New England Petroleum Co. v. OT SONJA

• Decision Date: 13 March 1990
• Docket Number: No. 86 Civ. 1308 (BN).,86 Civ. 1308 (BN).
• Citation: 732 F. Supp. 1276
• Parties: NEW ENGLAND PETROLEUM CO., Plaintiff, v. O.T. SONJA, her engines, boilers, tackle, etc. in rem and O.T. Shipping Ltd. of London, Defendants.
• Court: U.S. District Court — Southern District of New York

732 F. Supp. 1276

NEW ENGLAND PETROLEUM CO., Plaintiff, v. O.T. SONJA, her engines, boilers, tackle, etc. in rem and O.T. Shipping Ltd. of London, Defendants.

No. 86 Civ. 1308 (BN).

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

March 13, 1990.

COPYRIGHT MATERIAL OMITTED

Hill, Betts & Nash, New York City, for plaintiff; Kenneth Geller, of counsel.

Walker & Corsa, New York City, for defendants; Lenore E. McQuilling, of counsel.

OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW

NEWMAN, Senior Judge of the United States Court of International Trade, sitting by designation:

INTRODUCTION

Plaintiff New England Petroleum Co. ("NEPCO") commenced this admiralty action seeking to recover damages in the amount of $99,489.71 plus interest from defendant O.T. Shipping Ltd. of London ("Owner") for non-delivery of 4090 barrels of No. 6 fuel oil (the "Cargo") from an ocean shipment of 204,933 bbls., evidenced by a clean on board bill of lading. Defendant denies liability for non-delivery and disputes the amount not delivered.

The court has admiralty and maritime jurisdiction of this matter pursuant to 28 U.S.C. § 1333 (1982). The following constitutes the court's findings of fact and conclusions of law in accordance with Fed.R. Civ.P. 52(a).

FINDINGS OF FACT

In January 1986 NEPCO through its affiliate Charter Marine Transportation Co. ("Charterer"), contracted with defendant by charter party agreement, see Defendant's Exhibit B ("DX n"), to charter the O.T. SONJA (the "Vessel") to transport a cargo of No. 6 fuel oil, dirty petroleum which plaintiff had purchased from SELM S.p.A. (the "Seller"), from the port in Priolo, Italy to the United States. Agreed Fact 3,6 ("AF n"). Payment was made by NEPCO to SELM pursuant to a letter of credit through Banque Paribas (Suisse) S.A. in the amount of $4,610,992.50 or $22.50 per barrel, exclusive of freight. AF 17-18. The freight charged by the Vessel for transporting the Cargo was $1.82 per barrel. AF 19.

The relevant clauses of the charter party agreement read in pertinent part:

Special Provisions

(a) 2. Cargo.... Vessel to maintain loaded temperature but maximum 135 degrees Fahrenheit. If Charterers request raising temperature, Owners to raise temperature as per Charterer's instructions, but maximum 15 degrees Fahrenheit ... but Owners not required to raise temperatures above 135 degrees Fahrenheit.

(b) 7. Amoco Cargo Retention Clause.... Owners warrant pumps are capable of discharging .3 low sulphur fuel oil hi-pour cargo.

(c) 21. Stripping/draining.... Charterer at its option may detain the Vessel at the discharge point to improve stripping/draining of cargo tanks.

DX B at 11, 16.

Main clause 10 of the agreement states, "the cargo shall be discharged from the Vessel at Owner's risk only up to the Vessel's hose connections." Id. at 5. In accordance with the charter party agreement, the Vessel was instructed by the Charterer to maintain the Cargo at its loaded temperature or 135 degrees, whichever was higher. AF 13.

Before the Cargo was loaded, the vessel's tanks were gauged and inspected by Van Der Hoeven Consultants S.r.1., Marine Bulk Oil Surveyors ("Van Der Hoeven") and found to contain no on board quantity (O.B.Q.).¹ AF 11; Plaintiff's Exhibit 3 at 5 ("PX n"). The Vessel's chief officer confirmed this finding. AF 12. An analysis of the Cargo in Italy revealed that it had a pour point of 109 degrees fahrenheit, a sulphur content of .3 percent by weight, A.P.I. gravity of 22.54 at 60 degrees fahrenheit, viscosity of 80.2 ssf at 122 degrees fahrenheit and a BS & W content of .2 percent by volume. PX 3 at 3; DX M; AF 14, 24.² The Cargo is described as a low sulphur No. 6 fuel oil, the type which required heating during the voyage. Tr. 18-19.

The certificate of weight from the Van Der Hoeven Survey Report reveals that after loading there were 204,933 bbls. aboard the Vessel, the quantity stated in the bill of lading. PX 3 at 9; PX 25. Defendant's ullage report, however, states an amount loaded of 204,766 bbls., a difference of 167 bbls. AF 34; DX C at 9. As a result, the Master of the Vessel issued a letter of protest regarding the difference and agreed to sign the Cargo documents under protest.

Regarding this difference, the court notes a discrepancy in the Van Der Hoeven Survey Report between the amount of Long Tonnage recorded in the ullage report and the amount reported on the certificate of weight. PX 3 at 7, 10; see also AF 30 (discussing the difference in metric tons between the ship's loading figures and the bill of lading). Specifically, the ullage report states 29,375.295 Long Tons as the quantity on board according to ship's ullages and tables, whereas the certificate of weight states 29,385.896 Long Tons, a difference of 10.6 Long Tons. Using the Long Tons per Barrel conversion chart, see PX 38, and interpolating for an A.P.I. gravity of 22.54 at 60 degrees fahrenheit, reveals a difference of over 167 bbls. The court thus finds, using ship's figures, the Vessel's ullage figure of 204,766 bbls. as the more accurate figure reflecting the amount of Cargo actually loaded in Priolo, Italy. Additionally, it should be noted NEPCO reserved its rights against the Seller concerning this discrepancy.

The Vessel departed Italy on January 16, 1986. According to the engine log, the overhaul of the feedwater transfer pump had just been completed.³ See DX S (engine log entry dated 1/16/86). Significantly, on January 18, 1986 the feedwater pump necessarily had to be dismantled for another complete overhaul. Id. Again, on January 21, 1986 the feedwater pump was in need of repair. Id.; and subsequently, on January 28, 1986 the Vessel "stopped heating of cargo tanks due to extensive feedwater leak." Id. (deck log entry dated 1/28/86). Twenty hours later, on January 29, 1986 the Vessel resumed heating of the cargo tanks, only to halt again the following morning "due to loss of all feedwater." Id. There is no evidence that the Vessel ever resumed heating of the Cargo until discharge.

Defendant contends that the Vessel maintained a temperature of 135 degrees fahrenheit for a majority of the voyage. DX HH. But importantly, an examination of the Vessel's oil record book reveals that while the average Cargo temperature was maintained at 135 degrees fahrenheit, or more, for the first nine days of the voyage, nevertheless during the remaining six days and in the crucial period after defendant stopped heating the cargo, the average Cargo temperature dropped precipitously to 124 degrees fahrenheit, well below the heating requirement specified in the charter party agreement.

Defendant argues, however, even if this is so, it had no practical effect on the discharge efficiency of the cargo; and that having a pour point of 109 degrees fahrenheit, the oil would have reached absolute viscosity⁴ at a temperature of 122 degrees fahrenheit and would, at that temperature, be completely liquid.

In this aspect defendant's expert testified that even if the Cargo had been heated to 135 degrees fahrenheit, it would not have had an effect on the discharge. Tr. 175-76, 247. Plaintiff's expert Captain Peter Selenikas, on the other hand, testified that the Cargo aboard the Vessel had to be heated or it would solidify Tr. 18-19. Continuing Captain Selenikas emphasized that based on his experience, if the Vessel stopped heating the Cargo "for a long period of time ... for a few days, definitely some of the cargo below the heating coils would be solidified," and there would be excess clingage. Tr. 35. More importantly, Captain Selenikas stated that reheating the Cargo would not immediately make it liquid. Tr. 70.

On this point, the court finds plaintiff's expert testimony more credible.⁵ This conclusion is supported by the Charterer's Surveyor's Report, see DX W at 5 (noting that, after stripping, the two to three inch crust remaining on the tanks resulted from a failure to heat the cargo), and buttressed by defendant's own expert, who conceded on cross examination that it is difficult to reheat solidified petroleum. Tr. 251.

On February 1, 1986 the Vessel berthed at Con Edison's Hudson Avenue Terminal in Brooklyn, New York. Upon arrival plaintiff's surveyors Caleb Brett USA, Inc. ("Caleb Brett") and Stephen J. Makowski Associates, Inc. ("Makowski") inspected the cargo tanks, gauged the Vessel and measured the Cargo temperature in each of the tanks. Both the Caleb Brett and Makowski surveyors noted the Cargo had solidified and formed a crust on the Vessel's tanks, and in order to obtain accurate temperature and ullage readings it was necessary to break the crust with (it is unclear) either a 2" × 4" section of timber or an iron bar. See DX W at 1; PX 30.

Caleb Brett measured the temperature in the cargo tanks, which ranged from 124.5 to 144.2 degrees fahrenheit. AF 23. In addition, ullage readings indicate the Vessel arrived at the Con Edison Terminal with 204,305 bbls. aboard. AF 34; PX 1 at 5; DX C at 2. The difference between the amount after loading in Italy (204.766 bbls.) and before discharge in New York (204,305 bbls.) constitutes an in-transit loss of 461 bbls. AF 34. Consequently, Caleb Brett issued letters of protest concerning both defendant's failure to maintain the Cargo temperature in conformance with the charter party agreement and the in-transit loss. PX 1 at 10, 12.

Regarding the in-transit loss, the court finds defendant's expert testimony convincing on this point, that the loss is not a real loss but rather a "paper" loss, resulting from various changes in A.P.I. gravity, temperature, and BS & W content. Tr. 159-62. Thus, upon arrival in New York the Cargo had the following characteristics: A.P.I. gravity of 22.4 and a BS & W content of .1 percent by volume. PX 23. Defendant's expert testified that in terms of volume, a change in A.P.I. gravity from 22.54 to 22.4 would account for 176 bbls. of oil. Tr. 204; compare PX 23 with PX 3. Experts for both parties agreed that the .1...