Strachan Shipping Co. v. Dresser Industries, Inc., 82-3098

• Decision Date: 28 March 1983
• Docket Number: No. 82-3098,82-3098
• Citation: 701 F.2d 483
• Parties: STRACHAN SHIPPING CO., et al., Plaintiffs-Appellants, v. DRESSER INDUSTRIES, INC. et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 483

701 F.2d 483

1984 A.M.C. 237

STRACHAN SHIPPING CO., et al., Plaintiffs-Appellants, v. DRESSER INDUSTRIES, INC. et al., Defendants-Appellees.

No. 82-3098.

United States Court of Appeals Fifth Circuit.

March 28, 1983.

Burke & Mayer, James O.M. Womack, New Orleans, La., for plaintiffs-appellants.

Marc J. Fink, David F. Smith, Washington, D.C., for amicus curiae, U.S. Atlantic & Gulf/Australia-New Zealand Conference.

Lemle, Kelleher, Kohlmeyer & Matthews, Charles Kohlmeyer, Jr., New Orleans, La., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before CLARK, Chief Judge, THORNBERRY and REAVLEY, Circuit Judges.

REAVLEY, Circuit Judge:

This case involves a suit to recover carriage and stevedoring costs. Four shipping lines (the carriers) and Strachan (the carriers' agent) sued Dresser (the shipper). Dresser denied liability claiming that the plaintiffs had been paid in full since Dresser had paid Sierra (the forwarder), who had since gone bankrupt. The district court ruled for defendant. 534 F.Supp. 205 (E.D.La.1982). We reverse.

THE FACTS

Dresser shipped cargo on plaintiff carriers' vessels on five occasions between October 24, 1978 and January 19, 1979. The procedure employed was for Dresser to prepare Dresser paid Sierra $15 for its services in preparing each shipment. The carriers paid Sierra on a commission basis, ranging from 1.25 to 2.5 percent of the total freight charges.

                an export order blank.  Dresser then contacted Sierra, who booked space on available vessels.  Sierra prepared bills of lading and other required export documents.  Strachan, as agent for the carriers, signed the bill of lading once the vessel had sailed.  The negotiable original of each of bill of lading would be marked "Freight Prepaid" by Strachan and delivered to Dresser through Sierra.  A non-negotiable copy of the bill of lading would be stamped "freight due bill."    This due bill provided for payment within fifteen days and was delivered to Sierra.  Sierra then prepared its own invoice and billed Dresser, retaining the due bill.  Dresser paid Sierra, who in turn was supposed to pay Strachan.  In this case, however, Sierra received the funds from Dresser but never paid Strachan.  Strachan initially directed its collection efforts to Sierra.  It was not until April 17, 1979 that Strachan attempted to collect from Dresser, who refused to pay
                

THE LAW

The plaintiffs asserted two theories of liability in the lower court. The first theory relied on the language of a conference credit agreement. The second theory was grounded on the agency principle that an agent's failure to remit funds to a third party does not relieve the principal of his obligation to pay. The district court rejected both these arguments. We examine each argument separately.

A. The Conference Credit Agreement

Carriers are authorized by statute to form conferences. 46 U.S.C. Sec. 813a. These conferences perform a variety of functions for their carrier members, including the setting of rates. Each conference is typically limited to a specific geographic area or route. See generally S.Rep. No. 860, 87th Cong., 1st Sess., reprinted in 1961 U.S.Code Cong. & Ad.News 3108. A shipper signs a "loyalty contract" with the conference in which he agrees to ship exclusively on conference vessels in exchange for reduced freight rates.

Besides the loyalty contract, the conference also provides credit agreements. The general purpose of a conference credit agreement is to provide for the release of bill of ladings marked prepaid prior to the receipt of payment by the carrier. The release of the bill of lading is, in essence, an extension of credit by the carrier to the shipper. The shipper agrees to pay within a certain period of time after the vessel sails.

In this case, one of the carriers, the Bank and Savill Line ("Bank Line"), is a member of the U.S. Atlantic & Gulf/Australia-New Zealand Conference. ¹ Dresser signed both the loyalty contract and the conference credit agreement. The conference credit agreement provides:

In consideration of the extension of credit through the issuance and release of bills of lading indicating that freight is payable on other than a freight collect basis by members of the U.S. Atlantic & Gulf/Australia-New Zealand Conference to us directly through our forwarder or agent we hereby agree as follows:

1. To pay to the carrier, or his agents, either directly or through our forwarder or agents, within fifteen working days, excluding Saturdays, Sundays and legal holidays, after the date of the sailing of the vessel from port of loading all freights and charges due on such bill of lading.

2. We will be absolutely and unconditionally responsible to see that all freights and charges due are paid within the fifteen (15) day period, and guarantee that they will be paid to the carrier or his agent regardless of whether or not funds for such payment have been advanced to our forwarder/agent or otherwise.

3. Credit privileges hereunder shall be immediately suspended for any failure to comply with the provisions of this agreement.

Appellant Bank Line takes a plain meaning approach to this agreement. It argues that the language of paragraph 2 is absolutely clear, and that Dresser specifically guaranteed payment even if the forwarder (Sierra here) failed to remit the funds to the carrier.

Appellee Dresser, however, takes a "general intent of the document" approach. It argues that the agreement deals only with the extension of credit and was not intended to allocate the risk of a forwarder's insolvency on any particular party. As evidence of this, Dresser relies on the introductory section indicating that the agreement deals with the extension of credit. Dresser also asserts that the third paragraph provides conclusive evidence of this intent. Dresser contends that paragraph 3 defines the remedy and is specifically limited to the suspension of credit privileges but does not extend to double payment of freight charges.

The district court was convinced by appellee's arguments. The court below relied heavily on Koninklijke Nedlloyd BV v. Uniroyal, Inc., 433 F.Supp. 121 (S.D.N.Y.1977), a case construing an almost identical conference credit agreement. The court there ruled for the shipper, stating:

It must be remembered that the parties were bargaining for credit privileges and not over who would ultimately be responsible for payment .... The guaranty given was not that the shipper would in all events make good any default by the forwarder, but only that payment would be made within the agreed upon credit period. It is the timing of the payments which is at the heart of this agreement.

Id. at 126.

We first note that contract interpretation is a question of law and the clearly erroneous standard does not apply. Thornton v. Bean Contracting Co., 592 F.2d 1287 (5th Cir.1979). We think the district court erred in its interpretation of this agreement. Both the lower court and the Uniroyal court gave this agreement an unduly narrow interpretation. The language of the agreement is clear and unambiguous:

We will be absolutely and unconditionally responsible to see that all freights and charges due are paid within the fifteen (15) day period, and guarantee that they will be paid to the carrier or his agent regardless of whether or not funds for such payment have been advanced to our forwarder/agent or otherwise.

As we read this clause, Dresser agreed to pay promptly and it agreed to pay the carrier even though funds had been advanced to its forwarder. In regard to the third paragraph, we do not think it was intended to obliterate the guaranty language in the preceding paragraph, nor do we think that it was intended to limit the carrier's remedies to only the suspension of credit. ² We hold that under the conference credit agreement, Dresser agreed to be absolutely liable for the forwarder's failure to remit funds earmarked for the carrier.

B. The Fowarder: Whose Agent?

Despite our construction of the credit agreement, Dresser could escape liability if it could prove that Sierra acted as the carriers' agent. Payment by Dresser to an agent of the carrier would satisfy Dresser's obligation under the credit agreement. If Sierra was the carriers' agent for purposes of collection, Dresser would be relieved from liability to the other carriers not members of the conference, since Dresser would not be responsible for their agent's failure to remit the funds.

The district court held simply: "I find that in this case the facts establish that Sierra was plaintiffs' agent for receiving payment." 534 F.Supp. at 208. Ordinarily a finding of agency is a question of fact that will not be disturbed on appeal unless clearly erroneous. Wood v. Holiday Inns, Inc., 508 F.2d 167 (5th Cir.1975) (applying Alabama law); Bartlett-Collins Co. v. Surinam Navigation Co., 381 F.2d 546 (10th Cir.1967). However, in a case submitted on stipulations and depositions, as this one was, in which no credibility choices are made by the district court, "the burden of proving the district court's findings clearly erroneous 'is to some extent ameliorated.' " Onaway Transportation Co. v. Offshore Tugs, Inc., 695 F.2d 197, 200 (5th Cir.1983), quoting Stevens v. East-West Towing Co., 649 F.2d 1104, 1106 (5th Cir.1981), cert. denied, 454 U.S. 1145, 102 S.Ct. 1007, 71 L.Ed.2d 298 (1982). In addition we note that the district court cited no specific facts to buttress the agency conclusion. ³

We conclude that the district court's finding of agency is clearly erroneous. In examining the transaction involved, it becomes clear that the forwarder is an independent contractor who performs services beneficial to both shipper and carrier. This conclusion is in harmony with not only the majority of the case law, but the legislative and administrative history of the statute licensing freight forwarders and permitting carriers to pay...