B-153419, JUNE 12, 1964, 43 COMP. GEN 788

B-153419, JUNE 12, 1964, 43 COMP. GEN 788

GENERAL AVERAGE - CONTRIBUTION ITEMS - FREIGHT FREIGHT CHARGES ON GOVERNMENT CARGO SHIPPED UNDER A MILITARY SEA TRANSPORTATION SERVICE CONTRACT WHICH PERMITTED PARTIAL PAYMENT AFTER SAILING OF THE VESSEL FROM THE PORT OF LOADING BUT DID NOT CONTAIN LANGUAGE THAT COULD BE CONSTRUED AS MAKING PREPAID FREIGHT FULLY EARNED UPON LOADING REGARDLESS OF WHETHER THE CARGO IS DELIVERED AT DESTINATION MUST BE REGARDED AS UNEARNED AND AT THE RISK OF THE VESSEL OPERATOR; THEREFORE, FREIGHT ON GOVERNMENT CARGO LOADED ON A VESSEL SUBJECT TO A GENERAL AVERAGE INCIDENT AS A RESULT OF FIRE SHOULD CONTRIBUTE IN GENERAL AVERAGE ALONG WITH THE CARGO AND THE SHIP AND THE VESSEL OPERATOR IS LIABLE THEREFOR.

TO FRANK B. HALL AND CO., INC., JUNE 12, 1964:

WE HAVE REVIEWED THE BRIEF FILED BY YOUR ATTORNEY, MR. MILTON C. GRACE, ON YOUR BEHALF PROTESTING THE DECISION OF THE CONTRACTING OFFICER OF THE MILITARY SEA TRANSPORTATION SERVICE (MSTS), DEPARTMENT OF THE NAVY, IN HIS LETTER OF MAY 23, 1963, SER: P72 2116. IN SUCH DECISION, THE CONTRACTING OFFICER CONCLUDED THAT THE FREIGHT ON MSTS CARGO CARRIED UNDER CONTRACT MST-51 DATED JULY 1, 1950, AS AMENDED, ABOARD THE SS NATALIE WHICH HAD BEEN TIME CHARTERED TO THE STATES MARINE CORPORATION WHEN A GENERAL AVERAGE INCIDENT OCCURRED AS A RESULT OF FIRE ABOARD THE SHIP ON JUNE 29, 1957, AT YOKOHAMA, JAPAN, WAS UNEARNED UNTIL DELIVERED AT DESTINATION AND THEREFORE WAS 100 PERCENT AT RISK OF THE CARRIER AND ACCORDINGLY SHOULD CONTRIBUTE IN GENERAL AVERAGE ALONG WITH THE CARGO AND THE SHIP. THE EFFECT OF SUCH CONCLUSION ACCORDING TO YOUR COMPUTATIONS MADE AT OUR REQUEST WOULD BE TO INCREASE THE AMOUNT PAYABLE TO THE MILITARY SEA TRANSPORTATION SERVICE FOR ITS LOSSES INCURRED IN SAVING THE COMMON VENTURE BY THE SUM OF $7,969.66 AND TO REQUIRE PAYMENT OF THAT AMOUNT FROM YOUR COMPANY AS ADJUSTERS OF THE GENERAL AVERAGE.

MR. GRACE CONTENDS IN EFFECT THAT 80 PERCENT OF THE FREIGHT CHARGES UNDER CONTRACT MST-51, IN EFFECT AT THE TIME, WAS COMPLETELY EARNED WHEN THE VESSEL WAS LOADED AND THE OWNER OF THE VESSEL PRO HAC VICE, THE STATES MARINE CORPORATION, WAS ENTITLED TO RECEIVE AND RETAIN THEM IRREVOCABLY UNDER ALL CIRCUMSTANCES WHATSOEVER, SHIP AND OR CARGO LOST OR NOT LOST, THE VOYAGE BROKEN OR ABANDONED. HE THUS CONTENDS THAT ONLY 20 PERCENT OF THE FREIGHT WAS AT RISK, AND RECEIVED THE BENEFIT OF AND SHOULD CONTRIBUTE TOWARDS THE EXTRAORDINARY EXPENSES INCURRED IN AVERTING THE DANGER TO THE SHIP AND CARGO RESULTING FROM THE FIRE AND THAT YOUR AVERAGE STATEMENT WHICH WAS COMPUTED ON THAT BASIS WAS PROPER AND THE SUM OF $95,657.79 PAID AS GENERAL AVERAGE TO THE MSTS REPRESENTS THE FULL AMOUNT DUE THE UNITED STATES.

PRIOR TO ESTABLISHMENT OF THE MILITARY SEA TRANSPORTATION SERVICE FOR THE PURPOSES OF TRANSPORTING CARGO AND PASSENGERS BY SEA FOR THE DEPARTMENT OF DEFENSE, THE TRANSPORTATION CORPS, DEPARTMENT OF THE ARMY, PERFORMED SOMEWHAT SIMILAR SERVICES AND USED TO SECURE SUCH SERVICES A SPACE CHARTER, A TYPICAL CONTRACT CONTAINING IN SUCH REGARD A PROVISION WHICH READ AS FOLLOWS:

FULL FREIGHT TO THE DISCHARGING PORT NAMED IN THE VOYAGE COMMITMENT ORDER FOR THE SPACE COVERED BY SUCH ORDER SHALL BE CONSIDERED COMPLETELY EARNED WHEN THE VESSEL IS LOADED AND THE OWNERS SHALL BE ENTITLED TO ALL FREIGHT AND CHARGES DUE HEREUNDER WHETHER ACTUALLY PAID OR NOT AND TO RECEIVE AND RETAIN THEM IRREVOCABLY UNDER ALL CIRCUMSTANCES WHATSOEVER, SHIP AND/OR CARGO LOST OR NOT LOST, THE VOYAGE BROKEN OR ABANDONED, AND WHETHER ON OUT BOUND OR RETURN VOYAGES.

SUCH CONTRACTUAL CLAUSES, AS BETWEEN PRIVATE PERSONS, HAVE BEEN HELD TO BE VALID AND TO MAKE FREIGHT FULLY EARNED ON LOADING OF THE VESSEL AND PAYABLE IN ANY EVENT. ALLAN WILDE TRANSPORT CORP. V. VACUUM OIL CO., 248 U.S. 377 (1919); INTERNATIONAL PAPER CO. V. THE "GRACIE D. AMBERS," 248 U.S. 387 (1919); STANDARD VARNISH WORKS V. THE "BRIS," 248 U.S. 392 (1919). THERE MAY BE SOME QUESTION WHETHER SUCH A PROVISION IS VALID WHERE GOVERNMENT FREIGHT IS INVOLVED BECAUSE OF SECTION 3648 OF THE REVISED STATUTES, 31 U.S.C. 529, PROHIBITING THE ADVANCE PAYMENT OF PUBLIC FUNDS UNLESS AUTHORIZED BY THE APPROPRIATION CONCERNED OR OTHER LAW. SUCH QUESTION WAS CONSIDERED, BUT NOT DECIDED, BY THE SECOND CIRCUIT COURT OF APPEALS IN ALCOA STEAMSHIP CO. V. UNITED STATES, 175 F.2D 661, 663, (1949), AND BY THE SUPREME COURT IN ITS DECISION IN THE SAME CASE, 338 U.S. 421, 425 (FOOTNOTE) (1949), BOTH COURTS FINDING IT UNNECESSARY IN THE SITUATION THERE INVOLVED TO PASS UPON THE QUESTION.

UPON THE MSTS BEING ESTABLISHED, THAT SERVICE DRAFTED THE MSTS SHIPPING CONTRACT USED IN THIS CASE WHICH, IT REPORTS, IT INTENDED WOULD PROVIDE FOR FREIGHT BEING EARNED ONLY UPON DELIVERY OF THE CARGO TO DESTINATION AS UNDER THE GOVERNMENT BILL OF LADING CONSIDERED BY THE SUPREME COURT IN THE ALCOA CASE REFERRED TO ABOVE. IT IS REPORTED THAT THE LANGUAGE WAS ADOPTED IN ORDER TO CARRY OUT SUCH INTENTION AND WAS AGREED TO BY THE ENTIRE AMERICAN OCEAN SHIPPING INDUSTRY. ALSO IT IS REPORTED THAT MSTS HAS NEVER SETTLED ANY SHIPPING CONTRACT CARGO OR GENERAL AVERAGE CLAIM ARISING UNDER SUCH CONTRACT ON ANY BASIS OTHER THAN THAT FREIGHT WAS AT RISK OF THE VESSEL OPERATOR.

CONTRACT MST-51 IN ARTICLE 3 PROVIDES THAT THE FREIGHT RATES TO BE APPLIED SHALL BE IN ACCORDANCE WITH THE SCHEDULE OF RATES ATTACHED AND ARTICLE 4, AS AMENDED AND IN EFFECT AT THE TIME OF THE VOYAGE, HEADED"PAYMENT," PROVIDES:

(A) AT ANYTIME (SIC) AFTER THE SAILING OF THE VESSEL FROM THE PORT OF LOADING, THE CONTRACTOR MAY SUBMIT PROPERLY CERTIFIED INVOICES OR VOUCHERS WITH RESPECT TO EACH SHIPPING ORDER TOGETHER WITH A COPY OF SUCH SHIPPING ORDER AND SHALL THEREUPON BE PAID A SUM EQUAL TO EIGHTY PER CENT(80 PERCENT) OF THE COMPENSATION PAYABLE UNDER ARTICLE 3 FOR SUCH SHIPMENT. THE BALANCE OF THE COMPENSATION PAYABLE FOR SUCH SHIPPING ORDER, EXCEPT AS PROVIDED IN SUBPARAGRAPH (C) BELOW, SHALL BE PAID UPON THE DELIVERY OF THE CARGO TO THE CONSIGNEE OR AS OTHERWISE DIRECTED BY THE GOVERNMENT AT THE PORT OF DESTINATION AND THE SUBMISSION BY THE CONTRACTOR OF PROPERLY CERTIFIED INVOICES OR VOUCHERS WITH RESPECT TO THE SHIPPING ORDER, SUCH INVOICES OR VOUCHERS TO BE SUBSTANTIATED BY CERTIFIED COPY OF THE MANIFEST COVERING THE SHIPMENT TOGETHER WITH A COPY OF THE SHIPPING ORDER. THESE INVOICES SHALL BE SUBMITTED TO THE MILITARY SEA TRANSPORTATION SERVICE COMMANDER WHOSE ADDRESS APPEARS ON THE FACE OF THE SHIPPING ORDER AND WHO SHALL AFTER CONFIRMATION OF DELIVERY OF THE CARGO TO THE CONSIGNEE PREPARE THE PUBLIC VOUCHER AND MAKE PAYMENT. A COPY OF THE MANIFEST RECEIPTED BY THE CONSIGNEE MAY, FOR THE PURPOSE OF PAYMENT HEREUNDER, BE ACCEPTED AS CONFIRMATION OF DELIVERY OF THE CARGO.

(C) UPON DELIVERY, IF THERE IS ANY SHORTAGE OR DAMAGE NOT DEFINITELY KNOWN TO BE THE FAULT OF THE GOVERNMENT OR ITS AGENTS, AND IT IS CONSIDERED BY THE CONTRACTING OFFICER THAT WITHHOLDING OF CERTAIN MONIES IS NECESSARY TO PROTECT THE INTEREST OF THE GOVERNMENT, THE DOLLAR AMOUNT OF SUCH SHORTAGE OR DAMAGE MAY BE ESTIMATED AND WITHHELD FROM SUMS DUE, PENDING FINAL DETERMINATION OF THE AMOUNT OF SHORTAGE OR DAMAGE AND THE CONTRACTOR'S LIABILITY THEREFOR.

ARTICLE 15 UNDER THE HEADING "GENERAL AVERAGE CLAUSE" PROVIDES:

GENERAL AVERAGE SHALL BE ADJUSTED, STATED AND SETTLED, ACCORDING TO YORK- ANTWERP RULE 1950, AT SUCH PORT OR PLACE IN THE UNITED STATES AS MAY BE SELECTED BY THE CARRIER, AND AS TO MATTERS NOT PROVIDED FOR BY THOSE RULES ACCORDING TO THE LAWS AND USAGES AT THE PORT OF NEW YORK. IN SUCH ADJUSTMENT, DISBURSEMENTS IN FOREIGN (SIC) CURRENCIES SHALL BE EXCHANGED INTO UNITED STATES MONEY AT THE RATE PREVAILING ON THE DATES MADE AND ALLOWANCE FOR DAMAGE TO CARGO CLAIMED IN FOREIGN CURRENCY SHALL BE CONVERTED AT THE RATE PREVAILING ON THE LAST DAY OF DISCHARGE AT THE PORT OR PLACE OF FINAL DISCHARGE OF DAMAGED CARGO FROM THE SHIP.

ARTICLE 19 UNDER THE HEADING "DISPUTES" PROVIDES:

EXCEPT AS OTHERWISE PROVIDED IN THIS CONTRACT, ANY DISPUTE CONCERNING A QUESTION OF FACT ARISING UNDER THIS CONTRACT WHICH IS NOT DISPOSED OF BY AGREEMENT SHALL BE DECIDED BY THE CONTRACTING OFFICER, WHO SHALL REDUCE HIS DECISION TO WRITING AND MAIL OR OTHERWISE FURNISH A COPY THEREOF TO THE CONTRACTOR. WITHIN 30 DAYS FROM THE DATE OF RECEIPT OF SUCH COPY, THE CONTRACTOR MAY APPEAL BY MAILING OR OTHERWISE FURNISHING TO THE CONTRACTING OFFICER A WRITTEN APPEAL ADDRESSED TO THE SECRETARY, AND THE DECISION OF THE SECRETARY OR HIS DULY AUTHORIZED REPRESENTATIVE FOR THE HEARING OF SUCH APPEALS SHALL UNLESS DETERMINED BY A COURT OF COMPETENT JURISDICTION TO HAVE BEEN FRAUDULENT OR CAPRICIOUS OR ARBITRARY, OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE BE FINAL AND CONCLUSIVE; PROVIDED THAT, IF NO SUCH APPEAL IS TAKEN, THE DECISION OF THE CONTRACTING OFFICER SHALL BE FINAL AND CONCLUSIVE. IN CONNECTION WITH ANY APPEAL PROCEEDING UNDER THIS CLAUSE, THE CONTRACTOR SHALL BE AFFORDED AN OPPORTUNITY TO BE HEARD AND TO OFFER EVIDENCE IN SUPPORT OF ITS APPEAL. PENDING FINAL DECISION OF A DISPUTE HEREUNDER, THE CONTRACTOR SHALL PROCEED DILIGENTLY WITH THE PERFORMANCE OF THE CONTRACT AND IN ACCORDANCE WITH THE CONTRACTING OFFICER'S DECISION.

NO TIMELY APPEAL WAS TAKEN UNDER THE DISPUTES CLAUSE TO THE CONTRACTING OFFICER'S DECISION OF MAY 23, 1963, ON WHETHER THE FREIGHT WAS AT RISK AND IF SUCH QUESTION IS ONE OF FACT, IT HAS BECOME FINAL. ASSUMING THAT SUCH QUESTION IS ONE OF LAW, THERE IS NOTHING IN THE LANGUAGE OF THE CONTRACT TO INDICATE THAT FREIGHT OR ANY PORTION THEREOF WAS TO BE CONSIDERED FULLY EARNED IN THE ABSENCE OF DELIVERY AT DESTINATION. THE LANGUAGE USED IS ENTIRELY FREE OF THAT USUAL AND CUSTOMARY WHERE IT IS INTENDED THAT PREPAID FREIGHT IS TO BE CONSIDERED FULLY EARNED ON THE VESSEL BEING LOADED. THUS THERE IS NOTHING THEREIN STATING "FULL FREIGHT (OR 80 PERCENT OF THE FULL FREIGHT) SHALL BE CONSIDERED COMPLETELY EARNED WHEN THE VESSEL IS LOADED," NO LANGUAGE INDICATING ,THE OWNER SHALL BE ENTITLED TO ALL FREIGHT WHETHER ACTUALLY PAID OR NOT AND TO RECEIVE AND RETAIN IT IRREVOCABLY UNDER ALL CIRCUMSTANCES WHATSOEVER SHIP AND/OR CARGO LOST OR NOT LOST, THE VOYAGE BROKEN OR ABANDONED.'

IN ALCOA STEAMSHIP COMPANY, INC. V. UNITED STATES, 338 U.S. 421 (1949), THE SUPREME COURT STATED:

IT IS A PRINCIPLE OF AMERICAN MARITIME LAW THAT OCEAN CARRIER FREIGHT CHARGES ARE NOT EARNED UNLESS AND UNTIL THE GOODS ARE DELIVERED TO DESTINATION. BUT CONTRACTUAL PROVISIONS ESTABLISHING THE SHIPPER'S LIABILITY FOR FREIGHT REGARDLESS OF ACTUAL DELIVERY HAVE BEEN UNIFORMLY HELD VALID * * *.

ALSO, IN NATIONAL STEAM NAVIGATION CO. V. INTERNATIONAL PAPER CO., 241 F. 861 (1917), THE COURT STATED:

THE ENGLISH CASES ON THE SUBJECT OF PREPAID FREIGHT DO NOT EXPRESS THE LAW OF THIS COUNTRY. HERE PREPAID FREIGHT, IN THE ABSENCE OF AN AGREEMENT TO THE CONTRARY, MUST BE RETURNED TO THE SHIPPER, IF THE GOODS DO NOT ARRIVE, AND IN SUCH CASE THE SHIPOWNER CANNOT RECOVER IT OF THE SHIPPER IF NOT ACTUALLY PREPAID.

CONSIDERING THE ABSENCE OF THE USUAL LANGUAGE IN THE MSTS SHIPPING CONTRACT TO MAKE PREPAID FREIGHT (OR 80 PERCENT THEREOF) FULLY EARNED UPON THE LOADING OF THE VESSEL, WHICH LANGUAGE WAS WELL KNOWN TO BOTH THE OPERATOR OF THE VESSEL AND MSTS; THE REPORTED INTENTION OF MSTS TO HAVE THE CONTRACT PROVIDE THAT FREIGHT WAS TO BE PAID ONLY ON DELIVERY AT DESTINATION; AND ITS REPORT THAT IT HAS NEVER SETTLED ANY SHIPPING CARGO CONTRACT OR GENERAL AVERAGE CLAIM ARISING UNDER SUCH CONTRACT ON ANY BASIS OTHER THAN THAT FREIGHT WAS AT THE RISK OF THE VESSEL OPERATOR, IT IS OUR VIEW THAT FREIGHT ON THE S.S. NATALIE WAS AT THE RISK OF THE VESSEL OPERATOR AND THAT THE GENERAL AVERAGE SHOULD BE SETTLED ON SUCH BASIS. ACCORDINGLY REQUEST THAT THERE BE FORWARDED PROMPTLY THE SUM OF $7,969.66 WHICH YOU COMPUTE TO BE DUE THE MSTS ON SUCH BASIS.

WE FIND NOTHING IN COURT CASES RELIED ON IN MR. GRACE'S BRIEF WHICH WOULD WARRANT ANY OTHER VIEW OF THE MATTER AND HIS RELIANCE ON A SETTLEMENT OF A GENERAL AVERAGE CLAIM (Z1-858589) INVOLVING THE S.S. HENRY STEVENSON OF OUR CLAIMS DIVISION IS MISPLACED, IT HAVING BEEN REPEATEDLY HELD THAT SUCH CLAIMS SETTLEMENTS DO NOT CONSTITUTE A PRECEDENT TO BE FOLLOWED IN OTHER CASES. SEE 20 COMP. GEN. 403 AND 23 ID. 310.

PAYMENT OF THE SUM OF $7,969.66 SHOULD BE MADE BY CHECK OR DRAFT PAYABLE TO THE U.S. GENERAL ACCOUNTING OFFICE AND FORWARDED TO THE CLAIMS DIVISION, U.S. GENERAL ACCOUNTING OFFICE, WASHINGTON, D.C., 20548, WITHIN 60 DAYS OF THE RECEIPT OF THIS LETTER TO AVOID THE NECESSITY FOR FURTHER ACTION TO ENFORCE COLLECTION.