Insurance Co. v. Crude Oil Contracting Co.

• Decision Date: 20 March 1940
• Docket Number: Civ. No. 135.
• Citation: 32 F. Supp. 116
• Parties: INSURANCE CO. OF NORTH AMERICA v. CRUDE OIL CONTRACTING CO. et al.
• Court: U.S. District Court — Northern District of Oklahoma

32 F. Supp. 116

INSURANCE CO. OF NORTH AMERICA v. CRUDE OIL CONTRACTING CO. et al.

Civ. No. 135.

District Court, N. D. Oklahoma.

March 20, 1940.

F. A. Rittenhouse and Walter D. Hanson, both of Oklahoma City, Okl., for plaintiff.

John E. Curran and Morris L. Bradford, both of Tulsa, Okl., and A. M. Hoenny, of St. Louis, Mo., for defendants.

FRANKLIN E. KENNAMER, District Judge.

The Gulf Refining Company maintained a tank farm near Dublin, Indiana, for the storage of crude petroleum. By written contract it sold defendant Crude Oil Contracting Company an estimated quantity of 125,000 barrels of "tank bottoms" or "BS", which is the sediment deposited in the tanks from their use for oil storage. There was a provision in the contract that the crude oil contained in the tanks should be removed and then a joint gauge made of the tank bottoms to determine the quantity of the sediment to be taken by Crude Oil "and that upon completion of the joint gauge of each tank, the title to the tank bottoms or BS shall pass to Crude." Also, under the contract, said defendant agreed to clean the tanks after the removal of the sediment and to return them to the Gulf "in as good condition as they were at the time Crude started to use them — Gulf to be the judge of such condition." The contract further provided: "Crude further agrees to indemnify and hold Gulf harmless against all claims, losses, or damages, regardless of the nature thereof, arising out of its operations in treating and removing tank bottoms, commonly called BS, and residue or sludge, and whether said liability arises out of contract or in tort, and to include claims of every kind and character * * *". During the operations under this contract one of the tanks and its content of sediment was destroyed by an explosion. By this action, plaintiff under subrogation and assignment from the Gulf Refining Company seeks to recover for the value of the tank and contents so destroyed. The National Surety Corporation is also joined as a party defendant as surety of defendant Crude Oil Contracting Company for the performance of the contract. By its complaint, plaintiff asserts liability against the defendants both in contract and in tort.

It appears that operations under the contract were commenced in May, 1938, and the "bottoms" were removed from seven of the tanks by defendant Crude Oil prior to August 18, 1938, without mishap. On the morning of that day, tank No. 45 was gauged as provided by the contract and the tank turned over to Crude Oil for removal of the purchased sediment. This tank was approximately 120 feet in diameter and was surrounded, as were the other tanks, by an earthen fire wall approximately 6 feet in height and a diameter of 340 feet. Following the delivery of the tank to Crude Oil it immediately commenced operations for the removal of the sediment and the cleaning of the tank. A break was made in the northeast section of the fire wall sufficiently large to permit cars and trucks to enter its inside area. The door sheet on the tank was opened and the employees of Crude Oil began the removal of the sediment to treating tanks. About 9 o'clock P. M. of the same day, Crude Oil suspended this operation by stopping the pumps because considerable quantities of gas emanating from the tank had accumulated around the tank and inside the fire wall. The still and humid weather conditions caused the escaping gas to remain close to the ground instead of dissipating in the air. About midnight one Hicks, an employee of Crude Oil, came to the tank farm to begin his work shift. He arrived in a car driven by a friend named Kinnaman, the men being accompanied by some young ladies with whom they had spent the evening. Kinnaman stopped the car at distance estimated at 50 to 75 feet from the opening of the fire wall around tank 45, and Hicks got out to change his clothes preparatory to going to work. About that time one Zook, another employee of Crude Oil, arrived to also go to work, and started to drive inside the fire wall, but was...