Isthmian Steamship Company v. United States

• Decision Date: 16 January 1961
• Parties: ISTHMIAN STEAMSHIP COMPANY, Libelant, v. UNITED STATES of America, Respondent. STATES MARINE CORPORATION, Libelant, v. UNITED STATES of America, Respondent.
• Court: U.S. District Court — Southern District of New York

191 F. Supp. 338

ISTHMIAN STEAMSHIP COMPANY, Libelant, v. UNITED STATES of America, Respondent.

STATES MARINE CORPORATION, Libelant, v. UNITED STATES of America, Respondent.

United States District Court S. D. New York.

January 16, 1961.

Kirlin, Campbell & Keating, New York City, for libelant (E. L. Smith, New York City, of counsel).

S. Hazard Gillespie, Jr., U. S. Atty., New York City, for respondent; Benjamin H. Berman, Atty. in Charge, Admiralty and Shipping Section, Dept. of Justice, Washington, D. C. (William H. Postner, Washington, D. C., of counsel).

RYAN, Chief Judge.

We have at one trial tried by consent these two suits filed in the Admiralty; common questions of law are presented.

The suits have been brought to recover sums deducted by the Government from freight and demurrage charges earned by libelants for the transportation of Government goods. The parties stipulated in a pretrial order entered on May 16, 1960 that the issues to be tried were:

1. Whether libelants' claims for unpaid freights are time barred by the two year limitation of Section 5 of the Suits in Admiralty Act (46 U.S.C.A. § 745), and

2. If they are not so barred, whether respondents' time barred claims may be asserted as offsets.

We first examine the libels filed.

The original libel in Isthmian Steamship Company v. United States of America (A 187-125) was filed on January 5, 1956 under the Suits in Admiralty Act, § 741, 46 U.S.C.A., by libelant carrier and owner of the S.S. Steel Worker and S.S. Andrew Jackson for freights earned for the transportation of goods of respondent from United States ports to foreign ports under Government contracts on July 23 and September 4, 1954, and claimed $19,440 earned by the S.S. Andrew Jackson and $9,241.75 by the S.S. Steel Worker, a total of $28,681.75. On June 26, 1956, this libelant filed an amended libel under the Suits in Admiralty Act for freights earned amounting to $41,953.39, the balance alleged to be due after partial payment, allowances and adjustments on freights earned by the two vessels named in the original libel, as well as by several other vessels for the carriage of respondent's cargo from United States to foreign ports on various dates. This amended libel, in addition, also sought recovery for $3,017.04, the balance alleged to be due after partial payments, adjustments and allowances on demurrage charges for the use by respondent of libelant's pier for shipments belonging to respondent and carried by libelant. It was further alleged in this amended libel that on December 5, 1955, libelant earned additional freights of $30,000 for which it had been paid only $29,482.56 leaving a balance due of $517.44; that respondent does not dispute the amount earned and payable for freight and demurrage, that it has made some payments on account but refused to pay a balance of $45,487.87 and that it has withheld part of this balance to satisfy alleged claims against libelant aggregating $44,506.87 which claims are groundless and unenforceable.

Following the filing of this amended libel, Judge Dawson sustained respondent's exceptions to it, D.C., 150 F.Supp. 191, holding that the suit as pleaded was not timely filed under the Suits in Admiralty Act. Judge Dawson construed the libel as pleading claims for simple breach of contract for failure of respondent to pay and not claims for a balance due on an open running account as urged by libelant. He granted libelant leave to file a further amended libel to enable libelant to attempt to plead an open account running into the two-year statutory period. The amended libel was filed on October 15, 1956 and is now at issue.

In this second amended libel, in the first cause of action (so labeled), libelant pleads an account beginning prior to 1950 and running until April 1, 1956, arising from a course of business between libelant, as carrier, and respondent, as shipper, for carriage for hire, pier storage, stevedoring and lighterage services. It alleges performance by libelant for which respondent became indebted, and also claims by respondent for cargo damage and shortage arising out of such performance, and overpayments of freight and other services rendered to libelant. It also alleges that libelant and respondent from time to time on various dates prior to and after March 31, 1956, when libelant ceased to operate vessels in foreign service, settled and stated these respective claims. It further alleges that respondent sent notices acknowledging its indebtedness to libelant for the various items of account against which it purported to offset groundless and unenforceable claims.

In the second cause of action, libelant alleges that all the freights and demurrage charges due from respondent with certain exceptions were earned less than two years from the filing of the libel or the amended libels.

As a "third cause of action", libelant realleges the indebtedness of respondent and its failure to pay in full because of its purported offsets, and then alleges that, with certain exceptions, the "dates of the government's acknowledgments of its various items of indebtedness and its purported offset of part of such items of indebtedness *** were within two years of the filing of the libel herein *** and the amended libel." The schedules showing the items claimed in this second amended libel were identical to those attached to the first amended libel.

Respondent again excepted to this second amended libel upon the ground that the claims were time barred.

Ruling on these exceptions, Judge Bryan held, as had Judge Dawson before him, as to the first cause of action, 191 F.Supp. 335, that libelant had failed to allege facts sufficient to support a mutual running account since the allegations of the prior libel, which negatived the existence of the agreement necessary to support the allegation of an account, had simply been repleaded and the second amended libel merely pleaded multiple causes of action for alleged breach of contracts based on separate shipments for which separate bills had been presented and against which respondent had made separate claims and deductions. Judge Bryan, finding libelant unable to plead these separate claims as an account stated, denied leave to further amend.

With respect to the second cause of action, Judge Bryan found that, with some exceptions, the claims had been timely filed.

The third cause of action was read by Judge Bryan as "apparently" pleading payment in full for certain of the shipments and the subsequent deduction by the respondent of amounts for alleged damage, or overpayment arising from such shipments, by "offsetting them against other bills presented by libelant for subsequent and different shipments. These deductions were apparently made some time after the libelant's bills for the shipments had been paid in full, presumably after some sort of postaudit or recheck by the Government" and with certain exceptions within two years of the filing of the libel or amended libel. In sustaining this cause of action, Judge Bryan relied on the unrelated case of Eastern Freight Ways v. United States, D.C., 155 F.Supp. 22, Id., 2 Cir., 1958, 257 F.2d 703. This was a suit filed under the Tucker Act (28 U.S.C. § 2401(a)) by a motor carrier to recover transportation charges deducted by the Government as alleged overcharges. These overcharges were alleged to have been made in bills which the Government had paid in full and the deductions were made from bills due for a subsequent and different shipment charge. In Eastern Freight Ways, the Court held (1) that the making of the deductions gave rise to plaintiff's claim and started the period of limitation running, and that this period did not run from the date of the transportation rendered from which the deduction was in fact made, and (2) that the 6-year Tucker Act limitation was applicable rather than the 2-year I.C.A. limitation (49 U.S.C.A. § 304a(1)) because plaintiff was not suing for "charges" but for moneys wrongfully withheld from sums concededly due, and (3) that in any event it was questionable whether the I.C.A. statute was intended to apply to the United States.

Finally, on January 27, 1959, respondent answered, admitted the amounts claimed as earned, and the setoffs, but pleaded as a complete defense the 2-year Suits in Admiralty Act limitation on the ground that libelant's claim for freight arose when it received respondent's goods for carriage and that its claim for demurrage arose when it furnished such service. The answer also pleaded the legality of the withholdings and deductions made alleging that libelant, carrier, was indebted to respondent, Government, in a sum at least equal to that sought in the libel and denied that its claims for overpayment of freight were time barred.

Following the filing of this answer, there came the decision in United States v. Isthmian Steamship Co., 1959, 359 U.S. 314, 79 S.Ct. 857, 3 L.Ed.2d 845, holding that in an action brought under the Suits in Admiralty Act the respondent United States may not offset claims on unrelated maritime transactions. Thereafter and on January 26, 1960, an order of severance was made herein, and a final decree in the amount of $22,537.38 was entered in favor of Isthmian as to those claims which respondent conceded had been timely filed. This disposed of the claims pleaded in the original libel for unpaid freight on shipments transported on the S.S. Steel Worker and S.S. Andrew Jackson. These claims have been fully paid and are not before us.

We now examine the libel in the other suit before us.

The libel in States Marine Corp. v. United States (A. 195-395) was filed on October 9, 1958. It alleges that on October 30, 1956 libelant had received notice from the respondent that there was due libelant on account of freight earned for the carriage of respondent's goods two specified sums, that these sums had been recognized and allowed as earned but that there was nothing owing...