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WESSEL, DUVAL & CO. v. GRACE LINE

March 3, 1944

WESSEL, DUVAL & CO., Inc., et al.
v.
GRACE LINE, Inc.



The opinion of the court was delivered by: BRIGHT

When this case came on for trial before the court and a jury, after the jury had been selected counsel agreed that there was nothing for the jury to determine, that it might be discharged, and that the case be deemed tried by a jury of one subject to motions by counsel at the close of the case. At the same time, the second cause of action, as well as the second paragraph of the prayer for relief, were withdrawn, and the prayer was further amended so as to set out a demand for judgment for $ 213,393.88 with interest on $ 52,635.62 from May 1, 1940 and on $ 160,758.26 from August 1, 1940.

The complaint, as thus amended, seeks money damages for an alleged breach of a 'pooling agreement', dated May 19, 1937, as amended, under which the parties agreed to divide the gross earnings accruing to the vessel of each party out of its freight operations on all cargo originating in the United States, carried therefrom on a vessel of one of said parties, and destined for ports on the west coast of Colombia, Ecuador, Peru and Chile. It is alleged that operations under the agreement began on August 1, 1937, and each party had duly accounted for and paid to the other the sums owing up to and including January 31, 1940.

Recovery to the extent of $ 83,980.54 is sought for plaintiff's share of unpaid earnings between February 1 and April 30, 1940, during which it is claimed both parties had sailings within the agreement; and for an additional sum estimated at $ 195,000 for unpaid earnings alleged to have accrued between May 1 and July 31, 1940, from sailings of the defendant alone. It appears that at a pretrial conference, defendant conceded that there was due to the plaintiffs for the period from February 1 to April 9, 1940, $ 29,346.60 with interest, which it paid. Plaintiffs' demand was, therefore, amended as stated in the first paragraph.

 The particular question of law involved is the construction of the agreement. Plaintiffs 'and any interest they may control', called the West Coast Line, and defendant, prior to the agreement, were competing in trade by water between the ports mentioned. They obviously desired to pool the revenues from their business between those ports and to declare that they would not directly or indirectly operate vessels between such ports other than as provided in the agreement. The particular clauses here in controversy provide

 'Schedules

 'Except as hereinafter provided, and except also for a tolerance of ten percent (10%) one way or the other, as the case may be, the Grace Line shall maintain fifty six (56) passenger and/or freighter sailings per annum, and the West Coast Line shall maintain twenty six (26) freighter sailings per annum, from ports on the Atlantic Coast of the United States to ports on the West Coast of Colombia, Ecuador, Peru and Chile.'

 'Pooling

 'All gross earnings accruing to each vessel of each party hereto out of its freight operations including port and landing charges, and surcharges, on all cargo originating in the United States, carried therefrom on a vessel of one of said parties, and destined for ports on the West Coast of Columbia, Ecuador, Peru, and Chile, shall be divided seventy five percent (75%) to the Grace Line and twenty five percent (25%) to the West Coast Line after deducting four dollars ($ 4.00) per revenue ton, except on motor cars and trucks on which this deduction shall be fifteen dollars ($ 15.00) per unit. The Grace Line and the West Coast Line agree to send their manifests and/or freight lists to each other as soon as practicable after each sailing in order to arrive at a settlement of these percentages, which settlements shall be made in cash at the end of each three month period. Should in future the trade here involved necessitate additional or larger vessels, seventy five percent (75%) of such additional tonnage shall be provided for by the Grace Line and twenty five percent (25%) thereof by the West Coast Line.'

 The agreement further provided that if the Compania Chilena De Navegacion Interoceanica should become a party to the pooling agreement, it should receive, under certain circumstances, not more than 15% of the total pool, of which the Grace Line agreed to supply 75% and the West Coast Line 25%; and in the event that the Chilean company should withdraw entirely from service, the tonnage represented by it or its substitute, should be provided 75% by the Grace Line and 25% by the West Coast Line. It was also agreed that lines operating regular general cargo service with a frequency of not less than monthly departures from Chile and Peru to European ports via the Panama Canal, might become associates or members of the conference mentioned in the agreement. The agreement was to remain in force for a period of four years, and thereafter, unless either party gave six months' notice in writing to the other to terminate the same, except that either party would have the right to terminate after the agreement had been in force two and one-half years.

 The particular event which precipitated this controversy was the invasion of Denmark by Germany on April 9, 1940, and the declaration of Great Britain and France shortly thereafter that they would seize all Danish vessels as prize. All of the plaintiffs' vessels sailed under the Danish flag, and on April 10 were ordered to proceed to neutral ports, and later, after discharging their cargoes, were immobilized. At the same time, plaintiffs' cancelled sailings under the pooling agreement of six of their vessels, which had been scheduled for April 12, 19, 26 and May 3, 10 and 17.

 On April 29, 1940, defendant notified Wessel Duval and the Maritime Commission (by whom the pooling agreement, under the law, was required to and had been approved) that because of the occupation of Denmark and the inability of the Danish freighters to operate as per schedule, a major change had taken place affecting operations under the agreement, and that settlements thereunder would be stopped as of the sailing of defendant's S.S. Santa Ana on April 12, 1940.

 On May 20, 1940, Wessel Duval chartered the S.S. Malantic, on June 12, 1940 the S.S. Wind Rush, and on July 6, 1940, the S.S. Carolyn, all with the consent of the Maritime Commission, and those ships sailed from North Atlantic ports to the same ports in South America as the other ships of the West Coast Line on June 9, June 30 and July 20, 1940. There were no sailings of the West Coast Line other than the three mentioned after the invasion of Denmark.

 The Grace Line, however, continued its sailings between the ports mentioned in the pooling agreement, 23 being accomplished between April 5 and July 31, 1940.

 The dispute really narrows down to whether or not under the agreement each party was bound to maintain substantially regular sailings, the plaintiffs bi-weekly and the defendant weekly. In other words, defendant contends that when the plaintiffs cancelled their weekly sailings in April and May, following the invasion, they breached their part of the agreement. Plaintiffs answer that they had already had 31 sailings in the year immediately preceding the invasion, and had complied with their part of the contract which required them to maintain 26 freighter sailings per annum; that the contract did not require them to have a regular schedule, and that any attempt to so construe the agreement would be writing into an unambiguous contract something upon which the parties had not agreed. The ...


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