United States v. Waterman Steamship Corporation

• Citation: 397 F.2d 577
• Decision Date: 27 June 1968
• Docket Number: No. 24450.,24450.
• Parties: UNITED STATES of America, Appellant, v. WATERMAN STEAMSHIP CORPORATION et al., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

397 F.2d 577 (1968)

UNITED STATES of America, Appellant, v. WATERMAN STEAMSHIP CORPORATION et al., Appellees.

No. 24450.

United States Court of Appeals Fifth Circuit.

June 27, 1968.

Vernol R. Jansen, Jr., U. S. Atty., Mobile, Ala., David L. Rose, Robert E. Kopp, John C. Eldridge, Howard J. Kashner, Alan S. Rosenthal, Attys., Dept. of Justice, Washington, D. C., Edwin L. Weisl, Jr., Asst. Atty. Gen., for appellant.

T. K. Jackson, Jr., Mobile, Ala., W. Boyd Reeves, Mobile, Ala., Armbrecht, Jackson & DeMouy, Mobile, Ala., of counsel, for appellees.

Milton C. Grace, Washington, D. C., amicus curiae.

Before GODBOLD and SIMPSON, Circuit Judges, and McRAE, District Judge.

WILLIAM A. McRAE, Jr., District Judge.

This appeal is from a judgment entered in the court below requiring the United States to make certain contributions allegedly due as the result of a General Average Adjustment.

In August of 1959 the S.S. JEAN LA FITTE, owned by Appellee, Waterman Steamship Corporation (Waterman), was carrying government cargo under a contract with the Military Sea Transportation Service (MSTS). While en route the vessel became stranded on a shoal off the coast of France. In order to refloat the ship, numerous losses were voluntarily sustained for the common benefit of all the interests in the voyage: the ship, the cargo, and the freight.¹ In accordance with the terms of the Space Charters a General Average situation was declared and put into effect by the master of the vessel. The United States disputed the contribution required on its behalf and Waterman initiated this action to recover.

The sole issue presented to this Court is whether the 80% payment, made by the United States at the time of sailing, should be considered "earned" at that time or on delivery of the goods. If the freight is earned upon sailing, then the risk of contribution is on the cargo, and the United States would be responsible for a proportionate share of the losses suffered. On the other hand, if the freight is not considered earned until delivery of the goods, then the risk is on the shipowner, and the vessel must bear the expense.

It is a well settled principle of American maritime law that freight is not earned unless and until the goods are delivered to their destination. Alcoa S.S. Co. v. United States, 338 U.S. 421, 422, 70 S.Ct. 190, 94 L.Ed. 225 (1949). The parties by contractual agreement may alter this principle. E.g., International Paper Co. v. The "Gracie D. Chambers", 248 U.S. 387, 39 S.Ct. 149, 63 L.Ed. 318 (1919). Thus, the narrow issue presented in the case at bar is whether the terms of the charter agreements established the freight to have been earned upon the sailing of the vessel.

The provisions of the Space Charter agreements between Waterman and MSTS dealing with payment of freight read as follows:

(a) At anytime after the sailing of the vessel from the port of loading, the Contractor may submit properly certified invoices or vouchers with respect to each Shipping Order together with a copy of such Shipping Order and shall thereupon be paid a sum equal to eighty per cent (80%) of the compensation payable under Article 3 for such shipment. The balance of the compensation payable for such Shipping Order, except as provided in subparagraph (c) below, shall be paid upon the delivery of the cargo to the consignee or as otherwise directed by the Government at the port of destination and the submission by the Contractor of properly certified invoices or vouchers with respect to the Shipping Order, such invoices or vouchers to be substantiated by certified copy of the manifest covering the shipment together with a copy of the Shipping Order. * * *

(c) In the event there is any shortage or damage not definitely known to be the fault of the Government or its agents, the amount of such shortage or damage shall be estimated and withheld from the amount otherwise due, pending final determination of the amount of shortage or damage and the Contractor\'s liability therefor. If, upon final determination the amount of shortage or damage for which the Contractor is liable is more than the amount of compensation withheld, such excess shall be paid by the Contractor to the Government or shall be deducted by the Government from other amounts otherwise payable to the Contractor. However, if upon final determination of the amount for which the Contractor is liable, such amount is less than the amount withheld, the Contractor shall be paid such difference forthwith; * * * (R. 236-238).

Waterman contends that by agreeing to the provision of the charter requiring an 80% payment on sailing the United States accepted the responsibility for 80% of the freight interest...