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ATLANTIC OVERSEAS CORP. v. FEDER

May 12, 1978

ATLANTIC OVERSEAS CORPORATION, Plaintiff,
v.
LOUIS H. FEDER; PIONEER INSTITUTIONAL TRADING COMPANY; PAULSSEN & GUICE, LTD., and L. H. FEDER CORPORATION, Defendants



The opinion of the court was delivered by: BONSAL

BONSAL, D.J.

 This is an action brought by plaintiff Atlantic Overseas Corporation ("AOC") on behalf of the operators of the vessel the M/V DUMURRA to recover from defendants the sum of $65,520 paid to the Ivory Coast Customs Authorities ("Customs") in settlement of a fine imposed upon the DUMURRA for underdeclaration of weight with respect to a cargo of used clothing. Named as defendants in this action are L. H. Feder Corporation which does business under the name of Pioneer Institutional Trading Company (both hereinafter referred to as "PITC"), Louis H. Feder, its president, and Paulssen & Guice, Ltd. ("P & G"), the freight forwarder for PITC. In this action which was tried to the Court without a jury the only witness called by either side was a witness called by AOC to testify as an expert on the customs laws of the Ivory Coast. The balance of the evidence in this case consists of depositions, documentary exhibits and stipulations of facts stated in the pretrial order.

 Factual Background

 In early 1974 PITC contracted to sell a purchaser in Niamey, Niger: (1) 500 bales of used original shorts consisting of 140 pounds per bale; (2) 500 bales of used cotton pants consisting of 100 pieces per bale; (3) 100 bales of used boys' shirts consisting of 300 pieces per bale; and (4) 300 bales of used men's shirts consisting of 200 pieces per bale. The contract price for all 1400 bales of used clothing was $44,200 CIF Abidjan, Ivory Coast.

 The above cargo was booked aboard the DUMURRA for shipment from New York to Abidjan, Ivory Coast. From Abidjan the cargo was to be transported inland by road and rail to Niamey, Niger.

 P & G prepared the bill of lading and the certificate of origin for the cargo on the basis of PITC's commercial invoice which indicated a weight of 140 pounds per bale for the 500 bales of used shorts but provided no weight for the remaining 900 bales sold by the piece. P & G erroneously assumed that all 1400 bales of used clothing weighed 140 pounds per bale and, based on this assumption, stated the total weight of the cargo to be 196,000 pounds on the bill of lading and the certificate of origin.

 The draft dock receipts which were prepared by PITC and which accompanied the cargo to the pier indicated that the weight of the cargo was 105,000 pounds. PITC's clerk had arrived at this figure of 105,000 pounds by estimating the weight of each of the 1400 bales to be 75 pounds, overlooking the fact that the 500 bales of shorts actually weighed 140 pounds each.

 When the cargo arrived at the pier AOC noticed the discrepancy between the weight indicated on the dock receipts prepared by PITC and the weight indicated on the bill of lading prepared by P & G and contacted P & G to ascertain which weight was correct. After consulting with PITC, P & G advised AOC that, based on information P & G had received from PITC, the correct weight of the cargo was the weight of 105,000 pounds indicated on the dock receipts. On the basis of this communication, AOC changed the weight on the bill of lading from 196,000 pounds to 105,000 pounds and used the latter figure in preparing the DUMURRA's cargo manifest. Unfortunately, however, neither PITC nor P & G changed the certificate of origin to conform to the weight stated in the corrected bill of lading.

 On June 22, 1974 the DUMURRA arrived in port at Abidjan, Ivory Coast and discharged the cargo of used clothing. Customs subsequently noticed the discrepancy between the weight of the cargo indicated on the cargo manifest and the bill of lading on the one hand and the weight indicated on the certificate of origin on the other hand and notified AOC's local agent in the Ivory Coast, Societe Navale Transafric ("Transafric") that because the weight of the cargo was underdeclared the vessel would be subjected to a fine for Customs fraud. Although Customs initially informed Transafric that this fine would be 45 million African Financial Community ("CFA") francs, equivalent to $189,000 (U.S.), it later informed Transafric that the potential fine might be as much as 156 million CFA francs, equivalent to $655,200. As a result of negotiations between Transafric and Customs, Customs thereafter agreed to accept $65,520, or 10% of the potential fine, in settlement of this matter. Transafric communicated this proposal to AOC which authorized Transafric to enter into the settlement and to pay the amount of $65,520 on behalf of the vessel.

 After its attempts to recover this amount from defendants proved unsuccessful, AOC instituted this action for indemnity on behalf of the vessel owner.

 Discussion

 I. AOC's Claim for Indemnity

 A.

 AOC alleges that it was subjected to payment of $65,520 in settlement of the Customs fine solely on account of defendants' failure to state the correct weight of the cargo in the bill of lading and the certificate of origin and, accordingly, seeks recovery of this amount from defendants by way of indemnity. AOC asserts its claim for indemnity against defendants Feder (individually), PITC, and P & G on the basis of two separate theories, both of which are founded on defendants' alleged breach of warranty with respect to the actual weight of the cargo.

 AOC first contends that it is entitled to indemnity from defendants under the provisions of section 3(5) of the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. § 1303(5). Section ...


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