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YANGMING MARINE TRANSP. CORP. v. EAST COAST CHEMS.

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


September 14, 1986

YANGMING MARINE TRANSPORT CORP., Plaintiff,
v.
EAST COAST CHEMICALS AND PAPER CORP., Defendant

The opinion of the court was delivered by: SPRIZZO

OPINION AND ORDER

SPRIZZO, D.J.

Plaintiff, Yangming Marine Transport Corporation ("Yangming"), brought this action for breach of contract. Yangming seeks to recover outstanding freight charges for five containers of wastepaper shipped aboard plaintiff's vessel from Baltimore to Taiwan for the defendant in January of 1982. *fn1" See Complaint at [P][P] 4-7. The defendant, East Coast Chemicals and Paper Corporation ("East Coast") counterclaims for damages it allegedly suffered as a result of Yangming's refusal to ship thirty additional containers of wastepaper from New York and Baltimore to Taiwan during the same time period. See Counterclaim at [P] 7.

 A bench trial was held and both parties have filed post-trial briefs. Upon considering all of the evidence presented at trial, as well as all of the arguments made by the parties' counsel at trial and in their papers filed with the Court, the Court concludes that plaintiff is entitled to judgment on its claim set forth in the Complaint and defendant is entitled to judgment on its counterclaim. The following constitutes the Court's findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52.

 BACKGROUND

 The defendant, East Coast, is a New York corporation, see Pre-Trial Order ("PTO") at [P] 5(i), which exports wastepaper. See Tr. at 40. According to the testimony of Mr. Sharwell, the president of East Coast, wastepaper is used in the recycling business to make finished paper. See id. East Coast purchases the wastepaper in the United States and then sells the commodity to purchasers in countries, such as Taiwan and Korea, where there is no virgin pulp. See id. at 41. The testimony at trial establishes that the export market for wastepaper is highly competitive. See id. at 41-42. According to Mr. Sharwell, the freight rate is "the most integral" factor in determining which exporter will succeed in the competition for supply contracts. See id. at 42. This is because the freight rate costs more than the wastepaper itself. See id.

 The plaintiff, Yangming, is a foreign corporation engaged in the international carriage of goods by sea. See PTO at [P] 5(a). Solar International Shipping Agency Inc. ("Solar"), not a party to the action, is plaintiff's Atlantic and Gulf Coast agent. See PTO at [P] 5(b). It is authorized to make bookings, to issue bills of lading and to collect ocean freight. See id. Glory International Forwarders Inc. ("Glory"), not a party to the action, is a freight forwarder. See Tr. at 44. Acting as defendant's agent, it is authorized to make bookings that reserve cargo space for the shipment of defendant's wastepaper.

 On October 1, 1981, Yangming published a special freight rate for wastepaper at $1,300.00 per container. This rate applied only to wastepaper delivered to the pier prior to December 31, 1981. See Tr. 13-15. In late November, based on this freight rate, Mr. Sharwell was able to secure contracts for the sale of wastepaper to purchasers in Taiwan. See Tr. at 50-51; 83-85. After Mr. Sharwell guaranteed delivery of the wastepaper, the foreign purchasers issued irrevocable letters of credit to East Coast. See Tr. at 43, 51. East Coast then booked space on Yangming's vessels to ship the wastepaper.

 Specifically, on November 30, 1981, Glory, acting on behalf of East Coast, telephoned Mr. Wang, the supervisor of traffic at Solar, and booked space for fifteen containers of wastepaper aboard plaintiff's vessel, the Ming Moon, traveling from Baltimore to Taiwan ("the Baltimore booking"). See Pl. Ex. 12. On December 17, 1981, Glory, again acting as East Coast's agent, contacted Solar and booked space for twenty containers of wastepaper aboard plaintiff's vessel, the Ming Star, traveling from New York to Taiwan ("the New York booking"). See Pl. Ex. 19. *fn2"

 Once a booking was made, the normal shipping procedure between the parties was that plaintiff would release containers, which are used to carry the cargo aboard plaintiff's vessels, to East Coast's supplier of wastepaper. See Tr. at 33, 52, 56. The supplier then would load the wastepaper into the containers and return them to the pier. In December of 1981, however, Mr. Sharwell discovered that Yangming had only released five of the fifteen containers booked pursuant to the Baltimore booking. Moreover, Yangming had not released any of the containers booked pursuant to the New York booking. See id. at 51-52. Upon telephoning Yangming, Mr. Sharwell was informed that Yangming was cancelling both bookings because there was no space available for the wastepaper aboard plaintiff's vessels. See id. at 53.

 Following this telephone call, Mr. Sharwell went to Solar and met with Solar's vice president of sales and traffic, Mr. Edward Yu. See id. at 53, 117. At that meeting, Mr. Yu again told Mr. Sharwell that there was no space available for the wastepaper on the vessels booked. See id. at 54, 118. Moreover, Mr. Sharwell's testimony, which the Court finds credible, establishes that Mr. Yu refused Sharwell's request that Yangming roll the bookings over and carry the wastepaper on ships with space available sailing later in January. Mr. Yu told Mr. Sharwell that he could not roll the bookings over because there was no space available for wastepaper on Yangming's vessels travelling later in January. See id. at 54-55. In addition, Mr. Yu told Mr. Sharwell that, in any event, Yangming did not want wastepaper cargo anymore and that therefore Yangming was raising the rate for wastepaper to $1,900.00 a container. See id. at 55. *fn3"

 In accordance with what Mr. Yu told Mr. Sharwell, after Yangming's special freight rate for wastepaper of $1,300.00 per container expired on December 31, 1986, Yangming raised its rates for wastepaper to $1,900.00 per container. See Tr. at 23-24. On January 6, 1982, however, shortly after Yangming cancelled East Coast's bookings due to lack of available space, Yangming lowered its rate to $1,400.00 per container. See id. Yangming applied this lowered rate to cargo delivered to the pier after December 31, 1981 which was transported on ships sailing on or after January 6, 1982. See id. at 24-25.

 Mr. Wang, the supervisor of traffic at Solar, testified that the rate was initially raised to $1,900.00 because, in December of 1981, it appeared that Yangming had too much cargo and not enough space. See id. at 23. According to Mr. Wang, however, in early January it became apparent that Yangming did not have enough cargo on ships sailing in January, and the rate was lowered in an effort to attract more cargo. See id. at 24.

 On January 6, 1982, plaintiff's vessel, the Ming Star, left New York without any of East Coast's cargo, booked pursuant to the New York booking, aboard. See id. On or about January 15, 1982, however, Solar did issue two bills of lading for the shipment of the five containers which were previously released to East Coast pursuant to the Baltimore booking. See Pl. Ex. 1, 2. Plaintiff shipped those five containers aboard the Ming Moon, which left Baltimore for Taiwan on January 15, 1982. See Tr. at 24. Plaintiff's charge for this shipment, at the agreed upon rate of $1,300.00 per container was $6,500.00. *fn4" See Pl. Ex. 1, 2. It is undisputed that East Coast has not paid this freight charge. See Tr. at 39.

 As a result of Yangming's cancellation of the New York booking and the remaining portion of the Baltimore booking, East Coast cancelled its existing agreements with the suppliers of wastepaper in New York and Baltimore and made arrangements to ship similar amounts of wastepaper to Taiwan from Florida and California. According to Mr. Sharwell, this was the least costly alternative means by which East Coast could fulfill its contractual obligations to the purchasers of wastepaper in Taiwan. See Tr. 92, 96.

 DISCUSSION

 Plaintiff's Claim

 Yangming's complaint seeks to recover the $6,500.00 ocean freight bill for carrying the five containers of wastepaper aboard the Ming Moon. See Complaint at [PP] 6-7. At trial, defendant presented no defense to this claim. See Tr. at 39-40. Moreover, in its post-trial memorandum, defendant conceded that plaintiff properly shipped the wastepaper and that defendant has not paid any part of the agreed-upon freight bill of $6,500.00. See Defendant East Coast's Post-Trial Memorandum and Proposed Findings at 2-3. At the end of trial, the Court ruled in favor of the plaintiff on this claim, but stayed judgment pending the resolution of defendant's counterclaim. See Tr. at 161, 165. Defendant's Counterclaim

 Defendant counterclaims for $14,341.42 in damages as a result of Yangming's alleged breach of contract to transport the ten remaining containers of wastepaper booked on the Ming Moon pursuant to the Baltimore booking and the twenty containers booked on the Ming Star pursuant to the New York booking. See PTO at [P] 4.

 In defense of this counterclaim, plaintiff argues that both the New York and Baltimore bookings were conditional bookings subject to space availability. According to the plaintiff, there was no space available on either the Ming Moon or the Ming Star, see Plaintiff Yangming's Proposed Post-Trial Findings of Fact and Conclusions of Law at 3-4, and therefore plaintiff properly cancelled the bookings. See id. at 4; Plaintiff's Reply Memorandum at 2. Plaintiff specifically disclaims any obligation under the booking agreements to roll the bookings over and carry the cargo of vessels other than the Ming Moon or Ming Star, which may have has space available later in January.

 Defendant, on the other hand, argues that the two bookings were firm rather than space available bookings. See Defendant East Coast's Post-Trial Memorandum and Proposed Findings ("Def. Mem.") at 6. Defendant also contends that even if the bookings were subject to space availability, Yangming breached the shipping agreement because there was space available on both the Ming Moon and the Ming Star. See id. at 9-10; Tr. at 112-13. Finally, defendant argues that, even if there was no space available on those specific ships, there was space available on Yangming's ships sailing later in January and that Yangming was contractually obligated to roll the bookings over to the next available ship. See Def. Mem. at 10.

 The oral bookings in this action created a valid and binding contract of affreightment. See Orient Mid-East Lines v. Albert E. Bowen Inc., 458 F.2d 572, 574 (2d Cir. 1972); Alamo Barge Lines, Inc. v. Rim Maritime Co., Ltd., 596 F. Supp. 1026, 1034 (E.D. Louisiana 1984). The Court agrees with the plaintiff, however, that the contracts were made subject to space availability. Solar's booking memos, which were prepared in the ordinary course of Solar's business, contain the notation "subject to space available." See Pl. Ex. 12, 19. At trial, defendant attempted to rebut these documents by offering Glory's booking memos into evidence. These memos, however, do not contain any notation as to whether the bookings were firm or subject to space availability. See Def. Ex. H, I. The Court concludes that plaintiff's documents, which clearly state that the bookings are conditional, are more persuasive than the defendant's documents, which do not even purport to deal with the issue of firm versus space available bookings.

 Moreover, Mr. Wang testified that the bookings were made subject to space availability. See Tr. at 129, 136, 138. Since Mr. Wang accepted the bookings on behalf of Solar and Yangming, he clearly had personal knowledge of the terms of the bookings. In contrast, the only witness called by the defendant at trial, Mr. Sharwell, had no personal knowledge of the terms of the agreement. Although Mr. Sharwell testified that the bookings were firm, see Tr. at 46, an employee of Glory, not Mr. Sharwell, booked the shipments on behalf of East Coast with Yangming. That witness was not called at trial. Therefore, the Court does not find Mr. Sharwell's testimony on this issue persuasive.

 Having concluded that the bookings were made subject to space availability, the Court must next determine whether there was space available aboard the vessels booked. Although both Mr. Wang and Mr. Yu testified that there was no space available on either Ming Moon or the Ming Star, see Tr. at 118, 140, Mr. Wang also testified that Yangming lowered their rates for wastepaper to $1,400.00 per container on Janaury 6, 1982 because Yangming did not have enough cargo on vessels sailing later in January. See Tr. at 23-24, 30. In light of Mr. Wang's explanation as to why Yangming lowered its freight rate, the Court draws the obvious inference that there was space available on Yangming's vessels which sailed after January 6, 1982. Since the Ming Moon left Baltimore on January 15, 1982, see Tr. at 24, the Court concludes that there was space available for defendant's cargo aboard the Ming Moon. *fn5" Thus, Yangming clearly breached the Baltimore booking agreement when Yangming cancelled the booking due to lack of available space.

 The Court finds, however, that the defendant has not sustained its burden of proving by a preponderance of the evidence that there was space available for the New York booking on the Ming Star. The Ming Star left New York on January 6, 1982. Although Yangming applied the $1,400.00 rate to cargo aboard the Ming Star, since the rate was not filed until Janaury 6, see Tr. at 24-25, the Court is not persuaded that the lowered rate was precipitated by a need for extra cargo on that voyage. Cf Tr. at 27-28.

 Since there was no space available on the Ming Star, the Court must determine whether the plaintiff was obligated to roll the booking over to the later voyages on which there was space available. In interpreting the terms of the parties' booking contract, the Court must ascertain and effectuate the intent of the parties. See Lipsky v. Com. United Corp., 551 F.2d 887, 896 (2d Cir. 1976); Skandia America Reinsurance Corp. v. Schenck, 441 F. Supp. 715, 723-24 (S.D.N.Y. 1977). Evidence of a prior course of dealing between the parties and evidence of trade usage is admissible to aid in the interpretation of the parties' agreement. See 11 Williston, Contracts ยง 648 (3d ed. 1968). For the reasons set forth below, the Court concludes that the parties intended that the New York booking would be rolled over where, as here, there was space available on later ships.

 Mr. Sharwell testified that, during the eight years he had previously shipped wastepaper on Yangming's vessels, Yangming had always rolled over bookings when Yangming ran short of containers. See Tr. at 56. Moreover, Mr. Sharwell's understanding was that even on space available bookings, Yangming would roll the bookings over to subsequent ships. See Tr. at 102. Furthermore, he testified that the usual practice in the shipping industry is to overbook and then roll over cargo which does not get aboard a particular vessel. See id. at 101. The Court finds Mr. Sharwell's testimony on this point to be very credible.

 Indeed, the initial testimony of Mr. Wang fully supports Sharwell's interpretation of the contract. Thus, Wang initially testified that if cargo was overbooked on Yangming's vessels, the cargo would be rolled over to the next ship with available space. See Tr. at 34. Significantly, Wang did not state that this roll-over procedure was inapplicable to space available bookings.

 When Mr. Wang was recalled by the plaintiff as a witness in defense of the counterclaim, Wang for the first time suggested that the roll-over procedure varied according to whether a booking was firm or space available. According to Wang's revised testimony, Yangming first releases containers to firm bookings and then releases containers to space available bookings only if there is room for the cargo. See Tr. at 153. Moreover, Wang asserted that Yangming will only roll over bookings if the shipper's cargo was already delivered to the pier in Yangming's containers. See Tr. at 135, 136. *fn6" Given that Mr. Wang did not initially make any distinction between firm and space available bookings, and taking into account that the Court has already disbelieved Mr. Wang's testimony that there was no space available on the Ming Moon, the Court does not find Mr. Wang's revised testimony to be credible.

 In short, in accordance with Mr. Wang's initial testimony and Mr. Sharwell's testimony, the Court concludes that, at the time of contract, both parties intended that Yangming would roll the New York booking over to subsequent ships if no space was available on the the Ming Star and if space was available on subsequent voyages. *fn7" Moreover, as noted above, the Court concludes that there was space available on plaintiff's vessels which sailed after January 6, 1982. Plaintiff therefore breached the New York booking agreement when Mr. Yu refused to roll the bookings over to subsequent ships. See Tr. at 54-57. *fn8"

 The only remaining issue raised by the parties with respect to defendant's counterclaim relates to damages. Defendant has adequately proved that they have suffered a loss of $14,341.42, representing increased shipping costs and increased costs in the supply of wastepaper, as a result of plaintiff's breach. See Tr. at 65-70. Plaintiff argues, however, that East Coast is not entitled to those damages because East Coast failed to properly mitigate its damages.

 As the harmed party, East Coast was obligated to take whatever reasonable actions it could to minimize its damages. See Air Et Chaleur, S.A. v. Janeway, 757 F.2d 489, 494 (2d Cir. 1985). In an effort to satisfy its contractual obligations to the purchasers of wastepaper in Taiwan, *fn9" upon Yangming's cancellation of the Baltimore booking, East Coast arranged to have the same supplier of wastepaper supply the wastepaper at the same price in Miami instead of Baltimore. East Coast did this because the freight rate in Miami was less expensive than the lowest available rate in Baltimore. See Tr. at 92-93.

 With respect to the New York booking, taking into account the available freight rates in other port cities, as well as the price and availability of wastepaper in those cities, East Coast mitigated its damages by cancelling its New York supply contract and purchasing the wastepaper in California. Although East Coast paid a higher price for the wastepaper in California, since the freight rate was so much cheaper in California than in New York, East Coast was able to properly minimize its damages by shipping from California. See Tr. at 66-67. *fn10"

 Plaintiff argues that other shipping lines offered generally the same rate as Yangming in January of 1982 and that, therefore, East Coast could have shipped on other carriers in New York or Baltimore at a minimal increased cost. See Tr. at 144, 157-58. *fn11" The burden of proving that the defendant could have mitigated its damages by shipping on other lines in New York or Baltimore is on the plaintiff. See Air Et Chaleur, S.A., supra, 757 F.2d at 494; Katz Communications v. Evening News Association, 705 F.2d 20, 26 (2d Cir. 1983). The only evidence offered by plaintiff in support of this argument, however, was the conclusory testimony of Mr. Wang, which the Court does not find credible. While Mr. Wang asserted that other shipping lines' rates in January of 1982 were comparable to Yangming's rates, see Tr. at 144, he conceded that he had not even checked to see what the other lines' rates were before testifying. See id.

 In contrast, Mr. Sharwell testified after reviewing the available rates for January of 1982 that all other shipping lines' rate were higher than Yangming's in January of 1982. See Tr. at 167-68. The Court therefore concludes that the weight of the credible evidence establishes that East Coast properly mitigated its damages by choosing the least costly means of fulfilling its contractual obligations to the purchasers in Taiwan.

 CONCLUSION

 Plaintiff is entitled to damages in the amount of $6,500.00 as a result of defendants' failure to pay ocean freight bills due for shipments made aboard plaintiff's vessels.

 Defendant is entitled to damages in the amount of $14,341.42 as a result of plaintiff's breach of an agreement to transport defendant's cargo.

 Both parties are entitled to pre-judgment interest on their respective claims.

 The parties shall submit an appropriate proposed judgment within two weeks of the date of this Opinion and Order.

 It is SO ORDERED.


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