EAST, Inc. of Stamford, Conn. v. M/V ALAIA, Civ. A. No. 87-4931.

• Decision Date: 16 November 1987
• Docket Number: Civ. A. No. 87-4931.
• Citation: 673 F. Supp. 796
• Parties: E.A.S.T., INC. OF STAMFORD, CONNECTICUT v. M/V ALAIA, etc.
• Court: U.S. District Court — Eastern District of Louisiana

673 F. Supp. 796

E.A.S.T., INC. OF STAMFORD, CONNECTICUT v. M/V ALAIA, etc.

Civ. A. No. 87-4931.

United States District Court, E.D. Louisiana.

November 16, 1987.

Antonio J. Rodriguez, Mary Campbell Hubbard, Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for plaintiff.

Robert B. Deane, Chaffe, McCall, Phillips, Toler & Sarpy, New Orleans, La., for claimant.

ORDER & REASONS

CHARLES SCHWARTZ, Jr., District Judge.

East has come south to send everyone north before a vessel went west. Because the law on maritime liens should not wander in aimless directions, the Court believes a written explanation of that law as it pertains to this case is fit.

This matter is before the Court on the motion of claimant Advance Company, Inc. of Liberia (Advance) to release the vessel from seizure or alternatively to set the amount of security to be posted by claimant, and to set the amount of countersecurity to be posted by plaintiff. At the post-seizure hearing held October 26, 1987, the Court denied Advance's motion for immediate release of the vessel without bond, fixed security for the release at $175,000, fixed countersecurity at $100,000 and referred the parties to arbitration in London. The present Order & Reasons gives the reasons for these rulings.

The plaintiff, E.A.S.T., Inc. of Stamford, Connecticut (E.A.S.T.), argues that it had time chartered Advance's vessel, the M/V ALAIA, that Advance breached its warranty of seaworthiness and that E.A.S.T. is thus entitled to a maritime lien on the vessel. Advance naturally disagrees; it argues that the charter party either was never executed by Advance or was still executory at the time of the alleged breach and that no maritime lien was thus created. Because the Court believes Advance entered into a charter that was no longer executory at the time E.A.S.T. rejected the vessel for the alleged breach, the Court finds for the purpose of the preliminary, post-seizure hearing that the limited evidence brought out at the hearing supports E.A.S.T.'s claim for a maritime lien.

I.

On Wednesday afternoon, October 21, 1987, E.A.S.T. filed a verified complaint against the M/V ALAIA in rem and posted a $250 cost bond. Upon reviewing the complaint pursuant to Local Rule 32.1 and Rule C(3) of the Supplemental Rules for Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure, the Court ordered the Clerk to issue a warrant for arrest of the vessel. That evening, a U.S. deputy marshal arrested the vessel at the Nashville Avenue Wharf in New Orleans. Two days later, late Friday afternoon, Advance filed a notice of appearance in personam, an answer and a counterclaim, moved for an expedited post-seizure hearing and informally requested that the hearing be on Monday morning, October 26, 1987. To ensure due process of law, the Court granted the motion, and the hearing was held as and when requested.

At the hearing, E.A.S.T. called one witness: Robert Dammers, its president. According to Mr. Dammers, E.A.S.T. through its broker Estero in Rotterdam and Advance through its broker Matheson in London agreed to the main terms of a time charter on Friday, October 16, 1987 and agreed to the remaining details the next morning. Exhibit Dammers 3 (master's copy of the time charter);¹ see Tr. 28:21-29:9, 33:11-:17. The next business day, Monday, October 19, E.A.S.T.'s broker sent a fixture recap of all the negotiations. Exhibit Dammers 4 (E.A.S.T.'s FAX copy of the recap sent by Estero to Matheson);² see Tr. 29:5-:17, 30:13-31:6, 43:4-:15. Neither side sent further responses to the recap. Tr. 29:16-:17. According to Mr. Dammers, it is routine practice in the shipping industry to send such a recap, to be treated as the parties' final agreement. See Tr. 29:10-:15, 30:20-:21.

The fixture recap changes the place of arbitration from New York to London and states that English law shall govern the contract. Compare Exhibit Dammers 4, cl. 67 with Exhibit Dammers 3, cl. 17 (New York arbitration clause deleted). In its answer, Advance admits that the charter calls for arbitration in London.

On October 16, almost simultaneously with the fixture between E.A.S.T. and Advance, E.A.S.T. entered into two voyage subcharters for the vessel to carry cargoes to Puerto Cabello, Venezuela—one cargo of milk stock cartons and woodpulp to ship from New Orleans, see Exhibit Advance 3, and one cargo of soda ash to ship from Port Arthur, Texas.

Mr. Dammers testified that E.A.S.T. paid Advance $26,700 as advance hire, paid $15,000 for port and agency charges in New Orleans, see Exhibit Dammers 1, ordered bunkers for the vessel, see Exhibit Dammers 5, and through its New Orleans agent instructed the master of the vessel to bring the vessel to New Orleans to load the milk stock and woodpulp cargo first. Upon its arrival in New Orleans on October 20,³ the vessel was surveyed by Ronald Campana, an independent marine surveyor.⁴ His report of October 21 states that the vessel was unsuitable for the intended cargo. See Exhibit 1 to E.A.S.T.'s Memorandum in Opposition. Because of this report, neither cargo was loaded on the vessel and E.A.S. T. rejected the vessel. Later that day, E.A.S.T. filed this complaint, and the vessel was arrested; that Friday, Advance filed a counterclaim alleging E.A.S.T.'s wrongful rejection.

E.A.S.T. chartered another vessel to ship the soda ash, but the subcharterer for the New Orleans cargo canceled its subcharter on October 23; according to Mr. Dammers, E.A.S.T. attempted, but was unable to find another subcharterer for the ALAIA. Tr. 47:12-48:4.

II.

The Court's role at this point in this matter is most limited. Especially with the arbitration provision in the charter, the Court is not attempting to resolve the merits of the parties' dispute; it is only determining whether the arrest was proper, specifically, whether the evidence brought out at the hearing supports a prima facie claim of a maritime lien on the vessel. See Amstar Corp. v. S/S Alexandros T., 664 F.2d 904, 912 (4th Cir.1981). In determining such, the Court must conclude (1) whether based on the evidence from the hearing, Advance may deny the existence of the charter between E.A.S.T. and it and (2) if not, whether the charter falls within the executory contract doctrine of The Schooner Freeman v. Buckingham, 59 U.S. (18 How.) 182, 15 L.Ed. 341 (1855), and its progeny so as to deprive E.A.S.T. of its right to assert a maritime lien.

A.

Advance points to the absence of its authorized signature on E.A.S.T.'s exhibits of the original charter and the fixture recap and argues that without such a signature Advance cannot be bound to the charter.⁵ The argument fails.

A charter party, such as the New York Produce Exchange time charter involved here, is merely a form of contract and is generally subject to the rules and principles of construction for ordinary commercial contracts. See Marine Overseas Services, Inc. v. Crossocean Shipping Co., 791 F.2d 1227, 1234 (5th Cir.1986). A charter comes into existence when the parties have a meeting of the minds on the essential terms of the charter. E.g., Interocean Shipping Co. v. National Shipping & Trading Corp., 523 F.2d 527, 534 (2d Cir. 1975), cert. denied, 423 U.S. 1054, 96 S.Ct. 785, 46 L.Ed.2d 643 (1976). A charter does not have to be signed to be legally binding. A/S Custodia v. Lessin International, Inc., 503 F.2d 318, 320 (2d Cir.1974); see Valero Refining, Inc. v. M/T Laubenhorn, 813 F.2d 60, 64 (5th Cir.1987). Indeed, even an oral charter is valid and enforceable. E.g., St. Paul Fire & Marine Insurance Co. v. Vest Transportation Co., 666 F.2d 932, 939 (5th Cir.1982); accord Wilford, supra note 3, at 1 (on English law); see Kossick v. United Fruit Co., 365 U.S. 731, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961).

Mr. Dammers testified that both sides agreed to the essential terms of the charter and that the general shipping custom on fixture recaps did not require written confirmations to make these recaps binding. Advance offered no opposing testimony. Thus, based solely on the evidence presented so far, the Court finds that Advance is bound by the charter.⁶

Besides, Advance is barred by the doctrine of promissory estoppel from denying the existence of a binding and enforceable charter party. In reliance on Advance's agreement to charter the ALAIA to E.A.S.T., E.A.S.T. subchartered the vessel to a third party for the carriage of two cargoes, ordered bunkers for the vessel, appointed a local agent and paid port and agency charges for the vessel to enter the New Orleans port. Upon E.A.S.T.'s instructions to the vessel's master, Advance directed the vessel to sail to New Orleans; Advance had the vessel tender notice of readiness under the time charter with E.A. S.T. after its arrival and, in reliance on E.A.S.T.'s contractual obligation to appoint an agent in the port and to pay port charges, refrained from appointing its own agent and from paying any port charges. In sum, because E.A.S.T. relied to its detriment on Advance's own conduct, Advance is estopped from denying the existence of the time charter with E.A.S.T.

In passing, Advance argues that commencement of the charter was conditioned on E.A.S.T.'s acceptance of the vessel. This argument must likewise fail. Not only does the charter not expressly state such a condition, but also it expressly states a specific time when the charter is to commence, see supra note 3. Binding authority squarely rejects Advance's argument. See Eastern Marine Corp. v. Fukaya Trading Co., 364 F.2d 80, 84 (5th Cir.) (concerning an NYPE46 time charter) ("the court will presume the formation of a contract upon execution of the document if all other standard contractual requirements, such as consideration and capacity, have been satisfied"), cert. denied, 385 U.S. 971, 87 S.Ct. 508, 17 L.Ed.2d 435 (1966).

B.

The Federal Arbitration Act, 9 U.S.C. ßß 1 et seq. (1982), does not of itself create any independent federal jurisdiction....