United States v. Gissel

• Citation: 353 F. Supp. 768
• Decision Date: 19 January 1973
• Docket Number: Civ. A. No. 70-H-542,70-H-543.
• Court: U.S. District Court — Southern District of Texas
• Parties: UNITED STATES of America, Plaintiff, v. Julius Schutze GISSEL, d/b/a Collin & Gissel and Globe Indemnity Company, Defendants. UNITED STATES of America, Plaintiff, v. C. J. THIBODEAUX AND COMPANY, and Travelers Indemnity Company, Defendants.

353 F. Supp. 768

UNITED STATES of America, Plaintiff, v. Julius Schutze GISSEL, d/b/a Collin & Gissel and Globe Indemnity Company, Defendants.

UNITED STATES of America, Plaintiff, v. C. J. THIBODEAUX AND COMPANY, and Travelers Indemnity Company, Defendants.

Civ. A. Nos. 70-H-542, 70-H-543.

United States District Court, S. D. Texas, Houston Division.

January 19, 1973.

Anthony J. P. Farris, U. S. Atty., B. Stephen Rice, Asst. U. S. Atty., Houston, Tex., Anthony W. Gross, Atty., Admiralty and Shipping Section, Dept. of Justice, Washington, D. C., for plaintiff.

Alan S. Dale, Eastham, Watson, Dale & Forney, Houston, Tex., for defendants Gissel and Globe Indemnity Company.

Robert M. Julian, Vinson, Elkins, Searls & Smith, Houston, Tex., for defendants C. J. Thibodeaux & Co. and Travelers Indemnity Co.

MEMORANDUM OPINION

CARL O. BUE, Jr., District Judge.

In these consolidated actions the United States, as obligee, seeks to recover on two $10,000 bonds which it is asserted guaranteed the payment of certain customs duties previously assessed against the vessel SS SEA PIONEER pursuant to 19 U.S.C. § 257 as a result of foreign vessel repairs. The defendants are (1) the principals on the bonds, who are also the local berth or husbanding agents for the same vessel and its owner on separate occasions, and (2) the sureties on said bonds. The parties have stipulated the facts and, therefore, the causes have been submitted for decision on briefs.

I. THE FACTUAL BACKGROUND

The facts which lead to the instigation of these lawsuits against the local berth agents and the sureties on their bonds can be briefly summarized. The SS SEA PIONEER was a 18,000 ton merchant vessel owned and operated by Pioneer Tankers, Inc. and documented under the laws of the United States. The vessel made various trips to foreign ports and thereafter correlative first entries into American ports as a merchant vessel. Two such first entries into American ports provide the setting for these lawsuits. The first occurred at Port Arthur, Texas, and the second took place approximately 18 months later at Galveston, Texas.

Prior to the Port Arthur entry defendant Collin & Gissel in its capacity as local berth agent for various vessels routinely filed on January 8, 1964, with the Collector of Customs its blanket bond entitled "Vessel, Vehicle, or Aircraft Bond (Term)" on Customs Form 7569 in the principal sum of $10,000 covering the period January 7, 1964, through January 6, 1965. This bond bound this defendant as principal to pay to the Collector of Customs various sums potentially due the United States from the master or owner of the vessels that this defendant represented as a result of their entry into an American port. Defendant Globe Indemnity Company was surety on the bond. On May 22, 1964, defendant Collin & Gissel undertook to act as local agent in connection with the arrival, entry and clearance of the SS SEA PIONEER at the Port of Port Arthur. This defendant through a sub-agent filed with the Collector of Customs at Port Arthur a form entitled "Application and Permit to Lade or Unlade Vessels of 5 Net Tons or More and to Allow Unentered Cargo to Remain upon Wharf Beyond 5-Day Period" on Customs Form 3171 on which certain routine port operations or services were designated in connection with the soon-to-arrive vessel. Reference was made therein to the previously filed blanket bond.

The SS SEA PIONEER duly arrived at Port Arthur on May 27, 1964, inbound from a foreign voyage during which various repairs to the vessel had been made that required the payment of statutory duties. At the time of entry the master of the vessel filed an incomplete Customs Form 7535 designated "Entry of Equipment and/or Repair Parts Made in Foreign Countries upon American Vessels" reflecting that an indeterminate amount of repair duties was due. The vessel subsequently departed for another American port without its master or owner making a deposit or posting a bond for the preliminarily estimated duties. Following various communications between Customs officials and the vessel's owner this foreign repair entry was finally liquidated on November 28, 1967, and notice of duties due in the amount of $14,216.96 was sent to the vessel's owner and defendant Collin & Gissel. However, neither payment nor a statutory protest of the assessment, pursuant to 19 U.S.C. §§ 1514, 1515, was duly forthcoming on behalf of the owner or the local berth agent.

Prior to the Galveston entry of the SS SEA PIONEER, defendant C. J. Thibodeaux and Company (Thibodeaux) in its capacity as local berth agent for various vessels routinely filed its blanket bond entitled "Vessel, Vehicle, or Aircraft Bond (Term)" on Customs Form 7569 in the principal sum of $10,000 covering the period March 1, 1965, through February 28, 1966. Defendant Travelers Indemnity Company was surety on the bond. On October 11, 1965, defendant Thibodeaux undertook to act as local agent in connection with the arrival, entry and clearance of the SS SEA PIONEER at the Port of Galveston. As defendant Collin & Gissel had done, defendant Thibodeaux filed Customs Form 3171 on which certain routine port operations and services were designated in connection with the soon-to-arrive vessel, and reference was made therein to the previously filed blanket bond. The SS SEA PIONEER duly arrived at the Port of Galveston on October 12, 1965, inbound from a foreign voyage during which repairs to the vessel had been made which required the payment of a duty. At the time of entry the master of the vessel filed an incomplete Customs Form 7535 designated "Entry of Equipment and/or Repair Parts Made in Foreign Countries upon American Vessels" reflecting that certain duties on the ship repairs were due. The vessel subsequently departed for another American port without making a deposit or posting a bond for the estimated duties. Following various communications between Customs officials and the vessel's owners this foreign repair entry was finally liquidated on March 26, 1968, and notice of duties due in the amount of $57,674.26 was sent to the vessel's owner and defendant Thibodeaux. However, neither payment nor a statutory protest to this assessment, pursuant to 19 U.S.C. §§ 1514, 1515, was duly forthcoming on behalf of the owner or the local berth agent.

It is at this point that the facts of these lawsuits depart from what would be an ordinary and routine vessel entry and subsequent collection of custom duties from the vessel's owners. Sometime prior to May, 1968, the SS SEA PIONEER was seized in Singapore, Malaya in connection with judicial proceedings instituted to foreclose a ship mortgage held on the vessel. The SS SEA PIONEER was subsequently sold, and the proceeds of the sale were paid into the registry of the Singapore court. At the request and expense of defendant Collin & Gissel the United States agreed that such defendant could intervene on its behalf in the Singapore proceedings to assert the claim for foreign repair duties against the proceeds of the sale on deposit in the court registry. These efforts proved to be of no avail, since on April 29, 1969, the claim was disallowed in its entirety by the Singapore court as being in the nature of an unenforceable foreign revenue and/or penal law. Turning to the only other apparent sources of possible payment of these overdue duties, the United States then made formal demand on the sureties of the bonds of the agent-defendants, Collin & Gissel and Thibodeaux. When payment was not forthcoming in due course, these lawsuits were instituted.

II. THE CONTENTIONS

The contentions of the various parties can be simply stated. The Government contends that the obligations assumed by the defendants in executing the blanket term bonds are express and unequivocal. It is asserted that by the terms of these bonds the defendants as local agents unconditionally promised to pay any duties or other sums found to be legally owed to the United States by the vessel owner or its master. It is the Government's position that, since these defendants chose to obligate themselves unconditionally for the payment of the foreign vessel repair entry duties up to the $10,000 limit of their term bonds, there can be no legal defense to actions such as these to collect under the bonds.

The defendants, however, in an attempt to evade this theory of liability, simply assert that, notwithstanding the express language of the term bonds, they never promised or undertook to pay the foreign repair duties. It is their contention that the term bonds were executed only to accommodate and guarantee the payment of various nominal expenses ordinarily incurred by vessels entering and departing port and for which local berth agents are generally looked to for payment. Alternatively, in the event that they are liable on the bonds, defendants assert that the Government has waived its right to collect the duties from them both as agents and sureties since it granted continuous extensions of time to the owner of the SS SEA PIONEER to liquidate the duties due without their knowledge or consent. It is also asserted that the Government must exhaust its remedies against the vessel and its owner prior to seeking collection from the defendants.

Restated in more practical terms, this is an issue which arises solely because the owner of the SS SEA PIONEER went bankrupt, thereby causing the Government to look around for alternative sources in order to secure payment of such duties on foreign vessel repairs. This situation has caused the Government to focus on the agents' blanket bonds which concededly have never been attacked in such fashion before, at least in the Southern District of Texas.

From the evidence submitted for consideration by this Court, it is apparent that a ruling in this case is of more than incidental significance to all parties. If the Government under these circumstances cannot go against the agent's bond, it presumably...