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AMERICAN MAIL LINE, LTD. v. UNITED STATES

December 19, 1962

AMERICAN MAIL LINE, LTD., a corporation, Libelant,
v.
UNITED STATES of America, Respondent. JAMES GRIFFITHS & SONS, INC., Libelant, v. UNITED STATES of America, Respondent. OLYMPIC STEAMSHIP CO., Inc., Libelant, v. UNITED STATES of America, Respondent



The opinion of the court was delivered by: BEEKS

The captioned cases, arising out of the aftermath of World War II, have been consolidated for purposes of trial as to their common issues. There are issues involved in Griffiths and in Olympic which are not common to all and such issues have been reserved for determination at a future date. The libels in each case, brought under the Suits in Admiralty Act, 46 U.S.C. 741 et seq., sound in quasi contract and seek the return of so-called additional charter hire alleged to have been illegally exacted from libelants (charterers) in violation of Section 709(a), Merchant Marine Act of 1936, 46 U.S.C. 1199, incorporated by reference in Section 5(c) of the Merchant Ship Sales Act of 1946, 50 U.S.C. Appendix § 1738(c), (herein called Section 709(a)), which insofar as is pertinent reads:

'(a) Every charter made by the Secretary of Commerce * * * shall provide that whenever, at the end of any calendar year subsequent to the execution of such charter, the cumulative net voyage profits (after payment of the charter hire reserved in the charter and payment of the charterer's fair and reasonable overhead expenses applicable to operation of the chartered vessels) shall exceed 10 per centum per annum on the charterer's capital necessarily employed in the business of such chartered vessels, the charterer shall pay over to the Secretary, as additional charter hire, one-half of such cumulative net voyage profit in excess of 10 per centum per annum * * *.'

 The Government denies the illegality and has cross-libeled for charter hire allegedly due and unpaid in accordance with the terms of the charters involved or failing that, on the theory of unjust enrichment. The Government vigorously contends by way of defense that all libels are time-barred and each party asserts the defense of estoppel and/or voluntary payment in response to the affirmative claims set forth in the libels and cross-libels. Cross motions for summary judgment in American Mail have heretofore been heard and denied and all cases are now before the Court for decision on the merits as to the common issues. The amount due on the respective theories of each party is not in dispute, the only question before the Court being whether there is liability on the part of the Government or upon the charterers.

 Following the cessation of hostilities in World War II, the Government had a virtual monopoly on the ownership of ocean-going tonnage and these cases, as well as many others filed elsewhere, arose from the Government's attempt to rehabilitate the American merchant marine and return it to private operation in accordance with announced Congressional policy. *fn1"

 In March 1946, pursuant to such policy, the Government determined to sell or charter its surplus war-built or acquired vessels to private operators. *fn2" In carrying out this policy, the War Shipping Administration entered into temporary 'interim' demise charters, designated 'WARSHIPDEMISEOUT -- 203' (herein called Form 203), with established steamship companies under the provisions of Public Law 101 (77th Cong., 1st Sess.; Act of June 6, 1941; 55 Stat. 243, 50 U.S.C.Appendix § 1273(a)), pending the fixing of prices for the vessels and the issuance of regulations and charter forms under the 1946 Act. *fn3"

 Libelants entered into such interim bareboat charters which were modeled upon the provisions of the 1946 Act, and provided for 'basic charter hire' of 15 percent of the proposed sales price, and for 'additional charter hire' payable in accordance with the aforesaid provisions of Section 709(a), Merchant Marine Act, 1936.

 On September 1, 1946, Maritime *fn4" supplanted the interim charters with the Ship Sales Act form of charter designated 'SHIPSALESDEMISE -- 303' (herein called Form 303) and it is this form of charter which is involved herein. All libelants executed such a charter: On October 26, 1946, American Mail Line executed 'as of' September 2, 1946, and it thereafter operated 13 vessels under the charter during the years 1946 through 1949; on October 7, 1946, Olympic Steamship Company executed 'as of' September 2, 1946, and it thereafter operated 10 vessels under the charter during substantially the same period of time; on October 28, 1946, James Griffiths executed 'as of' October 5, 1946, and it thereafter operated 2 vessels under the charter until October 15, 1948.

 Form 303, like Form 203, fixed basic charter hire at 15 percent of the statutory sales price pursuant to Section 5(b) of the 1946 Act, 50 U.S.C.Appendix § 1738(b) (herein called Section 5(b)). However, when fixing the rate of 'additional charter hire,' Maritime substituted for the 50 percent sharing of excess profits specified in Section 709(a) and in Form 203, a sliding scale of rates ranging from 50 to 90 percent of such profits.

 Before executing Form 303, libelants, through associations of which they were members, protested the proposed inclusion of the sliding scale rates on the ground that they violated the 50 percent rate fixed by Section 709(a).

 Following receipt of the protests, Maritime in drafting Clause 13 of Form 303, relating to additional charter hire, substantially amended and revised the clause of Form 203 bearing the same number and relating to the same subject and it is Clause 13 of Form 303 which forms the basis of this litigation.

 As suggested by Judge Friendly in his dissenting opinion in American-Foreign Steamship Corp. v. United States, 291 F.2d 598, 613 (2nd Cir.), the differences in the two clauses can best be understood by setting down in parallel columns the relevant provisions of each:

 'Form 203.

 'Clause 13. Additional Charter Hire. After redelivery of all Vessels under this Agreement, if the cumulative net voyage profits computed for the period of the agreement (after the payment of the basic charter hire provided herein and payment of the Charterer's fair and reasonable overhead expenses applicable to operation of the Vessels) shall be in excess of a rate of ten (10) per centum per annum on the Charterer's capital necessarily employed in the business of the Vessels during the period of the agreement (all as hereinafter defined in Clause 23) the Charterer shall pay to the owner at Washington, D.C. within sixty (60) days thereafter, an amount equal to one-half of such cumulative net voyage profit in excess of an amount computed for the period of the agreement at the rate of ten (10) per centum per annum on such capital as hire in addition to the hire payable under Clause 12; Provided, however, That such payment of ...


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