Commonwealth Propane Co. v. Petrosol Intern., Inc.
| Decision Date | 26 June 1987 |
| Docket Number | 85-3931,Nos. 85-3924,85-3930,85-4028 and 85-4067,s. 85-3924 |
| Citation | 818 F.2d 522 |
| Parties | 3 UCC Rep.Serv.2d 1778 COMMONWEALTH PROPANE COMPANY, Plaintiff-Appellee (85-3924, 3930, 4028, 4067), Plaintiff-Appellant (85-3931), v. PETROSOL INTERNATIONAL, INC., Defendant-Appellee (85-3924, 3931), Defendant- Appellant (85-3930, 4067), and Cal Gas Corporation, Defendant-Appellant (85-3924, 4028), Defendant-Appellee (85-3931). |
| Court | U.S. Court of Appeals — Sixth Circuit |
Michael J. Boylan, argued, Cohen, Todd, Kite & Stanford, Terrence A. Mire, Cincinnati, Ohio, Stanley M. Fisher, Arter & Hadden, Cleveland, Ohio, for Commonwealth Propane Co.
Karen F. Aronoff, Rhoa, Follen, Rawlin & Johnson Co., Cleveland, Ohio, W. Andrew Hoffman, argued, Albert J. Rhoa, for Cal Gas Corp.
David J. Hooker, argued, Elizabeth B. Wright, Thompson, Hine & Flory, Cleveland, Ohio, for Petrosol Intern.
Before KENNEDY, JONES and NORRIS, Circuit Judges.
This diversity action, governed by Ohio law, involves allocation of the risk of loss between sellers and buyers where an underground propane gas storage facility collapsed and the stored gas could no longer be removed. Defendant-appellee Petrosol International, Inc. ("Petrosol") and defendant-appellant Cal Gas Corporation ("Cal Gas") appeal and plaintiff-appellee Commonwealth Propane Company ("Commonwealth") cross-appeals from different portions of a summary judgment allocating such loss and an order regarding prejudgment interest. We REVERSE the District Court's grant of summary judgment to Petrosol against Cal Gas and REMAND the action for entry of summary judgment in favor of Cal Gas. We also REVERSE the District Court's grant of summary judgment for Commonwealth against Petrosol and REMAND the action for determination of whether the transactions between these parties were governed by section 1302.53(B) or by section 1302.53(D) of the Ohio Revised Code.
On November 5, 1982, Cal Gas entered into a contract with Petrosol for the sale and delivery of 10,000 barrels of liquid propane gas stored at Lake Underground Storage ("Lake Underground"), a storage facility in Painesville, Ohio. Petrosol agreed to pay $0.57 per gallon for the propane; Cal Gas agreed to deliver the propane on demand on or before March 31, 1983.
Petrosol entered into a contract with Commonwealth on the same day for the sale and delivery of 10,000 barrels of propane at a price of $0.58 per gallon. Again, the propane was to be delivered on demand on or before March 31, 1983.
Petrosol sent Commonwealth a form entitled "Sales Acknowledgment," which Commonwealth accepted on November 22, 1982. Commonwealth paid Petrosol for the propane two days later. Petrosol also sent Cal Gas a form entitled "Purchase Acknowledgment," dated November 5, 1982, which was accepted by Cal Gas on November 22, 1982. After receiving Petrosol's payment, Cal Gas sent a "Confirmation of Distribution" to Lake Underground, indicating a product flow from Cal Gas to Petrosol and clearing Commonwealth as the carrier to pull the transport loads.
A second transaction, with the same sequence of events, followed. Petrosol purchased an additional 10,000 barrels of propane stored at Lake Underground from Cal Gas on November 18, 1982. Again, the price was $0.57 per gallon and delivery was to occur on demand on or before March 31, 1983. Petrosol sold the 10,000 barrels of propane to Commonwealth on the same date. As in the earlier contract, delivery was to occur on demand on or before March 31, 1983.
Commonwealth accepted Petrosol's Sales Acknowledgment for this second transaction on December 2, 1982. Commonwealth paid for this propane on December 3, 1982. Petrosol sent Cal Gas a Purchase Acknowledgment, which Cal Gas signed on November 30, 1982. After receiving Petrosol's payment, Cal Gas mailed a Confirmation of Distribution to both Lake Underground and Petrosol, indicating a product flow from Cal Gas to Petrosol to Commonwealth and acknowledging a total delivery of 20,000 barrels from Cal Gas to Petrosol.
In February, 1983, a wall in the cavern of Lake Underground collapsed. As a result, the propane was apparently either lost or destroyed before Commonwealth was able to remove it from the storage facility. 1 This litigation arises from that loss.
On December 29, 1983, Commonwealth filed a complaint in the United States District Court for the Northern District of Ohio for damages based on breach of contract against both Cal Gas and Petrosol. Petrosol answered that the propane had been delivered to Commonwealth and that Commonwealth thus bore the risk of loss. Petrosol also cross-claimed against Cal Gas, contending that Cal Gas had not delivered the propane to it and that the risk of loss thus fell on Cal Gas. Cal Gas answered Petrosol's cross-claim by stating that the risk of loss had passed to Petrosol since Cal Gas had tendered delivery of the propane to Petrosol. Cal Gas answered Commonwealth's complaint by asserting the same defenses it had raised against Petrosol in its answer to Petrosol's cross-claim. Cal Gas also asserted that Commonwealth lacked privity of contract with Cal Gas. Cal Gas then cross-claimed against Petrosol, alleging that it had fully performed its contract with Petrosol and that any damages suffered by Commonwealth resulted solely from Petrosol's breach or omissions. Petrosol answered that either Cal Gas or Commonwealth, but not Petrosol, bore the risk of loss as to the propane.
Following the filing of motions for summary judgment by the parties, the District Court issued an Order and Opinion on September 30, 1985. It granted Commonwealth summary judgment against Petrosol in the amount of $487,200 and Petrosol summary judgment against Cal Gas in the amount of $478,800. All other motions were denied and Cal Gas was ordered to pay costs.
On October 24, 1985, Petrosol filed a Motion for Relief from Judgment, requesting that the sum of $487,200 be corrected to $483,000. On October 28, 1985, Commonwealth filed a Motion to Correct the Judgment pursuant to Rule 60(a), asking for the same correction and seeking an additional award of prejudgment interest. On November 27, 1985, the District Court issued an Order and Opinion granting Petrosol's Motion for Relief from Judgment and awarding prejudgment interest against Petrosol for Commonwealth, and against Cal Gas for Petrosol.
These appeals followed.
The main issue in this case is which company bore the risk of loss as to the propane stored at Lake Underground. The Uniform Commercial Code ("UCC") as adopted in Ohio applies to this case. Ohio Rev.Code Ann. Sec. 1302.53 (Anderson 1979) governs the shifting of the risk of loss where, as here, there has been no breach by the seller. 2
The District Court granted summary judgment to Petrosol in the Cal Gas/Petrosol transactions. It rejected Cal Gas' contention that these transactions were governed by Ohio Rev.Code Ann. Sec. 1302.53(B) and instead found that the parties had a "contrary agreement" within the meaning of section 1302.53(D), which placed the risk of loss on Cal Gas.
In reaching this conclusion, the District Court relied on Paragraph 3 of the Purchase Acknowledgments, which stated:
Deliveries shall be made as, when and where specified on the reverse hereof. Title to products delivered shall pass to Buyer upon completion of loading thereof into tank trucks furnished by Buyer, upon delivery thereof in a tank car to carrier, upon arrival thereof in a tank truck furnished by Seller alongside unloading facilities at destination, or as specified on the reverse hereof, as the case may be.
See Joint Appendix at 17 & 21. The District Court found that, in accordance with this paragraph, title did "not pass to [Petrosol] until 'completion of loading' into [Petrosol's] truck, tank car, or P.T.O., F.O.B. in Painesville, Ohio, at any time from November 5, 1982, through March 31, 1983." Joint Appendix at 246. The District Court found these terms "consistent with industry custom and practice," Joint Appendix at 246, and concluded that since the propane was never loaded into either party's trucks or cars, Cal Gas had retained the risk of loss as to the propane lost at Lake Underground in February, 1983. The Court specifically rejected Cal Gas' argument that its dealings with Petrosol were governed by section 1302.53(B). Rather, the District Court found that the presence of the term on the front of the second Purchase Acknowledgment stating "HOW DELIVERED Truck, tank car or P.T.O." indicated that the parties intended that the propane be moved for delivery to occur, and that section 1302.53(D) thus controlled the transactions.
We disagree. Rather, we find that Paragraph 3 did not constitute a "contrary agreement" reallocating the risk of loss between the parties within the meaning of section 1302.53(D). Paragraph 3 refers only to passage of title and does not mention passage of risk of loss. As the Supreme Court of Ohio has noted, passage of title is irrelevant to passage of risk of loss:
No longer is the question of title of any importance in determining whether a buyer or a seller bears the risk of loss. It is true that the person with title will also (and incidentally) often bear the risk that the goods may be destroyed or lost; but the seller may have title and the buyer the risk, or the seller may have the risk and the buyer the title. In short, title is not a relevant consideration in deciding whether the risk has shifted to the buyer.
Hughes v. Al Green, Inc., 65 Ohio St.2d 110, 114, 418 N.E.2d 1355, 1357 (1981) (emphasis omitted) (quoting Nordstrom, Sales Sec. 130, at p. 393). See also Ohio Rev.Code Ann. Sec. 1302.42 (Anderson 1979) ("[T]he rights, obligations, and remedies of the seller, the buyer, purchasers, or other third parties appl[y] irrespective of title to the goods"...
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