Dow Chemical Co. v. TEXACO REFINING & MARKETING

• Decision Date: 22 May 1995
• Docket Number: Civ. A. No. 2:94cv449.
• Citation: 887 F. Supp. 853
• Parties: The DOW CHEMICAL COMPANY, Plaintiff, v. TEXACO REFINING AND MARKETING, INC., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

887 F. Supp. 853

The DOW CHEMICAL COMPANY, Plaintiff, v. TEXACO REFINING AND MARKETING, INC., Defendant.

Civ. A. No. 2:94cv449.

United States District Court, E.D. Virginia, Norfolk Division.

May 22, 1995.

COPYRIGHT MATERIAL OMITTED

Morton H. Clark, Henry P. Bouffard, Vandeventer, Black, Meredith & Martin, Norfolk, VA, for plaintiff.

Glen A. Huff, David N. Ventker, Huff, Poole & Mahoney, Virginia Beach, VA, for defendant.

FINAL OPINION AND ORDER

MORGAN, District Judge.

Plaintiff The Dow Chemical Company brought this action against defendant Texaco Refining and Marketing, Inc. for the breach of a bareboat charter for a tugboat and barge. The Court presided over the trial from March 20, 1995 to April 6, 1995.

I. FACTUAL AND PROCEDURAL HISTORY

The Dow Chemical Company ("Dow") is a corporation registered in Delaware with its principal place of business in Houston, Texas. Texaco Refining and Marketing, Inc. ("Texaco") is a corporation registered in Delaware with its principal place of business in White Plains, New York. Dow brings this admiralty claim pursuant to 28 U.S.C. § 1333(1), and asserts that both parties have agreed to venue in this Court.

Dow contracted in the late 1970's for the construction of a tugboat and a barge in order to transport petroleum and chemical products to and from Dow facilities.¹ The two vessels were designed to function as an integrated tug and barge unit ("ITB"), by which the bow of the tugboat locked into the stern of the barge allowing the tugboat to maneuver the barge. The tugboat, named the SEA SKIMMER, was constructed in 1980 by fitting a new bow section with two stern pieces from World War II-era vessels. The tugboat contains a specially designed bow section, called a Bludworth system, which locks into a V-shaped notch in the stern of the barge.² The tugboat is classified as A-1 Towing Class with the American Bureau of Shipping ("ABS"),³ but lacks a Maltese Cross designation which indicates that the vessel was not fully constructed under the jurisdiction or survey of an ABS member.

The barge, named the PLAQUEMINE, was built in 1978 to design specifications issued by the United States Coast Guard and the ABS and is classed with the ABS as an A1 tank barge with a Maltese Cross designation.⁴ The barge is a double-hulled vessel with eight independent cargo tanks, four on each side of the vessel. Between the hull of the ship and the cargo tanks are ten ballast tanks, five on each side, which are flooded with water to allow for increased maneuverability. Each ballast tank is divided into eleven bays, with each bay composed of steel structural members.⁵ The barge originally carried six cylindrical propane tanks on its deck for storage of gaseous or liquid petroleum products.

Dow never used the tugboat and the barge according to its original plan, and attempted to charter the vessels to third parties. In 1987, through the assistance of a broker, Dow and Texaco entered into negotiations for the charter of the vessels. Texaco researched the history of the tugboat and the barge during negotiations by checking the vessels' history with the ABS and sending Texaco personnel to inspect the vessel visually. On January 30, 1988, the parties agreed to separate bareboat charters for the SEA SKIMMER and the PLAQUEMINE for a period of two years with a right for Texaco to renew the charters for three additional one year terms.

The two bareboat charters, or charter parties, required Texaco to comply with the classification and inspection standards promulgated by the ABS, including the ABS drydocking and surveying schedules. The charter parties contained differing provisions with respect to particular sections. The tugboat charter party contained a section on redelivery of the vessel that stated:

Charterer at its expense will redeliver the Vessel to Shipowner in serviceable condition for ships of like age and type and in conformity with the provisions of Section 6 hereof, ordinary wear and tear excepted. At the time of redelivery the Vessel shall have been credited with a classification drydock survey as of a date no more than 36 months prior to such date of redelivery and the Vessel, at such time, shall hold the highest classification and rating of the American Bureau of Shipping for vessels of the same class, age and type....

. . . . .

Within 180 days prior to redelivery, a joint survey shall be made by Charterer and Shipowner to determine the condition and fitness of the Vessel and her machinery and equipment. The cost of such survey shall be paid by Charterer. All repairs and work shown by such survey to be necessary to put the Vessel in the condition required by the preceding paragraph of this Section 24 shall be done and all repairs of damage occurring after such survey shall be made by Charterer at Charterer's expense prior to redelivery, or Charterer shall discharge such obligation by payment for the cost of such repairs and work and for the time of the Vessel required therefor at the rate of Charter Hire (computed on a per diem basis) provided for in this Charter and other expenses incidental to such work.⁶

The section on maintenance of the tugboat, section 6, states:

Charterer always at its own expense, procurement and risk, shall have full responsibility for possession, maintenance and repair of the Vessel throughout the Charter Period, and at its expense and for its account (whether or not any applicable insurance proceeds are adequate for the purpose) will (i) maintain and preserve the Vessel and her equipment in good condition, running order or repair, so that the Vessel shall be, insofar as due diligence can make her so, tight, staunch, strong and well and sufficiently tackled, appareled, furnished, equipped and in every respect seaworthy and in good operating condition, (ii) keep the Vessel in such condition as will entitle her to the highest classification and rating from the American Bureau of Shipping for vessels of the same class, age and type, and furnish to Shipowner upon request photostatic copies of all certificates issued by the American Bureau of Shipping evidencing the maintenance of such classification and all reports of such Bureau with respect to annual or other periodic or damage surveys, (iii) cause the Vessel to meet all safety, operational and maintenance requirements of the United States Coast Guard and any other United States, international or other authority having jurisdiction over the Vessel and (iv) cause the Vessel to be overhauled when necessary and to be drydocked, cleaned and bottom-painted when necessary, but at least as frequently as may be required to maintain such classification. All maintenance and repair of the Vessel performed for the purpose of meeting the requirements of the American Bureau of Shipping, including changes in or additions to such requirements, shall be for Charterer's account.⁷

The parties included a separate warranty by Dow for the gearboxes by which Dow warranted the condition of the gearboxes and promised to cover any costs of repair.

The charter party for the barge contains a section on redelivery that states:

Charterer shall redeliver the Vessel at the time of the expiration of the Term, except that the Term shall be extended for the duration of any voyage of the Vessel in progress at such time of expiration and for such additional time as shall be required to effect redelivery; and Charterer will pay Hire for the period of such extension at a daily rate proportionate to the monthly Hire. Charterer shall make such redelivery of the Vessel to Owner at any safe United States Gulf of Mexico port or United States East Coast Port, at Charterer's option, and Charterer shall notify Owner at least ninety (90) days in advance of such approximate time of redelivery. Charterer agrees that at the time of such redelivery the Vessel shall be free and clear of all liens, charges and encumbrances ... and shall be in the same good order and condition as when delivered hereunder, ordinary wear and tear alone excepted. If there should be redelivery on account of the occurrence of an event of default hereunder, Charterer shall, at the request of Owner and at Charterer's expense have the Vessel surveyed by a qualified marine surveyor.⁸

The barge charter's maintenance section states:

(a) From and after the Delivery Date of the Vessel and delivery thereof of Charterer, Charterer, always at its own expense, procurement and risk, shall have exclusive control of the Vessel and shall be charged with full responsibility for its possession, maintenance and repair, use and operation throughout the Term. Charterer shall at all times maintain and preserve the Vessel in accordance with good commercial maintenance practice, shall keep the Vessel in such condition as will entitle her to maintain the classification and rating of the American Bureau of Shipping as exists on the Delivery Date for vessels of the same age and type and shall furnish to Owner photostatic copies of all certificates issued by the American Bureau of Shipping evidencing the maintenance of such classification. The Vessel shall, and Charterer covenants that it will, at all times, comply with all applicable laws, treaties and conventions, and rules and regulations issued thereunder, and shall have on board, when required thereby, valid certificates showing compliance therewith.

(b) The Vessel and its equipment shall be repaired and overhauled by Charterer at its expense, whenever necessary. The Vessel shall likewise be drydocked, cleaned and bottom painted by Charterer at its expense, whenever necessary, but in any event at least as often as may be required by the American Bureau of Shipping during the Term for maintenance of the classification referred in paragraph (a) of this Article 5. Charterer will comply as required with all recommendations resulting from each special survey of the Vessel made under the rules of the American Bureau of Shipping. Charterer shall, at

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