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NORTHERN STAR S.S. CO. v. KANSAS MILLING CO.

October 22, 1947

NORTHERN STAR S.S. CO. of CANADA, Limited,
v.
KANSAS MILLING CO. et al.



The opinion of the court was delivered by: LEIBELL

On June 16, 1947 the Northern Star Steamship Company, a Canadian corporation, filed a libel against the respondents, the Kansas Milling Company (a Kansas corporation) and the Dawson Export Company (a Washington, D.C. corporation) alleging:

'Fourth: That the libellant through its agents, Ocean Freighting & Brokerage Corporation, entered into negotiations in the City and State of New York for the chartering of the S.S. Captain Polemus with the Scanamerican Chartering Corporation which was acting as agents for the respondents Kansas Milling Company and Dawson Export Company.

'Fifth: That on or about December 31, 1946, the vessel was fixed for charter to Kansas Milling Company under the terms and conditions set forth in the fixture, a copy of which is annexed hereto, marked exhibit A, and made a part hereof; that pursuant to the terms and conditions of said fixture, the charter party attached hereto, marked Exhibit B, and made a part hereof, was signed by the libelant and forwarded to the respondent's agent for execution.

 'Sixth: That subsequently, Scanamerican Chartering Corporation notified libellant, through its agent, Ocean Freighting & Brokerage Corporation, that the Kansas Milling Company was not the charterer, but was guaranteeing the performance of the charter for Dawson Export Company of Washington, D.C.

 'Seventh: That the respondent, Kansas Milling Company, on or about January 7, 1947, through its agents, notified the libellants agent that the charter party was cancelled.'

 On June 16, 1947 process in personam issued, with a clause of Foreign Attachment, and subsequently on June 27, 1947 the United States Marshal filed his return on the attachment showing that funds of the respondent, the Kansas Milling Company had been attached in the amount of $ 39,847.59. But this is still a suit in personam. Asiatic Petroleum Corporation v. Italia Societa, 3 Cir., 119 F.2d 610, at page 613.

 A copy of the 'fixture', Exhibit A, is set forth in a footnote. *fn1" The draft of the charter party, prepared by libelant's attorney, is dated December 31, 1946, and names the Kansas Milling Company as the charterer, but neither respondent ever signed it

 On July 25, 1947 Kansas Milling Company filed exceptions to the libel on the grounds that the facts averred therein were insufficient to constitute a cause of action; that they did not constitute a claim within the admiralty and maritime jurisdiction of the court; and that the court should decline jurisdiction on the ground that all the parties to the suit are foreign corporations and the convenience of the court would not be served by accepting jurisdiction.

 Thereafter on October 7, 1947 the respondent, Kansas Milling Company, moved the court for an order dismissing the libel on the ground that the court should decline to assume jurisdiction of this controversy wholly between citizens of foreign states, and for an order sustaining the exceptions.

 With respect to the respondent's first exception, I believe that the libel states a claim upon which relief can be granted. It appears from the libel that the libellant's vessel was 'fixed for charter to the Kansas Milling Co.', through agents for both parties, that the 'charter party was cancelled', and that 'in reliance upon the fixture' the libellant sustained certain damages. It sufficiently sets forth a cause of action against the respondent, Kansas Milling Company and respondent's first exception is accordingly overruled.

 The second exception argued by the respondent is based upon an interpretation of the libel, which would rest the liability of the respondent, Kansas Milling Company, upon an alleged guarantee of the charter. This interpretation relies upon the sixth article of the libel hereinabove set forth. While it does not appear that such is the gravamen of the action (see paragraph fifth), nevertheless if it were it would still withstand the objection that it constitutes a common law obligation not cognizable in admiralty. Libelant's proctor asserts that paragraph Eighth shows that the claim is based 'upon the fixture of December 31, 1946'.

 It is generally true that a bond securing the performance of a charter party is not a maritime contract within the jurisdiction of Admiralty and that a surety company executing such bond may not be sued thereon in admiralty. Pacific Surety Company v. Leatham and Smith Towing and Wrecking Company, 7 Cir., 1907, 151 F. 440; Eadie v. North Pacific S.S. Co., D.C.N.D. Cal. 1914, 217 F. 662. In the Pacific Surety Co. (151 F. 441) case the court said: 'That the charter party was a maritime contract and the undertaking of the charterer was for maritime service and transactions is unquestionable. * * * The appellant, however, as surety on the bond, was no party to the maritime undertaking; neither promised performance of the charter service, nor was authorized under the contract terms to perform. * * * The obligation of the appellant as surety on the bond was not for performance of the charter party, but for the payment of damages in the event of nonperformance on the part of the charterer.'

 From the language of that case it appears that the obligation of the guarantor was to pay money damages or to indemnify the shipowner. But the allegation in the libel (Article Six) in the case at bar indicates that the proof may show that the respondent, Kansas Milling Company, agreed to perform the charter in the event the Dawson Export Company defaulted thereon. If that be so then the agreement of Kansas Milling Company was a maritime contract; it was a guaranty to perform a maritime service (the charter party) and was not an agreement of indemnity. See Compagnie Francaise de Navigation a Vapeur v. Bonnasse, D.C.S.D.N.Y. 1926, 15 F.2d 203, 204. 'It is the nature of contracts which controls on the question of admiralty jurisdiction.' Berwind-White Coal Mining Co. v. City of New York, 2 Cir., 135 F.2d 443, at page 446.

 The respondent also argues that even if a maritime contract is involved and assuming that the libel states a cause of action, there is no allegation in the libel that the alleged guaranty was in writing, therefore any action thereon would be barred by the Statute of ...


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