Interocean Shipping Co. v. National Shipping & Trading Corp.

• Decision Date: 24 June 1975
• Docket Number: No. 223,D,223
• Citation: 523 F.2d 527
• Parties: INTEROCEAN SHIPPING COMPANY, Petitioner-Appellee, v. NATIONAL SHIPPING AND TRADING CORPORATION and Hellenic International Shipping, S. A., Respondents-Appellants. ocket 74-1713.
• Court: U.S. Court of Appeals — Second Circuit

Page 527

523 F.2d 527

INTEROCEAN SHIPPING COMPANY, Petitioner-Appellee, v. NATIONAL SHIPPING AND TRADING CORPORATION and Hellenic International Shipping, S. A., Respondents-Appellants.

No. 223, Docket 74-1713.

United States Court of Appeals Second Circuit.

Argued Nov. 26, 1974.

Decided June 24, 1975.

David I. Gilchrist, New York City (Eli Ellis, Mark M. Jaffe and Hill, Betts & Nash, New York City, on the brief), for respondents-appellants.

James M. Estabrook, New York City (Lennard K. Rambusch, Stephen R. Remsberg and Haight, Gardner, Poor & Havens, New York City, on the brief), for petitioner-appellee.

Before CLARK, Associate Justice, ^* and MOORE and TIMBERS, Circuit Judges.

TIMBERS, Circuit Judge:

On this appeal from an order entered April 15, 1974 after a four day hearing in the Southern District of New York, Sylvester J. Ryan, District Judge, pursuant to the remand ordered in our prior decision, Interocean Shipping Co. v. National Shipping and Trading Corp., 462 F.2d 673 (2 Cir. 1972), to determine whether there existed a valid charter party which contained a provision requiring the parties to arbitrate whether there was a breach of the charter party, the essential questions are:

(1) Whether the findings of fact of the district court that a valid charter party did exist were clearly erroneous.

(2) Whether the findings of fact of the district court that De Salvo, the charter broker, had authority to act for appellants were clearly erroneous.

(3) Whether the district court erred in ordering National Shipping and Trading Corporation, the guarantor of the charter party, to arbitrate.

For the reasons below, we affirm the district court's findings of fact with respect to questions (1) and (2) as not clearly erroneous; but, with respect to question (3), we modify its arbitration order by eliminating the direction that National proceed to arbitration. We affirm

the district court's arbitration order as modified.

I. FACTS AND PRIOR PROCEEDINGS

This is the second time in three years that this petition to compel arbitration pursuant to Section 4 of the Federal Arbitration Act, 9 U.S.C. § 4 (1970), has been before us. On the instant appeal, the essential issues are (1) the correctness of the district court's findings of fact pursuant to the remand ordered in our prior decision, and (2) the scope of its direction to arbitrate.

In view of the comprehensive statement of facts set forth in the district court's opinion, ¹ we shall summarize only those facts necessary to an understanding of our rulings on the issues stated above.

The dramatis personae includes:

Appellee Interocean Shipping Company (Interocean) was a Liberian corporation and a wholly-owned subsidiary of Bethlehem Steel Corporation (Bethlehem). Interocean owned the tanker, the Oswego Reliance, which is the subject of the aborted charter party here at issue.

Anthony Germano was an employee of Steamship Service, Inc., another wholly-owned subsidiary of Bethlehem, which acted as house broker for vessels owned by Bethlehem and its subsidiaries.

Appellant National Shipping and Trading Corporation (National) was a New York corporation engaged in chartering and operating tankers on behalf of various principals. The stock of National was held in trust for the benefit of Harry Theodoracopulos (H.T.), its vice-president. Thomas Spears was president of National.

Appellant Hellenic International Shipping, S.A. (Hellenic), was a Panamanian corporation which was wholly-owned by Hellenic Shipping & Industries, Ltd., of Greece. The principal shareholder of the latter was John Theodoracopulos, the father of H.T.

Francis De Salvo was a broker employed by the ship brokerage firm of Poten & Partners, Inc., in New York City. De Salvo had known H.T. for many years and through him had negotiated several previous charters with National.

On March 17, 1971, H.T. invited De Salvo to lunch to discuss the tanker market. A specific unnamed vessel was discussed. This apparently was the Oswego Reliance. After lunch, H.T. called De Salvo and asked him to check on the vessel's availability for charter.

De Salvo then contacted Germano of Steamship Service concerning the Oswego Reliance. De Salvo relayed to H.T. the message that it was available for charter. H.T. told De Salvo "to bring a firm offer in".

De Salvo again contacted Germano who was hesitant to give a firm offer since he was not familiar with Hellenic, the proposed charterer. Germano told De Salvo that it would be necessary to determine what arrangements could be made for a guarantee from National, that he would have to check with his people, and that he would call back De Salvo.

Shortly thereafter, Germano called De Salvo as promised. He offered the Oswego Reliance "for reply 4:55 today". De Salvo wrote down Germano's terms and relayed them to H.T. by telephone. There followed several offers and counter-offers by H.T. and Germano, all relayed through De Salvo. At 4:45 P.M. that day, in response to one of Germano's counter-offers relayed to H.T. through De Salvo, H.T. said to De Salvo in substance, "You are confirmed".

Throughout these and the subsequent negotiations, De Salvo kept notes which were received in evidence. De Salvo's During the negotiations, De Salvo informed H.T. that Germano required a guarantee. H.T. replied that "appropriate guarantees" would be given and that Hellenic was a subsidiary of National.

notes indicate that the terms being negotiated through him were charterhire, the length of the charter, and overtime and petties; that the charterer would be Hellenic; that the Mobiltime form charter "sub details" ² would be used, excluding certain clauses; and that a suitable drydock clause would be worked out with sufficient advance notice. Other terms also were reflected in the notes.

Following the negotiations, De Salvo sent telexes to both parties confirming the fixture of the Oswego Reliance and setting forth the agreed upon terms (the fixture telex). ³

The telex was received by National at 5:36 P.M. It was studied by H.T. and Spears. Both testified that they understood it, including its use of the term "fixed" which meant the conclusion of a negotiation. Neither H.T. nor Spears contacted Poten & Partners to comment on or to correct the fixture telex.

All of the above events took place on the afternoon of March 17, 1971. No direct communication between H.T. and Germano ever took place. All negotiations were conducted through De Salvo.

On the next day, March 18, De Salvo and Germano drew up a working copy of the charter party and a proposed drydock H.T. received the proposed charter party on Monday, March 22. He called De Salvo and asked him for two modifications: (1) to broaden the delivery range from the Persian Gulf to include the Red Sea; and (2) to permit trading with Communist China. Interocean agreed to the first modification but could not agree to the second because the crew was Nationalist Chinese. H.T. made no mention of the drydock clause.

clause. This clause required the charterer to guarantee to place the vessel in a position so that it could be drydocked in November 1971 in Portugal, Spain or Japan. These documents were sent to Interocean and National the following day.

Backing up for a moment, on March 18 or 19, De Salvo had asked H.T. if he wanted to subcharter the Oswego Reliance. H.T. replied that he wanted to subcharter the vessel to Chevron for a single voyage. Chevron, however, would not consider the vessel unless she had Tovalop ⁴ insurance which she did not. H.T. requested De Salvo to ask Germano to obtain such coverage for the Oswego Reliance.

This was the first time Tovalop had been mentioned. The Mobiltime form charter was printed in 1967. It did not refer to Tovalop which did not come into effect until 1969.

De Salvo relayed H.T.'s request to Germano on Friday, March 19. Germano informed De Salvo that the entry of the Oswego Reliance into Tovalop would require the entry of Bethlehem's entire fleet and that he would have to check with his principals.

On Tuesday, March 23, Bethlehem acceded to H.T.'s request and entered its entire fleet into Tovalop. Germano so informed De Salvo who relayed the information to H.T. Bethlehem stated that the cost was to be at charterer's expense but H.T. insisted that it be at owner's expense.

Returning to the drydock clause, it was not until the afternoon of March 23, after H.T. had gone on vacation, that Spears informed De Salvo that this clause was unacceptable because he was unable to guarantee the position of the vessel in November 1971. De Salvo then asked for a counter-proposal to give to the owners. Spears did not give De Salvo a proposed clause until about 5:15 P.M. That proposed clause provided that the charterer would "do all possible" to place the vessel "in the UKC MED or Far East area" for drydocking between October 15 and December 15, 1971.

Although Spears had told De Salvo that this clause was one which Hellenic "could live with," at 9 A.M. the next morning, March 24, he called De Salvo and asked him whether he had conveyed the clause to Germano as yet. De Salvo said that he had not because it had been received after business hours the previous day. Spears then told De Salvo not to transmit the clause to Interocean, that the deal was finished, that there was no agreement to charter the Oswego Reliance and that it was too late for an agreement.

Nevertheless, later that same morning, De Salvo called Spears and informed him that Interocean had agreed to bear the cost of Tovalop as H.T. had insisted and that Interocean had agreed to the language of Spears' drydock clause.

At about 11 A.M. on March 24, National telexed De Salvo as follows:

"YOU HAVE BEEN PREVIOUSLY ADVISED THAT DUE TO THE ABSENCE OF MEETING OF THE MINDS OF THE PARTIES REGARDING ALL DETAILS NECESSARY TO A COMPLETED CHARTER AGREEMENT NEGOTIATIONS HAVE BEEN TERMINATED WITHOUT MUTUAL AGREEMENT."

The telex further stated that De Salvo's last...