Liberty Navigation & Trading Co., Inc. v. Kinoshita & Co., Ltd., Tokyo

285 F.2d 343, 1960 U.S. App. LEXIS 3042
CourtCourt of Appeals for the Second Circuit
DecidedDecember 14, 1960
Docket14, Docket 26107
StatusPublished
Cited by5 cases

This text of 285 F.2d 343 (Liberty Navigation & Trading Co., Inc. v. Kinoshita & Co., Ltd., Tokyo) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Liberty Navigation & Trading Co., Inc. v. Kinoshita & Co., Ltd., Tokyo, 285 F.2d 343, 1960 U.S. App. LEXIS 3042 (2d Cir. 1960).

Opinions

FRIENDLY, Circuit Judge.

This appeal presents an interesting question as to the measure of damages for the breach of a voyage charter. Our view differs both from that of the trial judge and from that urged by appellant.

On May 17, 1957, Liberty Navigation & Trading Co., Inc., as owner, and Kin■oshita & Co., Ltd., as charterer, entered into a charter of the American steamer Josefina. The vessel was to proceed to loading ports in the Philippines, there load a cargo of raw sugar in bags, “10,-160 metric tons 5% more or less at owners option which the charterers bind themselves to ship,” and then proceed to ■discharging ports in Korea. The freight was to be $12 per long ton. The Josefina was required to be in the first loading port in the Philippines on or before July 10,1957. The charterer was to load .at the average rate of 1,000 metric tons per weather working day and to discharge at the average rate of 1,200 metric tons per weather working day, ‘Sundays and holidays excepted, unless ■used. Loading and discharge were to be performed by the charterer at its expense; however, a separate clause, 22, provided: “Dunnage and mats, and taxes, if any, to be for Owners account.”

On June 10, 1957, the Philippine Government having suspended the issuance ■of export licenses for sugar to Korea, ■defendant cancelled the charter. The Josefina was then en route with a cargo from India to Japan. On June 21 plaintiff wrote that it regarded the notice of June 10 as a repudiation of the charter, would seek other employment for the Josefina, and would hold defendant liable in damages. Plaintiff did not succeed in obtaining other cargoes within the Far East. However, by paying an indemnity of $12,000 to another vessel, plaintiff arranged a charter from the Philippines to the east coast of the United States, on what were known to be relatively unfavorable terms. The substitute charter consumed 82 days, earned freight of $152,310, and resulted in an overall loss of $71,735; however, it had the advantage, among others, of returning the Josefina to the United States where she had to be in any event in October when the articles of her crew expired. Defendant does not dispute that it is liable for breach of the charter and that plaintiff took all reasonable measures to mitigate the damages.

The first step in computing the damages was to determine the freight plaintiff would have received under the can-celled charter. Here there was a dispute as to how much sugar the Josefina could have carried. The trial court found she had capacity to carry 10,145 long tons, an amount within the owner’s option to take on 10,160 metric tons 5% more or less; at the agreed rate this would have yielded freight of $121,740. Appellant claims she could not have carried more than 9,539 long tons, but we accept the judge’s finding since there was a conflict of testimony and his determination can in no event be deemed clearly erroneous.

A much more serious controversy concerned the amount to be deducted from the freight for the expenses plaintiff would have had in performing the can-celled charter and the consideration to be given to the results of the substitute charter. As to the former, the trial judge took the view that the only expenses properly deductible from the freight under the cancelled charter were such expenses as would have been entailed in making the voyage over and above the amounts that would have had to be expended in any event to maintain the vessel for the same length of time in a foreign port. As to the second, he held that, since the substitute charter had resulted in a loss, it was not to be considered at all. From the estimated freight of $121,740 receivable under the [346]*346cancelled charter he therefore deducted only $23,124, this being the sum of ship broker’s commissions, port charges and dunnage that would have been payable by’ the vessel under the cancelled charter, and the excess of the cost of fuel for the I6V2 days when the Josefina would have been at sea over the fuel cost for maintaining her in port during the same period. Accordingly, he awarded damages of $98,616.

Defendant attacks the award as excessive, contending that, at least in the ordinary case, damages for the breach of arvoyage charter may not be more than the excess of the freight for the voyage over the expenses of the voyage determined on a full costing basis, although they may be less than this to the extent that a substitute charter has produced profits. The plaintiff claims the award to be required by The Gazelle and Cargo, 1888, 128 U.S. 474, 9 S.Ct. 139, 32 L.Ed. 496. In our view the District Court overcompensated the plaintiff, but not to the extent the defendant argues.

We see no logical basis for a rule that would set the difference between the freight and the fully allocated cost of performing the cancelled voyage as the maximum damages that could be recovered for breach of a charter where consequential damages are not established. Plaintiff points out that such a rule would provide an incentive for the breach of voyage charters when the market had fallen so that owners were offering charters at less than full costs. The damages which the law accords to the plaintiff are the value of the defendant’s performance less the plaintiff’s savings from being relieved of the necessity of performing on his own part. 5 Williston, Contracts (1937 ed.), pp. 3765-66. Accordingly, what must be deducted from the freight is “any saving to the plaintiff due to the non-performance of the contract.” Ibid., p. 3764; amounts which the plaintiff has had to pay in any event, e. g., crew wages, during a period when the vessel is idle, have not been saved. Defendant has cited no authority to support the rule of limitation which it advances. Indeed, in one of the decisions relied on by it,. United Transportation Co. v. Berwind-White Coal-Mining Co., 2 Cir., 1926, 13. F.2d 282, this Court sanctioned a measure of damages more liberal to the owner. There the cancelled charter would have been completed in 36 days, whereas, the substitute charter began five days later and ran for a longer period. The commissioner computed damages as being the profit under the broken charter determined after deducting full costs, less 31 times the daily profits under the substitute charter similarly computed, plus 5 days of ordinary expenses for keeping' the vessel in port while awaiting the substitute charter. This Court sustained the commissioner’s computation against attack by the charterer.

The formula in the United Transportation case would support the award here made by the District Court if there had been no substitute charter; for, if the vessel is idle for the entire period, it is immaterial whether one first deducts, from the freight the expenses of the broken charter computed on a fully allocated basis and then adds back the expenses of maintaining the vessel in port for the same period, or deducts only the added expenses as the district judge did. However, here there was a substitute charter which, although operated at an overall loss, made some contribution to such expenses as crew hire, maintenance, etc., during the period of the broken charter. The District Court was mistaken insofar as it failed to credit defendant with the amount so contributed and thereby required defendant to reimburse plaintiff for some general expenses that plaintiff has already recovered.

Analysis of the figures of record will serve both to demonstrate this and to arrive at a proper award, bearing in mind the caution in Venus Shipping Co. v. Wilson, 2 Cir., 1907, 152 F.

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285 F.2d 343, 1960 U.S. App. LEXIS 3042, Counsel Stack Legal Research, https://law.counselstack.com/opinion/liberty-navigation-trading-co-inc-v-kinoshita-co-ltd-tokyo-ca2-1960.