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Interocean Shipping Co. v. National Shipping and Trading Corp.

decided: June 24, 1975.


Appeal from order entered in the Southern District of New York, Sylvester J. Ryan, District Judge, granting vessel owner's petition pursuant to the Federal Arbitration Act to compel arbitration of its claim for breach of of a charter party. Order modified and affirmed.

Tom C. Clark, Associate Justice,*fn* and Moore and Timbers, Circuit Judges.

Author: Timbers

TIMBERS, Circuit Judge :

On this appeal from an order entered April 15, 1974 after a four day hearing in the Southern District of New York, Sylvester J. Ryan, District Judge, pursuant to the remand ordered in our prior decision, Interocean Shipping Co. v. National Shipping and Trading Corp., 462 F.2d 673 (2 Cir. 1972), to determine whether there existed a valid charter party which contained a provision requiring the parties to arbitrate whether there was a breach of the charter party, the essential questions are:

(1) Whether the findings of fact of the district court that a valid charter party did exist were clearly erroneous.

(2) Whether the findings of fact of the district court that De Salvo, the charter broker, had authority to act for appellants were clearly erroneous.

(3) Whether the district court erred in ordering National Shipping and Trading Corporation, the guarantor of the charter party, to arbitrate.

For the reasons below, we affirm the district court's findings of fact with respect to questions (1) and (2) as not clearly erroneous; but, with respect to question (3), we modify its arbitration order by eliminating the direction that National proceed to arbitration. We affirm the district court's arbitration order as modified.


This is the second time in three years that this petition to compel arbitration pursuant to Section 4 of the Federal Arbitration Act, 9 U.S.C. ยง 4 (1970), has been before us. On the instant appeal, the essential issues are (1) the correctness of the district court's findings of fact pursuant to the remand ordered in our prior decision, and (2) the scope of its direction to arbitrate.

In view of the comprehensive statement of facts set forth in the district court's opinion,*fn1 we shall summarize only those facts necessary to an understanding of our rulings on the issues stated above.

The dramatis personae includes:

Appellee Interocean Shipping Company (Interocean) was a Liberian corporation and a wholly-owned subsidiary of Bethlehem Steel Corporation (Bethlehem). Interocean owned the tanker, the Oswego Reliance, which is the subject of the aborted charter party here at issue.

Anthony Germano was an employee of Steamship Service, Inc., another wholly-owned subsidiary of Bethlehem, which acted as house broker for vessels owned by Bethlehem and its subsidiaries.

Appellant National Shipping and Trading Corporation (National) was a New York corporation engaged in chartering and operating tankers on behalf of various principals. The stock of National was held in trust for the benefit of Harry Theodoracopulos (H.T.), its vice-president. Thomas Spears was president of National.

Appellant Hellenic International Shipping, S.A. (Hellenic), was a Panamanian corporation which was wholly-owned by Hellenic Shipping & Industries, Ltd., of Greece. The principal shareholder of the latter was John Theodoracopulos, the father of H.T.

Francis De Salvo was a broker employed by the ship brokerage firm of Poten & Partners, Inc., in New York City. De Salvo had known H.T. for many years and through him had negotiated several previous charters with National.

On March 17, 1971, H.T. invited De Salvo to lunch to discuss the tanker market. A specific unnamed vessel was discussed. This apparently was the Oswego Reliance. After lunch, H.T. called De Salvo and asked him to check on the vessel's availability for charter.

De Salvo then contacted Germano of Steamship Service concerning the Oswego Reliance. De Salvo relayed to H.T. the message that it was available for charter. H.T. told De Salvo "to bring a firm offer in ".

De Salvo again contacted Germano who was hesitant to give a firm offer since he was not familiar with Hellenic, the proposed charterer. Germano told De Salvo that it would be necessary to determine what arrangements could be made for a guarantee from National, that he would have to check with his people, and that he would call back De Salvo.

Shortly thereafter, Germano called De Salvo as promised. He offered the Oswego Reliance "for reply 4:55 today". De Salvo wrote down Germano's terms and relayed them to H.T. by telephone. There followed several offers and counter-offers by H.T. and Germano, all relayed through De Salvo. At 4:45 P.M. that day, in response to one of Germano's counter-offers relayed to H.T. through De Salvo, H.T. said to De Salvo in substance, "You are confirmed ".

Throughout these and the subsequent negotiations, De Salvo kept notes which were received in evidence. De Salvo's notes indicate that the terms being negotiated through him were charterhire, the length of the charter, and overtime and petties; that the charterer would be Hellenic; that the Mobiltime form charter "sub details"*fn2 would be used, excluding certain clauses; and that a suitable drydock clause would be worked out with sufficient advance notice. Other terms also were reflected in the notes.

During the negotiations, De Salvo informed H.T. that Germano required a guarantee. H.T. replied that "appropriate guarantees" would be given and that Hellenic was a subsidiary of National.

Following the negotiations, De Salvo sent telexes to both parties confirming the fixture of the Oswego Reliance and setting forth the agreed upon terms (the fixture telex).*fn3

The telex was received by National at 5:36 P.M. It was studied by H.T. and Spears. Both testified that they understood it, including its use of the term "fixed" which meant the conclusion of a negotiation. Neither H.T. nor Spears contacted Poten & Partners to comment on or to correct the fixture telex.

All of the above events took place on the afternoon of March 17, 1971. No direct communication between H.T. and Germano ever took place. All negotiations were conducted through De Salvo.

On the next day, March 18, De Salvo and Germano drew up a working copy of the charter party and a proposed drydock clause. This clause required the charterer to guarantee to place the vessel in a position so that it could be drydocked in November 1971 in Portugal, Spain or Japan. These documents were sent to Interocean and National the following day.

H.T. received the proposed charter party on Monday, March 22. He called De Salvo and asked him for two modifications: (1) to broaden the delivery range from the Persian Gulf to include the Red Sea; and (2) to permit trading with Communist China. Interocean agreed to the first modification but could not agree to the second because the crew was Nationalist Chinese. H.T. made no mention of the drydock clause.

Backing up for a moment, on March 18 or 19, De Salvo had asked H.T. if he wanted to subcharter the Oswego Reliance. H.T. replied that he wanted to subcharter the vessel to Chevron for a single voyage. Chevron, however, would not consider the vessel unless she had Tovalop*fn4 insurance which she did not. H.T. requested De Salvo to ask Germano to obtain such coverage for the Oswego Reliance.

This was the first time Tovalop had been mentioned. The Mobiltime form charter was printed in 1967. It did not refer to Tovalop which did not come into effect until 1969.

De Salvo relayed H.T.'s request to Germano on Friday, March 19. Germano informed De Salvo that the entry of the Oswego Reliance into Tovalop would require the entry of Bethlehem's entire fleet ...

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