International Barges, Inc. v. Kerr-McGee Corp., KERR-M

• Citation: 579 F.2d 1204
• Decision Date: 05 July 1978
• Docket Number: No. 77-1256,KERR-M,77-1256
• Parties: INTERNATIONAL BARGES, INC., a Delaware Corporation, Plaintiff-Appellant, v.cGEE CORPORATION, a Delaware Corporation, and Kerr-McGee Chemical Corporation, a Delaware Corporation, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1204

579 F.2d 1204

INTERNATIONAL BARGES, INC., a Delaware Corporation, Plaintiff-Appellant, v. KERR-McGEE CORPORATION, a Delaware Corporation, and Kerr-McGee Chemical Corporation, a Delaware

Corporation, Defendants-Appellees.

No. 77-1256.

United States Court of Appeals, Tenth Circuit.

Submitted on Briefs June 20, 1978.

Decided July 5, 1978.

Robert B. Smith, of Bloodworth, Smith & Biscone, Oklahoma City, Okl., for plaintiff-appellant.

Derrill Cody and Kerr, Davis, Irvine, Krasnow, Rhodes & Semtner, by Francis S. Irvine and Harvey L. Harmon, Jr., Oklahoma City, Okl., for defendants-appellees.

Before McWILLIAMS, DOYLE and LOGAN, Circuit Judges.

WILLIAM E. DOYLE, Circuit Judge.

This is a diversity suit in which plaintiff, International Barges, Inc., sought damages arising from movement by it of 3600 tons of anhydrous ammonia in its barges from Lake Charles, Louisiana to New Orleans. The governing agreement was oral and provided that the demurrage rate was to be $125.00 per hour for a maximum of 48 hours delay and thereafter $170.00 per hour. Damages for delay in delivering the ammonia which plaintiff alleges was not through its fault are demanded in the amount of $32,278.60.

Defendant, Kerr-McGee Chemical Corporation, denied its responsibility for the demurrage and asserted that the delays were caused by the actions of plaintiff-appellant. Appellee Kerr-McGee interposed a counterclaim alleging a loss suffered by it as a result of the specific refusal of appellant to move its barge temporarily. This caused damage to American Cyanamid Company, which Kerr-McGee had to pay. This was $1,960. Kerr-McGee also sought $162,000 resulting from alleged loss in market of anhydrous ammonia. This was attributable to the action on the part of the appellant.

Trial was to the court, which awarded judgment to the appellant in the amount of $5,300 for demurrage sustained, and to appellee in the amount of $28,950 for loss suffered as a result of the cargo, anhydrous ammonia, in one of the barges being contaminated by remnants of butylene from the previous cargo. Appellant seeks reversal of this judgment on the counterclaim and seeks also an award of enhanced damages for the demurrage which the court failed to allow for the barge Mary Lee, which contained the allegedly contaminated anhydrous ammonia. It was the Mary Lee which was found to have 117 parts per million of butylene. This remained after a prior transportation, and even though the quantity of the butylene was somewhat infinitesimal, the trial court found that it was unacceptable and that it was International Barges' responsibility to deliver ammonia free of contamination. No such contamination was present in the cargo transported in the second barge of the appellant, the Marjorie B. The demurrage which was awarded to plaintiff in the amount of $5,300 was that which was incurred by the Marjorie B. The trial court found that the plaintiff was not legally responsible for the delay and resulting demurrage in connection with the unloading of the Marjorie B.

The crux of this controversy is whether the court was correct in placing legal responsibility on the appellant for the contamination of the anhydrous ammonia, remnants of which were in the Mary Lee's tanks when the ammonia was taken on. This was the basis for the judgment on the counterclaim in favor of Kerr-McGee for economic loss incurred by Kerr-McGee due to, so to speak, the impure state of the anhydrous ammonia which was sought to be delivered. It was also the basis for the judgment in favor of Kerr-McGee in the controversy involving demurrage resulting from the delay in unloading the Mary Lee. The underlying questions are, first, whether the contamination was so slight as not to be significant, and, second, whether the notification of Kerr-McGee by International Barges produced a waiver or shifted the responsibility to Kerr-McGee. The trial court resolved these questions in favor of Kerr-McGee.

The Mary Lee was found by the trial court to have been used for transportation or storage of butylene immediately prior to the transport of the ammonia. Plaintiff attempted to purge the Mary Lee of any residual butylene (using nitrogen for the purpose) prior to loading it with anhydrous ammonia. The court also found that the effort of appellant to decontaminate the barge was not wholly successful. The court also found that appellant notified appellee of the fact that the barge had been engaged in prior butylene service, which required that it be purged. Appellant emphasizes this fact, believing that it somehow or other shifted the burden of providing a clean vessel to the defendant or perhaps caused the defendant to assume the risk of the contamination. The trial court rejected both of these contentions, and we agree with the view thus adopted by the court.

The understanding was that the barges were to be delivered to the Monsanto Company dock at Luling, Louisiana. The barges arrived there at 8:00 a. m. on March 12, 1975, but unloading was not commenced because the ammonia had not reached the -28o F. temperature required for unloading. Afterwards the cargoes of both the Mary Lee and the Marjorie B were sampled and analyzed by Monsanto Company through a contract laboratory. This analysis revealed that the ammonia aboard the Mary Lee contained the 117 parts per million of butylene. On the other hand, the cargo of the Marjorie B was free of this condition.

A contract between Monsanto Company and Kerr-McGee allowed the latter to store anhydrous ammonia in the common storage tank of Monsanto. This agreement required that it had to contain 99.5% Minimum of anhydrous ammonia, a maximum of 0.5% Water and four parts per thousand maximum of oil.

Once it was discovered that the ammonia had a foreign substance Monsanto rejected it for storage in its common tanks. Kerr-McGee made an effort to dispose of the contaminated ammonia by contacting other companies in the area. It was unable to sell the contaminated material and it was unable to store it in a common storage tank. However, Kerr-McGee was able to make a trade with United States Steel Corp., whereby United States Steel agreed to accept the contaminated material in exchange for an equal quantity of anhydrous ammonia to be furnished by United States Steel to Kerr-McGee at some later time. The trial court was of the opinion that the delay in unloading the Mary Lee was attributable to the contamination of the cargo and that this was attributable, in turn, to the failure of the appellant to purge the barge prior to loading it with the ammonia. The delay in the unloading of the Marjorie B was ruled to be attributable to the testing carried out by Monsanto. The equipment was ready to be unloaded at 10:00 p. m. on March 17, but unloading did not commence then but was delayed until 1:10 a. m., March 18.

The court found that as a result of the testing proving to be negative as to the Marjorie B, the time taken for testing the Marjorie B did not toll the running of demurrage (in favor of appellant) on that barge. Therefore, the court awarded to appellant damage to cover demurrage on the Marjorie B from 5:00 p. m., March 15, 24 hours after her being ready for unloading, until 10:00 p. m., Monday, March 17, when Monsanto was ready for the unloading. This was a span of 53 hours at the rate of $100.00 per hour. Demurrage was disallowed for the additional delay from 10:00 p. m., March 17, until 1:10 a. m., March 18, because of this delay being due to the fault of the plaintiff.

We must determine whether the court was correct in finding that plaintiff in undertaking to load and transport the anhydrous ammonia in the Mary Lee which contained the contaminating butylene, failed to provide a vessel seaworthy and suitable; and in concluding that plaintiff received the ammonia in an uncontaminated state, caused it to become contaminated and, as a result, it was liable for the consequential damages which were suffered by Kerr-McGee. Our conclusion is that the judgments of the trial court were correct.

I.

Kerr-McGee had paid $250.00 per net ton for the 1800 tons of ammonia which became contaminated aboard the Mary Lee. To replace it, the court found, Kerr-McGee had to purchase an additional 1800 tons of anhydrous ammonia at $265.00 per net ton. The trial court did not take into account the loss incurred by Kerr-McGee in obtaining the 1800 tons of ammonia from United States Steel Co. It noted that there had been a substantial drop in value from the time Kerr-McGee delivered the ammonia to United States Steel to the time that Kerr-McGee received the equal amount from United States Steel. The court regarded this, however, as an indirect loss which did not fully relate to appellant's deficiencies. It said that the fact that the market value had changed did not affect the damages in this case because the market was not a factor in the exchange between United States Steel and Kerr-McGee. Kerr-McGee was thus limited to damages in the amount of $15.00 per ton for the 1800 tons which it had purchased at the time in order to fulfill its obligation to the company for whom it had obtained the material, Brewster Phosphates.

II.

The contentions of appellant are as follows:

1. That appellant was not compelled to provide shipping tanks which were 100 percent free of foreign substance, particularly in light of the fact that Kerr-McGee was given notice that the tanks had been used previously for storing the substance butylene.

2. That the trial court erred in determining that the ammonia in question was contaminated.

3. That there was error in determining the appropriate measure of damages.

III.

In answer to International's position that there was no legal duty on its part to provide tanks which were 100 percent free of foreign substance considering the fact that Kerr-McGee was notified that the tanks had theretofore been used for storing butylene, Kerr-McGee simply calls attention to the fact...