U.S. v. Central Gulf Lines, Inc.

• Decision Date: 28 February 1983
• Docket Number: No. 81-3383,81-3383
• Citation: 699 F.2d 243
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. CENTRAL GULF LINES, INC., In Personam and S/S GREEN VALLEY, In Rem, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 243

699 F.2d 243

1984 A.M.C. 2882

UNITED STATES of America, Plaintiff-Appellant, v. CENTRAL GULF LINES, INC., In Personam and S/S GREEN VALLEY In Rem, Defendants-Appellees.

No. 81-3383.

United States Court of Appeals Fifth Circuit.

Feb. 28, 1983.

William French Smith, Atty. Gen., James A. Lewis, Torts Branch, Civ. Div., U.S. Dept. of Justice, Washington, D.C., for plaintiff-appellant.

Jones, Walker, Waechter, Poitevent, Carrere, Denegre, John J. Broders, James E. Wright, III, New Orleans, La., for defendants-appellees.

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

Before WISDOM, REAVLEY and TATE, Circuit Judges.

REAVLEY, Circuit Judge:

The United States filed this maritime contract claim, seeking approximately $53,000 for recoupment of the value of cargo and for freight payments made for shipment of undelivered cargo, from Central Gulf Lines, Inc. ("Central") and its vessel, the S/S GREEN VALLEY. After a nonjury trial, the district court rendered judgment in favor of the government for part of its freight recoupment claim, but denied damages for the value of the undelivered cargo. The United States appealed. We affirm, holding that under these facts the United States is not entitled to recover for either the value of undelivered cargo or for freight charges beyond the amount allowed by the district court.

I. Factual Background

In 1974 Central and the government of South Vietnam agreed to the carriage on board the S/S GREEN VALLEY of numerous consignments of urea being shipped from various ports in Louisiana to Saigon for use as fertilizer. The parties dispute whether the United States ever held actual title to the urea and the record is unclear on this point. It appears either that the United States, acting through the Agency for International Development ("AID"), ¹ bought the urea from American suppliers and later transferred title to the South Vietnamese government, or that the United States (through AID) loaned money to South Vietnam to purchase the urea. The precise mechanism is unimportant for purposes of our opinion here; either way the transaction is fairly characterized as a loan from AID, or the United States, to South Vietnam. It is undisputed that this "loan" has never been repaid. What is important is that prior to the arrival of the shipment in Saigon, the South Vietnamese government had sold and transferred title to the urea to private Vietnamese importers who produced the original bills of lading at the dock in Saigon to receive the goods.

AID executed five essentially identical but separate contracts with Central for the carriage of five shipments of bulk and bagged urea. These contracts were in the form of a standardized supplier's certificate and agreement. Section 4 of each certificate obligated Central to make prompt refund to AID in the event of breach or nonperformance of the contract. ²

Central then accepted the five loads of urea, two in bulk and three packaged in bags, issued appropriate bills of lading and received payment in full from AID for freight charges. Upon arrival in Saigon, the cargo was examined by Hoditas, a South Vietnamese firm hired by Central to determine the condition and quantity of urea delivered. The Hoditas report on cargo landed revealed delivery of less urea than the quantities specified in the bills of lading. As a result, AID made demand on Central for refund of freight charges and for the value of the missing urea. When Central rejected that demand, AID filed this suit for breach of the five contracts. The suit was filed in 1976, approximately one and one-half years after the cargo was delivered and one year subsequent to the fall of the South Vietnamese government.

II. Claim for Value of Undelivered Cargo

As noted earlier, the United States makes two kinds of claims based on the shortages of urea at delivery: one for the value of missing urea, and another for the cost of freight charges paid for shipping the undelivered urea. We examine first the claim for value and ask the threshold question whether the United States has any type of contractual relationship with Central that permits it to maintain such a claim. We conclude that it does not, following the reasoning of precedent existing in this circuit.

In United States v. Waterman Steamship Corp., 471 F.2d 186 (5th Cir.1973), the Waterman Company contracted to ship certain goods abroad for the Cooperative of American Relief Everywhere, Inc. ("CARE"), a private and nonprofit voluntary relief organization. A contract of carriage was executed by Waterman and CARE. The United States, acting through AID, agreed to reimburse CARE for the cost of shipping the goods. To this end, AID executed a supplier's certificate and agreement with Waterman whereby AID agreed to pay all freight charges. AID paid the shipping costs but then discovered that Waterman had charged a rate of freight in excess of prevailing rates--such action constituting a breach by Waterman of a provision in the supplier's certificate.

The United States then brought suit against Waterman to recover the excess freight charges paid. One defense advanced by Waterman was that the government's suit was time-barred by the one-year limitations period provided for in the bill of lading or contract of carriage under which the goods were shipped. This court rejected that defense, reasoning that because the United States was not a party to the contract of carriage, its suit for overcharges brought under the supplier's certificate could not be barred by the limitations period in the contract of carriage. 471 F.2d at 188-89.

The contractual arrangements in the case at hand mirror those in Waterman Steamship. As that case makes clear, the contractual obligations arising under the supplier's certificate and agreement are distinct from those existing under the contract of carriage. The only cause of action for which the United States brought suit in that case (and, indeed, the only one it possessed) was an independent one arising out of its supplier's certificate with Waterman. 471 F.2d at 188. That supplier's certificate governed only the costs of freight to be paid by the United States. Likewise, in our case the only contract to which the United States is a party, the supplier's certificate with Central, concerns the cost of freight charges. Any suit for recovery of the value of missing urea would have to be grounded upon a breach of the contract of carriage, to which the United States is not a signatory. ³ The proper parties to sue for the value of any missing urea are the South Vietnamese government or the private Vietnamese importers that bought title to the cargo. It is undisputed that these parties have never made any claim against Central for loss of cargo (even though the shipment was delivered approximately one year before the South Vietnamese government collapsed). Thus, the United States, because it was not the owner of the missing urea, received no assignment of claim by the owner, and enjoyed no guarantee of loan payment by Central, has no interest entitling it to recover from Central the value of the urea.

The district court disallowed any recovery for the value of undelivered urea on the ground that the United States had failed to introduce evidence of the market value of the urea or of the price paid for this urea. The district court thus reached the proper result with regard to the government's claim for value, but for the wrong reason. ⁴ Because we reach the same result as to the claim for value, we affirm the district court's denial of recovery for this element of the government's case.

III. Claim for Cost of Freight Charges Paid

As the preceding discussion illustrates, the United States is entitled at most to recover for the cost of freight charges paid for that portion of urea found to be undelivered, the right of such recovery being grounded upon the supplier's certificate executed between Central and the United States. Central, however, argues vigorously that it should not be required to refund any portion of the freight costs because the amounts of urea missing are within the range of customary and expected loss in the shipping trade. We agree.

It has been held that certain minute losses of cargo will always occur in the process of loading, shipping and unloading and that, under recognized industry practice, carriers and ships should not be held liable for such loss up to a certain limit. For example, in Northeast Petroleum Corp. v. S/S PRAIRIE GROVE, 1977 AMC 2139 (S.D.N.Y.1977), the court held that the measurement of petroleum cargoes is inexact at best and, therefore, the carrier would not be liable for shortages in gasoline and diesel fuel delivered up to the 0.005 industry-recognized loss tolerance. 1977 AMC at 2142-43 n. 2. Likewise, in Palmco, Inc. and Fireman's Fund Insurance Co. v. American President Lines, Ltd. d/b/a American Mail Lines, Ltd., 1978 AMC 1715 (D.Or.1978), the court held that a carrier is not responsible for 0.5 percent of loss attributable to the film of palm oil left on the walls of the ship's holds and in the pumping lines when such cargo is transported in bulk. The court stated:

Although defendant cannot explain away the full amount of the loss, it also contends that a certain small percentage of a bulk shipment of oil is always lost, despite the carrier's due diligence. This amount, known as a "tare," is the result of a film of oil left on the walls of the ship's holds, plus normal retention in the pumping lines. Defendant contends that the normal tare for bulk oil is .5%.

Plaintiff contends that there is no legal basis for deducting .5% of the cargo unless provided for in the bill of lading. However, the carrier is not an insurer of the cargo.... Defendant's proof of an expected and normal loss of...