROUND

In March of 1975 the chartered vessel, the VIRA 8, entered Vietnamese waters with the shipowner's knowledge that maritime insurance companies considered the area a war zone. The VIRA 8 was insured under a private war risk insurance policy until April 27, 1975. ¹ On April 9, three weeks before the fall of the Republic of Vietnam (South Vietnam) to North Vietnamese forces, the plaintiff and the Navy signed a letter agreement chartering the VIRA 8 to the Navy to facilitate supplying fuel oil to the Navy's ships operating in Vietnamese waters in connection with the evacuation of South Vietnam. Although both parties intended that the letter agreement would be superseded by a more formal document, a formal contract was never prepared due to the exigencies of the military situation. The letter agreement did not specify a termination date for the charter.

On April 23, Thai Sung Chhun, the representative of the shipowner, requested that the charter be cancelled. Thai testified that he made this request because the cost of renewing the vessel's war risk insurance for another week after April 27 would have exceeded the amount of charter hire the VIRA 8 could earn in the same period and because the shipowner had entered into another charter that called for delivery of the VIRA 8 in Singapore on May 15. At the time this request was made, the ship was fully loaded with a cargo of fuel oil belonging to the Navy. The Navy agreed to cancel the charter effective April 25. Both parties expected to be able to discharge the cargo on or before that date. However, the rapidly deteriorating military situation prevented discharging the cargo and the VIRA 8 continued to move from place to place as the Navy directed while the Navy tried to find a place where the cargo could be discharged. ²

On April 30, 1975, South Vietnam fell to the North Vietnamese. While the ship was five miles off shore awaiting instructions from the Navy, 110 fleeing South Vietnanese soldiers commandeered the ship. After On March 19, 1976, the shipowner filed suit in the United States district court claiming $280,401.86 for the loss of the vessel, the daily hire rate of $1,400 per day from April 9, 1975 through April 30, 1975, and lost profits from April 30 through May 9, 1975. The United States filed a counterclaim seeking to recover $161,214.60 for the loss of the Navy's 15,095 barrels of fuel oil.

this event, the Navy no longer controlled the ship's movement. The soldiers ordered the master to sail to Singapore. Singapore refused to let the vessel enter the port. The ship returned to Vietnam, and on May 8, 1975 the forces of North Vietnam took possession of both the ship and its cargo.

The district court entered judgment for the plaintiff shipowner on July 30, 1986, allowing only the shipowner's claim for charter hire for the seventeen days from April 9, the date of the charter agreement, through April 25, the agreed cancellation date. The district court also denied the government's counterclaim. The shipowner appealed the district court's denial of recovery for loss of the vessel, charter hire from April 26 through April 30, and lost profits. The appeal is timely. The government has abandoned its counterclaim.

We reverse the district court's denial of charter hire for the five days from April 26 through April 30 but affirm the judgment in all other respects.

DISCUSSION

I. The Effect of the Agreement to Terminate the Charter

The district court found that the parties agreed to terminate the charter on April 25, 1975. We do not question this determination. However, appellant claimed that the charter could not terminate so long as the Navy's cargo was on board. The effect of the agreement when the government's cargo was still aboard the ship is a question of law reviewable de novo. See Dunn v. Phoenix Newspapers, Inc., 735 F.2d 1184, 1186 (9th Cir.1984).

Whether the presence of the charterer's cargo on board extends the charter beyond the cancellation date is an issue which involves the doctrine of overlap. ³ Through the doctrine of overlap, "[t]he courts have recognized that redelivery [of the ship to its owner] on [a] specified day is often impracticable considering the exigencies of the maritime industry...." 2B BENEDICT ON ADMIRALTY, Sec. 2, at 1-14 (M. Cohen Ed.1986). See also G. GILMORE & C. BLACK, THE LAW OF ADMIRALTY 231-32 (1975). Under the doctrine, if a voyage is uncompleted when the termination date arrives, the time charter does not terminate until the conclusion of the voyage. Id. at 232. See Straits of Dover S.S. Co. v. Munson, 95 F. 690, 693 (S.D.N.Y.1899), aff'd 100 F. 1005 (2d Cir.1900). The courts will treat the charter as extended for such period of time as is reasonable under the particular circumstances. Straits of Dover, 95 F. at 692-93. A charter is extendable if circumstances beyond the control of the parties and outside of the provisions of the charter make it impossible to complete the voyage as contemplated, and a reasonable extention is granted as a matter of course. Under the facts of this case, the parties were still within a reasonable extension period when the fleeing South Vietnamese soldiers commandeered the vessel. For this reason the shipowner is entitled to the daily charter hire rate through April 30. ⁴

II. Liability for Loss of the Vessel

The appellant has articulated three theories under which it claims that the United States is liable for the loss of the VIRA 8: 1) negligence, 2) breach of an agreement to provide war risk insurance, and 3) deprivation of the shipowner's constitutional rights to due process under the Fifth Amendment due to the government's failure to include the VIRA 8 in a government indemnification program that covered other ships similarly situated.

A. Negligence

For appellant to prevail on any of the variations of its negligence theory, it must show that the Navy breached a duty it owed appellant and that this breach of duty was the proximate cause of the loss of the VIRA 8. Appellant bases its negligence claim on the theory that the Navy had a duty to arrange for the discharge of the cargo in a reasonable time, or, alternatively, that the Navy had a duty to direct the VIRA 8 to a safe port.

In a time charter such as the one at issue, "absent any special provision or circumstance, the duty to load, stow, and discharge cargo--and the consequences for failing to do so properly--fall upon the ship and her owners." Nichimen Company v. M.V. Farland, 462 F.2d 319, 330 (2d Cir.1972) (note omitted). Both parties agree that special circumstances were present in this case. The district court found that the charter terminated on April 25, but specifically found that after April 25 both parties nevertheless had a duty "to use reasonable efforts to discharge the cargo in a reasonable time and manner." The government agrees that the Navy had a duty to make reasonable efforts to arrange for the discharge of its cargo. Appellant disputes this conclusion of the district court only to the extent that it imposes a duty on appellant. Appellant doesn't dispute that the Navy's conduct should be judged by a standard of reasonableness. ⁵ Neither the charter nor the agreement to terminate the charter fixed a specific time for discharging the cargo. ⁶ In such cases, "the law implies an agreement on the part of the charterer to load or discharge the cargo within a reasonable time, and so far as there is a joint duty in loading or unloading, that the merchant [the Navy] and shipowner shall each use reasonable diligence in performing his part." A. MOCATA, M. MUSTILL & S. BOYD, SCRUTTON ON CHARTER PARTIES AND BILLS OF LADING 320-21 (19th Ed. 1984) [hereinafter SCRUTTON ON CHARTER PARTIES] (notes omitted).

The district court found that a voyage on April 26 from Newport to Vung Tau was made upon the agreement of the Navy and the ship's master "so that the cargo could be ready for discharge." The district court also found that on April 29 the vessel was instructed to proceed back up the Saigon River to Nah Be "in order to discharge the cargo." The record supports these findings. South Vietnamese military officials refused to let the vessel proceed to Nah Be. It is undisputed that the Navy subsequently arranged for permission for the vessel to proceed to Nah Be. Finally, the record contains ample evidence as to the district court's finding that "all of the ports in the area were exposed to chaotic military, political and commercial conditions" during the relevant period. ⁷ Because these facts which are supported by the record support the district court's finding that the Navy's conduct was reasonable, the finding is not clearly erroneous. Since the Navy's conduct was reasonable, it did not violate any duty to appellant in the course of its efforts to arrange for the discharge of the cargo.

Appellant's alternate negligence theory is that the Navy had a duty to...