Koch Fuels, Inc. v. CARGO OF 13,000 BARRELS, ETC.

• Decision Date: 30 December 1981
• Docket Number: No. 80-353A(4).,80-353A(4).
• Citation: 530 F. Supp. 1074
• Court: U.S. District Court — Eastern District of Missouri
• Parties: KOCH FUELS, INC., Plaintiff, v. CARGO OF 13,000 BARRELS OF NO. 2 FUEL OIL, More or Less, In Rem, and Inland Oil & Transport Company, Defendants.

530 F. Supp. 1074

KOCH FUELS, INC., Plaintiff, v. CARGO OF 13,000 BARRELS OF NO. 2 FUEL OIL, More or Less, In Rem, and Inland Oil & Transport Company, Defendants.

No. 80-353A(4).

United States District Court, E. D. Missouri, E. D.

December 30, 1981.

COPYRIGHT MATERIAL OMITTED

John S. Sandberg and Peter Von Gontard, Shepherd, Sandberg & Phoenix, St. Louis, Mo., for plaintiff.

Joseph P. Conran and Harry B. Wilson, St. Louis, Mo., for defendants.

MEMORANDUM

HUNGATE, District Judge.

This matter is before the Court for a decision on the merits of the claim of plaintiff Koch Fuels, Inc., (Koch Fuels) against Inland Oil & Transport Company (Inland). Koch Fuels claims ownership and the right to possession of a certain cargo of fuel oil loaded onto one of Inland's barges, and damages for tortious conversion of the oil by Inland. Inland asserts various defenses.

The Court held a nonjury trial in this cause on September 1, 1981, allowing the parties a full opportunity to present evidence.

The parties stipulated that the Court can consider all of the testimony and exhibits previously received in the jury trial on Inland's counterclaim against Koch Industries, Inc., subject to all previous objections.

Having considered the pleadings, trial testimony, exhibits, stipulations, and memoranda of the parties, and being fully advised in the premises, the Court hereby makes and enters the following findings of fact and conclusions of law.

Findings of Fact

1. Plaintiff Koch Fuels, Inc., is a corporation duly organized according to law at all times in question.

2. Defendant Inland Oil & Transport Company, a barge line, is a corporation duly organized according to the laws of the State of Missouri at all times in question.

3. Koch Industries, Inc., (Koch Industries) is a corporation duly organized according to the laws of the State of Kansas at all times in question.

4. Koch Fuels is a wholly-owned subsidiary of Koch Industries.

5. Late in the afternoon of February 26, 1980, Roger Elliott of the barge transportation department of Koch Industries contacted Jane Novak of Inland about moving a shipment of oil from Union Oil Company in LeMont, Illinois, to a terminal operated by Koch Fuels in the Chicago, Illinois, area. Koch Industries was moving the oil on behalf of its subsidiary, Koch Fuels.

6. Ms. Novak indicated that she did have a barge available that was capable of carrying the oil. It was barge IOT-114 (the barge). A tentative agreement was made between Roger Elliott and Jane Novak. The agreed upon terms were that Koch Industries would use the barge for three days for $800.00 per day, payable upon receipt of invoice. Novak also mentioned that there would be some additional terms relating to insurance and indemnity, but she indicated that she would spell that out in a telex message to Mr. Elliott. She, therefore, sent a telex which Roger Elliott received late that afternoon. Mr. Elliott then talked with his boss, Richard Mayer, about the terms of the telex. Mr. Mayer indicated that the language waiving the warranty of seaworthiness on the barge and holding Inland harmless for anything that could possibly go wrong was unacceptable and that Mr. Elliott should talk with Dick Shisler of Koch Industries' insurance department to work out suitable language. Mr. Elliott did this and he and Mr. Shisler attempted to call Novak, but she had already left for the day. Mr. Elliott did not anticipate any insuperable problems in working out mutually acceptable terms for charter of the barge.

7. The telex sent by Ms. Novak also asked Koch Industries to acknowledge acceptance of the charter by return telex. Koch Industries did not send any acknowledgement.

8. The LeMont refinery of Union Oil Company, after being informed that Inland would supply the barge, contacted Jane Novak. Russ Anderson of Union Oil talked with Ms. Novak and obtained information on how they were to load the barge. Later, Novak called Anderson back and asked if he could suggest a barge company who could move the barge. Anderson suggested Ham-Tug & Fleeting, among other companies. Novak contacted Ham-Tug and asked them to call Union about delivering the barge from the LeMont shipyard to the Union Oil refinery. This movement was made by Ham-Tug without the knowledge of Koch Industries.

9. Barge IOT-114 was delivered to the Union Oil refinery on the morning of February 27, 1980. Loading began at approximately 7:40 a.m. The personnel working at the Union Oil docks were supervisory personnel, inexperienced at loading barges and measuring their contents. The normal dock crew was on strike. Sometime that morning, a pinhole leak was discovered in one of the compartments of the barge.

10. After the leak was discovered, both Novak and Elliott were advised of the problem. On several occasions, they discussed what should be done. They agreed that the oil would be pumped back to Union Oil's refinery and the barge would then be taken back to the LeMont shipyard for repairs.

11. During the attempt to pump the oil back to the refinery, the pump on the barge broke down. Elliott found out about this problem the next day, February 28, 1980. Also on the same day, February 28, Union ordered Ham-Tug to take the barge to the LeMont shipyard for repairs to the pump. As of February 29, 1980, the pump was repaired.

12. Sometime during the day of February 27, officials at the Union Oil refinery dock measured the amount of oil in the barge. The method employed was strapping, whereby a stick is placed in each compartment to measure the depth of the oil in the compartment. Knowing the size of each compartment, the approximate volume of the contents was calculated as 554,171 gallons. The record contains insufficient evidence from which the Court can infer whether this measurement was taken before or after any oil was pumped back to the refinery. Koch Industries paid Union Oil for 554,171 gallons of oil.

13. On February 28, Inland sent a telex to Koch Industries advising Koch Industries that Inland would hold Koch Industries responsible for the spill from the barge under the terms of the February 26, 1980, telex. Later that day, Koch Industries responded by telex, denying any liability arising out of the movement of the barge, stating that Koch Industries never accepted Inland's offer of charter embodied in the February 26 telex. The telex also contained a request that Inland inform Koch Industries of the time and place of any survey by Inland so Koch Industries' surveyor could attend.

14. As of the afternoon of February 28, Elliott and Novak were interested in getting the oil off the barge.

15. On February 29, Koch Industries sent a telegram to Inland stating that due to the circumstances, shipment of the oil would not occur.

16. On the morning of March 1, Novak received a call from Ham-Tug & Fleeting indicating that Union Oil had dock space available for the barge at their refinery. Novak's understanding was that this meant that the barge could be unloaded. Ham-Tug wanted to know what it should do with the barge. Novak told Ham-Tug not to move the barge or have it unloaded. Novak's reason for not having the barge unloaded was that Elliott had not called her. Novak, however, made no attempt to call Elliott on March 1.

17. On March 3, relations between Inland and Koch Industries deteriorated rapidly. Early that morning, Inland sent a telex to Koch Industries stating that it was Inland's position that the barge was redelivered to Inland by Koch Industries on February 29. The telex also stated that Inland accepted the redelivery, considered it an abandonment of the cargo, and would bill Koch Industries for the charter hire, barge repair, and all other liability since February 26.

18. Elliott called Novak at approximately 11:00 a.m. on March 3. Elliott had not yet received Inland's telex. Late that afternoon, Elliott called Inland again and talked with Herbert Wolkowitz, president of Inland. Elliott informed Wolkowitz that Koch Industries wanted the oil discharged.

19. That same afternoon, Koch Industries responded to Inland's telex sent that morning, stating that Koch Industries had not abandoned the oil on the barge.

20. Early in the evening of March 3, several officials of Koch Industries called Wolkowitz. The Koch Industries officials could not tell Wolkowitz who owned the oil. They also stated that Koch Industries would not indemnify Inland. Wolkowitz responded that Inland would not discharge the oil unless Koch Industries agreed to indemnify Inland and put up $60,000.00 as security for Inland's losses. The Koch Industries officials refused to meet Wolkowitz's demands. It was Koch Industries' position that liability for expenses could be discussed once the oil was returned.

21. Koch Industries attempted to get the oil discharged on March 4, but failed because Inland had instructed Union Oil not to discharge it.

22. On March 2, an independent inspector hired by Inland inspected the barge and determined that it contained approximately 515,662 gallons of no. 2 fuel oil.

23. On March 4 or 5, Inland had the barge picked up and towed south. The barge was still loaded with the oil.

24. Also on March 4, Inland sent a telegram to Koch Industries, stating that Inland considered the barge redelivered and the oil abandoned. The telegram also stated that "we will store the cargo at your cost and for your account, until the issues are resolved," and reiterated Inland's demand that Koch Industries indemnify Inland for all losses resulting from the charter of the barge.

25. On March 5, 1980, Koch Industries again sent a written demand for return of the oil. Inland's response was another telegram demanding documentation of ownership of the oil and the barge, and stating that Inland's position remained unchanged.

26. The oil ended up in storage at a terminal in St. Louis, Missouri.

27. On March 13, 1980, Koch Industries initiated this litigation by filing a verified in rem...