decided: December 19, 1983.
CAVCAR COMPANY, AN IRANIAN CORPORATION
M/V SUZDAL, HER ENGINES, BOILERS, TACKLE, ETC., IN REM AND BLACK SEA SHIPPING COMPANY, A FOREIGN CORPORATION, IN PERSONAM; MARINE TRANSPORT SERVICE, INC., A NEW YORK CORPORATION AND FIRST PENNSYLVANIA BANK, PLAINTIFF AND COUNTER-RESPONDENT, V. CAVCAR COMPANY AND SHERKATE SAHAMI KHASS AUTO PARS, BOTH FOREIGN CORPORATIONS, DEFENDANTS & COUNTER-CLAIMANTS, V. THOMAS J. HOLT, HOLT HAULING & WAREHOUSING SYSTEMS, INC., B.H. SOBELMAN & CO., INC., WATERSIDE OCEAN NAVIGATION, INC., GLOUCESTER SHIPPING CORP. OF MONROVIA, HOLT MARINE TERMINALS, INC., HOLT MOTOR EXPRESS, INC., WORLD WIDE MARINE TRADING CORPORATION, T&L LEASING, INC., AND CAMDEN REFRIGERATING & TERMINAL, INC., ADDITIONAL COUNTER-RESPONDENTS, V. MTS AGENCIES, INC., AND ANTHONY CASTELBUONO, INDIVIDUALLY AND AS A FORMER PARTNER IN THE FIRM OF AUSTRIAN, LANCE & STEWART AND IRVING B. STEWART, AS PARTNER IN THE FIRM OF AUSTRIAN, LANCE & STEWART AND DAVID S. BROWN, AS PARTNER IN THE FIRM OF AUSTRIAN, LANCE & STEWART AND PATTON R. CORRIGAN, AS PARTNER IN THE FIRM OF AUSTRIAN, LANCE & STEWART AND MARK J. KRONMAN, AS PARTNER IN THE FIRM OF AUSTRIAN, LANCE & STEWART AND JULIUS J. ROSEN, AS PARTNER IN THE FIRM OF AUSTRIAN, LANCE & STEWART, THIRD PARTY COUNTERCLAIM DEFENDANTS; SHERKATE SAHAMI KHASS AUTO PARS, AN IRANIAN CORPORATION, PLAINTIFF-APPELLANT, V. M/V FINN-AMER, HER ENGINES, BOILERS, TACKLE, ETC., IN REM AND AMER SEA O/Y A FOREIGN CORPORATION, IN PERSONAM, DEFENDANTS-APPELLEES
On Appeal from the United States District Court for the District of New Jersey.
Aldisert, Becker, Circuit Judges and Pollak, District Judge.*fn*
This appeal raises the question whether a vessel may be liable in rem for breach of the contract of carriage by the operator of the vessel when the vessel's owner is not liable in personam for the breach. The district court held that there can be no in rem liability in such circumstances. For the reasons stated below, we reverse.
This case has a long and complex factual and procedural history which must be reviewed, at least in summary form, in order to understand the legal issues presented on appeal. In 1975, appellant, Sherkate Sahami Khass Auto Pars ("Auto Pars") ordered 200 Ford Bronco trucks from Ford Export Corporation. This purchase was financed by two letters of credit issued by Iranian banks. At the port of Philadelphia, forty-nine of these vehicles were loaded on the M/V FINN AMER ("Finn Amer"), the appellee.
The Finn Amer is registered in Finland and is owned by Amer Sea O/Y ("Amer Sea") a Finnish company. When this controversy arose, the Finn Amer was time-chartered to Gloucester Shipping Corporation which is not a party to these proceedings. Although the master of the Finn Amer was employed by Amer Sea, the vessel was operated by Marine Transport Services (MTS), a New Jersey corporation. The district court found that "MTS provided the operational infrastructure, arranged the stevedoring, solicited cargo, processed all documents and established an agency network in overseas points with respect to the Finn-Amer. It did not charter that vessel." App. 347a.
When the forty-nine Broncos were loaded on the vessel, MTS issued a negotiable bill of lading. The bill of lading specified Bandar Shahpour, a port of Iran, as the destination. It listed as consignee "Order of: Bank of Teheran Takhte Djamshid Branch, Teheran, Iran" and as "notify party" the appellant, Auto Pars. Amer Sea was not a party to the bill of lading and the master of the Finn Amer never saw the bill of lading.
The Finn Amer arrived at Bandar Shahpour on January 23, 1976. Auto Pars was notified of the vessel's arrival and was requested by MTS to "preclear" the Broncos. Preclearance is a procedure by which the customs duty on the cargo is paid in advance of discharge and the consignee takes direct delivery from the side of the vessel. The district court found that there was no legal requirement of preclearance and that consignees generally resisted the preclearance system.*fn1
The Finn Amer was granted berth on February 19, 1976. It discharged all of its cargo other than the forty-nine Broncos. The Broncos were the only cargo which was not precleared. While the vessel was at Bandar Shahpour no bill of lading was presented for these vehicles. In fact, the original bill of lading remains at the Bank of Teheran, Takhte Djamshid Branch.
On February 23, without giving notice to Auto Pars, MTS ordered the Finn Amer to depart from Bandar Shahpour with the Broncos. It did so and returned the vehicles to Philadelphia as directed by MTS. The Broncos were impounded and eventually sold by United States Customs.
This suit is one of two which arose from the shipping of the forty-nine Broncos. In 1976, MTS filed suit in the federal district court in New Jersey against Auto Pars to recover for losses sustained due to MTS ' inability to deliver the vehicles. Auto Pars counterclaimed against MTS for failure to deliver the cargo. That action was later consolidated with the action presently before us -- a suit for damages for nondelivery of the Broncos which was filed in 1977 by Auto Pars against the Finn Amer and Amer Sea.*fn2 After a bench trial, the district court filed detailed findings of fact and conclusions of law. The court determined that MTS was a "carrier" under the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. §§ 1300-15 and was liable to Auto Pars for failure to deliver the cargo. In addition, the court held that Auto Pars was not liable to MTS for any costs related to the return of the vehicles to Philadelphia. Moreover, the court found that neither Amer Sea nor the Finn Amer were parties to the bill of lading and the master of the ship had taken all relevant actions solely under the direction of MTS. The court concluded that Amer Sea, the owner of the Finn Amer, was not liable for the nondelivery of the cargo and that Auto Pars had failed to establish any basis for the imposition of in rem liability.
Auto Pars has appealed the district court's decision solely with respect to the finding on in rem liability. It does not dispute the lower court's finding that Amer Sea is not personally liable for the nondelivery. The primary issue before us is whether in rem liability exists when the charterer or operator of the vessel has breached ...
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