Austin v. Servac Shipping Line, Ltd., Civ. A. No. B-83-436-CA.
| Decision Date | 06 June 1985 |
| Docket Number | Civ. A. No. B-83-436-CA. |
| Citation | 610 F. Supp. 229 |
| Parties | Jim AUSTIN and Aulemic, Inc. v. SERVAC SHIPPING LINE, LTD., Hassan A. Gaafar, Individually and Lexington Insurance Company. |
| Court | U.S. District Court — Eastern District of Texas |
David S. Prince, Wayne Adams, Lorance & Thompson, William A. Durham, Eastham, Watson, Dale & Forney, Houston, Tex., for plaintiffs.
Daniel V. Flatten, Mehaffy, Weber, Keith & Gonsoulin, Beaumont, Tex., Joel L. Hodes, Jonathan P. Nye, Whiteman, Osterman & Hanna, Albany, N.Y., for defendants, Servac Shipping Line, Ltd. and Hassan Gaafar.
H.S. Morgan, Jr., Richard L. Lagarde, Vinson & Elkins, Houston, Tex., for defendant, Lexington Ins. Co.
Plaintiffs, JIM AUSTIN and AULEMIC, INC., brought this admiralty suit against LEXINGTON INSURANCE COMPANY to recover for the loss of their vessel, the M/V Amazon Trader, which was insured under an American Institute Time Hull Policy issued by Lexington. Plaintiffs also sought statutory penalties for unfair claims handling practices in violation of TEX.INS.CODE ANN. art. 21.21 (Vernon 1981).
Plaintiffs sued SERVAC SHIPPING LINE, LTD. and HASSAN A. GAAFAR, Individually, to recover for the breach of a charter party for the M/V Amazon Trader. Servac Shipping Line, Ltd. counterclaimed against Jim Austin, individually, for breach of the same agreement.
Both the charter party and insurance policy are maritime contracts within the admiralty jurisdiction of the Court. Because the charter and insurance contracts were both Texas contracts which were to be performed in whole or in part by the parties in Texas, the Court has in personam jurisdiction of the Defendants. Lexington's policy of insurance was issued to and is payable to Plaintiffs in Beaumont, Texas. The policy was, therefore, a Texas contract per Tex.Insur.Code Ann. art. 21.42 (Vernon 1981). The charter party was received and signed by Austin in Beaumont, Texas. Under the charter, Austin paid the monthly mortgage payments on the vessel to the Parkdale Bank in Beaumont. Servac was required to and Gaafar did report to Austin in Beaumont on the vessel's performance and made an offer for a long-term charter. The Court concludes that the Defendants were "doing business" in the state of Texas, within the meaning of art. 2031b, Tex. Rev.Civ.Stat.Ann. (Vernon 1964 and Supp. 1985).
The parties tried the case to the Court, sitting in admiralty. The Court heard the testimony of nineteen (19) witnesses, both live and by deposition. In addition, all parties submitted extensive pre-trial and post-trial briefs.
After careful review of the evidence, the Court finds and concludes that at all material times prior to June 16, 1982, the M/V Amazon Trader was seaworthy and reasonably fit for its intended use; that the damage to the vessel was caused by the negligence of the master and crew, which peril was insured under the insurance policy; and that Lexington Insurance Company has engaged in "unfair and deceptive acts or practices" in the handling of Plaintiffs' claims in violation of TEX.INS.CODE ANN. art. 21.21. Consequently, judgment will be entered for Plaintiffs against Lexington Insurance Company.
The Court further concludes that Plaintiffs should take nothing by reason of their suit against Servac Shipping Line, Ltd. and Hassan A. Gaafar, and that Servac Shipping Line, Ltd. take nothing by reason of its counterclaim against Jim Austin.
Jim Austin is the sole owner of Aulemic, Inc., a Cayman corporation having its principal place of business in Beaumont, Texas. Aulemic, Inc. bought the M/V Amazon Trader in December 1981. Aulemic had the vessel surveyed and refurbished, spending in excess of $200,000 to make it fit for transoceanic refrigerated cargo voyages. Extensive surveys by at least three marine surveyors found the vessel fit for duty and it was so certified. Among other things, the surveyors inspected certain of the devices which later failed at sea from misuse.
In early May 1982, Hassan Gaafar, President of Servac, contacted Austin at his residence in Beaumont, Texas for the purpose of chartering the vessel to carry frozen cargo to Alexandria, Egypt from Tampa, Florida. Austin and Gaafar agreed to enter into a charter party and on June 2, 1982, Austin, on behalf of Aulemic, received and signed in Beaumont a charter party with Servac. Performance of the parties' obligations under the charter agreement was guaranteed by both Austin and Gaafar in their individual capacities.
In that charter party, Austin did not charge a freight rate or hire for use of the vessel. Instead, Austin entered the charter party so Servac could evaluate the vessel in anticipation of entering into a long-term charter. Under the charter party, Servac agreed to pay all expenses of the vessel during the charter from June 1st until the vessel returned to Tampa.
Plaintiffs' insurance broker, Frank B. Hall & Co. of Florida, placed hull insurance on the Amazon Trader on February 10, 1982 with Lexington Insurance Company. Lexington's policy of marine insurance was issued to Plaintiffs in Texas on July 1, 1982. Lexington insured Plaintiffs' vessel in the amount of $1,000,000 against loss and damage for the period from February 10, 1982 to February 10, 1983. Lexington had been instructed to name James D. Austin, the principal of Aulemic, Inc., as an additional insured and Parkdale Bank of Beaumont as mortgagee.
On June 13, 1982, the Amazon Trader sailed from Tampa, with a master and crew hired by Austin, on a round-trip voyage to Alexandria, Egypt carrying the cargo of Servac: many tons of frozen turkeys. The captain, David Ashbee, was qualified to serve as master of the vessel. His nine crewmen were qualified in their jobs and the Amazon Trader was properly manned, equipped and supplied and reasonably fit for the voyage to Alexandria, Egypt.
Three days out of Tampa the captain stopped the vessel's engine to repair a slipping clutch. The vessel was then located approximately 70 to 80 miles off the east coast of Florida and within its trading warranty. The chief engineer gave the Captain two options: Either call a seatug to take her back to port for proper repairs, or weld the clutch into a solid unit.
Captain Ashbee made a serious error in judgment by ordering the chief engineer to weld the clutch into a solid unit without first consulting the owner. The welding of the clutch caused a misalignment of the vessel's main engine power train. The continued operation of the vessel in that condition resulted in extensive damage to the vessel's main engine, clutch, thrust-bearing and tail shaft. In addition to the mechanical problems noted above, the vessel suffered a fire and its generators were damaged by contaminated fuel.
Ashbee knew the repairs to the clutch were temporary and that the chief engineer recommended proper repairs in the next available port. But he continued on to Alexandria because the Charterer's agent advised him "to continue to Egypt and in Egypt we'd have all the major repairs corrected when you discharge the cargo." Moreover, Gaafar gave Ashbee an arrival deadline before the vessel left Florida. The vessel arrived in Alexandria on July 15 and discharged its cargo.
Prior to the vessel's arrival in Alexandria, Plaintiffs received, in Beaumont, Servac's favorable evaluation of the vessel's performance and an offer for a long-term 30 month charter. Under this proposed charter party, Plaintiffs were to realize at least $13,000 a month clear net profit for the 30 months of the charter, resulting in at least $390,000 profit from the long-term charter of the vessel to Servac.
Before addressing the dispute with Lexington, the Court will dispose of the cross claims of Austin and Gaafar and of their companies. Both Austin and Gaafar allege breaches of their charter party agreement by the other's company. The Court concludes that it was the intention of the parties that Servac pay all expenses, including repairs to the vessel, incurred in shipping its product to Egypt. That was simply the consideration for using the vessel.
Because Servac actually paid the expenses of the vessel during the charter, the Court concludes that Gaafar and Servac did not breach the charter party.
Servac's allegations that Plaintiffs failed to exercise due diligence and breached the implied warranty of seaworthiness are without merit. The damages Servac seeks from Austin in its counterclaim, by the admission of Servac's President, Gaafar, are either related to an earlier charter party for which Servac indemnified Aulemic or are expenses incurred in operating the vessel.
Maritime law permits parties to assume liabilities in contracts as they choose. J.B. Effenson Co. v. Three Bays Corporation, Ltd., 238 F.2d 611 (5th Cir.1956). The Court concludes that Servac's position is contrary to the plain reading of the contract and to Servac's earlier course of action. Accordingly, the Court holds there was no breach by Austin.
The balance of the lawsuit concerns the refusals of Lexington to pay claims under the marine insurance policy and its liability to Austin for its failure to pay claims.
On August 3, 1982, Austin reported to Frank B. Hall & Co. two claims for main engine damage and a fire which occurred on the vessel while en route from Florida to Egypt. Frank B. Hall & Co. immediately notified Lexington of the two claims under the policy. The policy contained a trading warranty which insured the vessel only while within the Western Hemisphere. Lexington refused to pay, insisting that Aulemic breached that warranty and thereby voided the coverage.
The Court finds that all the damage to the Amazon Trader occurred in the Western Hemisphere and within the vessel's trading warranty. The Court further finds that Lexington failed...
To continue reading
Request your trial
-
Austin v. Servac Shipping Line
...of the Texas Insurance Code, Tex.Ins.Code Ann. art. 21.21 (Vernon 1981), and seeking the return of layup premiums. 1 The district court, 610 F.Supp. 229, sitting in admiralty without a jury, entered judgment against Lexington in the amount of $367,592 for amounts owed under the policy, 2 pl......
-
COMPLAINT OF DIEHL
... ... Civ. No. 83-3032 ... United States District Court, ... came in contact with a high-voltage power line in an area of the lake known as Shaw Bay. The ... ...