Marine Overseas Services, Inc. v. Crossocean Shipping Co., Inc., 85-2029

Decision Date16 June 1986
Docket NumberNo. 85-2029,85-2029
Citation791 F.2d 1227
PartiesMARINE OVERSEAS SERVICES, INC., Plaintiff-Appellant Cross-Appellee, v. CROSSOCEAN SHIPPING CO., INC., Defendant-Appellee Cross-Appellant, Muhammadi Steamship Co., Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Ross, Griggs & Harrison, H. Lee Lewis, Jr., Victoria C. Blanks, Houston, Tex., for plaintiff-appellant cross-appellee.

Royston, Rayzor, Vickery & Williams, Kenneth D. Kuykendall, Houston, Tex., for defendant-appellee cross-appellant.

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

Before GOLDBERG, HILL, and JONES, Circuit Judges.

ROBERT MADDEN HILL, Circuit Judge:

The central issue presented by this admiralty case is whether a party in breach of a contract of affreightment is entitled to an offset reflecting the injured party's failure to repay loans taken out from the injured party's customers. We hold that the district court erred in allowing such an offset, and we reverse and remand.

I. BACKGROUND
A. Facts

In the summer of 1975, Marine Overseas Services, Inc., ("Marine Overseas") was engaged in the export service business and as a part of its business acted as a broker in booking ocean cargo for freight forwarders. Marine Overseas acted as local agent for Serviocean International, Inc., and solicited cargo in the Houston and New Orleans areas for Serviocean vessels calling in ports along the Gulf of Mexico. In June 1975, Marine Overseas booked approximately 6,500 tons of cargo for shipment to the Middle East aboard the Serviocean vessel M/V Dona Gisella. Because of mechanical problems the Dona Gisella did not make its expected calls at Gulf ports. By the time Marine Overseas learned of the Dona Gisella's cancellation of its voyage, the cargo had already been delivered to the dock for loading and the freight forwarders requested that Marine Overseas rebook the cargo.

On July 22, 1975, William D. Rasco, Jr., a vice president of Marine Overseas, contacted a New York shipping agency and arranged to book the cargo on the M/V Al Kulsum through Century Lines, Inc. The Al Kulsum was owned and operated by Muhammadi Steamship Company ("Muhammadi"); its general agent was Crossocean Shipping Company, Inc. ("Crossocean"). Century Lines had chartered the vessel from Crossocean. Loading of the cargo aboard the Al Kulsum began on July 23. Later that day, Crossocean notified Marine Overseas that Century had failed to book enough cargo to satisfy the terms of the charter party with Muhammadi and therefore the charter party between Century and Crossocean had been canceled. In order to retain the space it had previously booked on the Al Kulsum, Marine Overseas began negotiations with Crossocean that same afternoon.

The parties took different views of these negotiations. Marine Overseas claimed that in the course of a telephone conversation on the afternoon of July 23, Rasco and Marko Zaja of Crossocean reached agreement on a contract of affreightment under the terms of which Marine Overseas would book the cargo aboard the Al Kuslum at a freight rate of $75 per ton, with Marine Overseas being allowed a 5% commission. According to Marine Overseas, the total amount due Crossocean pursuant to this agreement was $308,000. Crossocean claims that during this telephone conference, or in the course of a subsequent exchange of telexes, the parties reached a somewhat different agreement, under the terms of which the cargo would be carried aboard the vessel under a "space charter" for a lump sum of $350,000.

The Al Kulsum, loaded with 4,300 revenue tons of cargo booked by Marine Overseas, departed from Houston on July 28 with the terms of carriage still in dispute. On August 18, Marine Overseas sent a telex to Crossocean "confirming" that it owed Crossocean freight of $75 per ton for the cargo originally booked with Century and $90 per ton for additional cargo of vegetable oil Marine Overseas had booked on the Al Kulsum following the collapse of the Century charter, minus a 5% commission. Marine Overseas calculated the total freight charge to be $311,826.90. On August 22, Crossocean replied that it understood their agreement to provide for a lump sum charge of $350,000 to cover all of the cargo except the vegetable oil for which an additional $3,535.71 (or $90 per ton) was to be paid and that no commission was to be paid Marine Overseas. Crossocean demanded immediate payment of the total amount and stated that if payment was not forthcoming Crossocean would not release bills of lading for the cargo.

Thereafter, relations between Marine Overseas and Crossocean became more strained. Crossocean charged that Marine Overseas was providing its customers with false bills of lading. Crossocean informed the freight forwarders that they would have to renegotiate the terms of carriage directly with Crossocean and that they must pay freight charges directly to Crossocean or Crossocean would collect freight from the recipients at the ports of discharge.

On October 7, in a meeting attended by representatives of the freight forwarders, Marine Overseas and Crossocean, a representative of Marine Overseas signed a charter party with Crossocean providing for payment of a lump sum freight of $350,000. Marine Overseas had already paid $266,509.20 to Crossocean out of the $402,447.57 Marine Overseas collected from its freight forwarders after expenses. Crossocean demanded the difference between the amount due under the charter party and the amount already paid, a sum Crossocean says was $83,283.83. 1

At the time of this demand, Marine Overseas did not have funds available to pay the extra freight required by Crossocean; the record does not indicate how Marine Overseas disposed of the remainder of the net collections beyond the $266,509.20 already paid. The freight forwarders agreed to lend Marine Overseas the money necessary to cover the additional $83,283.83. The freight forwarders issued checks to Marine Overseas for the additional freight demanded by Crossocean on their respective cargos. Marine Overseas endorsed these checks over to Crossocean. One freight forwarder, Harper Robinson & Company ("Harper Robinson"), issued a check directly to Crossocean in the amount of $25,000 in order to ransom its cargo from the Al Kulsum; Marine Overseas then executed a promissory note in that amount to Harper Robinson. This note was subsequently assigned to the shipper, Paccar International, Inc., ("Paccar"), who later appeared in the guise of intervenor in this case.

B. Prior Proceedings

Marine Overseas instituted this admiralty action against Crossocean, Muhammadi, and others to recover the excess freight paid to Crossocean. Marine Overseas alleged that it had consummated a contract of affreightment with Crossocean during the telephone conversation between Rasco and Zaja on the afternoon of July 23 under the terms of which the total freight was to be computed at the rate of $75 per ton and the total amount due was $308,467.57, rather than the $350,000 claimed by, and ultimately paid to, Crossocean. Marine Overseas also sought additional damages totaling $3,247.60 to cover the cost of tarps which Marine Overseas purchased in order to protect cargo stored on the deck of the Al Kulsum. Marine Overseas claimed that the agreement with Crossocean provided for underdeck stowage. Paccar, in its complaint in intervention, alternatively sought to recover the $25,000 in freight charged by Crossocean above and beyond that provided by the agreement with Marine Overseas or to recover the amount of the debt evidenced by the promissory note from Marine Overseas.

Crossocean and Muhammadi answered claiming that the charter party signed by Marine Overseas on October 7 embodied the agreement between the parties and that Marine Overseas had no cause of action for damages against Crossocean. Crossocean and Muhammadi also counterclaimed for the difference between the freight charged pursuant to the charter party which Marine Overseas signed under protest, $350,000, and the freight which would have been due under the defendants' tariff in the absence of any charter party.

Following a nonjury trial, the district court found that the parties did not reach a meeting of the minds as to the terms of shipment during the July 23 telephone conversation. The court also found that the parties never executed a valid charter party agreement and that consequently Muhammadi was a common carrier statutorily obligated to charge freight in accordance with the tariff rate. The court found that the full freight due in accordance with Muhammadi's tariff was $549,596.64 and therefore entered judgment for Crossocean and Muhammadi on their counterclaim in the amount of $196,060.36, representing the difference between the freight owed under the tariff and the freight actually collected. The court further held that Marine Overseas was entitled to no reimbursement for expenditures arising out of on deck stowage of the cargo because there was no proof that the defendants were obligated to provide below deck storage. Paccar's claim in intervention against Crossocean was dismissed; however, the court entered judgment in Paccar's favor, and against Marine Overseas, on the $25,000 note.

On appeal this court held that the district court clearly erred in finding that Marine Overseas and Crossocean did not enter into a private contract of affreightment at the time of the telephone conference of July 23. Marine Overseas Services, Inc. v. Crossocean Shipping Co., Inc., 647 F.2d 1117 (5th Cir.1981) ["Marine Overseas I "]. The unpublished panel decision reversed the judgment for Crossocean on its counterclaim for sums due in accordance with its tariff, and ordered the case "remanded to the district court for a determination of a reasonable price under the circumstances of the carriage services performed by the M/V Al Kulsum." Id. at 10. The panel authorized the district court to receive new...

To continue reading

Request your trial
57 cases
  • JJ Water Works, Inc. v. San Juan Towing & Marine Servs., Inc.
    • United States
    • U.S. District Court — District of Puerto Rico
    • 23 Septiembre 2014
    ...11–1, 11–2. For the most part, traditional principles of commercial contract interpretation apply. Marine Overseas Servs., Inc. v. Crossocean Shipping Co., 791 F.2d 1227, 1234 (5th Cir.1986). So, for example, “[w]hen interpreting unambiguous provisions ... a court may not look beyond the wr......
  • Garanti Finansal Kiralama A.S. v. Aqua Marine & Trading Inc.
    • United States
    • U.S. Court of Appeals — Second Circuit
    • 2 Octubre 2012
    ...Procedure § 1271 (3d ed.2012); see also Schock v. United States, 254 F.3d 1, 6 (1st Cir.2001); Marine Overseas Servs., Inc. v. Crossocean Shipping Co., Inc., 791 F.2d 1227, 1233 (5th Cir.1986); Rayonier, Inc. v. Polson, 400 F.2d 909, 923 (9th Cir.1968); Muscletech Research & Dev., Inc. v. E......
  • Hunter Automotive, Inc. v. Volkswagen United States, Inc., CAUSE NO. 1:93CV226-D-D (N.D. Miss. 10/__/1995)
    • United States
    • U.S. District Court — Northern District of Mississippi
    • 1 Octubre 1995
    ...R. Civ. P. 8(c). The general rule is that when such a defense is not pled, it is considered waived. See Marine Overseas Servs. v. Crossocean Shipping, 791 F.2d 1227, 1233 (5th Cir. 1986). Failure to exhaust administrative remedies is an affirmative defense. Orloff v. Willoughby, 345 U.S. 83......
  • BP Exploration & Prod. Inc. v. Cashman Equip. Corp.
    • United States
    • U.S. District Court — Southern District of Texas
    • 22 Septiembre 2015
    ...the court applies the general ordinary rules of contract construction and interpretation.4 Marine Overseas Servs., Inc. v. Crossocean Shipping Co., 791 F.2d 1227, 1234 (5th Cir.1986); Stoot v. Fluor, 851 F.2d at 1517; Theriot v. Bay Drilling Corp., 783 F.2d 527, 538 (5th Cir.1986)("the cons......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT