Associated Metals & Min. Corp. v. Swedish America Mex. L.

• Decision Date: 04 November 1942
• Parties: ASSOCIATED METALS & MINERALS CORPORATION v. SWEDISH AMERICA MEXICO LINE, Ltd.
• Court: U.S. District Court — Southern District of New York

48 F. Supp. 819

ASSOCIATED METALS & MINERALS CORPORATION v. SWEDISH AMERICA MEXICO LINE, Ltd.

District Court, S. D. New York.

November 4, 1942.

Paskus, Gordon & Hyman, of New York City (Joseph C. Slaughter, of New York City, of counsel), for plaintiff.

Kirlin, Campbell, Hickox, Keating & McGrann, of New York City (Roger Siddall, of New York City, of counsel), for defendant.

CAFFEY, District Judge.

Due to the shifting of numbers and letters on the exhibits at various stages of the case there may be difficulty at times in certainly identifying which are referred to. I shall use the numbers and letters with which the exhibits were marked by the clerk as they were introduced in evidence at the trial, — though occasionally I shall furnish also numbers or letters previously put on the papers.

In 1930 fifteen ocean carriers formed an association called the North Atlantic Baltic Freight Conference (hereinafter referred to as the conference). What it consisted of and what were its functions are set out in a written agreement (trial exhibit A; bill of particulars exhibit C; Freese deposition exhibit 1). It dealt with transportation, and especially with rates of freight, from North Atlantic ports of the United States and Canada to ports in Sweden and other European countries within the Baltic area. It prescribed certain regulations governing the conference, as well as its members. It is unnecessary, however, to set out details with respect to its contents.

The conference is still in existence. The defendant was one of the original members who participated in organizing it and has ever since continued to be a member.

In 1937 the number of shipping lines belonging to the conference had grown to eighteen. By then also, and perhaps considerably earlier, the conference carriers had adopted a form for shipping agreements between themselves and the merchants (commonly spoken of as contract shippers) who employed the facilities of the carriers.

Two contracts of the type described were entered into by the conference carriers (including the defendant) with the plaintiff during December, 1937. One was dated the 7th day (trial exhibit 3) and the other, the 29th day (trial exhibit B; bill of particulars exhibit A) of that month. Every contract-shipper contract was signed by an individual merchant. It was also signed by the conference as agent for all carriers included in the conference. It left the merchant free to ship by any conference member of his own choice who, when called on, had space available.

Because both December, 1937, shipper contracts with the plaintiff were identical, except for the names of particular commodities and the rates of freight thereon inserted in one of the blanks in the forms (which were printed), there is no need for setting out more than one of the agreements. As the parties in argument on this aspect of the case referred chiefly to the December 29 agreement (trial exhibit B) with respect to details I shall confine myself to that and shall hereinafter call it the shipping contract.

There are several features of the shipping contract which should be carefully noted. The first is that the contract with which we are now concerned was made by the conference, in behalf of all its members, with the plaintiff alone. Another is that the contract related wholly to export shipments of the commodities therein mentioned from specified North Atlantic ports, on this side of the ocean, to Scandinavian and Baltic ports. A third thing is that it provided for discharge of cargo at one of the latter ports, served by the carriers, as might be designated by the merchant who, upon signing the instrument, became a contract shipper. Among the ports of departure at which it was stipulated that articles to be transported should be tendered to carriers for their vessels was Montreal.

While the shipping contract (trial exhibit B), just described, was in full force, on August 14, 1939, by telephone the plaintiff and the defendant reached terms, confirmed by a letter of that day from the defendant to the plaintiff (trial exhibit 1; complaint exhibit A; Freese deposition exhibit 4), for the booking by the plaintiff with the defendant of a shipment of 1,000 tons of pig iron from Cleveland, Ohio, to a Swedish port to be designated later by the plaintiff. The destination ports among which the plaintiff could select were six in number and were of two kinds. The evidence shows that in the language of the trade four of them were what are called base ports and two of them were what are called out ports. The shipper was required, in advance of loading, to specify the discharging port.

In the booking letter the freight on a through basis to a base port was specified to be $5.50 and to an out port as $6 per ton. It was further specified that the pig iron was to be loaded into a lake vessel at Cleveland on October 12 or 13 in order to connect with the defendant's vessel Svaneholm, scheduled to sail from Montreal on October 19. The August 14 agreement is hereinafter referred to as the booking.

Twenty days after the booking and more than five weeks previous to the date set for the plaintiff to present the cargo to the defendant at Cleveland, on September 3, 1939, war broke out. This was between Germany on the one hand and Great Britain, Northern Ireland, France and Poland on the other. Four days later, on September 7, 1939, in behalf and at the instance of the carriers, the conference gave notice (trial exhibit C; Freese deposition exhibit 3) to the plaintiff that, because of the war, the agreements with the plaintiff then "in effect covering shipments" to Scandinavian and Baltic ports (which notice by its terms apparently included the shipping contracts dated December 7 and 29, 1937, trial exhibits 3 and B, and the booking dated August 14, 1939, trial exhibit 1, complaint exhibit A) were terminated. Eight days after war began, — and a month before the date fixed for the cargo to be turned over to the defendant at Cleveland, — on September 11, 1939, direct notice to the plaintiff (trial exhibit 2; complaint exhibit B) of the cancellation of the August 14, 1939, booking (trial exhibit 1; complaint exhibit A) was given by the defendant individually. Thereafter the defendant refused to transport the pig iron.

As stated above, it was originally contemplated that the cargo would pass into the hands of the defendant at Cleveland. The program was that it would move from Cleveland to Montreal and from there, on the defendant's ship Svaneholm, to the Swedish port of destination. After the cancellation notices had been given there were negotiations between the plaintiff and the defendant for shipment from Cleveland to New York and from New York to a Swedish port (trial exhibits D to G). These, however, came to nothing. In November, 1939, the pig iron was shipped via a different carrier at the freight rate of $14 per ton.

The present action seeks to recover $8 per ton. This is the excess of the $14 per ton actually paid by the plaintiff for transportation on the line of another carrier over the $6 rate stipulated in the booking (trial exhibit 1). In other words, the total transportation expense to the plaintiff was $8,000 greater than it would have been at the original agreed-on rate. The present action is to recover this sum, with interest.

The facts are without substantial dispute. On the uncontroverted evidence there arise merely questions of law. Six have been discussed by counsel. These are as follows:

(1) Did the shipping contract (trial exhibit B) apply to pig iron?

(2) Did a so-called war clause (paragraph 9) in that contract confer on the conference, in behalf of the defendant as well as of other conference members, or confer on the defendant, power to end the contract, on the ground that war was in progress, or was the authority to cancel on the ground of war limited to refusal to make future commitments?

(3) If, by reason of the war clause, the defendant had the right to terminate the shipping contract, did the exercise of that right release the defendant from liability under the booking?

(4) Was the shipping contract inapplicable to the shipment mentioned in the booking because transportation of the goods, as provided for, was partly extra-territorial?

(5) Was the cancellation in bad faith?

(6) If the cause of action sued on be established, what amount is the plaintiff entitled to recover?

A good deal of the evidence has no bearing on these questions and must be disregarded. However, before attempting to answer them some further explanatory comment may be helpful.

In the branch of the shipping business involved here, at the time of the transactions dealt with there were, and I understand there still are, two types of ports in Sweden and other European countries. As heretofore remarked, one set are called base ports; the others are called out ports.

Base ports are major ports and are direct ports of call for vessels going from this side of the Atlantic. An example of such ports in Sweden is Gothenburg. Out ports are ports to which cargo is delivered usually by means of transshipment from base ports, although there are instances in which, if the cargo be of sufficient quantity to warrant and the water be of sufficient depth, sometimes the ships after crossing the Atlantic continue to the out ports; thus avoiding transshipment. An illustration of an out port in Sweden is Otterbacken, which is near Stockholm.

To determine the freight rate to an out port an arbitrary is combined with the rate for carriage to the base port. A list of arbitraries on pig iron as well as on sundry other commodities is given in a tariff sheet (trial exhibit J). As appears in the sheet, the arbitrary on pig iron to Otterbacken is $1 per ton. If, therefore, the base port were Gothenburg, in order to get the total freight charge on pig iron to Otterbacken, $1 per ton would be added to the rate to Gothenburg.

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