Tarstar Shipping Co. v. Century Shipline, Ltd.

• Decision Date: 23 May 1978
• Docket Number: No. 76 Civ. 1266 (RJW).,76 Civ. 1266 (RJW).
• Citation: 451 F. Supp. 317
• Parties: TARSTAR SHIPPING CO., Plaintiff, v. CENTURY SHIPLINE, LTD., Century Shipline & Agencies, Inc. and Koctug Line, Defendants.
• Court: U.S. District Court — Southern District of New York

451 F. Supp. 317

TARSTAR SHIPPING CO., Plaintiff, v. CENTURY SHIPLINE, LTD., Century Shipline & Agencies, Inc. and Koctug Line, Defendants.

No. 76 Civ. 1266 (RJW).

United States District Court, S. D. New York.

May 23, 1978.

Freehill, Hogan & Mahar, New York City, for plaintiff; Philip V. Moyles, Robert J. Babiak, New York City, of counsel.

Hill, Betts & Nash, New York City, for defendant Koctug Line; Daniel K. Read, David I. Gilchrist, New York City, of counsel.

OPINION

ROBERT J. WARD, District Judge.

Plaintiff, Tarstar Shipping Co. ("Tarstar"), owner of the vessel M/V "Aliki I.P." ("the Aliki"), sues defendant Koctug Line ("Koctug"), a Turkish shipping company, to recover $85,071.55 plus interest from March 8, 1976.¹ Tarstar claims that Koctug unjustifiably refused to honor Tarstar's notice of lien, served on Koctug on March 8, 1976, in which Tarstar asserted a superior interest in any freights or subfreights, up to the amount of $85,071.55, owing from Koctug to the charterer of the Aliki. Jurisdiction is based on diversity, 28 U.S.C. § 1332, and admiralty and maritime jurisdiction, 28 U.S.C. § 1333.

FACTUAL BACKGROUND

Tarstar claims to have chartered the Aliki to Century Shipline, Ltd. ("Century, Ltd." or "Century"). Clause 5 of the charter party required Century, Ltd. to pay hire in cash, semi-monthly in advance. Clause 2 of the charter party required the charterer to provide and pay for all fuel (bunkers). The first hire payment, due on February 11, 1976 when the vessel was turned over to Century, was paid a couple of days later. However, the second hire payment of $65,812.50, due on or about February 26, 1976, and a bunker payment of $19,259.05, apparently due about the same time, were never paid. Clause 18 of the charter party provided "That the Owners shall have a lien upon all cargoes, and all subfreights for any amounts due under this Charter."

On January 9, 1976 Koctug had entered into a Liner Booking Note contract with Prodex International ("Prodex") whereby Koctug would carry a shipment of lentil beans from Baton Rouge, Louisiana, to Algiers, Algeria.² Koctug had "intended to carry this shipment on one of its vessels; but when the vessel could not meet the loading date, it substituted the M/V `Aliki I.P.' by entering into a Freight Engagement" with Century Shipline & Agency, Inc., agent for Century, Ltd. (stipulated fact (e)). It accomplished this by contacting Mr. Charles Ries, a broker with International Chartering Services, Inc. ("International"), and asking him to locate a suitable vessel. Ries came up with the Aliki, which had been chartered to Century.

On February 25, 1976, in keeping with clause 23 of the Freight Engagement, which provided that the "owners guarantee on board BS/L Bills of Lading latest Feb. 26, 1976," Prodex' cargo of lentil beans was loaded on board the Aliki in Baton Rouge and Century duly issued bills of lading.³ Pursuant to the Freight Engagement, freight was to be paid to Century within six days after the issuance of the bills of lading, i. e., by March 2, 1976. Prodex was to pay freight or subfreight to Koctug and Koctug was to pay Century.

On March 1, 1976 ICD Export Corporation, one of the shippers of the lentil beans, delivered a check for $147,326.57 to Koctug. That same day Koctug endorsed the check over to its broker, International, and delivered it to International⁴ for the latter to pay Century for the freight or subfreight due on or about March 2, 1976.

On March 8, 1976 Tarstar reacted to Century's default by having its attorney, Mr. Babiak, call Mr. Ustun of Koctug.⁵ Later that day, Mr. Babiak had hand delivered to Mr. Ustun a notice of lien "on any freights or subfreights owed from you to Century Shiplines Agencies up to the amount of $85,071.55.⁶ At trial, Mr. Ustun testified as to what ensued after receiving the notice of lien:

Q After you received this letter on March 8, what did you do?

A I haven't done anything.

Q Did you call Mr. Babiak after you received the letter?

A No.

Q Why not?

A It doesn't say on the letter that I should call him back.

Q What was your interpretation as to that letter when you received it?

A Nothing. First time in my life I was given a letter like this. It didn't mean anything to me. Mr. Babiak's name didn't mean anything to me. I never heard of it. Freehill's name didn't mean anything to me. I never heard of them. Tarstar's name didn't mean anything to me. I had never heard of them up to that moment.

. . . . .

Q At any time after March 8, did you check with your brokers with respect to the freight payment on the Aliki, I.P. on the lentil beans?

A No, sir.

Q Is it your testimony after you received that letter you did nothing with respect to contacting your brokers who you endorsed the check, Exhibit 3, over to?

A The letter was, the letter was clear to me. It was saying to me, if I had any funds in my hand, that I should immediate return it to Freehill.

I did not have any funds in my hand. I wasn't in any position to return any money to Freehill. If I had money in my hand, I wouldn't return it to Freehill, anyway.

Q Why didn't you call up your broker and ask him did he still have the check?

A That wasn't necessary.

(Tr 100-03) (emphasis added).

As it turned out, Century had not yet been paid on March 8, 1976. On March 3, 1976 International had deposited the check it had been given on March 1 in its special account at Marine Midland. One week later, on March 10, 1976, International issued its own check to Century Shipline & Agency, Inc. in the amount of $127,519.38. On March 11, 1976 Century Shipline returned the check to International and asked that it be certified. On or about March 11, 1976 International got the check certified and returned it to Century Shipline.

Marine Midland paid the check to Century on March 12, 1976. Later that day — late on Friday afternoon — Mr. Ustun told his attorney about the notice of lien. Monday morning, March 15, 1976, the attorney, Koctug and International met to consider stopping payment on the certified check. International in fact asked Marine Midland on March 15th if it could stop payment. By that time, however, it was too late. This suit was commenced on March 16, 1976.

PARTIES' CONTENTIONS

It is Tarstar's position that International was Koctug's agent for purposes of transmitting the payment to the charterer, that Koctug, therefore, had possession or control over the the funds until March 11, and, consequently, the March 8 notice of lien was timely. Accordingly, Koctug's failure to freeze the funds or otherwise notify its broker not to pay the charterer despite the timely notice of lien renders it liable for the amount requested in the notice of lien.

Koctug counters:

First, no lien could have arisen in favor of Tarstar inasmuch as the charter hire was payable to Tuna Shipping, which had originally been listed in the charter party as the owner. Koctug contends that the debt ran to Tuna and therefore so did the lien. Koctug also appears to the contend that Tarstar was not actually a party to the charter and that no charter party ever came into existence.

Second, Koctug maintains that when it entered a Freight Engagement with the charterer it did so as an agent of disclosed principals — the cargo owners; therefore, Koctug never owed any freight or subfreight to the charterer and cannot be liable for acting as an agent for a disclosed principal.

Third, Koctug contends that even though the charterer had not yet been paid on March 8, 1976, the notice of lien was not timely inasmuch as Koctug had already paid International. It maintains that it did not have possession or control over the funds while they were in International's possession because International was not its agent, but, rather, was the agent or bailee of the cargo owners. It maintains that it did not know that International had not yet paid Century on March 8, it was reasonable for it to assume that International had already done so, and because International was not its agent it had no obligation to check further.

Fourth, Tarstar is barred from recovery by its failure to exercise due diligence to protect itself against default. This defense is based on the premise that Tarstar knew or should have known of Century's impending financial difficulty and taken steps to secure itself against default.

Fifth, Koctug argues that Tarstar was guilty of laches in waiting until March 8 to assert its lien.

Sixth, the lien on freights or subfreights was extinguished when the cargo was released without assertion of a lien.

Koctug asks this Court to dismiss the complaint against it, vacate the warrant of attachment, vacate the summons to show cause and process of maritime attachment and garnishment, and award costs and attorneys fees against plaintiff.

This case was tried non-jury. The following constitute the Court's findings of fact and conclusions of law:

FINDINGS AND CONCLUSIONS

1. There Was a Charter Party Between Tarstar and Century and a Lien Arose in Tarstar's Favor.

Tarstar's brokers in London, Independent Chartering, Ltd. ("Independent"), who had been appointed by Tarstar's London agent, P. Wigham-Richardson Co., Ltd., negotiated a fixture of the Aliki with Steen Christensen of N. J. Costalas, Inc. ("Christensen"), who represented Century Shipline & Agency Inc., agent of Century, Ltd. Andre Duma of Chester, Blackburn & Roder ("Duma") acted as cable broker, transmitting communications between Independent and Christensen.

An oral fixture was arranged on February 6, 1976 and was confirmed by telexes. Christensen thereafter prepared the charter party on a New York Produce Exchange Form. It was the custom for the owner to sign the charter party before the charterer. Accordingly, when the charter party was prepared Christensen delivered it to Duma and on February 11, 1976 Duma forwarded a copy to Independent and requested authority to sign the original on behalf of the owner.

On February 17, 1976...