Mobil Shipping v. Wonsild Liquid Carriers, Docket No. 98-9148

• Decision Date: 01 August 1998
• Docket Number: Docket No. 98-9148
• Citation: 190 F.3d 64
• Parties: (2nd Cir. 1999) MOBIL SHIPPING AND TRANSPORTATION COMPANY, Plaintiff-Counter-Defendant-Appellee, v. WONSILD LIQUID CARRIERS LTD., Defendant-Counter-Claimant-Appellant
• Court: U.S. Court of Appeals — Second Circuit

Page 64

190 F.3d 64 (2nd Cir. 1999)

MOBIL SHIPPING AND TRANSPORTATION COMPANY, Plaintiff-Counter-Defendant-Appellee, v. WONSILD LIQUID CARRIERS LTD., Defendant-Counter-Claimant-Appellant.

Docket No. 98-9148

August Term, 1998

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: May 24, 1999

Decided: August 30, 1999

Defendant appeals from an order of the United States District Court for the Southern District of New York (Martin, J.), granting judgment in plaintiff's favor following a bench trial.

AFFIRMED.

[Copyrighted Material Omitted]

MANUEL R. LLORCA, Chalos & Brown, P.C., New York, NY (Stephan Skoufalos, of counsel), for Defendant-Counter-Claimant-Appellant.

PETER H. GHEE, Waesche, Sheinbaum & O'Regan, P.C., New York, NY (Richard W. Stone, II, of counsel), for Plaintiff-Counter-Defendant-Appellee.

Before: KEARSE, MINER, AND McLAUGHLIN, Circuit Judges.

BACKGROUND

McLAUGHLIN, Circuit Judge:

In late 1994, Mobil Shipping and Transportation Company ("Mosat") chartered a doubled-hulled freighter named the Alsterstern from Wonsild Liquid Carriers Ltd. ("Wonsild"). It was to transport lube oil from Europe to Hong Kong via Singapore. Under the charter contract, Wonsild warranted that the Alsterstern "shall be in good working order and condition and in every way seaworthy and fit for the carriage of the cargo" throughout the voyage.

The voyage to Singapore was uneventful. On February 9, 1995, it successfully completed the first delivery in Singapore. Then, while proceeding to another Mosat discharge berth in Singapore harbor, the Alsterstern suddenly lost power. The vessel crashed into the discharge berth. The allision left the vessel with a 30-foot long gash in her outer hull nine feet above the water line, and another 33-foot long indentation twenty feet above the water line.

Over the next couple of days, a surveyor from Germanischer Lloyd, an international ship classification society hired by Wonsild, inspected the vessel three times. The surveyor ultimately determined that the vessel was fit to continue its voyage to Hong Kong, but only if: (1) the vessel sailed at the safest possible speed; (2) the vessel sailed in favorable weather; and (3) the hull damage was monitored during the voyage.

The ship's crew also isolated what they (erroneously) believed to be the source of the sudden power loss - a broken tachometer. To remedy this perceived problem, the crew "jury-rigged" the electrical system to run off the emergency generator.

Because the vessel's navigation warning system forecasted good weather for the next four days, which was how long it would take the Alsterstern to sail to Hong Kong, the Alsterstern's captain informed Wonsild officials that he could deliver the cargo before repairing the vessel. Accordingly, Wonsild advised Mosat that the Alsterstern was prepared to proceed to Hong Kong.

Mosat was less sanguine. It told Wonsild that it was contemplating a discharge of the Hong Kong cargo in Singapore; and it instructed the vessel to remain in Singapore for further instructions. In response, Wonsild informed Mosat that: (1) Germanischer Lloyd had certified the vessel as seaworthy to continue the voyage; (2) immediate repairs were not required; and (3) if Mosat instructed Wonsild to off-load the oil and effectuate repairs, it would do so, but Mosat would have to bear the costs associated with temporarily storing and insuring the cargo.

Mosat then gave Wonsild a choice. Wonsild could either: (1) abandon the voyage and face the consequences of breaching the contract; or (2) repair the vessel while storing the cargo at Wonsild's risk and expense during the repair period. Insisting that the vessel was seaworthy, Wonsild refused to repair it.

Mosat directed Wonsild to have the remaining oil discharged in Singapore. Mosat paid the full freight as if the cargo had been transported to Hong Kong. It also incurred additional expenses to off-load the oil in Singapore, store it, and obtain another vessel to transport it to Hong Kong.

One week later, the engineers repairing the Alsterstern discovered the actual cause of the sudden power loss - faulty insulation in one of the pressure switches that controlled the regular generator.

Mosat commenced a breach of contract action in the United States District Court for the Southern District of New York (Martin, J.). Mosat alleged that Wonsild breached the charter contract by failing to maintain the vessel in seaworthy condition throughout the voyage. Mosat sought to recover the expenses it incurred securing alternate carriage for its cargo.

In its defense, Wonsild argued that: (1) it did not breach the contract because the Alsterstern was seaworthy; and (2) even if the vessel was unseaworthy, Wonsild could not be held liable because the unseaworthiness resulted from a latent defect. Wonsild also counter-claimed, seeking payment of demurrage and port expenses incurred during the delay in Singapore.

Following a two-day bench trial, the district court issued an Opinion and Order holding that Wonsild breached its contractual warranty that the Alsterstern would be seaworthy throughout the voyage. While volunteering that the vessel would be seaworthy if it was transporting a benign liquid cargo, such as milk, the court concluded that a heightened standard of seaworthiness applied because the ship was carrying lube oil, a hazardous substance. Under this heightened standard, the vessel was not seaworthy and Wonsild thus breached the charter contract. The court awarded Mosat approximately $277,000 in damages and prejudgment interest. Judge Martin did not address Wonsild's latent defect defense.

Wonsild now appeals, arguing that the court: (1) erred when it held that the Alsterstern was not seaworthy; and (2) failed to address Wonsild's latent defect defense.

DISCUSSION

Seaworthiness

Wonsild raises two arguments to support its position that the vessel was seaworthy. First, it contends that Judge Martin's finding is against the weight of the evidence. In the alternative, Wonsild asserts that Judge Martin applied an incorrect legal standard to determine whether the vessel was seaworthy. Specifically, Wonsild asserts that Judge Martin was wrong to consider the cargo's hazardous nature when evaluating whether the Alsterstern was seaworthy.

A. Standard of Review

On appeal from a bench trial, the district court's findings of fact are reviewed for clear error and its conclusions of law are reviewed de novo. See LoPresti v. Terwilliger, 126 F.3d 34, 38 39 (2d Cir. 1997). Under the clear error standard, we "may not reverse [a finding] even though convinced that had [we] been sitting as the trier of fact, [we] would have weighed the evidence differently." Anderson v. Bessemer City, 470 U.S. 564, 574 (1985). Rather, a finding is clearly erroneous only if "although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Id. (internal quotations omitted).

Second Circuit jurisprudence concerning the appropriate standard of review for a district court's finding of seaworthiness is in a state of flux. In In re Marine Sulphur Queen, 460 F.2d 89, 97-98 (2d Cir. 1972), we held that a conclusory finding of seaworthiness (as distinguished from the evidentiary facts upon which the finding is based) is not entitled to the benefit of "clearly erroneous" review. Rather, the finding is "entitled to great weight and will ordinarily stand unless the lower court manifests an incorrect conception of the applicable law." Id. However, our more recent cases suggest that a district court's finding of seaworthiness is reviewed for clear error. See Raphaely Int'l, Inc. v. Waterman Steamship Corp., 972 F.2d 498, 503 (2d Cir. 1992); Marchese v. Moore-McCormack Lines, Inc., 525 F.2d 831, 835 (2d Cir. 1975).

We need not settle this controversy today. Under either the "clearly erroneous" standard or the less-deferential standard of Marine Sulphur Queen, Judge Martin reached the correct conclusion.

B. Seaworthiness

To support its contention that the vessel was seaworthy, Wonsild points to: (1) the opinions of Germanischer Lloyd, Captain Kahns, the Master of the vessel, and the vessel's hull underwriters and owners that the vessel was seaworthy; and (2) the decision of the Singapore Port Authorities to allow the vessel to move about the port. Wonsild contends that Judge Martin's determination cannot stand in the face of this evidence. We disagree.

A vessel is seaworthy when it "is reasonably fit to carry the cargo which she has undertaken to transport." The Silvia, 171 U.S. 462, 464 (1898); see, e.g., GTS Indus. S.A. v. S/S "Havtjeld", 68 F.3d 1531, 1535 (2d Cir. 1995) ("Seaworthiness is defined as 'the ability of a vessel adequately to perform the particular services required of her on the voyage she undertakes.'") (quoting McAllister Lighterage Line, Inc. v. Insurance Co. of North Am., 244 F.2d 867, 870 (2d Cir. 1957)); Nichimen Co. v. M.V. Farland, 462 F.2d 319, 332 (2d Cir. 1972) ("One essential aspect of seaworthiness is that the vessel must be fit for the purpose intended under the charter party."); R.T. Jones Lumber Co. v. Roen Steamship Co., 270 F.2d 456, 458 (2d Cir. 1959) (seaworthiness "means not only the reasonable ability of a ship to meet the anticipated conditions of the sea but its ability to carry safely the cargo which it has accepted for shipment"). Where, as here, the parties contract to transport liquid cargo, we have defined "seaworthiness" to require that the vessel "be equipped to store and transport the fluid safely." Amerada Hess Corp. v. S/T Mobil Apex, 602 F.2d 1095, 1097 (2d Cir. 1979).

Viewed in its entirety, the record contains ample evidence to support Judge Martin's conclusion that the vessel was not seaworthy. The Alsterstern had experienced an unexpected loss of power and would have been undertaking a 1400 mile voyage on the open sea with a...