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ZERVOS v. S.S. SAM HOUSTON

December 7, 1976

Nikiforos ZERVOS, Plaintiff,
v.
S.S. SAM HOUSTON and Waterman Steamship Corp., Defendants



The opinion of the court was delivered by: WERKER

STATEMENT OF FACTS

 WERKER, District Judge.

 This is a suit to determine the right of the parties to the proceeds of 150 tons of Djimmah coffee, each shipment of 75 tons each of which was shipped from Ethiopia to the ports of New York and New Orleans.

 The motion before the court is a motion by Waterman Steamship Corporation ("Waterman") for summary judgment against Continental Bank International ("CBI"). Judgment is sought for freight charges in the amount of $6,619.92, demurrage in the amount of $7,590.25 and disbursements in the amount of $298.26 incurred in the defense of this action. Waterman seeks this amount under two agreements variously called guarantees or indemnities dated October 22, 1975 issued by CBI (the "CBI Agreements"). The motion is opposed by Addis Ababa Bank ("Addis Bank"), National Bank of Ethiopia, Solomat, P.L.C. ("Solomat") (hereinafter collectively referred to as the "Ethiopian parties"), and CBI.

 Waterman is a carrier of goods by sea which maintains an agent in Addis Ababa, Ethiopia by the name of Gellatly Hankey & Co. (Eth) S.C. ("Gellatly"). Among other services it provides, Waterman carries cargoes of coffee from Ethiopia to United States ports.

 Solomat, an Ethiopian corporation, had borrowed funds from Addis Bank in July 1975 for the purchase of 600 metric tons of coffee for export, some 450 of which were bound for San Francisco and which are not at issue here. Pursuant to the financing arrangement Solomat had with Addis Bank, bills of lading were to be negotiated and delivered to Addis Bank to secure the repayment of loans by Solomat. Seventy-five metric tons were destined for New York, and another seventy-five tons were bound for New Orleans. A contract had been entered by Solomon Mahteme Selassie ("Solomon"), Solomat's general manager, with Van Ekris & Stoett, Inc. ("Van Ekris") for the purchase of 500 tons of coffee, 75 tons of which were destined for New York. Payment for the New York shipment was to be made by Van Ekris by means of a letter of credit in favor of Addis issued by Marine Midland Bank ("Marine Midland") at Van Ekris's request. Another contract had been entered under which Solomon agreed to sell and Lonray, Inc. ("Lonray") agreed to buy 75 metric tons of coffee destined for New Orleans. Payment for this shipment was to be made through a letter of credit issued by First National City Bank ("Citibank") at the instance of Lonray.

 Gellatly received two written shipping instructions from Solomat on or about August 20 or 21, 1975, one of which was to cover the New York shipment of coffee aboard the S.S. Sam Houston, a Waterman vessel, the other of which was to cover the New Orleans shipment. The shipping instructions for the New York shipment requested that a bill of lading naming Solomon as shipper, the consignee as "order" and the notify party as "Van Ekris & Stoett, Inc." be issued. The shipping instructions for the New Orleans shipment requested the issuance of a bill of lading naming Solomat as shipper, the consignee as "order" and the notify party as Lonray. In accordance with the shipping instructions, Gellatly issued two bills of lading. The bill of lading for the New York shipment was designated No. 1 and the bill of lading covering the New Orleans shipment was designated No. 2. Solomon, on or about August 26, 1975, took bills of lading Nos. 1 and 2, which the Ethiopian parties allege were the property of Solomat and fled Ethiopia.

 On September 3, 1975, Gellatly received notice of the alleged theft of bills of lading Nos. 1 and 2 and was simultaneously requested to issue fresh bills of lading for both shipments. In a letter dated September 5, 1975, Addis Bank wrote Gellatly indicating that it would hold Gellatly "harmless and indemnified against any liabilities, claims, risk and damages which you may sustain consequent upon your taking action on the basis of this letter." The letter elsewhere requested Gellatly's assistance in preventing Solomon from negotiating the two bills of lading. The letter further indicated that "If you later on deem it necessary, we can make arrangements to back our guarantee via our international correspondent banks in London and New York." Waterman by telex dated September 5, 1975 stated that it would issue duplicate original bills of lading against the shipper's guarantee endorsed by the bank. No mention was made in Waterman's responsive telex of a correspondent bank backing such a guarantee.

 On September 16, 1975 Addis Bank gave Gellatly two letters of indemnity, the "Addis Agreements," to cover Waterman and its agents upon the issuance of duplicate originals. Gellatly delivered the requested duplicate original bills of lading to Solomat on September 17, 1975. The numbers affixed to the duplicate original New York and New Orleans bills of lading were Nos. 11 and 14 respectively. One day later Addis Bank advised Van Ekris to clear the goods against payment since a replacement bill of lading for the New York shipment had been obtained.

 The Sam Houston arrived in New York on or before September 20, 1975 *fn1" and discharged its New York shipment.

 On September 22, 1975, the United Overseas Bank of Geneva advised that it was holding bill of lading No. 2. The following day, Waterman received notice from an international freight forwarder named Natural, Nydegger Transport Corporation that it was holding bill of lading No. 1. Thereupon Waterman telexed Gellatly and requested that it instruct Addis Bank and the shipper not to negotiate bills of lading Nos. 11 and 14. Waterman also stated that it would now require the posting of a bond with a United States bonding company or the opening up of a letter of credit with a major United States bank and that failing the posting of this additional security that it would require the return of bills of lading Nos. 11 and 14.

 On September 25, 1975, Waterman received a telex from the plaintiff, Nikiforos Zervos ("Zervos") stating that he was in possession of bill of lading No. 1. Thereupon Waterman sent a telex directly to Addis Bank advising it of the Zervos telex and threatening the bank with suit in a United States court unless it returned bills of lading Nos. 11 and 14 and posted the United States security. Negotiations amongst Waterman, CBI and Addis Bank ensued over the issue of United States security.

 In the meantime on September 24, 1975 Marine Midland had received from Addis Bank a delivery package including bill of lading No. 11, and on or about October 2, 1975, it added its endorsement to the bill of lading and delivered it to Van Ekris, indicating that it was releasing the bill of lading free of payment so that Van Ekris could obtain clearance of the shipment of coffee. On the same day, Van Ekris added its endorsement to bill of lading No. 11 and then delivered it fully endorsed to Waterman. Van Ekris presented at the same time a delivery order requesting delivery of the New York shipment to its customer, Hills Bros. Coffee, Inc. ("Hills Bros."). Waterman accepted the fully endorsed bill of lading No. 11 and a check from Hills Bros. covering freight but refused to deliver the New York shipment.

 Later, Zervos appeared at the Waterman office to tender freight monies and demand delivery of the New York shipment. One day after this, on October 22, 1975, CBI issued the two agreements which were signed by a representative of Addis Bank as well. Upon the execution of the CBI Agreements, Waterman then returned to Zervos the check he had tendered for the freight on the two shipments. In the meantime, however, Van Ekris now refused to take delivery of the New York shipment. *fn2" This litigation was begun on October 24, 1975. In an order signed December 17, 1975, the court directed that the coffee constituting the New York shipment be sold ...


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