CASE 11-6 The Chinese Seamen’s Foreign Technical Services Co.v. Soto Grande Shipping Corp., Sa

The defendant was the owner of the Panamanian MN Pomona. The Facts The plaintiff in this action was engaged in the provision of crewing services for vessels in maritime commerce. The defendant was the owner of the Panamanian MN Pomona.

The Facts Dec. 17th,1984 The plaintiff and the defendant shipowner executed a crewing services contract in Shanghai. The contract required the plaintiff to provide 25 seamen to serve for one year aboard the Pomona. The defendant was to pay monthly wages of $20,833 to the plaintiff. Jan.14th,1985 The plaintiff dispatched the 25 seamen to the vessel. By Sep. 16th,1985 The plaintiff had received only two payments, totaling $21,455 for wages and $840.80 for ship’s stores. The plaintiff claimed $225,283.05 in wage payments from the defendant shipowner.

The Seizure and Sale On Sep.16th, 1985, the plaintiff submitted to the Shanghai Maritime Court a petition for the seizure of the Pomona, which prayed for an order directing the shipowner to post security in the amount of U.S. $200,000, or alternatively, for an order directing the sale of the vessel. On Sep.28, the court therefore ordered the vessel’s seizure.

The Seizure and Sale Due to the failure of the shipowner to furnish security, the court ordered the sale of the Pomona in accordance with Article 93, clause 3 of the Law of Civil Procedure(For Trial Implementation) of the People’s Republic of China. Clause 3 …provides that if the property under legal custody cannot be held and maintained for a long period, the People’s Court may compel a sale and deposit the proceeds in the court’s registry. The Pomona was sold at public auction on October 18,1985, and sales proceeds of $430,000 were generated and deposited in the court’s registry. Simultaneously, the court published an official announcement that all creditors of the vessel should apply to register their claims within 30 days.

The Suit On October 3,1985, the plaintiff commenced suit in the Shanghai Maritime Court and sought, in addition to the above-mentioned back wages of the seamen, the fuel expenses which it had covered for the vessel, the cost of the vessel arrest, its legal fees, liquidated damages for breach of contract, and interest. The total amount of plaintiff’s claim was $259,636.03. The shipowner failed to file answering papers within the time limit prescribed by law. Although twice formally summoned by the court, the shipowner consistently failed to submit any legitimate reasons for its refusal to enter a formal appearance in the action. Having give the defendant the requisite opportunity to be heard, the court conducted a trial of the action in the shipowner’s absence.

The Rulings The shipowner was required to compensate the plaintiff for crew wages in the amount of $190,149.24. The shipowner was required to compensate the plaintiff for fuel expenses in the amount of $3,500.00. The plaintiff’s claims for other expenses were denied. The shipowner was required to bear certain costs of litigation, including the filing fee($1,176.87), the application fee for seizure of the vessel($625), and miscellaneous litigation expenses($139.90), totaling $1,941.77. Those expenses were to be deducted from the sales proceeds after the effective date of the ruling.

The Preliminary Distribution of The Sales Proceeds A claim for seamen’s wages in the sum of $171,840.26 put forward by the Chinese Seamen’s Foreign Technical Services Company(CSFTSC) of the Shanghai Maritime Transport Bureau; Claims totaling $23,292.18 for harbor usage, ship’s stores and other items put forward by the Ningpo Branch of the China Ocean Shipping Agency(COSA); A ship mortgage in the amount of $1,931,530.34 held by the National Westminster Bank, USA. A claim asserted by the Repair Center of the Shanghai Shipbuilding Industry Corporation(SSIC) for repairs totaling $39,000.

The Final Distribution of Sales Proceeds The plaintiff received $202,549.50 The Shanghai CSFTSC received $150,000 The Ningpo Branch of COSA received $15,274.29 The National Westminster Bank USA received $44,970.23 The Repair Center for SSIC Corporation received $4,500.00

Casepoint In this case, a shipowner had contracted for a crew of 25 seamen for a one-year period, but nine months after the crew started work, only a small portion of the wages had been paid. Thus, the law in China(as elsewhere) allowed the seizure and sale of the ship to satisfy the wage and other claims. The owner was notified but did not answer the court petition, so judgment was entered for the plaintiff and the ship was sold at auction. The court then decided how to distribute the proceeds of the sale.