Fairmont Shipping Corp. v. CHEVRON INTERNAT'L OIL CO., INC.

• Decision Date: 08 March 1974
• Docket Number: No. 70 Civ. 3382-LFM.,70 Civ. 3382-LFM.
• Citation: 371 F. Supp. 1191
• Parties: FAIRMONT SHIPPING CORP. and Fairwinds Ocean Carrier Corp., Owners of the S.S. WESTERN EAGLE, Plaintiffs, v. CHEVRON INTERNATIONAL OIL COMPANY, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

371 F. Supp. 1191

FAIRMONT SHIPPING CORP. and Fairwinds Ocean Carrier Corp., Owners of the S.S. WESTERN EAGLE, Plaintiffs, v. CHEVRON INTERNATIONAL OIL COMPANY, INC., Defendant.

No. 70 Civ. 3382-LFM.

United States District Court, S. D. New York.

March 8, 1974.

Burlingham, Underwood & Lord, New York City, for plaintiffs; Joseph C. Smith, New York City, of counsel.

D'Amato, Costello & Shea, New York City, for defendant; Robert E. Meshel, New York City, of counsel.

OPINION

MacMAHON, District Judge.

In the early morning hours of December 14, 1969, the S.S. WESTERN EAGLE, a vessel of Liberian registry, stranded on a dike in Flushing Roads, a body of water leading to the port of Flushing, The Netherlands. Plaintiffs, the owners of the WESTERN EAGLE, seek to recover for the damage to the vessel, claiming that the conduct of the tugs SOPHIA and FREDERIK HENDRIK caused the grounding and that defendant is liable, in contract, for the breach by the tugs of an implied warranty of workmanlike service. The case was tried to the court, sitting without a jury, on the issue of liability only.

Plaintiffs' theory of recovery is based upon an alleged contract for bunkers¹ between plaintiffs and defendant, whereby defendant promised, among other things, to provide the WESTERN EAGLE with pilotage and tugs at Flushing. This contract, plaintiffs argue, contains an implied warranty of workmanlike service, which was breached by the tugs' conduct, and defendant is therefore liable for the foreseeable damages resulting from the breach. Defendant denies the existence of any contract between it and plaintiffs, or the existence of any clause in the contract for pilotage or towage, or of an implied warranty of workmanlike service, or any conduct by the tugs amounting to a breach of that warranty. We turn first to the question of the contract, if any, and its terms.

The WESTERN EAGLE, a converted T-2 tanker, was bound for the United States after discharging her cargo at Boulogne and was in need of fuel. The only bunkers available in Northern France in December 1969 were being sold at excessively high prices and, therefore, Alex Pagel, an employee of Norland Shipping & Trading Co. (Norland), which was acting as agent for the vessel's owners, attempted to acquire a more economical stem² for the WESTERN EAGLE at other ports in Northern Europe. Pagel called C. D. Mallory & Co., Inc. (Mallory), Norland's regular bunker broker, to discuss an economical stem. Pagel spoke to Franz P. K. Werner of Mallory, who advised him that a good bunkering port might be Flushing, Holland.

Pagel examined the bunker prices at Flushing and found them to be slightly higher than at Rotterdam, where Norland had a contract with Gulf Oil Co., so he asked Werner why the WESTERN EAGLE should bunker at Flushing if it were more expensive. Werner replied: "Ah, but there is a gimmick to this one. . . . Chevron takes care of everything there. They furnish the agents and the pilots and the tugs and so forth." Werner also pointed out that Flushing, being located further south, would involve less steaming than Rotterdam.

A few days later, Mr. Joyce and Mr. Johnson, sales representatives for Chevron, met with Pagel and:

"Made a small pitch for us using Flushing so that they would get the business rather than Gulf Oil and the tenor of their pitch was fairly consistent, that if we go to Flushing they take care of everything, they said, they take care of the pilots, they take care of the tugs, they take care of the agents and the only thing we would have to do is send an ETA for themselves there in Holland and they acted as agents for us. The suppliers would be some company I believe called SHV or PAM Oil."

Werner testified that he made an offer to Pagel on behalf of Chevron and that, during the negotiations with Pagel, they referred to Chevron's price list for "Marine Marketing," dated October 1, 1969 (PX 2). Werner stated that this document "is sort of our booklet we go by." On page 9 of the booklet, under the column entitled "Remarks," for Flushing appears this language:

"Following included in the price: Pilotage, harbor dues, clearance, quay hire, mooring, unmooring and ordinary tug assistance if required, provided vessel enters Flushing for purpose of bunkering only and lifts min. 150 tons."

The agreement between Norland and Chevron was finalized on December 8, 1969 and is contained in plaintiffs' Exhibit 1, the "Bunker Confirmation." This document is a Mallory standard form and lists WESTERN EAGLE as the vessel involved, Norland as the buyer and Chevron as the seller of 1,000 tons of bunkers. The "Readiness Date" is listed as "December 12-16, 1969." Chevron is also listed as "Vessel's Agent."

Pagel was aware that the bunkers would be supplied at Flushing by Steenkolen Handelsvereeniging (SHV),³ a local Dutch firm, but it was always his impression that "Chevron was the person with whom we would have the contract. . . ."

There can be no doubt from the evidence that the contract contained in Exhibit 1 was between Norland, as agent for the owners of the WESTERN EAGLE, and Chevron, as seller of the bunkers. Certainly this was the contemplation of the parties, especially Pagel and Werner, who conducted most of the negotiations. Werner made his offer to Norland on behalf of Chevron, and it was always the parties' understanding that Chevron would be the contracting party. This view is amply supported by Exhibit 1, which lists Chevron as the seller, as well as by the testimony of Werner and Pagel. Chevron's claim that it acted merely as agent for SHV is not supported by the evidence. Rather, SHV acted as a subcontractor to, or supplier for, Chevron.

Moreover, the contract negotiations reveal that the parties believed the contract included a term requiring Chevron to provide tug assistance and pilotage to the WESTERN EAGLE at Flushing. Not only did Pagel and Werner rely on the Chevron price list, which spelled out the "extras" available at Flushing, but Pagel discussed the pilotage and tug provisions with Chevron's employees⁴ and with Werner. In fact, these special provisions were the motivation for the vessel's bunkering at Flushing rather than Rotterdam. Thus, we find that a contract for bunkers existed between plaintiffs, the owners of the WESTERN EAGLE, and Chevron and that the contract required Chevron to provide the WESTERN EAGLE with pilotage and tug assistance at Flushing.

Plaintiffs contend that Chevron's promise to provide tugs contained an implied warranty of workmanlike service and that this warranty was breached by the SHV tugs' "negligent" conduct.

The doctrine of the implied warranty of workmanlike service in maritime contracts originated in the landmark case of Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956) (Ryan). There, the Supreme Court sustained a claim for indemnity against a stevedoring firm by a shipowner which had paid a substantial judgment to a longshoreman injured while unloading cargo improperly stowed by the stevedore. The Court reasoned that it was "of the essence of the stevedoring contract" that the stowage of cargo be performed competently and safely and likened the stevedore's warranty of workmanlike service "to a manufacturer's warranty of the soundness of its manufactured product." 350 U.S. at 133-134, 76 S. Ct. at 237. The Court emphasized that the shipowner's action was in contract, not in tort.

Similar warranties have been implied in other maritime service contracts involving comparable expertise, control and supervision to that of the stevedore in Ryan. Tebbs v. Baker-Whiteley Towing Co., 407 F.2d 1055, 1058 n. 1 (4th Cir. 1969); Great American Ins. Co. v. Bureau Veritas, 338 F.Supp. 999, 1014 (S.D.N.Y.1972). A contract of towage also gives rise to an implied warranty of workmanlike service. Dunbar v. Henry Du Bois' Sons Co., 275 F.2d 304, 306-307 (2d Cir. 1960); James McWilliams Blue Line, Inc. v. Esso Standard Oil Co., 245 F.2d 84, 87 (2d Cir. 1957); Tebbs v. Baker-Whiteley Towing Co., supra, 407 F.2d at 1058-1059; A/S Atlantica v. Moran Towing & Transp. Co., 360 F.Supp. 1225, 1227 (S.D.N.Y.1973); T. J. Stevenson & Co. v. George W. Whiteman Towing, Inc., 331 F.Supp. 1038, 1043 (E.D.La.1970); Farrell Lines, Inc. v. Birkenstein, 207 F.Supp. 500, 507 (S.D.N.Y.1962).⁵ The shipowner turns his vessel over to the tug's control, depending on the latter's expertise in conducting safe towing operations.

The presence and extent of the warranty and its breach, if any, depends upon the circumstances of the particular case relating to control, supervision and expertise. H & H Ship Service Co. v. Weyerhaeuser Line, 382 F.2d 711, 713 (9th Cir. 1967); Tebbs v. Baker-Whiteley Towing Co., supra, 407 F.2d at 1059. The Supreme Court, in the stevedore cases, established the rule that "liability should fall upon the party best situated to adopt preventive measures and thereby to reduce the likelihood of injury." Italia Societa per Azione di Navigazione v. Oregon Stevedoring Co., 376 U.S. 315, 324, 84 S.Ct. 748, 754, 11 L.Ed.2d 732 (1964) (Italia). Thus, the burden should be placed, ultimately, upon the party whose default caused the injury. Reed v. The Yaka, 373 U.S. 410, 414, 83 S.Ct. 1349, 10 L. Ed.2d 448 (1963); Italia, supra, 376 U. S. at 324, 84 S.Ct. 748.

This brings us to the question of control. Chevron claims that the tugs were never in a position of control and that, therefore, no implied warranty of workmanlike service arose. This point is well taken, but this case does not turn on the narrow issue of control. Even if the tugs were not technically "in control," they may still have been the party best situated to prevent the accident, Italia, supra, 376 U.S. at 324, 84 S.Ct. 748, and therefore liable for breach of the warranty of workmanlike service.

We wish to emphasize that this is a case in contract, not tort, Ryan, supra, 350 U.S. at 134, 76 S.Ct. 232, and that non-negligent as...