Van Nievelt, Goudriaan Co's Stoomvart Maatschappij, N v. V. Cargo & Tankship Management Corporation

421 F.2d 1183, 1970 U.S. App. LEXIS 10683

• Court: Court of Appeals for the Second Circuit
• Decided: February 16, 1970
• Docket: 33965_1
• Status: Published

Opinions

HAYS, Circuit Judge.

This appeal challenges so much of a judgment entered in the United States District Court for the Southern District of New York as failed to allow pre-judgment interest on’ the amount of appellant’s recovery.

I.

Plaintiff-appellant chartered three motor vessels to defendant-appellee in 1960 and 1961 at an agreed price per deadweight ton per month, payable semi-monthly. The charters were extended beyond the original periods through the summer of 1963. However, the charterer stopped regular payments in the fall of 1962 and the vessels were withdrawn in the late spring and early summer of 1963.

On April 9, 1964, the shipowner commenced suit against the charterer for the earned but unpaid charter hire and for certain cash expenditures. The total amount claimed was $663,789.71, and a demand was made for pre-judgment interest on that figure. The shipowner did not claim damages based upon the unexpired terms of the charters.

Although the charterers’ answer was a general denial, in a pre-trial order dated June 1966, it admitted liability, disputing only the amount.¹ In that same pre-trial order, the shipowner renewed its demand for interest.

On April 16, 1969, at a pre-trial conference before Judge Edelstein, the charterer's counsel stated that he had authority to consent to a judgment. However, the shipowner had submitted amended figures for the unpaid hire² which reflected certain clerical adjustments in the initial computations and charterer’s counsel requested a short adjournment so that his client, who was in Europe, could verify these amended figures. This request was granted.

On June 3, 1969,³ the charterer’s counsel informed the court that he was authorized to consent to judgment in the amount of $627,576.11.⁴ Shipowner’s counsel again raised the question of interest on the amount awarded. The court requested memoranda and held a further conference before reserving decision on this point. When the final judgment was rendered on July 2, 1969, interest was not awarded and no reasons were given for its denial.⁵ We agree with the shipowner that interest should have been awarded and therefore reverse and remand to the court below for the computation of interest.

II.

The charterer argues that the figure consented to was the product of a negotiated settlement which included the question of interest. The record belies this contention. The liability was liquidated and the minor adjustments were merely clerical corrections. At no time did' the shipowner’s counsel agree to relinquish the demand for interest.⁶ In fact, he vigorously renewed the demand even after the charterer’s counsel indicated that he had authority to consent to the judgment.

The charterer also suggests that since the question of awarding interest was within the discretion of the trial judge, it should not be disturbed on appeal. The general rule is that an admiralty court has discretion to award or deny pre-judgment interest. E. g., Lek-as & Drivas Inc. v. Goulandris, 306 F.2d 426, 429 (2d Cir.1962); O’Donnell Transportation Co. v. City of New York, 215 F.2d 92, 95 (2d Cir.1954). However, this discretion is not unlimited:

“ * * * allowance of interest is the general rule and * * * disallowance is supportable only in the face of ‘exceptional circumstances.’ See The Wright, 2 Cir., 1940, 109 F.2d 699, 702. But it is equally clear that the rationale underlying the award of interest is the desire to make whole the injured party, see The President Madison, 9 Cir., 1937, 91 F.2d 835, 846, and the presence or absence of ‘exceptional circumstances’ must always be determined in the light of that purpose.” Id.

This general rule in favor of allowing interest is much stronger where, as in the instant case, the damages are liquidated and are based upon a breach of contract. Cf. Gardner v. The Calvert, 253 F.2d 395, 402 (3d Cir.), cert. denied sub nom. Sound Steamship Lines Inc. v. Gardner, 356 U.S. 960, 78 S.Ct. 997, 2 L.Ed.2d 1067 (1958) ;⁷ 5 Corbin, Contracts § 1046 (1964); 3 Benedict, Admiralty § 419 p. 191 (Knauth ed. 1940). And interest must be awarded if the shipowner is to be made whole, since it was unjustifiably deprived of the use of the money.

Thus unless there were “exceptional circumstances”⁸ e.g., O’Donnell Transportation Co. v. City of New York, supra, 215 F.2d at 95, interest should have been awarded. In the record below and the arguments before this court we find no suggestion of any such “exceptional circumstances.”

Accordingly, the decision as to interest is reversed and the case remandéd for the award of interest.

1 . Charterer’s contentions were summarized as follows in the pre-trial order:

“[Respondent does not agree to the extent of the damages as contended herein by libillant (sic). Libillant does not show items which should be credited to the respondent in the sense of mitigating libillents damages.”

2 . The amended hire figures provided for a total reduction of $36,213.60 from the figure originally pleaded.

3 . On May 22, 1969 a conference was held at which time charterer’s counsel informed the court that the figures had not been verified. At a conference held on June 2, 1969 charterer’s counsel’s associate advised the court that he was authorized to consent to the amended hire figures. However, he had no authority to consent to the cash expenditures originally pleaded, and Judge Edelstein requested that charterer’s counsel appear the next day.

4 . This figure represents the original amount pleaded minus the amended hire figures.

5 . Judge Edelstein merely crossed out the provisions relating to interest in the proposed judgment submitted by the shipowner and signed the document.

6 . This fact was recognized by the charterer’s counsel, Mr. Poles, at the hearing of June 17, 1969 when he said:

“Mr. Poles: Mr. Rohrer, [the shipowner’s counsel] I think I can cut your argument short here. At no time did I mention that you had waived any interest nor in my memorandum is there any information that you did waive interest. If you reached that conclusion, that was merely a conclusion of your own — maybe by an overabundance of caution or whatever it is. I say here and now that I at no time indicated that you waived any interest.

7 . The charterer suggests that the following language from The Calvert supports its position:

“The libelant urges, however, that the principle above referred to [that the trial court has discretion to award or deny interest] applies only to collision cases and not to cases in which damages are awarded for breach of contract. We do not agree. Where damages are unliquidated and can only be established by litigation the application of the rule is a matter of discretion for the court dependent upon the circumstances of the case.” 253 F.2d at 402.

This language is entirely consistent with our decision since the damages in this case were liquidated and litigation was not required for their establishment.

8 . Such “exceptional circumstances” include delaying tactics on the part of the plaintiff, the continued use of damaged vessels, the absence of repairs, O’Donnell Transportation Co. v. City of New York, supra at 95; appealing from an order which was plainly unappealable, Petition of Wills Lines Inc., 251 F.2d 306, 310 (2d Cir.), cert. denied sub nom. Wills Lines, Inc. v. Tankport Terminals, Inc., 356 U.S. 939, 78 S.Ct. 782, 2 L.Ed.2d 814 (1958); and the fact that damages were caused by joint fault, The Wright, 109 F.2d 699, 702 (2d Cir. 1940).