Amoco Transport Co. v. S/S Mason Lykes

• Decision Date: 16 August 1985
• Docket Number: No. 83-2219,83-2219
• Parties: AMOCO TRANSPORT COMPANY, Plaintiff-Appellee, v. S/S MASON LYKES, etc., et al., Defendants-Appellees, v. CUMBERLAND MARKETING INTERNATIONAL, INC., et al., Intervenors-Appellants. NORTHWESTERN NATIONAL INSURANCE COMPANY, Plaintiff-Appellant, v. AMOCO TRANSPORT CO., etc., Defendant Third-Party Plaintiff-Appellee, Lykes Bros. Steamship Co., Inc., Third-Party Defendant-Appellee. CHINA STEEL CORPORATION, Plaintiff-Appellant, v. M/V MASON LYKES, etc., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 659

768 F.2d 659

1986 A.M.C. 563

AMOCO TRANSPORT COMPANY, Plaintiff-Appellee, v. S/S MASON LYKES, etc., et al., Defendants-Appellees, v. CUMBERLAND MARKETING INTERNATIONAL, INC., et al.,

Intervenors-Appellants.

NORTHWESTERN NATIONAL INSURANCE COMPANY, Plaintiff-Appellant, v. AMOCO TRANSPORT CO., etc., Defendant Third-Party Plaintiff-Appellee, Lykes Bros. Steamship Co., Inc., Third-Party Defendant-Appellee.

CHINA STEEL CORPORATION, Plaintiff-Appellant, v. M/V MASON LYKES, etc., et al., Defendants-Appellees.

No. 83-2219.

United States Court of Appeals, Fifth Circuit.

Aug. 16, 1985.

John K. Meyer, Houston, Tex., for Cumberland, Buhrke, Harnischfeger, Hyundai & China Steel.

John Eric Olson, New York City, for China Steel.

John R. Pearson, Houston, Tex., and Donald M. Waesche, New York City, for Northwestern & Tokio.

Joseph Newton, Houston, Tex., for Amoco.

Samuel B. Kent, Galveston, Tex., for S/S Mason Lykes & Lykes Bros.

Appeal from the United States District Court for the Southern District of Texas.

Before CLARK, Chief Judge, RUBIN and POLITZ, Circuit Judges.

POLITZ, Circuit Judge:

The owners and insurers of cargo aboard the S/S MASON LYKES appeal the judgment of the district court, 550 F.Supp. 1264, denying recovery for a duplication of freight charges incurred as a result of a collision between the S/S MASON LYKES and the M/V AMOCO CREMONA. Concluding that the cargo interests have asserted valid claims against both Lykes Bros. Steamship Co., Inc. and Amoco Transport Co., we reverse and remand.

Facts

On April 1, 1980, the MASON LYKES left New Orleans with a partial load of cargo, bound for the Far East with intermediate stops in Galveston and Houston to complete loading. The next morning, in a dense fog, as the MASON LYKES neared the sea buoy to the Galveston Channel, the outbound AMOCO CREMONA appeared on her radar screen. MASON LYKES' chief officer ordered a slight change of course, but the path of the AMOCO CREMONA was not plotted on radar. Simultaneously, when the MASON LYKES appeared on the AMOCO CREMONA's radar, her master likewise ordered a slight change of course. When a collision became apparent, the master of the AMOCO CREMONA first called for a 20? change of course and then commanded an emergency hard starboard, full ahead. In the meantime, the MASON LYKES was thrown into hard port, full astern. Before the officer on the MASON LYKES could countermand his erroneous order, his vessel's stern struck and penetrated the hull of the AMOCO CREMONA, port-forward.

The trial court found both vessels at fault, assigning 90% of the responsibility for the accident to the MASON LYKES and 10% to the AMOCO CREMONA. Both vessels sustained extensive damages. The MASON LYKES limped into the Port of Galveston, aided by tugs, and an immediate damage survey was done. Based on the initial oral reports of damages, Lykes estimated that repairs to the MASON LYKES would take 60 days. Without waiting for a full field survey or consulting with the cargo owners, Lykes unilaterally determined that a 60-day delay would be considered unreasonable by the cargo interests and decided to abandon the voyage under clause 10 of the bill of lading. ¹

Although the cargo was put in jeopardy by the collision, it was not physically damaged. It was unloaded at Galveston approximately a week after the collision and reshipped aboard another Lykes vessel a month later. ² Because the bills of lading contained a "freight earned clause," ³ the full freight was charged for the original voyage to the Far East even though the cargo was discharged at Galveston. The cargo owners had to pay a second full freight charge to secure shipment of their goods from Galveston to the Far East and filed suit against the owners of both the MASON LYKES and and the AMOCO CREMONA for recovery of the second payment. They also asserted their claims by way of intervention in an action between Lykes and Amoco. The suits were consolidated. All claims between Amoco and Lykes were settled; only the claims of the cargo interests remained for trial. Those claims were decided by the district court adverse to cargo and are now before this court.

Recovery from Lykes Bros.: The Decision to Abandon Voyage

and Retain Freight

One of the basic principles of American maritime law is that "ocean carrier freight charges are not earned unless and until the goods are delivered to destination." Alcoa Steamship Co. v. United States, 338 U.S. 421, 422, 70 S.Ct. 190, 191, 94 L.Ed. 225 (1949). Parties are free, however, to agree that freight will be considered earned upon loading, regardless of whether the cargo is ever actually delivered to its final destination. Id. But such "freight earned clauses" do not give the carrier an unqualified right to abandon the voyage and retain the freight.

In deciding to abandon the voyage, the carrier has a duty to exercise reasoned judgment, having due regard for the interests of the cargo, and "must endeavor to hold the balance evenly between ship and cargo when their interests conflict." The Steamship STYRIA v. Morgan, 186 U.S. 1, 9, 22 S.Ct. 731, 734, 46 L.Ed. 1027 (1902). See also T.J. Stevenson & Co. v. 81,193 Bags of Flour, 629 F.2d 338 (5th Cir.1980); Orient Mid East Lines, Inc. v. Cooperative For A.R.E., Inc., 410 F.2d 1006 (D.C.Cir.1969). Factors to be considered in the evaluation of the reasonableness of the carrier's decision to terminate the voyage and retain the freight include:

(1) the information available to the carrier at the time the decision to abandon was made;

(2) efforts by the carrier to obtain additional reliable information upon which to base the decision;

(3) efforts by the carrier to contact the shippers for instructions;

(4) the presence or absence of instructions from the shippers;

(5) whether the circumstances suggesting abandonment are the result of fault on the part of the carrier; ⁴ and (6) whether it is possible to complete the voyage either on the current vessel or upon another vessel (albeit with additional expense to the carrier).

T.J. Stevenson & Co. v. 81,193 Bags of Flour; De La Rama S.S. Co. v. Ellis, 149 F.2d 61 (9th Cir.), cert. denied, 326 U.S. 718, 66 S.Ct. 23, 90 L.Ed. 425 (1945); The WILDWOOD, 133 F.2d 765 (9th Cir.), cert. denied, 319 U.S. 771, 63 S.Ct. 1436, 87 L.Ed. 1719 (1943); Schirmer Stevedoring Co., Ltd. v. Seaboard Stevedoring Corp., 306 F.2d 188 (9th Cir.1962); Silva v. Bankers Commercial Corp., 163 F.2d 602 (2d Cir.1947); Merchants Corp. of America v. 9655 Long Tons, No. 2 Yellow Milo, 238 F.Supp. 572 (S.D.Tex.1965); The CHRISTOS, 1966 A.M.C. 1455 (D.D.C.1965); The LOUISE, 58 F.Supp. 445 (D.Md.1945).

The trial judge found that Lykes' decision to abandon the voyage of the MASON LYKES was reasonable and that it was entitled to retain the freight as earned under clause 16 of the bill of lading. The determination that such a decision is reasonable involves a mixed question of fact and law, triggering broad appellate review. ⁵

When the MASON LYKES collided with the AMOCO CREMONA she was loaded with 2,352 tons of cargo that had been lifted in the port of New Orleans. An additional 4,000 tons were to be loaded in the ports of Galveston and Houston. After the collision it was obvious that the MASON LYKES could not continue the voyage without repairs, and she was towed into the port of Galveston where the Lykes' maintenance and repair division immediately began to survey the damage. During the first week in April, a field representative of Lykes orally informed its vice president of maintenance and repair that the entire bow area back to the number one cargo hold was twisted, fractured, and open to the sea. The representative also reported extensive damage to the fo'c'sle deck and anchors and a fracture in the hull which was admitting water into the bow thruster and machinery space. Based upon this oral report, the vice president of maintenance and repair estimated that repairs would take approximately 60 days in a large shipyard. Shortly thereafter, he gave this estimate to other members of the Lykes management who were meeting to discuss the effect of the damage on the voyage. In the meantime, a formal field survey of the damage was undertaken and the maintenance and repair division began contacting shipyards to determine their availability and interest.

Lykes began unloading the cargo from the MASON LYKES at 6:00 a.m. on April 5. By April 8 at the latest, ⁶ a formal decision to abandon the voyage and retain the freight was made, and a letter to that effect was sent to all cargo interests. The letter offered to book the cargo on the HOWELL LYKES, which was scheduled to call at Galveston on April 25, but informed the cargo owners that a second full freight would be charged for the continuation of the voyage on that vessel. This letter was Lykes' first attempt to contact the cargo owners after the collision. No attempt was made to determine whether the cargo owners would consider the estimated 60-day repair time unreasonable, or to obtain instructions from the cargo owners regarding disposition of their cargo before unloading commenced. Although one cargo owner inquired about the possibility of leaving his cargo aboard the MASON LYKES for delivery after repairs, Lykes stated that its letter was a formal abandonment which did not give cargo the option of shipping aboard the MASON LYKES after the repairs were completed without paying a second freight. The unloading was concluded on April 10 and the cargo was stored in Galveston at the risk and expense of the cargo owners.

On April 10, the field survey was completed and bid specifications were distributed. Lykes received three bids which it opened on April 12. All three bids contemplated completion by at least mid-June when Lykes was obligated to deliver the MASON LYKES to the Military Sea Lift Command under the terms of a charter that had been executed several months before. Two of the bids promised completion of repairs by ...