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Banking & Trading Corp. v. Floete

decided.: July 9, 1958.


Author: Waterman

Before HINCKS, LUMBARD and WATERMAN, Circuit Judges.

WATERMAN, Circuit Judge.

The appellant, Banking & Trading Corporation, Ltd. (BTC), an Indonesian corporation, commenced this action in the district court to recover the price of a shipment of rubber which its agent Isbrandtsen Company on its behalf allegedly sold in 1947 to Rubber Development Corporation (RDC), an agency of the United States.*fn1 The cause was tried to the court, which rendered judgment for the defendant. The grounds upon which the judgment was based were that (1) the parties never entered into a contract for the sale of the rubber, (2) if they did enter into such a contract, RDC had the power to and did rescind it, and (3) in any event, plaintiff never performed the alleged contract because of its failure to obtain export permits and its failure to deliver the rubber. Banking & Trading Corporation v. Reconstruction Finance Corporation, D.C.S.D.N.Y.1956, 147 F.Supp. 193. The appellee sets up as an additional basis for denying recovery that BTC breached its express warranty of title.

A comprehensive statement of the facts is contained in the opinion of the district court. We set forth here only such facts as are relevant to our conclusion that the court below correctly held that BTC and RDC did not enter into a contractual relationship.

During 1946 there was a serious shortage of rubber in the United States, one of the causes of which was the lack of exports from Indonesia, a principal source of rubber. This situation was due to the war of independence being waged by the Indonesians against the Netherlands which had theretofore exercised sovereignty over the area. Toward the end of 1946 the Republic of Indonesia controlled, with the exception of a few seaports, the entire islands of Java, Sumatra and Madura upon which were located substantially all of the estates where rubber was produced. However, since the Netherlands Navy controlled the surrounding waters, the Dutch were able to effectively enforce a ban upon exports imposed by them upon the Republic.

During the World War and until the spring of 1947 RDC was the agency of the United States Government charged with the procurement of natural rubber, and it was the only authorized importer thereof in this country. During 1946 the procedure adopted by RDC for buying rubber was to enter into agreements providing for the general terms of sale with governments of rubber-producing nations. The actual arranging of individual transactions, however, was left to private traders within the United States who purchased the rubber from the foreign sources and then sold to RDC the rubber so acquired on terms of sale set forth in prescribed RDC form contracts. By letter dated January 24, 1947 RDC told the trade that it reserved the right to refuse to purchase any rubber "at any time prior to the actual execution of a purchase contract for the amounts shown thereon."

In January 1947 the plaintiff, an agency of the Republic of Indonesia, approached Isbrandtsen Company, an American corporation, and requested the latter to act for it in arranging the sale and carriage of Indonesian products to the United States and with the proceeds of such sales to purchase for Indonesian use American consumer goods and industrial equipment. Thereafter, on January 20, 1947, representatives of Isbrandtsen proposed to one Proctor, the vice-president of RDC, that RDC purchase certain rubber in the possession of the Republic. Though RDC was anxious to obtain the rubber, it was unable to arrange the purchase because of objections interposed by our State Department. The State Department knew, as RDC did also, that substantially all rubber coming from Indonesia had been produced on estates owned by citizens of the Netherlands that were then under the control of the Republic. Because the Netherlands had placed an embargo on all estate produce and since the United States still recognized Dutch sovereignty over all of Indonesia, the State Department informed Isbrandtsen and RDC that it was "unable to approve any action contrary to Dutch regulations * * *." Negotiations between RDC and Isbrandtsen were thus brought to a standstill.

On January 27, 1947, one week after RDC had been originally approached by representatives of Isbrandtsen, one Ryan, the general counsel of Isbrandtsen, informed two State Department officials that he had received assurances from Dutch authorities that the Netherlands government would not oppose the purchase by RDC of rubber from the plaintiff. That same day the same State Department officials met with one Zimmerman, the Netherlands East Indies Trade Commissioner in Washington, and they verified the information which they had received from Ryan. Accordingly, the State Department withdrew its previous objections to the proposed negotiations and so notified Isbrandtsen and RDC. On February 3 a representative of Isbrandtsen met with Proctor, the vice-president of RDC, and discussed terms for the purchase of the rubber by RDC. At Proctor's suggestion Isbrandtsen, on that day, submitted a written offer on plaintiff's behalf.*fn2 By the terms of the offer plaintiff proposed to sell RDC "up to five thousand (5000) long tons of Java rubber * * * F.O.B. ocean vessel at port or ports in Java * * *." Four days later, on February 7, the general counsel of RDC prepared a letter, approved by RDC's Executive Committee, which he sent to Isbrandtsen. This letter, which did not come to the attention of the Isbrandtsen officers handling the transaction until February 11, restated the terms of the offer and went on to add:

"We are prepared to accept this rubber on an F.O.B. steamer basis for February shipment only. If the rubber is not shipped in February it will be necessary for you to re-offer on a Cost and Freight basis. Shipment in any event must not be later than March 31, 1947. As soon as you have particulars of shipment of rubber we suggest that you prepare contracts to cover the quantity and price of the several grades shipped in accordance with the usual procedure on the F.O.B. contract form enclosed. Such contracts * * * [the enclosed contract form was RDC's printed form 22, the standard form by which it purchased rubber from American sellers] should contain the necessary qualifications to conform to the above terms."

Meanwhile, on February 8, at Cheribon, Java, the plaintiff began loading rubber aboard the S.S. Martin Behrman, a ship operated by Isbrandtsen under bareboat charter from the U.S. Maritime Commission. The loading began and continued even though Isbrandtsen had by then received information either that new regulations promulgated by Netherlands East Indies authorities prohibited the export of the rubber involved or, at the very least, prohibited it unless those authorities issued an export permit. On February 12 the master of the Martin Behrman received a radio message from Isbrandtsen, dated February 11, that the rubber he was loading had been sold to the United States Government. The record is clear, however, that loading of the rubber was not dependent upon receipt of an acceptance from RDC of Isbrandtsen's offer, for not only had the loading of the Martin Behrman started prior to the receipt by Isbrandtsen of any acceptance of its offer but the loading was to continue even if RDC refused the offer. On February 13 Isbrandtsen notified plaintiff's insurers that coverage for the rubber should cease as soon as the rubber was loaded. This is claimed to have been done in accordance with RDC's instructions to the trade to the effect that RDC's own insurance attached from the time that rubber purchased on its account was placed aboard a vessel.

On February 13, and again on February 17, Isbrandtsen notified one Sniffin, the New York Buying Agent of RDC, of the loading of a total of 3,000 tons of rubber aboard the Martin Behrman. These notifications were appropriately recorded by Sniffin. Also on February 13 Isbrandtsen modified and filled out the RDC form 22 contract which had been enclosed in RDC's letter of February 7. Modifications in the form were necessary in order to conform the contract to the terms of the previous correspondence between the parties and also because form 22 had been drawn to cover the typical situation in which the American trader was itself the seller, and not, as here, an agent of a foreign seller. The contract was then executed by one Smith, vicepresident of Isbrandtsen, and mailed to Sniffin who received it on February 14.On February 17 Sniffin and Proctor, the former vice-president of RDC, who was then acting only as a consultant, discussed with Isbrandtsen certain suggestions RDC wished for revisions on its part in the contract form which Isbrandtsen had previously modified and had then executed. The suggested revisions dealt primarily with safeguards as to the quantity and quality of the rubber, shipping tolerances and shipping documents. Isbrandtsen made some, but apparently not all, of the changes Sniffin and Proctor suggested. Later that day Sniffin mailed Isbrandtsen's proposed contract to the president of RDC, together with a letter suggesting that still another change be made in the form.

The contract represented by the modified form 22 was never executed by RDC. On February 17 RDC's general counsel learned of the new Netherlands East Indies regulations.Accordingly he called Smith of Isbrandtsen and told him that RDC expected Isbrandtsen to obtain any necessary export permit and that RDC "would not do anything further until the export permit had been granted." The files of Isbrandtsen's insurance carrier contain the following notation:

"R.D.C. * * * telephoned Isbrandtsen that it would not sign contracts for purchase of rubber until Isbrandtsen had received permit from Dutch to sail."

By the end of February all the rubber had been loaded aboard the Martin Behrman. As soon as the loading was completed the Dutch naval authorities at Cheribon ordered the Martin Behrman to Batavia. At Batavia the entire cargo of the Martin Behrman was seized by the Dutch officials there, and Isbrandtsen's control thereof ceased. There is some dispute between the parties as to whether the seizure was under eminent domain or was a confiscation ...

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