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DIANA COMPANIA MARITIMA, S.A. v. THE SUBFREIGHTS

February 28, 1968

DIANA COMPANIA MARITIMA, S.A. OF PANAMA, Libelant,
v.
The SUBFREIGHTS OF the S.S. ADMIRALTY FLYER, Respondent


Herlands, District Judge.


The opinion of the court was delivered by: HERLANDS

HERLANDS, District Judge:

Petitioner, Diana Compania Maritima, S.A. of Panama [hereinafter "Owner"], owner of the S.S. Admiralty Flyer moves for (1) an order, pursuant to Section 9 of the Federal Arbitration Act, 9 U.S.C. § 9 *fn1" , confirming an arbitration award rendered between the Owner and Admiralty Lines, Ltd. [hereinafter "Charterer"], and (2) an order releasing the subfreights of the Admiralty Flyer presently held by the Clerk of the United States District Court for the Southern District of New York. *fn2" The trustee in bankruptcy of the Charterer [hereinafter "Trustee"] objects to the release of the subfreights but does not object to the confirmation of the arbitration award. For the reasons hereinafter set forth, the Owner's motions are granted in all respects.

 In order to place this motion in proper context, the Court will fully explicate the sequence of events leading to this motion as well as all facts material to its disposition. Many of these facts are either undisputed or have been conclusively determined. *fn3"

 On May 4, 1965, the Charterer entered into a time charter party *fn4" with the Commercial Steamship Company, agents for the Owner of the Admiralty Flyer. The agreement provided that the Charterer would hire the vessel for a period of about 18 to 21 months, payment of hire to be made "monthly in advance". The vessel was presented to the Charterer on July 9, 1965, and proceeded on its voyage.

 On November 9, 1965, the Charterer defaulted in payment of hire due on that date. At the time of default, the vessel was proceeding toward Capetown, South Africa, where an additional breach of the charter party occurred when the Charterer failed to supply fuel.

 On November 23, 1965, the Owner sent a telegram to the Charterer, giving notice of withdrawal of the vessel. The telegram read:

 
"IN VIEW OF YOUR BREACH OF THE TIME CHARTER BY FAILURE TO PAY HIGHER ON THE ADMIRALTY FLIER AND YOUR FAILURE TO SUPPLY THE VESSEL WITH BUNKERS YOU ARE HEREBY NOTIFIED THAT THE VESSEL IS WITHDRAWN BECAUSE OF YOUR BREACH AND OWNER IS TAKING STEPS TO MITIGATE DAMAGES OWNER HOLDS YOU RESPONSIBLE FOR ALL DIRECT AND CONSEQUENTIAL DAMAGES RESULTING FROM YOUR BREACH." (Charterer's Rebuttal Affidavit, Exhibit A)

 The notice of withdrawal was given pursuant to clause 5 of the charter party. *fn5"

 On November 29, 1965, the Owner filed a libel against the freights and subfreights of the Admiralty Flyer and attached certain subfreights in the hands of 14 cargo consignees.

 Upon the arrival of the Admiralty Flyer at the United States Gulf Ports on December 25, 1965, the Owner retained possession of the cargo.

 Upon motion of certain of the cargo consignees, this Court, on December 30, 1965, ordered the consignees to pay the freight due into court. This "Interim Order No. 1" provided that, upon payment, the Owner would release the cargo from the "possessory lien". The Court indicated that the purpose of the order was

 
"* * * to serve as a method to substitute money deposits of freights due * * * [for the asserted liens] in order to facilitate the release of said cargo and subfreights from the liens asserted * * *"

 In short, the order served as a practical method of releasing the cargoes and removing the consignees from a litigation in which they had neither an actual interest nor possible liability beyond the amount of the freights due.

 Since the only persons legally interested in the fund being held by the Clerk of the Court were the Owner and the Charterer, this Court, on January 3, 1966, ordered the Owner and Charterer to proceed to arbitration in accordance with clause 17 of the charter party. *fn6" The Court retained jurisdiction to enter a decree upon the award.

 After three arbitration hearings had been held, an involuntary bankruptcy petition was filed against the Charterer on February 4, 1966. On March 15, 1966, ...


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