Hilton Oil Transport v. Oil Transport Co., S.A.

• Decision Date: 09 August 1995
• Docket Number: No. 94-560,94-560
• Citation: 659 So.2d 1141
• Parties: , 20 Fla. L. Weekly D1795 HILTON OIL TRANSPORT, et al., Appellant, v. OIL TRANSPORT CO., S.A., Appellee.
• Court: Florida District Court of Appeals

Page 1141

659 So.2d 1141

1996 A.M.C. 113, 20 Fla. L. Weekly D1795

HILTON OIL TRANSPORT, et al., Appellant, v. OIL TRANSPORT CO., S.A., Appellee.

No. 94-560.

District Court of Appeal of Florida Third District.

Aug. 9, 1995.

Rehearing Denied Sept. 27, 1995.

Mitchell, McAlpin & Associates and Richard McAlpin, for appellants.

Keller, Houck & Shinkle and Patrick E. Novak and Vincent O'Brien and John Keller, for appellee.

Before BARKDULL, LEVY and GREEN, JJ.

GREEN, Judge.

Hilton Oil Transport ("Hilton Oil") and Percy C. Overman ("Overman"), defendants below, appeal from an adverse final judgment entered against them and in favor of Oil Transport Co., S.A. ("O.T.C.") after a bench trial. O.T.C. cross appeals that portion of the final judgment assessing attorneys' fees against O.T.C. as well as denying prejudgment interest to O.T.C. for its damages for breach of contract.

BACKGROUND

O.T.C., the plaintiff below, is a Dominican Republic corporation which leases tug boats for hire. Hilton Oil is a Cayman Islands corporation based in Miami and Overman is Overman operated Hilton Oil and his other corporate entities in a very informal manner. For example, Hilton Oil's debts were usually paid by other entities owned by Overman without any notes or other financial records documenting such loans; Overman rarely, if ever attended board meetings; written minutes were rarely made of critical decisions made by the board members.

its managing director and primary owner. Hilton Oil operated out of an office occupied by various other corporate entities owned and/or controlled by Overman. Aside from Overman, Hilton Oil's only other employees were two pumpmen.

In 1989, Hilton acquired its sole asset, a 250 feet barge named "Hilton", from Overman. The barge was capable of transporting petroleum products but needed extensive refurbishing. It was subsequently towed by a tug to Jacksonville, Florida for repairs. Overman personally invested approximately $800,000 for such repairs, $560,000 in the form of a loan to Hilton Oil. Hilton Oil gave Overman a note and mortgage on the barge to secure the loan.

In August 1990, after the repairs were completed, a company known as Rio Energy contacted Hilton Oil for the purpose of chartering the barge Hilton to ship asphalt from Venezuela to Honduras. On August 30, 1990, Hilton Oil and Rio Energy entered into an agreement for the barge Hilton to transport the asphalt in two consecutive voyages to Honduras. Thereafter, Rio Energy entered into a sub-charter agreement with Comision Administradora Del Petroler ("C.A.P."), an agency of the Honduran Government, for the transportation of the asphalt on substantially similar terms as the Hilton Oil/Rio Energy Charter. ¹ The agreement and the subcharter agreement contained a provision for the arbitration of all disputes between these parties.

Hilton Oil needed a tug to tow its barge for the voyages to Venezuela and approached O.T.C. to lease a tug. On August 31, 1990, Hilton Oil entered into an agreement with O.T.C. to lease or charter the tug Elizabeth from O.T.C. The charter hire or rental fee was fixed at $1300 per day and all fuel, lube oil and port charge expenses were to be borne by Hilton Oil. According to this agreement, the tug Elizabeth was to tow the barge Hilton from Puerto Rico (where the barge was currently located) to Caracas and from there to Honduras and back. Unlike the Hilton Oil/Rio Energy/C.A.P. agreement, the agreement between Hilton Oil and O.T.C. contained no arbitration provision.

The barge Hilton and tug Elizabeth arrived with the first load of asphalt in Puerto Cortes, Honduras in mid-September 1990. At that time, however, a commercial dispute over the discharge temperature of the asphalt developed between the operators of the barge and C.A.P. ² On October 16, 1990, C.A.P. decided to send the barge to Puerto Castilla, Honduras for discharge because it was thought that the shore line there would be more favorable for discharge. The tug and barge arrived at Puerto Castilla on October 18 and resumed heating the asphalt using shore power. On October 21, the receiving agent for the government there advised that it was shutting down the barge's operations because asphalt was foaming in the shore tank and there was fear of a possible "boil over" on the shore. The government's receiving agent there then advised the barge's operators that it would not accept the remainder of the asphalt. Subsequently, C.A.P. directed the port authorities to detain both the vessel and the tug in port while the Honduran government began attachment proceedings. Both the barge Hilton and tug Elizabeth were named in this legal proceeding. Ultimately the barge was allowed to resume its discharge operations and was able to complete the same on November 3, 1990.

Upon the discharge of the cargo, the Honduran government informed Hilton Oil that the barge and tug would still be detained and not allowed to set sail. ³ Approximately one week later, a severe storm swept through Puerto Castilla and the barge broke away from its mooring and was effectively destroyed. The tug Elizabeth, on the other hand, survived the storm.

After the destruction of the barge, Overman brought a foreclosure action against Hilton Oil on the note and mortgage in the United States District Court for the Southern District of Florida. Alternate directors for Hilton Oil authorized a shareholder of the company named Andrew Giovenco to confess judgment on behalf the company in this action. As a result, Overman readily obtained a monetary judgment in his favor against Hilton Oil for $633,000.

Additionally, Overman filed a claim on behalf of Hilton with the hull insurer of the barge. The insurer was instructed to forward the proceeds of the insurance claim to Overman and Associates, another entity owned by Overman in Miami which had informally made loans to Hilton Oil in the past. When the insurer failed to pay, litigation ensued in the United States District Court for the Southern District of Florida and Hilton Oil was awarded $747,993.11. This judgment is currently on appeal by the insurer.

In November 1990, Hilton Oil instituted arbitration proceedings against both Rio Energy and C.A.P. for damages incurred as a result of the detention and loss of use of the barge. Hilton Oil asserts that, as part of its claims in this arbitration proceedings, it sought recovery for O.T.C.'s loss of use of the tug as well.

On April 9, 1993, the arbitrators entered their Final Award finding that detention of the barge and tug to be wrongful by the Honduran government and awarding Hilton Oil $1,055,171.53 plus post judgment interest for, among other things, its damages for the loss of use of the barge up to the date anticipated for the completion of the second voyage for the delivery of the asphalt. Neither the arbitrators nor the final award addressed O.T.C.'s claims against Hilton Oil. The arbitration award was later confirmed as a final judgment. See In re Consolidated Arbitration between Hilton Oil Transport against Rio Energy Int'l, Inc. and between Rio Energy Int'l, Inc. against Comision Administradora Del Petroleo, No. 93 Civ. 2900, 1993 WL 256714 (S.D.N.Y. July 6, 1993) (unpublished).

Meanwhile, during the pendency of the arbitration proceeding, O.T.C. submitted its final invoice to Hilton Oil in the amount of $796,400 on April 1, 1992. ⁴ When Hilton Oil failed to pay, O.T.C. commenced the action below against both Hilton Oil and Overman personally for breach of the charter agreement.

The parties proceeded at a bench trial below and the court entered final judgment in favor of O.T.C. and against Hilton Oil and Overman for $562,981.00. This represented the daily charter hire rate up to the date of the release of the tug less a set off in the sum of $200,00.00 which represented O.T.C.'s pro rata share of Hilton Oil's attorneys fees incurred in the arbitration proceeding plus an uncontested set-off in the sum of $33,419.00. The trial court denied prejudgment interest to O.T.C. on its claim on equitable grounds.

Hilton Oil and Overman appeal this judgment on the grounds that: (1) the Honduran government's wrongful detention of the barge and tug frustrated its charter agreement with O.T.C.; therefore as a matter of law, Hilton Oil was relieved of its obligation to pay charter hire to O.T.C.; (2) even if Hilton Oil is liable for charter hire to O.T.C., its liability should be limited up to the anticipated date of completion of the second voyage, just as Hilton Oil's recovery was limited in its arbitration proceeding with Rio Energy and C.A.P.; and (3) the trial court erred in disregarding Hilton Oil's corporate entity or "piercing the corporate veil" to impose personal liability against Overman. O.T.C. has

                filed a cross appeal asserting that the trial court erred (1) in assessing a pro rata share of Hilton Oil's attorneys' fees incurred in the arbitration proceeding against Rio Energy and C.A.P.;   and (2) denying prejudgment interest to O.T.C. on its breach of contract claim against Hilton Oil
                

I. MAIN APPEAL

A. COMMERCIAL FRUSTRATION

Hilton Oil's first argument on appeal is that the trial court's award of the full charter hire to O.T.C. for the entire sixteen month period that O.T.C. was without the use of its tug was error. Hilton Oil asserts that its charter with O.T.C. was commercially frustrated both by the detention of the barge and tug as well as the subsequent destruction of the barge by the storm. Therefore, Hilton Oil argues that as a matter of law it was thereby relieved of any obligation to pay the charter hire. We conclude that the charter was not commercially frustrated by the seizure of the barge and tug as a result of the commercial dispute with the local port authorities but we do find that the charter was subsequently frustrated by the loss of the barge during the storm. Hence, we find O.T.C. was entitled to its charter hire up to the date of the destruction of the...