Sun Co. Inc. v. S.S. Overseas Arctic

United States Court of Appeals,
Fifth Circuit.
No. 93-3400.
SUN COMPANY INC. and Sun Oil Trading Company, Plaintiffs-
Appellants,
v.
S.S. OVERSEAS ARCTIC, Overseas Bulktank Corporation, and BP Oil
Shipping Co., U.S.A., Defendants-Appellees.
Aug. 8, 1994.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before JOHNSON, BARKSDALE, and DeMOSS, Circuit Judges.
JOHNSON, Circuit Judge:
This case calls on the Court to determine whether the M/T
OVERSEAS ARCTIC, Overseas Bulktank Corporation, and BP Oil Shipping
Company (collectively referred to as "Carriers") breached their
duty to properly and carefully load, carry, care for, and discharge
high-temperature fuel oil1 under the Carriage of Goods by Sea Act
("COGSA") during a voyage from Guayanilla, Puerto Rico, to the
ports of Good Hope and St. Rose, Louisiana. The district court
found that the carriers did not violate said duties. This Court
agrees and therefore affirms.
I. Facts and Procedural History
On March 25, 1991, Sun Oil Trading Company ("Sun") contracted
to sell Clarendon Marketing, Inc., 300,000 barrels of straight run
1
High-temperature fuel oil solidifies or congeals at high
temperatures and often requires heat to remain in a liquid state.
1
fuel oil for $18.50 per barrel. To carry out this arrangement, Sun
entered a Tanker Voyage Charter Party with the Carriers. In this
charter party, Sun agreed to charter one of the Carrier's vessels.
The Carriers, in turn, agreed to transport Sun's straight run fuel
oil from Guayanilla, Puerto Rico, to two ports in Louisiana—Good
Hope and St. Rose. The Carriers also covenanted to provide a
vessel which could heat the cargo up to a maximum temperature of
135 degrees and maintain that temperature.2 Anticipating that the
Carriers would only be required to maintain the temperature of the
fuel, as opposed to increasing the temperature, the parties deleted
the contract's penalty for failing to increase the cargo's
temperature.3
Consistent with this expectation, the charter party's Maraven
Cargo Heating Clause expressly provided that "unless otherwise
requested by Charterer, Vessel shall only be required to maintain
2
All temperatures referred to herein are measured in
Fahrenheit.
3
The Maraven Cargo Heating Clause in the original contract
placed upon the Carriers a duty to increase and maintain the
temperature of the cargo to a maximum of 135 degrees if ordered
to do so by Sun. The contract also provided a penalty for the
Carriers' failure to properly heat the cargo. The penalty
portion of the contract stated that if the vessel "fails to
maintain the loaded temperature or to increase and maintain the
temperature of the cargo, as requested by Charterer, Charterer
shall have the option to hold Vessel off berth and/or to suspend
discharging all until the cargo is properly heated, all time and
expense in connection with the foregoing being for [Vessel]
Owner's account." Exh. 2 (emphasis added). Although the parties
left undisturbed the provision which required the vessel to
increase the temperature of the fuel oil if so ordered, the
parties deleted the italicized portion of the Heating Clause,
providing a penalty only for the vessel's failure to maintain the
loaded temperature.
2
the cargo at the temperature loaded ... throughout the voyage and
the entire discharge." Assuming that Sun—the charterer—would not
order the chartered vessel to increase the temperature of cargo,
the Carriers designated the M/T OVERSEAS ARCTIC as the vessel to
transport Sun's cargo.4
On March 27, 1991, the OVERSEAS ARCTIC arrived at the loading
port at Guayanilla, Puerto Rico. It commenced loading Sun's
straight run fuel oil on the following day. Richard Beza, the
captain of the OVERSEAS ARCTIC, complained to the port terminal
that the loading of the cargo was taking much longer than
anticipated. In a letter of protest to the terminal, the captain
contended that the delay was due to the low temperature of the
fuel. Unbeknownst to Captain Beza, the vast majority of the cargo
was loaded at temperatures lower than the cargo's pour point.5
Although the captain was displeased with the slow rate of the
loading, he testified that neither the loading nor the temperature
of the cargo raised concerns in his mind, for the fuel was
4
Although the OVERSEAS ARCTIC could maintain the temperature
of the cargo up to 135 degrees, it could not increase the
temperature thereof.
5
The pour point is the temperature at which liquid begins to
solidify, such that it can no longer be poured. In this case,
the pour point of the fuel oil was 95 degrees. Captain Beza
explained during trial that 218,000 of the 330,000 barrels loaded
on the vessel came aboard at temperatures ranging between 86 and
89.9 degrees. One third of the oil had a load temperature which
fluctuated between 101 and 108.3 degrees. The temperature of the
remainder of the fuel, just 3000 barrels, was 115 degrees. This
cargo was combined on the ship, resulting in an average
temperature of 93.6 degrees, a temperature lower than the pour
point.
3
obviously fluid enough to be pumped on board the vessel.6 He
nevertheless sent a telex to Sun, informing the company that the
temperature of the cargo coming aboard was between eighty nine and
ninety degrees. He advised Sun that the vessel was "putting heat
on cargo immediately" and that it would "maintain load
temperature."
After three days of loading, the OVERSEAS ARCTIC departed
Guayanilla and headed for the Louisiana ports. In its voyage
orders to the OVERSEAS ARCTIC, Sun directed Captain Beza only to
maintain the loaded temperature of the fuel.7 Sun did not alter
this order at any time throughout the OVERSEAS ARCTIC's voyage.
Captain Beza claimed at trial that the Carriers complied with Sun's
orders. In fact, he testified that the vessel not only maintained
the temperature in accordance with industry standards, but the
vessel actually increased the temperature of the fuel in some of
the tanks. Indeed, the average temperature of the fuel at
discharge was 89.9 degrees, three-tenths of a degree higher than
the loaded temperature. Nevertheless, as the ship moved from the
warmer Caribbean waters—which, at that time, were eighty degrees—to
cooler Mississippi River waters—which were fifty eight degrees—the
6
Captain Beza testified that the industry standard required
that the fuel be loaded at 20 to 30 degrees above the pour point.
Not knowing the actual pour point of the cargo, Captain Beza had
no reason to believe that the fuel's temperature failed to meet
this standard.
7
Captain Beza testified that he did not know that Sun
expected the vessel to have heating capabilities. As was
customary, the Captain never received a copy of the charter party
which, in this case, was the only document which stated that the
ship was to have such capabilities.
4
cargo located closest to the skin of the single-skin vessel began
to congeal.
Upon reaching the first discharge port in Good Hope,
Louisiana, Captain Beza recognized that the ship would have
problems unloading the cargo. He therefore informed BP's shore
captain, Captain Maslen, of the problems. Captain Maslen contacted
Sun and informed Sun that it needed to have barges immediately
available at the second discharge port. Captain Maslen explained
that any delay could cause further cooling and solidification of
the fuel. The request went unheeded. The OVERSEAS ARCTIC was
required to wait more than thirty-four hours before it was allowed
to begin discharge operations. The low load temperatures, the
cooler Mississippi waters, and the delay in discharge operations
caused 8734 barrels of fuel oil to solidify and therefore remain on
board ("ROB").8 Sun and the Carriers unsuccessfully sought ways to
discharge the ROB from the ship. After meeting failure at every
turn, Sun released the OVERSEAS ARCTIC to go to its next
destination.
The vessel traveled to Coatzacoalcos, Mexico, where it loaded
crude oil for Petrocanada Products. The crude oil acted as a
solvent and melted the ROB. When it arrived at its discharge port
in Portland, Maine, the OVERSEAS ARCTIC unloaded not only
Petrocanada's cargo, but also the ROB from Sun's voyage. The
8
Sun attempted at trial to prove that 10,444 barrels of the
cargo remained on board. However, we agree with the district
court that the ship retained just 8734 barrels of the fuel oil.
Notably, Sun's representative at the discharge ports confirmed
that the ROB consisted of only 8734 barrels of the fuel oil.
5
Carriers did not charge Petrocanada for the excess cargo. Hence,
the ROB inured totally to Petrocanada's benefit.
Sun later brought this action against the M/T OVERSEAS ARCTIC,
Overseas Bulktank Corporation, and BP Oil Shipping Co. for the loss
of its cargo. After a bench trial, the district court ruled that
Sun, having failed to prove that the cargo was in good order when
loaded, had failed to make out its prima facie case. The district
court further held that Sun had breached its duty to load the
high-temperature fuel oil at a proper temperature. Concluding that
the Carriers had fully complied with their obligations to Sun, the
court entered judgment in favor of the Carriers and against Sun.
Sun appeals.
II. Discussion
A. Carriage of Goods by Sea Act
The parties initially dispute whether rules applicable to
private carriage contracts or provisions outlined in the Carriage
of Goods by Sea Act ("COGSA") control in this action. By its own
terms, COGSA applies only if the bill of lading or another similar
document of title evidences the contract for the carriage of goods
by sea. 46 U.S.C. § 1300; Shell Oil Co. v. M/T GILDA, 790 F.2d
1209, 1212 (5th Cir.1986). If one charters an entire vessel,
however, the charter party controls, not the bill of lading. Id.
at 1212. Hence, in that situation, COGSA is inapplicable.
Nevertheless, parties may incorporate the terms of COGSA into their
charter party provisions. When parties so do, COGSA controls, but
only to the extent provided in the charter party. Id. If parties
6
therefore incorporate COGSA provisions, in their entirety, into the
terms of their private carriage contract, COGSA will govern the
entire transaction.
In this case, as in Shell Oil, the parties evidenced their
intent that COGSA govern the entirety of their venture in the
charter party's Clause Paramount. That clause, in pertinent part,
reads as follows: "This Bill of Lading shall have effect subject
to the provisions of the Carriage of Goods by Sea Acts of the
United States."9 In view of the charter party's full incorporation
of COGSA in this case, we hold that COGSA controls here.
B. Applicability of COGSA
As this Court so appropriately declared in Nitram, Inc. v.
Cretan Life, "[t]o enforce their respective rights under [COGSA],
9
The Clause Paramount in this case is almost identical to
the Clause Paramount adopted by the parties in Shell Oil. The
entire clause in the charter party under review here provides the
following:
This Bill of Lading shall have effect subject to the
provisions of the Carriage of Goods by Sea Acts of the
United States, approved April 16, 1936, except that if
this Bill of Lading is issued at a place where any
other Act, ordinance or legislation gives statutory
effect to the international Convention for the
Unification of Certain Rules relating to Bills of
Lading at Brussels, August 1924, then this Bill of
Lading shall have effect, subject to the provisions of
such Act, ordinance or legislation. The applicable
Act, ordinance or legislation (hereinafter called the
"Act") shall be deemed to be incorporated herein and
nothing herein contained shall be deemed a surrender by
the Owner of any of its rights or immunities or an
increase of any of its responsibilities or liabilities
under the Act. If any term of this Bill of Lading be
repugnant to the Act to any extent, such term shall be
void to the extent but no further.
See Shell Oil, 790 F.2d at 1212 n. 3.
7
litigants must engage in the ping-pong game of burden-shifting
mandated" by sections 1303 and 1304 of the Act. 599 F.2d 1359,
1373 (5th Cir.1979). To present a prima facie case under COGSA for
the loss of cargo, a charterer must initially prove that the
carrier failed to deliver all of the goods initially loaded. See
Tenneco Resins, Inc. v. Davy International., AG, 881 F.2d 211, 213
(5th Cir.1989); Horn v. Cia de Navegacion Fruco, S.A., 404 F.2d
422, 435 (5th Cir.1968). The charterer's proffer of the bill of
lading creates the rebuttable presumption that all of the cargo
listed in the document was, in fact, loaded upon the carrier's
vessel in the condition therein described. Blasser Bros. v.
Northern Pan-American Line, 628 F.2d 376, 381 (5th Cir.1980).
Once the charterer presents its prima facie case, the burden
shifts to the carrier to prove either that it exercised due
diligence in preventing the loss of the cargo or to prove that the
loss was caused by at least one of the exceptions set out in
section 1304(2) of COGSA. Tenneco Resins, Inc., 881 F.2d at 213.
If the carrier successfully rebuts the charterer's prima facie
case, the burden returns to the charterer to prove that the
carrier's negligence was at least a concurring cause of the loss.
Id. If the charterer meets this challenge, the carrier must
finally satisfy the heavy burden of proving the percentage of loss
due to its negligence and the percentage of loss due to the
charterer's negligence. Id. If the carrier fails to prove the
proportionate fault of each of the parties, the carrier becomes
liable for the entire loss. Id.
8
1. Sun's Prima Facie Case
Sun proffered the Tanker Bill of Lading, signed by Captain
Beza, which showed that 329,686.27 barrels of straight run fuel oil
was loaded upon the OVERSEAS ARCTIC in Guayanilla, Puerto Rico.
According to Caleb Brett, Sun's representative at the discharge
ports, the vessel delivered all but 8734 barrels of fuel at the
Good Hope, Louisiana, and St. Rose, Louisiana, ports. The
tendering of the bill of lading, combined with the evidence that
the Carriers failed to discharge all of the 329,686.27 barrels of
the fuel sufficiently established Sun's prima facie case.10
2. Statutory Exception
The burden therefore shifted to the Carriers to prove that
they either acted with due diligence or that one of the statutory
exceptions in section 1304(2) applies. The Carriers charged, and
the district court found, that because the fuel oil was not loaded
at twenty to thirty degrees above its pour point, two provisions in
section 1304(2) absolved the Carriers of liability. The first
provision argued by the Carriers is subsection (m), which provides
an exception to a carrier's liability if the loss was caused by an
"inherent defect, quality, or vice of the goods." 46 U.S.C. §
10
The district court therefore erred in ruling that Sun
failed to make out its prima facie case. This Court has made
clear that the charterer proves its prima facie case when it
presents a bill of lading which shows that the carrier accepted
the goods in the condition shown therein. Blasser Bros., 628
F.2d at 381; Horn, 404 F.2d at 435; see C. Itoh and Co. v. M/V
HANS LEONHARDT, 719 F. Supp. 479, 503 (E.D.La.1989) (noting that
the Fifth Circuit has never required the charterer to disprove
the existence of an inherent defect in the cargo as part of its
prima facie case).
9
1304(2)(m). The second provision proffered by the Carriers,
subsection (i), excuses carriers from liability for the loss of
cargo if the loss was caused by the "[a]ct or omission of the
shipper or owner of the goods, his agent or representative."
Although we agree that the latter provision exonerates the Carriers
from any liability, we disagree that the former provision is
applicable in the case sub judice.
a. Inherent Defect
By its clearly expressed terms, subsection (m) applies only
when the defect, quality, or vice is inherent in the cargo. As
this Court explained in Quaker Oats Co. v. M/V Torvanger, to prove
that the inherent defect provision applies, the carrier must show
that some defect, quality, or vice existed within the cargo,
itself. 734 F.2d 238, 241 n. 3 (5th Cir.1984). Consistent with
our construction of this provision, every carrier in every section
1304(2)(m) case argued before this Court, prior to this case, has
contended that a condition inherent in or on the goods at issue
caused the loss or damage in question.
In Shell Oil, the carriers complained that the fuel oil there
contained excessive amounts of paraffin which caused the cargo to
become extremely viscous and, hence, unpumpable. 790 F.2d at 1213.
The carriers in Quaker Oats contended that a peroxide formation
within the cargo, tetrahydrofuran, was an inherent vice. 734 F.2d
at 241. Similarly, in Harbert International Establishment v. Power
Shipping, (5th Cir.1981) the carriers asserted that pipes which
they transported contained defective seal coats. 635 F.2d 370, 374
10
(5th Cir.1981). Finally, in this Court's only other section
1304(2)(m) case, Horn v. Cia de Navegacion Fruco S.A., the carriers
argued that bananas which they transported had been loaded in an
overly ripe condition. 404 F.2d at 435.
These cases are all readily distinguishable from the facts of
this case. The temperature of the fuel oil transported by the
OVERSEAS ARCTIC in this case did not constitute an inherent defect.
A defect—perhaps; however, the defect, unlike those in the
above-reviewed cases, was due to external, as opposed to internal
conditions. A simple change in the external conditions could have
easily remedied the fuel oil's temperature problems. Thus, based
upon the explicit terms of subsection (m), as well as our
construction of that provision in Quaker Oats, this Court finds
that the inherent defect exception is unavailable to the Carriers
here.
b. Sun's Act or Omission
The district court also found that Sun's failure to load the
cargo at temperatures which reached at least twenty to thirty
degrees above the pour point caused the loss of the fuel. We
agree. Witnesses for both Sun and the Carriers testified that the
industry standard required high-temperature fuel oil to be loaded
twenty to thirty degrees above the pour point.11 These witnesses
explained that the industry requires such oil to be loaded at high
temperatures because transportation in oft-times cooler waters will
11
In Tenneco Resins, Inc., we recognized that industry
standards are appropriate guides in COGSA cases. See Tenneco
Resins, Inc., 881 F.2d at 213-14.
11
cause a decrease in the temperature of at least some of the oil.
In the case sub judice, Sun failed to meet this industry
standard. There is no dispute that the average temperature of the
cargo in this case, when loaded, was below the pour point. Sun had
the duty to ensure that fuel oil was pumped on board at a
sufficient temperature.12 Its failure to perform this obligation,
without doubt, caused the ROB. The exception set forth in section
1304(2)(i) therefore applies in this case.
3. Carrier Negligence
Because the Carriers proved that section 1304(2)(i) applies,
the burden returned to Sun to prove that the Carriers' negligence
at least partially caused the loss of the cargo. Attempting to
satisfy this burden, Sun contends that even if the load temperature
was inadequate, the Carriers' provided an unseaworthy vessel. The
unseaworthiness of the vessel, according to Sun, caused the loss of
its cargo. Sun additionally avers that the Carriers failed to
maintain the loaded temperature of the fuel, as required by the
charter party and the voyage orders. Finally, Sun argues that the
Carriers failed to exercise due diligence to ensure that the cargo
was properly heated. We find no merit in any of Sun's contentions.
a. Unseaworthiness
12
Although Sun claims that it had no control over the shore
facility which loaded the oil, we note that that facility acted
as Sun's agent, since it loaded the oil at Sun's behest. See
Sigri Carbon Corp. v. Lykes Bros. Steamship Co., Inc., 655
F. Supp. 1435, 1440 (W.D.Ky.1987) (ruling that when the charterer
hires a stevedore to load a ship, any damage due to the loading
is a result of an act or omission of the shipper, his agent, or
representative).
12
Sun first argues that the OVERSEAS ARCTIC was unseaworthy
because it could not raise the temperature of the cargo to 135
degrees as required in the charter party. The Carriers conceded
that such was the case. However, there is no dispute that Sun, at
no time during the voyage, requested that the temperature be
raised. To the contrary, it specifically ordered the vessel to
maintain the loaded temperature.13 Had Sun ordered the Carriers to
increase the temperature during the voyage, we would agree with
Sun's argument here.14 However, to carry its burden at this point,
Sun must prove that the unseaworthy condition in question not only
13
Even Sun's coordinator for loading and discharging
operations, Susan O'Connor, testified that this order meant
exactly what it said. The Carriers questioned Ms. O'Connor on
the meaning of this instruction:
Q. Now you will notice in the voyage orders, those are
Sun voyage orders, under "heating," "Vessel maintain
loaded temperature up to 135 degrees Fahrenheit." That
means that whatever the loading temperature was, the
vessel would keep it at that temperature; is that
correct?
A. Yes.
Q. So, if the cargo came aboard at 89 degrees, the
vessel under those instructions would keep it at 89
degrees?
A. Yes. That's right.
Q. If it came aboard at 90 degrees, they would keep it
at 90 degrees?
A. Yes.
14
The COGSA provision most applicable in this argument is
not the seaworthiness provision, but section 1303(1)(c) which
places upon carriers the affirmative duty to make all "parts of
the ship in which goods are carried[ ] fit and safe for their
reception, carriage, and preservation." 46 U.S.C. § 1303(1)(c).
13
existed, but actually caused the loss of the cargo. See Bruszewski
v. Isthmian S.S. Co., 66 F. Supp. 210 (D.C.Pa.), aff'd, 163 F.2d 720
(3d Cir.1947), cert. denied, 333 U.S. 828, 68 S. Ct. 451, 92 L. Ed.
1113 (1948). This, Sun has not done. By failing to order the
Carriers to increase the temperature of the cargo, Sun never
provided the Carriers the opportunity to breach their duty to
provide a seaworthy vessel and to ensure that the vessel's storage
tanks could properly preserve the fuel oil.15 Sun's seaworthiness
claim therefore fails.
b. Proper Maintenance of the Temperature
Sun next complains that the Carriers did not maintain the
temperature of the oil. This contention is logical: If some of
the oil cooled to such an extent that it solidified, the Carriers
clearly failed to maintain the temperature of that portion of the
oil. Captain Beza, in so many words, admitted that such was the
case. However, the captain testified that an order to maintain the
loaded temperature does not require vessels to maintain every
square inch of the cargo at one temperature. According to Captain
Beza, a "maintain heat" order requires vessels to maintain the
average temperature of their cargo. Captain Beza testified that
his interpretation of the order was consistent with the standards
in the high-temperature fuel oil transportation industry. Sun
15
Averring that the law does not require one to do a vain
thing, Sun argues that it would have been vain to order the ship
to raise the temperature. This axiom is not helpful to Sun's
case. The basic premise underlying this axiom is that one who
fails to act must know that his act would be vain. One who fails
to act out of ignorance or neglect may not take advantage of this
principle.
14
proffered no testimony or evidence which contradicted the Carriers'
contention that, based upon industry standards, the vessel complied
with Sun's orders.16 Sun's argument that the Carriers failed to
maintain the load temperature is therefore not well taken.
c. Special Knowledge Requirements
Sun finally argues that the Carriers had a duty under COGSA
to know the special characteristics and heating requirements of the
cargo and to properly carry, care for, and discharge the cargo.
Sun is only partially correct. COGSA does, indeed, expressly
require carriers to "properly and carefully load, handle, stow,
carry, keep, care for, and discharge the goods carried." 46 U.S.C.
§ 1303(2); Shell Oil Co., 790 F.2d at 1213. However, this Circuit
has rejected the argument that carriers have a legal duty to learn
the special needs of their cargo. Tenneco Resins, Inc., 881 F.2d
at 214. To the contrary, we have ruled that the charterer "has an
obligation to inform the carrier of the cargo's special
requirements." Id. (emphasis added). We have determined that
this view properly places the burden to discern cargo's special
stowage needs upon the party which will most likely know or have
16
Our review of the record reveals that the Carriers not
only maintained the average temperature of the cargo, but they
actually increased the temperature of the fuel oil by
three-tenths of one percent. The record also shows that Caleb
Brett, Sun's representative at the discharge port, agreed that
the Carriers had accomplished Sun's heating requirements during
the voyage. During a phone call placed after the OVERSEAS ARCTIC
left the first Louisiana port, a Caleb Brett employee informed
Sun's discharge coordinator, Susan O'Connor, that the Carriers
had increased the temperature of the cargo. Caleb Brett's
analysis of the situation confirms Captain Beza's testimony that
Sun's "maintain-heat" order merely required the vessel to
maintain the average temperature of the cargo.
15
access to knowledge of such needs. Id. (quoting O'Connell
Machinery Co. v. M/V Americana, 797 F.2d 1130, 1134 (2d Cir.1986)).
Consistent with our Tenneco Resins, Inc., decision, Captain
Beza testified that he expected Sun to know the pour point of the
fuel oil and ensure that it came aboard at the proper temperature.
Although Captain Beza informed Sun of the load temperature prior to
departing Guayanilla,17 Sun, in the best position to know the pour
point of the cargo, did not respond. Sun neither informed the
Carriers of the pour point nor, more importantly, instructed the
Carriers to increase the temperature of the cargo. Even if Captain
Beza had recognized a problem with the temperature of the cargo,
and even if the OVERSEAS ARCTIC had possessed heating capabilities,
Captain Beza could have discharged his duties in no different
manner, for he was under express orders to maintain, not increase,
the temperature of the oil. We will not penalize the Carriers for
following Sun's specific instructions.
III. Conclusion
The district court erred in holding that Sun failed to present
a prima facie case. However, its ultimate decision—that Sun
breached its duty to ensure that the temperature of the cargo
exceeded that pour point by twenty to thirty degrees during loading
and that the breach of that duty caused Sun's loss—was correct.
Because Sun did not prove that any negligence of the Carriers
17
Captain Beza testified that he informed Sun of the
temperature and told Sun that the OVERSEAS ARCTIC would
immediately apply heat to the cargo simply to let Sun know that
he was following the voyage orders.
16
contributed to the loss, this Court AFFIRMS.
17