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TRANSATLANTIC FIN. CORP. v. UNITED STATES

April 28, 1965

TRANSATLANTIC FINANCING CORPORATION
v.
The UNITED STATES of America



The opinion of the court was delivered by: CORCORAN

 CORCORAN, District Judge.

 This case involves a libel by Transatlantic Financing Corporation (herein Transatlantic) against the United States of America for abnormal costs incurred by the libellant in the ocean transportation of cargo for the United States Government from Galveston, Texas to Bandar Shapur, Iran. The added costs are attributable to a diversion of a ship from the normal sea route due to the blockage of the Suez Canal on July 26, 1956 by the Egyptian Government.

 The Court has jurisdiction of the cause by reason of the Suits in Admiralty Act, 46 U.S.C. §§ 741-742.

 The facts were stipulated and the case argued on briefs.

 The controlling facts follow:

 On October 2, 1956 the libellant and the United States (acting through the United States Department of Agriculture as agents for the International Cooperation Administration) executed a voyage charter for the carriage by the SS CHRISTOS (then under a time charter to Transatlantic) of a shipload of bagged wheat from a United States Gulf port to one or two safe ports in Iran, the port or ports to be designated by charterer.

 The charter did not prescribe the sea route to be followed by the CHRISTOS but the normal, most direct route would have been via the Straits of Gibraltar and the Suez Canal. The freight charge was agreed at $31.00 per ton or $31.50 per ton if two ports of discharge were designated. Ninety percent of the freight was to be paid on completion of loading and the balance with all adjustment for dispatch, demurrage, dead freight and extra freight was to be paid after completion of the voyage, on vouchers supported by documents.

 The CHRISTOS loaded a cargo of 9,982.5 long tons of bagged wheat at Galveston, Texas and cleared that port on October 27, 1956 for Bandar Shapur, Iran where the United States, exercising its option, had directed that the entire cargo was to be discharged.

 The ship plotted a course through the Straits of Gibraltar and the Suez Canal. In the meantime, on July 26, 1956, the Government of Egypt had nationalized the Suez Canal Company and assumed its operation, causing an international crisis which was unresolved at the time that the CHRISTOS cleared for Iran. However, on the date of sailing the Canal was still open to traffic notwithstanding the seizure by the Egyptian Government.

 Two days after the CHRISTOS cleared Galveston, to wit on October 29, 1956, Israel invaded Egypt. On October 31, 1956 Great Britain and France invaded the Suez Canal Zone. On November 2, 1956 the Egyptian Government sank three ships to obstruct the entrance to the Canal and thus closed it to traffic. The CHRISTOS, in Mid-Atlantic, thereupon reduced her speed to await developments and instructions.

 On or about November 7, 1956 a Mr. Beckman of J.H. Winchester and Company, the brokers and agents for the libellant, called a Mr. Potosky of the Transportation and Storage Division of the Department of Agriculture with whom the negotiations for the carriage charter had been conducted. Beckman, in view of the Suez crisis, requested instructions concerning the disposition of the cargo or the deviation of the ship from its normal course. He sought an agreement from Potosky to pay additional compensation to cover the cost of routing the ship around the Cape of Good Hope. Potosky was not the contracting officer for the Department of Agriculture and although he was authorized to engage in preliminary negotiations he had no authority to bind the United States to a contract or a modification of a contract. He advised Beckman that the United States expected Transatlantic to live up to the terms of the charter, i.e., to deliver the cargo at the designated port in Iran regardless of the route required to be followed. He further advised Beckman that he did not believe Transatlantic was entitled to additional compensation for costs incurred by reason of a deviation, but that Transatlantic would be free to file a claim if in the opinion of Transatlantic it was entitled to additional compensation.

 On the same day, November 7, 1956, the libellant advised the ship's master to proceed to Bandar Shapur via Cape of Good Hope. The CHRISTOS thereupon changed course and began its voyage around the Cape.

 On November 14, 1956 Beckman again called Potosky to advise that the CHRISTOS had been reported off Dakar and was proceeding to Iran by way of the Cape. On this occasion Potosky, having by this time conferred with his superiors, advised Beckman that the United States Government would not amend the charter to provide for additional compensation for ...


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