Exxon Corp. v. Central Gulf Lines, Inc.

• Decision Date: 21 July 1989
• Docket Number: No. 86 Civ. 9445 (WCC).,86 Civ. 9445 (WCC).
• Citation: 1989 AMC 2943,717 F. Supp. 1029
• Parties: EXXON CORPORATION, Plaintiff, v. CENTRAL GULF LINES, INC., in personam and the M/V GREEN HARBOUR (ex William Hooper) in rem, her engines, boilers, tackle, etc. and a certain Letter of Credit No. P 621208 dated December 26, 1984 issued by the Chase Manhattan Bank, N.A., in rem., Defendants.
• Court: U.S. District Court — Southern District of New York

717 F. Supp. 1029

1989 AMC 2943

EXXON CORPORATION, Plaintiff,

v.

CENTRAL GULF LINES, INC., in personam and the M/V GREEN HARBOUR (ex William Hooper) in rem, her engines, boilers, tackle, etc. and a certain Letter of Credit No. P 621208 dated December 26, 1984 issued by the Chase Manhattan Bank, N.A., in rem., Defendants.

No. 86 Civ. 9445 (WCC).

United States District Court, S.D. New York.

July 21, 1989.

Nourse & Bowles, New York City, for plaintiff (Armand M. Pare, Jr., and Bradley F. Gandrup, Jr., of counsel.)

Bigham Englar Jones & Houston, New York City, for defendants (Francis A. Montbach, and Karin A. Schlosser, of counsel.)

OPINION AND ORDER

WILLIAM C. CONNER, District Judge.

Plaintiff Exxon Corporation ("Exxon") moves for reconsideration of the Court's Opinion and Order, dated March 3, 1989, dismissing its claim for a maritime lien, under the Federal Maritime Lien Act (the "Act"),¹ for want of admiralty jurisdiction. See Exxon Corporation v. Central Gulf Lines, Inc., 707 F.Supp. 155 (S.D.N.Y. 1989).

I have carefully considered "the matters and controlling decisions" which Exxon "believes the court has overlooked," Local Rule 3(j); accord Ruiz v. The Commissioner of the Department of Transportation of the City of New York, 687 F.Supp. 888, 890 (S.D.N.Y.), aff'd 858 F.2d 898 (2d Cir. 1988), but conclude that Exxon's claim was rightly dismissed.

BACKGROUND

Familiarity with my March 3, 1989 Opinion is presumed. Defendant Central Gulf Lines, Inc. ("Central Gulf") owns a vessel, the Green Harbour ex William Hooper (the "Hooper"), upon which plaintiff has asserted a lien. The Hooper was chartered by the Waterman Steamship Corporation ("Waterman"), which for forty years used Exxon as its exclusive worldwide supplier of bunkers.

Under the contract governing the relationship between Exxon and Waterman in 1983, Waterman's fuel requirements were provided by the "Seller" (Exxon) or by "Supplying Companies." Exhibit 3 to Affidavit of James E. Sharkey hereinafter Waterman/Exxon Contract. Waterman made purchases under this agreement by telephoning Exxon in New York and providing Exxon with delivery information. Exxon would effect delivery on its own, or cause a local supplier to deliver the bunkers to the vessel. Exxon would invoice Waterman for the fuel supplied, and if a local supplier was used, pay the supplier.

The bunkers delivery which is the subject of this motion occurred on October 26, 1983, when the Hooper put in at Jeddah, Saudi Arabia. In order to fulfill its obligation to procure fuel for Waterman at that port, Exxon used a local supplier, Arabian Marine Operating Co., Ltd. ("Arabian Marine").

Exxon had promised Arabian Marine that it would "solicit and arrange for the sale of marine fuels to international customers having bunkering requirements at the port of Jeddah." In return for Exxon's services, Arabian Marine had agreed to pay Exxon a "commission." Exhibit 4 to Affidavit of James E. Sharkey ¶¶ 1 & 5 hereinafter Exxon/Arabian Marine Contract.

In my March 3, 1989 Opinion, I found that Exxon's agreement to procure bunkers for Waterman in Saudi Arabia was outside of the Court's admiralty jurisdiction. I observed that the Second Circuit in Peralta Shipping Corp. v. Smith & Johnson (Shipping) Corp., 739 F.2d 798 (2d Cir.1984), cert. denied, 470 U.S. 1031, 105 S.Ct. 1405, 84 L.Ed.2d 791 (1985), had reaffirmed the rule that "agency contracts under which a party agrees to solicit or procure freight, passengers, crew, or supplies for a vessel are not maritime contracts," 707 F.Supp. at 159, and concluded that Exxon's services with respect to the Saudi Arabian delivery constituted such a preliminary contract:

Under the contract, Exxon served in two distinct capacities. Its first role was as a supplier of marine fuels. When Waterman vessels called at ports where Exxon maintains its own bunker stations, Exxon promised to physically deliver the bunkers. When the vessels, however, called at ports where Exxon depends on local suppliers, Exxon promised to arrange for the local suppliers to provide Waterman ships with fuel. When acting in this latter capacity, Exxon was merely Waterman's agent.

Exxon wore its agency hat when it procured bunkers for the Hooper in Jeddah. Its services with respect to the Jeddah delivery included taking Waterman's order, contacting Arabian Marine, maintaining a bunkers contract with Arabian Marine, and advancing Waterman the purchase price by paying Arabian Marine. It never actually possessed the fuel that was supplied to the Hooper at Jeddah. Indeed, pursuant to Exxon's contract with Arabian Marine, title to the fuel passed directly from Arabian Marine to the Hooper. In return for these services, Exxon received a commission which was deducted from Arabian Marine's invoice to Exxon. In sum, Exxon's role in the transaction was strictly "shoreside," E.S. Binnings v. M/V Saudi Riyadh, 815 F.2d 660 at 664 11th Cir.1987. As Exxon put it in its discussion of the choice of law issue, the locus of Exxon's relationship with Waterman was the United States, not the dock in Jeddah. See Plaintiff's Memorandum of Law at 16. Exxon's services were thus "preliminary"; they ended before the bunkers reached the Hooper.

707 F.Supp. at 160.

DISCUSSION

Exxon offers four reasons why I erred in dismissing its lien on jurisdictional grounds: (1) Exxon sold the bunkers to Waterman; it was not Waterman's agent; (2) Exxon was not a general agent within the meaning of Peralta; it was a special agent and thus entitled to assert a maritime lien; (3) the Waterman/Exxon Contract was not a preliminary contract; and (4) Exxon extended credit to the Hooper, and can claim jurisdiction on that ground. Plaintiff also argues that "in the event the Court considers no such lien exists ... further evidence should be allowed on the nature of the Exxon/Waterman Fuel Oil Contract" and that "any question of Exxon's rights under Saudi law should be reserved." Plaintiff's Brief at 28-29. I will address each argument individually, and then briefly discuss the merits of Exxon's underlying claim.

I. Agent or Seller

Plaintiff first contends that the Waterman/Exxon Contract should be characterized as a sales contract, not an agency contract. "At the very most a recasting of the contract would make any `Supplying Company' a subcontractor of Exxon, and Exxon the contractor." Plaintiff's Brief at 9. I disagree.

It is well-settled that an agency relationship involves: (1) consent; (2) fiduciary duty; (3) absence of gain or risk to the agent; (4) control by the principal; and (5) power of the agent to alter the legal relations between the principal and third persons and between the principal and himself. Boss v. Int'l Brotherhood of Boilermakers, 567 F.Supp. 845, 847 n. 1 (N.D.N.Y.) (Miner, J.), aff'd 742 F.2d 1446 (1983), cert. denied, 469 U.S. 819, 105 S.Ct. 89, 83 L.Ed.2d 36 (1984); Restatement (Second) of Agency §§ 12, 13 & 14 (1958).²

It is sometimes difficult, however, to distinguish between a seller or supplier and a mere agent. The Restatement suggests that "one who contracts to acquire property from a third person and convey it to another is the agent of the other only if it is agreed that he is to act primarily for the benefit of the other and not for himself." Id. § 14K. The comment to that section explains:

Factors indicating that the one who is to acquire the property and transfer it to the other is selling to, and not acting as agent for, the other are: (1) That he is to receive a fixed price for the property, irrespective of the price paid by him. This is the most important. (2) That he acts in his own name and receives the title to the property which he thereafter is to transfer. (3) That he has an independent business in buying and selling similar property. None of these factors is conclusive.

Id. comment a.³ As the factors listed above suggest, an important difference between sellers and agents is the manner in which risk of loss and opportunity for gain are distributed:

Who is to be affected by the fluctuations of the price is often significant. If the one who is to supply the goods is to do so at a fixed price regardless of market fluctuations, there is strong evidence of a sale rather than of agency. Upon whose responsibility are the goods to be procured, is also a significant question. If they are to be obtained upon the credit of the person, who is to supply them without possibility of recourse to the person to whom they are to be supplied, this is also strong evidence of a sale. Who is to determine of whom, where, to what extent, upon what terms, the goods to be supplied are to be procured? If the person who is to supply them is to determine these matters, then the transaction may be a sale.

1 F. Mechem, Law of Agency § 46 (1914).

After reviewing the terms of both contracts involved in this case, I remain convinced that the elements of an agency relationship are satisfied here. First, Exxon's likelihood of profit or loss was fixed. Although Exxon asserts that its responsibility under the agreement was to "provide the minimum quantities of fuel irrespective of any difficulties it may have in obtaining the supplies," and that if it were an agent, it would have only had to use its "best efforts" to procure bunkers, Plaintiff's Brief at 5, Exxon's duties under the contract were in fact much less onerous then it claims. Practically, Exxon was only obligated to exercise its best efforts to procure fuel for Waterman. The contract permitted Exxon to escape performance where difficulties "not reasonably within its control" intervened and protected Exxon from fuel shortages caused by "any ... event." Waterman/Exxon Contract § 6.7(C) & (D). Moreover, the contract insulated Exxon from shifts in the market price of fuel, by basing the price of the bunkers on the local supplier's price. Id. § 4.1 (Waterman was charged "the established selling price effective for the time and place of delivery by Seller or ...