Cia. Atlantica Pacifica, SA v. Humble Oil & Refining Co., 4833.

• Decision Date: 31 August 1967
• Docket Number: No. 4833.,4833.
• Parties: CIA. ATLANTICA PACIFICA, S. A., Libelant, v. HUMBLE OIL & REFINING COMPANY, Respondent.
• Court: U.S. District Court — District of Maryland

274 F. Supp. 884

CIA. ATLANTICA PACIFICA, S. A., Libelant, v. HUMBLE OIL & REFINING COMPANY, Respondent.

No. 4833.

United States District Court D. Maryland.

August 31, 1967.

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William A. Grimes and Ober, Williams & Grimes, Baltimore, Md., for libelant.

John H. Skeen, Jr. and Skeen, Wilson & Gilbert, Baltimore, Md., James J. Higgins and Kirlin, Campbell & Keating, New York City, for respondent.

FRANK A. KAUFMAN, District Judge.

Libelant,¹ owner of the M/V CLYDEWATER, chartered that vessel in June of 1962 under a tanker time charter party to a wholly, or substantially wholly, owned subsidiary of Standard Oil Company of New Jersey. The charter party contained the new Jason Clause pursuant to which cargo owners and consignees are required to contribute in general average despite negligence of the ship "for which, or for the consequence of which, the Owner of the ship is not responsible, by statute, contract, or otherwise."²

In October 1963, a full cargo of petroleum products consigned to respondent³ (a wholly-owned subsidiary of Standard Oil Company of New Jersey) at Charleston, South Carolina, was loaded aboard the CLYDEWATER at the Caribbean island of Aruba and shipped under a bill of lading which incorporated the new Jason Clause. En route from Aruba to Charleston, the vessel stranded on October 16, 1963 on Silver Bank off the Dominican Republic. Efforts to refloat her were successful. As a result of the stranding and/or refloating the CLYDEWATER sustained substantial bottom and other damage. The master indicated in what appears to be an entry in the vessel's deck logbook dated October 21, 1963 his intention to notify a declaration of general average upon reaching port. The vessel proceeded to Charleston and upon its arrival on October 24, 1963, the ship's master declared general average. The cargo was discharged and delivered to respondent after respondent executed an agreement dated October 24, 1963.⁴

This agreement — the general average agreement — was executed in Houston, Texas by a vice president of respondent and sent by him to the ship's master in care of Tidewater Commercial Company to Baltimore, Maryland, the CLYDEWATER's next port of call, under cover of the following letter:

Dear Sir:

We as owners of the cargo aboard the MT "CLYDEWATER" which loaded and sailed on October 15, from Aruba bound for Charleston, S. C., guarantee to pay all proper and legal general average contributions due from the cargo owner as a result of the casualty occurring during the voyage.

We also attach an executed standard form of Average Agreement for your use.

In accordance with the average agreement, libelant thereafter appointed Manley Hopkins, Son & Cookes (Hopkins) of London as average adjuster. Esso International, Inc., like respondent, a wholly-owned subsidiary of Standard Oil Company (New Jersey), was advised, and approved, of the appointment. On March 1, 1965, Hopkins submitted to both parties a general average statement which computed respondent's liability for general average contribution in an amount in excess of one hundred thousand dollars. After respondent's failure to make payment of all or any part thereof, libelant commenced these proceedings, alleging two causes of action: (1) Breach of contract, on the theory that the general average agreement of October, 24, 1965, is conclusive and binding upon the parties and requires payment of the contribution set forth in the Hopkins general average statement; (2) An action under general principles of maritime law on the ground that whether or not the general average statement per se establishes such liability, respondent as a cargo owner is liable in general average in the amount of the contribution set forth in the general average statement. In its answer respondent denied that it was bound by the general average statement and also denied that it was bound to contribute in general average.

At a pre-trial conference on November 22, 1966, both parties requested the Court, in advance of trial and after a hearing, to decide the following questions: (1) Is the general average statement conclusive as to the rights and obligations of the parties? (2) If the statement is not conclusive, who has the burden of proof to establish the correctness or incorrectness of the computations in the general average statement? (3) If the statement is not conclusive, who has the burden to show that the stranding was due to an error in navigation? and (4) If the statement is not conclusive, who has the burden to prove that the stranding was the result of unseaworthiness and occasioned by the owner's failure to exercise due diligence to make the vessel seaworthy? These questions present preliminary issues the resolution of which are clearly appropriate prior to trial.

I.

The law of general average derives from the Rhodian maxim "that if merchandise is thrown overboard to lighten the ship, the loss occasioned for the benefit of all must be made good by the contribution of all."⁵ The principle embodied in this maxim — that loss for the common benefit which is incurred by one who partakes in a maritime venture should be shared ratably by all who participate in the venture — may quite likely pre-date the Rhodians and be grounded in an ancient and customary undertaking by owners of cargo that if one of their number should suffer loss during a voyage through lightening of the ship, all who had profited through the voyage would pay their share to make that loss good.⁶ Contribution in general average was a maritime principle recognized by the Romans and one which survived the fall of the Roman Empire and retained a hold among seafarers throughout the middle ages. Gradually the principle received formal recognition in written codes and digests.⁷ The right to general average contribution, in modern times, is a principle of general maritime law recognized by "all the principal maritime nations."⁸ Current law and practice relating to the adjustment of general average is for the most part determined by reference to the York-Antwerp Rules of 1950,⁹ which are not of themselves binding as law but which are generally incorporated in charter parties and bills of lading and are thereby made binding by contract as between the parties.

The question of whether or not all or any part of the loss suffered by ship or cargo or both is a general average loss depends upon how much, if any, of the damage was sustained in connection with efforts for the common good of both ship and cargo. For example, damage incurred in this case in the CLYDEWATER's "going on" the Silver Bank would seem hardly to qualify as general average loss under normal circumstances. On the other hand, damage suffered in "carry off" would usually be expected so to qualify. See e. g., Navigazione Generale Italiana v. Spencer Kellogg & Sons, 92 F.2d 41, 44 (2d Cir. 1937).

From an early date it appears to have been the duty of the ship to declare general average and make the necessary and proper adjustment. Ralli v. Troop, 157 U.S. 386, 400, 15 S.Ct. 657, 39 L.Ed. 742 (1895). "The reason why the shipowner usually acts in the premises is because in most cases there is a balance of general average due to him, and also because, if cargo has been sacrificed, he is under a duty to that cargo to obtain security from the other cargo." Kohler & Chase v. United American Lines, 60 F.2d 530, 533 (S.D.N.Y.1932) (report of special commissioner prefacing order of court approving that report). Pending a general average adjustment the ship has "a lien upon the cargo for such contributory share as, under the facts of the case, the cargo owners might be bound to pay * * *." The Agathe, 71 F. 528, 530 (S.D.Ala. 1895).¹⁰ Practical necessities, which dictate that neither goods nor ships can long suffer removal from the channels of commerce, make enforcement of contribution through lien proceedings exceedingly undesirable to all engaged in maritime ventures. This consideration has led to "the almost universal practice * * * for the master, before delivering the goods, to take an average bond, and for the owners of the cargo to give such a bond." Wellman v. Morse, 76 F. 573, 579 (1st Cir. 1896). Such bonds, more generally referred to as general average agreements, are undertakings on the part of one who may be liable in general average to pay such contribution as may be found to be owing by him. General average agreements are sometimes executed and cargo discharged, as in the present case, upon this undertaking alone. In other instances the agreement is "in the form of a bond with surety, sometimes accompanied by a deposit, and sometimes guaranteed by the underwriters." Corrado Societa Anonima D. v. L. Mundet Sons, 18 F. Supp. 37, 41 (E.D.Pa.1936).

In addition to the desire to avoid delay and tie-ups of either ship or cargo, another important reason why it is most undesirable for general average contribution to be dependent upon enforcement of liens is the fact that adjustment of general average is a highly complex matter which usually, at least in modern days, requires preparation of a written statement setting forth the intricate computations pursuant to which contributions, said to be owing, are determined. In the context of current maritime complexities, such statements may be a number of years in preparation. See e. g., Chandris v. Argo Ins. Co., 1963 2 Lloyd's List L.R. 65, 72-73, 75; Rebora v. British & Foreign Marine Ins. Co., 258 N.Y. 379, 180 N.E. 90, 91 (1932). Although the shipowner appears always to have had the right to prepare his own average statement, a group of professional average adjusters has made a specialty of this often arduous task. "The members of this profession enjoy a very high reputation for fairness to ship and cargo alike," and their services are customarily sought whenever there is a situation of general average.¹¹ It is, for instance, the practice of insurers on the...