Crown Central Petroleum Corp. v. Cosmopolitan Shipping Co., Inc.

• Decision Date: 15 June 1979
• Docket Number: No. 397,D,397
• Citation: 602 F.2d 474
• Parties: CROWN CENTRAL PETROLEUM CORPORATION, Plaintiff-Appellee, v. COSMOPOLITAN SHIPPING CO., INC., Defendant-Appellant. ocket 78-7367.
• Court: U.S. Court of Appeals — Second Circuit

Page 474

602 F.2d 474

CROWN CENTRAL PETROLEUM CORPORATION, Plaintiff-Appellee, v. COSMOPOLITAN SHIPPING CO., INC., Defendant-Appellant.

No. 397, Docket 78-7367.

United States Court of Appeals Second Circuit.

Argued Jan. 15, 1979.

Decided June 15, 1979.

Richard G. Ashworth, New York City (Haight, Gardner, Poor & Havens, New York City, Bert I. Weinstein, New York City, of counsel), for defendant-appellant.

Donald M. Waesche, Jr., New York City (Bigham, Englar, Jones & Houston, New York City), for plaintiff-appellee.

Before WATERMAN, GURFEIN and VAN GRAAFEILAND, Circuit Judges.

WATERMAN, Circuit Judge:

Cosmopolitan Shipping Co., Inc. (Cosmopolitan) appeals from a judgment entered in the United States District Court for the Southern District of New York (Cannella, J.) awarding Crown Central Petroleum Corp. (Crown Central), as owner of a cargo of Algerian blend crude oil, damages for a partial loss of cargo and a recovery for any contributions in general average and salvage that it may be compelled to pay as a result of the stranding of the T/V Ellen Conway. After a one-day bench trial on the issue of liability, the district court found that Cosmopolitan as the vessel's managing agent "had a most substantial measure of control over the operation of the vessel," therefore became the "employer" of the officers and crew, and hence was liable for damages caused by the vessel's negligent navigation.

Cosmopolitan argues on appeal that the district court erred as a matter of law in concluding that a managing agent, having a substantial measure of control over the operation of a vessel, was the owner pro hac vice of the vessel and therefore was liable for damages caused by the vessel's negligent navigation. We agree with appellant and reverse the district court.

Crown Central was the owner and consignee of crude oil cargo, laden in good order and condition on board the T/V Ellen Conway at the port of Arzew, Algeria, for delivery to Houston, Texas. Shortly after departure, however, the vessel grounded and it became necessary to charter another vessel to complete the voyage. As a result of the casualty a portion of the cargo was lost or damaged. The vessel owners, Ellen Tankers, Inc. (Ellen Tankers), brought suit in the High Court of Justice, London, England, against the charterer of the ship, Easco, Inc., and against Crown Central seeking contribution in general average occasioned by efforts at refloating the ship and for the transportation of the cargo to its destination. This action was settled on October 11, 1978, when Crown Central agreed to pay a percentage of the general average contribution. That payment is part of Crown Central's claim for damages against Cosmopolitan in the present action.

There was substantially no dispute as to the facts in the court below. The pre-trial order entered on consent of the parties provided that "(t)he stranding and consequent damage or loss of (Crown Central's) cargo was caused as a result of the negligence of the officers of the T/V Ellen Conway in failing to properly navigate the vessel." It was further stipulated that Cosmopolitan was not a party to the contract of carriage and therefore was not a "carrier" as that term is used in the United States Carriage of Goods by Sea Act (COGSA), 46 U.S.C. § 1301(a) (1977). Cosmopolitan, however, if it is deemed to be the employer of the officers and crew by virtue of its control over the operation of the vessel pursuant to the management agreement, asserts the right to avail itself of the carrier's COGSA defenses. As set forth in the pre-trial order, the sole issue before the district court was whether Cosmopolitan was liable in tort for the damages incurred by Crown Central which resulted from the stranding of the T/V Ellen Conway.

Cosmopolitan and Ellen Tankers entered into an oral agreement with reference to the management of the T/V Ellen Conway. The oral agreement incorporated the terms of a form management agreement in writing which had previously been used by Cosmopolitan. Pursuant to their agreement, Cosmopolitan, among its contractual responsibilities, was to " '(e)quip, victual and supply' the vessel, 'appoint the masters' of the vessel, and 'procure, for employment by the masters, . . . full complements of officers and crew' all subject to the approval of Ellen Tankers, Inc."; but the master was to be the employee of Ellen Tankers and the officers and crew were to be the employees of the master.

In fulfillment of its management obligations Cosmopolitan arranged, through a crewing agent in Taiwan, for the employment, on behalf of Ellen Tankers, of the T/V Ellen Conway's master, officers, and crew. Ellen Tankers advanced funds to Cosmopolitan for the payment of the crew's wages and allotments, which funds were forwarded to the crewing agent and/or master for disbursement. Funds so advanced were placed in a "Tanker's Management Account" established and controlled by Cosmopolitan and out of which all operating expenses were paid. The wages of the crew were expenses of Ellen Tankers and were so carried on its financial statements. Under the agreement, Ellen Tankers, as vessel owner, provided all operating funds for running the ship, supervised all chartering activities and all of the ship's income producing activities, and controlled all drydocking decisions and all capital improvements to the ship.

As is common in the shipping industry, Cosmopolitan and Ellen Tankers are owned by the same persons and have had the same officers and directors at all relevant times. The parties, however, stipulated in the pre-trial order that ...