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AMERICAN EXPORT ISBRANDTSEN LINES v. UNITED STATES

January 9, 1975

AMERICAN EXPORT ISBRANDTSEN LINES, INC., as owners of the S/S EXPORT AMBASSADOR, Plaintiff,
v.
The UNITED STATES of America, Defendant


Edward Weinfeld, District Judge.


The opinion of the court was delivered by: WEINFELD

FINDINGS OF FACT AND CONCLUSIONS OF LAW

EDWARD WEINFELD, District Judge.

 This is an action by plaintiff to recover from defendant United States of America the sum of $12,333, a fine imposed by the Italian courts upon plaintiff for its failure to pay customs duties upon a shipment of tobacco and cigarettes consigned by defendant to the United States Naval Support Activity and intended for use by NATO forces in Italy. The shipment was carried by plaintiff's vessel SS Export Ambassador from the United States and discharged to the United States Naval Support Activity at a Pier in Naples, Italy, on October 11, 1960. The shipment was stolen by persons unknown while being removed to a United States Naval warehouse by longshoremen paid by the United States Navy.

 The Status of Forces Convention of the NATO nations provides that no duty shall be levied on goods destined for NATO forces if the Armed Forces unit receiving them files a NATO customs declaration in proper form. *fn1" Such a declaration had been submitted prior to the vessel's arrival at Naples, but no customs billetto or customs bill was issued by the Italian authorities, presumably because the goods had disappeared.

 Almost four years after the out-turn of the shipment the Italian Customs Authority indicated to plaintiff that it intended to levy a customs fine with respect to the shipment. Thereafter, at the instance of the plaintiff, the United States Naval Support Activity submitted to plaintiff a letter dated April 28, 1964, acknowledging receipt of the shipment prior to its theft.

 In May of 1964, the Italian Customs Authority served upon plaintiff's agent at Naples, one Dresda, a notice demanding payment of customs duties on the shipment of tobacco and cigarettes. Dresda filed an objection with the Tribunal of Naples on January 9, 1965. After a trial, judgment was entered against plaintiff on September 29, 1966 and a fine of $12,333 imposed. On appeal the judgment was affirmed on May 17, 1967, by the Italian Court of Appeals at Naples. Plaintiff did not appeal to the Italian Supreme Court and paid the customs fine on September 21, 1967. Plaintiff now seeks reimbursement from the United States of America for the amount of the fine, plus interest and costs, as well as its legal costs in the Naples litigation. *fn2"

 Plaintiff bases its claim upon an alleged express contract of indemnity with the United States or, in the alternative, upon an implied obligation to indemnify plaintiff. Defendant, in resisting plaintiff's claim for reimbursement of the fine and expenses, contends that it is exempt under Article XI(4) of the NATO Status of Forces Agreement from payment of customs duties on the goods for its NATO forces in Italy; that the contractual provision upon which plaintiff relies does not cover the instant situation; and finally, that the imposition of the customs fine on plaintiff was due entirely to its own fault.

 I

 The claim of an express contract of indemnity is based on Article 8 of Space Charter Contract MST 80, entered into between plaintiff and defendant on July 1, 1950, pursuant to which the shipment in question was made:

 
"ARTICLE 8. Receipt.
 
(a) The Master shall sign a manifest or receipt acknowledging receipt of the cargo in apparent good order and condition or he shall note specifically thereon any apparent damage to or shortage of such cargo or any other specific exception to the cargo as listed on the manifest or receipt.
 
(b) Any receipt signed by or on behalf of the Master shall be without prejudice to the terms, conditions and exceptions of this contract and subject to all of them. The Government hereby agrees to indemnify and hold harmless the Contractor, the Master, and the Vessel of and from all consequences or liabilities that may arise from any irregularity in the papers supplied by the Government."

 Plaintiff argues that in order to secure the NATO customs exception the Naval Support Activity was required to comply with procedures prescribed by the Italian Customs Authority and that this could not be done because the goods were stolen before they could be delivered to a warehouse on the pier. There Italian customs officers physically check the cargo against the ship's manifest before issuing a customs bill evidencing that a shipment is entitled to the customs exemption. Although, as already noted, a NATO customs declaration containing a list of the goods had been filed prior to the vessel's arrival, no customs bill was issued. Plaintiff asserts that the defendant's failure to obtain the customs bill was the reason it was held liable for the duty and contends this was an "irregularity in the papers supplied by the Government" within the meaning of Article 8 of the Space Charter Contract. This argument disregards the explicit words upon which plaintiff relies and the contractual context in which they are set. It assumes that papers were delivered contrary to plaintiff's contention that defendant failed to produce the customs bill. Plaintiff inferentially concedes this when it states that the language of the Article "clearly envisioned . . . an obligation on the part of the defendant to indemnify the plaintiff for liabilities due to irregularities in and omissions to produce any papers required to be issued or processed by the defendant regarding cargo shipped aboard plaintiff's vessels." *fn3" Only by adding, as plaintiff has, the emphasized words "and omissions to produce" to the last sentence of Article 8 can plaintiff's contention be upheld. In the absence of those words, the sentence as set forth in the contract provides for indemnity in those instances where plaintiff has suffered a loss due to an irregularity contained in papers actually supplied by the government, such as miscounts, improper listings, misdescription, or similar errors. It would be a distortion of language to apply a contractual provision that deals with "papers supplied by the Government" to a situation where plaintiff's claim is that the government failed to supply papers. Moreover, the last sentence of Article 8 cannot be separated from the remainder of the Article. It deals with the manifest or receipts supplied by the government for goods to be shipped by the carrier. The indemnity clause that follows refers to this class of documents, not to customs bills issued by the country to which the goods are shipped. Plaintiff does not contend that there was an irregularity in the manifest. *fn4"

 Plaintiff, in its effort to support its claim of an express indemnity obligation, invokes the traditional rule of construction that contract language is construed most strongly against its drafter. That maxim only applies, however, where the contract language is ambiguous -- where it is susceptible of two reasonable and practical interpretations. *fn5" The contract clause here at issue is unambiguous and lends itself to only one reasonable construction. The interpretation advanced by plaintiff would distort the normal meaning of the words used. Plaintiff presented no evidence that the intent ...


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