Cargill, Incorporated v. S/S NASUGBU

• Decision Date: 03 December 1975
• Docket Number: Civ. A. No. 73-274.
• Citation: 404 F. Supp. 342
• Parties: CARGILL, INCORPORATED v. S/S NASUGBU, her engines, tackle, apparel, etc., in rem, and Nasugbu Navigation Co., Inc., and California Molasses Company, in personam.
• Court: U.S. District Court — Middle District of Louisiana

404 F. Supp. 342

CARGILL, INCORPORATED

v.

S/S NASUGBU, her engines, tackle, apparel, etc., in rem, and Nasugbu Navigation Co., Inc., and California Molasses Company, in personam.

Civ. A. No. 73-274.

United States District Court, M. D. Louisiana.

December 3, 1975.

COPYRIGHT MATERIAL OMITTED

Charles Kohlmeyer, Jr., Thomas W. Thorne, Jr., Lemle, Kelleher, Kohlmeyer & Matthews, New Orleans, La., for plaintiff.

Charles E. Dunbar, III, Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for defendants.

E. GORDON WEST, District Judge:

This maritime libel is brought by libelant Cargill, Inc. (Cargill) against respondents Nasugbu Navigation Co., Inc. (Nasugbu) and California Molasses Co. in personam, and against the S/S NASUGBU in rem seeking damages for contamination of a cargo of molasses owned by Cargill. Cargill was the consignee of a cargo of blackstrap molasses shipped to Port Allen, Louisiana, from Puerto Cortez, Honduras, and Vera Cruz, Mexico, aboard the S/S NASUGBU pursuant to a molasses charter party entered into on July 3, 1973, between Cargill Americas, S.A., the original cargo owner, and Nasugbu, the vessel owner. Prior to NASUGBU's arrival in port, Cargill became the owner of the cargo. Upon the NASUGBU's arrival in Port Allen, Louisiana, on September 1, 1973, the molasses, stored in twelve separate storage tanks, was found to be contaminated with creosote in varying degrees. Cargill refused to accept delivery of any part of the cargo, and retained a marine cargo surveying firm to sell the molasses as a salvage distress lot. Sealed bids were solicited and the entire cargo, roughly 8,825 short tons, was sold to the high bidder. Cargill seeks to recover the difference between what the molasses would have been worth but for the contamination, and the value received upon its bidded disposition.

Nasugbu defends on the ground that Cargill was unreasonable in refusing to accept delivery of the molasses and counterclaims for demurrage resulting from the delay in discharging the vessel and for ten per cent (10%) unpaid balance of the ocean freight. Cargill concedes that the unpaid freight balance is due and owing.

California Molasses Co., a foreign corporation, has filed no responsive pleadings in this matter, but no default was ever requested or entered against this respondent.

Prior to trial, Nasugbu admitted that the NASUGBU was unseaworthy at the inception of this voyage due to the presence of creosote residual in its pumps and cargo lines, and that such condition was discoverable by Nasugbu in the exercise of due diligence. Nasugbu further admitted that the molasses contamination resulted from its pumping through the NASGUBU's pumps and cargo lines which contained the creosote residual, and that the occurrence was the fault of Nasugbu's servants, in violation of the charter party.

Liability for contamination of the cargo being admitted, the only questions remaining before the Court are: (1) whether any damages were in fact sustained by Cargill, and if so, the extent and measure thereof, and (2) whether Cargill is liable to Nasugbu for demurrage because of its unconditional refusal to accept delivery of the cargo.

This case was tried to the Court without a jury on June 2, 1975, and now, after due consideration of the evidence and arguments of counsel, the Court concludes that Cargill did sustain damages as a result of the cargo contamination and is entitled to judgment in its favor. The Court further concludes that respondent Nasugbu is not entitled to limitation of liability to the extent of its ownership interest in the vessel. However, Cargill was unreasonable in refusing to accept delivery of this contaminated cargo, and is liable to Nasugbu for resulting demurrage, in addition to the unpaid freight. The Court therefore makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

1.

Libelant Cargill produces a high quality livestock feed reputably known in the industry as "Nutrena." A component of Nutrena is blackstrap molasses which goes into the production of liquid and dry based feed supplement by Cargill's Nutrena Feed Division that in turn comprises part of the final product. Cargill meets most of its molasses requirements by importing from South and Central America into U. S. Gulf ports. It then ships the cargo via barges up the Mississippi River to its various feed supplement production plants in the upper Missouri River Valley. Cargill owns and/or leases storage terminal facilities at various points along the Mississippi and Missouri Rivers, and must get its up-river terminals to full capacity before the Missouri River freezes over in November so that the Nutrena Feed Division can produce feed supplement through the winter months.

2.

On July 3, 1973, Cargill Americas, S. A., entered into a molasses charter party with Nasugbu requiring the NASUGBU to transport specified tonnages of blackstrap molasses from Central American ports to U. S. Gulf ports as designated on bills of lading. This charter party provided, inter alia, that the charterer (or its consignee) would be liable for demurrage at the rate of $1,400.00 per day for any time exceeding the allowable sixty hours lay time when discharging the vessel's cargo. It also provided that Nasugbu would not be responsible for cargo contamination unless such contamination resulted from an unseaworthy condition of the vessel existing at the time of loading or at the inception of the voyage which was discoverable by the exercise of due diligence. The charter party further stipulated that Nasugbu would have the benefit of all limitations of, and exemptions from, liability accorded them as vessel owner by any statute or rule of law then in force.

3.

Nasugbu negligently cleaned the NASUGBU's pumps and cargo lines following discharge of a cargo of creosote on or about August 21, 1973.

4.

The NASUGBU was unseaworthy at the inception of this voyage at Puerto Cortez, Honduras, on or about August 24, 1973, and was unfit to carry the molasses cargo because of the presence of a residual of creosote in some of the NASUGBU's pumps and lines. Such condition was discoverable by Nasugbu in the exercise of due diligence.

5.

Contamination of the molasses occurred as a result of pumping it through the NASUGBU's pumps and cargo lines which contained the creosote residual, due to the fault of Nasugbu's servants in violation of the charter party.

6.

Cargill became the owner of the molasses prior to the NASUGBU's arrival in port.

7.

The NASUGBU docked in Port Allen, Louisiana, on September 1, 1973, laden with this shipment of molasses taken aboard in Puerto Cortez, Honduras, and Vera Cruz, Mexico, which originally had been consigned to Cargill. The molasses was stored in twelve separate storage tanks. A "notice of readiness" to discharge the cargo was issued at 18.30 hours by the vessel's master to Henry Gravois of Cargill's Molasses Department.

8.

That evening, Gravois went aboard the NASUGBU accompanied by an agent for the vessel, a U. S. Customs Agent, LeJeune, a Cargill representative, and Derek Waugh, a surveyor from Evans Laboratories in New Orleans, Louisiana, in order to survey the cargo for quantity and quality. Sampling and gauging were proceeding when LeJeune indicated to Gravois that there appeared to be a foreign substance in the molasses. Gravois conducted his own subjective observations by tasting and smelling the molasses in several of the storage tanks. The foreign substance was creosote.

9.

Gravois notified Jerry Grund, Cargill's Operation Manager in Minneapolis, Minnesota, and Cargill's cargo insurer, Insurance Company of North America (INA), about the situation. Gravois then delivered a letter to the vessel's master advising that Cargill believed the cargo to be contaminated with creosote and that Cargill would hold the NASUGBU responsible for all resulting damages and costs.

10.

The next morning, September 2, 1973, one composite and seven individual samples were taken from the Puerto Cortez shipment for analysis by Cargill and its cargo surveyors. One composite and five individual samples were also taken from the Vera Cruz shipment. The following Tuesday, September 4, 1973, cargo samples were taken for analysis by the vessel's interests. Sampling was conducted by means of a "bomb sampler," a round cylindrical device which is dropped into the molasses with a chain through the tank hatch. When the bomb sampler reaches the desired level, another chain is pulled to open a door to allow the sampler to fill with molasses.

11.

Gravois next contacted Manard Molasses Co. in Port Allen, Louisiana, to inquire whether they would store the molasses in their terminal facility. Manard reluctantly agreed to accept the molasses, but at Cargill's risk if any contamination to their storage tanks resulted. Gravois also contacted Pacific Molasses Co. in New Orleans who agreed to accept the molasses for storage under the same restrictive conditions, i. e., at Cargill's risk. Cargill rejected the idea, and made no serious attempt to locate barges or railroad tank cars for storage of the molasses for fear of potential liability should contamination of such temporary storage facilities result.

12.

Under the relevant provisions of the charter party, lay time expired and demurrage began at 12.30 hours on September 4, 1973.

13.

Cargill's samples were analyzed by Analysis Laboratories in New Orleans on September 10, 1973. The gas liquid chromotographic analysis revealed that the individual tank samples of the Puerto Cortez shipment were contaminated with creosote in degrees ranging from 22 parts per million (p. p. m.) to 136 p. p. m. The Puerto Cortez composite sample was found contaminated to the extent of 82 p. p. m. Four of the Vera Cruz individual samples showed no discernible contamination, less than 4 p. p. m., while the fifth sample tested 8 p. p. m. of creosote. The composite Vera Cruz sample, though, revealed...