Phillips Petroleum Co. v. Stokes Oil Co., Inc.

• Citation: 863 F.2d 1250
• Decision Date: 12 December 1988
• Docket Number: Nos. 87-5444,87-5468,s. 87-5444
• Parties: 27 Fed. R. Evid. Serv. 381 PHILLIPS PETROLEUM COMPANY, Plaintiff, v. STOKES OIL COMPANY, INC., Defendant-Appellant (87-5444), Defendant-Appellee (87-5468), and Marine Transportation Company, Defendant-Appellee (87-5444), Defendant-Appellant (87-5468).
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 1250

863 F.2d 1250

27 Fed. R. Evid. Serv. 381

PHILLIPS PETROLEUM COMPANY, Plaintiff, v. STOKES OIL COMPANY, INC., Defendant-Appellant (87-5444) Defendant-Appellee (87-5468) and Marine Transportation Company, Defendant-Appellee (87-5444) Defendant-Appellant (87-5468).

Nos. 87-5444, 87-5468.

United States Court of Appeals Sixth Circuit.

Argued Aug. 16, 1988.

Decided Dec. 12, 1988.

Robert Nienhuis, John R. Halpern (argued), Goldstein and Price, St. Louis, Mo., for Marine Transp. Co.

Michael P. Penick, Boehl, Stopher, Graves, Deindoerfer, M. Greg Rains (argued), Paducah, Ky., for Stokes Oil Co., Inc.

Before JONES and RYAN, Circuit Judge, and HULL, District Judge. ^*

RYAN, Circuit Judge.

This is an appeal and cross-appeal from judgments entered below in this litigation growing out of a fire that occurred on January 27, 1981 in a gasoline storage facility in Hickman, Kentucky.

The issues raised by the appellants and cross-appellants are whether the trial court erred in

1. apportioning liability,

2. rejecting a claim of implied warranty of workmanlike performance,

3. admitting certain documentary evidence,

4. determining damages, and

5. awarding pre-judgment interest.

We find no error affecting the district court's judgments, and we affirm.

I.

The plaintiff, Phillips Petroleum Company, had a contract with defendant-appellant Stokes Oil Company, Inc. under which Stokes received large quantities of petroleum products from Phillips and stored them at Stokes' terminal facility in Hickman, Kentucky. Phillips also had a contract with Marine Transportation Company by which Marine was required to transport Phillips' gasoline by river barge from East St. Louis, Illinois to Stokes' terminal in Kentucky.

On January 26, 1981 in East St. Louis, Illinois, Marine loaded Phillips' gasoline into ten gasoline storage compartments aboard its barge, MTC 941. The barge then proceeded to Stokes' oil terminal in Hickman, Kentucky. Unleaded gasoline filled four of the compartments and leaded gasoline filled the remaining six. Each compartment was equipped with a valve that when opened, would permit gasoline to be pumped in or out. At all other times the valves were supposed to remain closed. Gerald McKinney captained the barge; tankermen Ray Enlow and Fred Robey were responsible for unloading its cargo of fuel.

The district court found that "Cub Stokes, vice-president of Stokes, and Stokes' employees Raymond Forsythe and Levis Scarborough were responsible for the discharge process." Id. Phillips Petroleum Co. v. Stokes Oil Co., 639 F.Supp. 291, 295 (1986). The terminal in East St. Louis had previously informed the Stokes employees that the MTC 941 was on its way to the Stokes terminal containing 160,272 gallons of unleaded and 344,862 gallons of leaded gasoline. Based upon this information, Stokes decided to pump all of the unleaded gasoline into shore tank number three. Because that tank had a capacity of 200,000 gallons and currently contained 29,000 gallons, Stokes assumed that it would hold the 160,272 gallons of unleaded gasoline from the barge.

MTC 941 arrived at Stokes' oil terminal at approximately 12:30 a.m. on January 27, 1981. The barge crew began pumping the unleaded gasoline into shore tank number three about an hour later. From the evidence adduced at trial, the district court found:

During the pumping of the gasoline into shore tank three, Cub Stokes, Scarborough, and Forsythe did not closely monitor the level of liquid in the tank. They spent most of their time in a company pick-up truck on the levee where their view of tank three was blocked by shore tank six. They did not take a gauging of the tank during the discharge. Once, Scarborough climbed to the top of the tank and checked the level of gasoline with a flashlight.

Unknown to all at the time of the pumping, the valve to one of the barge compartments containing leaded gasoline was also open. As a result, the barge pumped 184,448 gallons of gasoline into shore tank three, an amount well in excess of the tank's capacity. As a result, several thousand gallons of gasoline spilled out of the top of the tank and onto the ground. Approximately two hours after the pumping began, the overflowing gasoline ignited, consuming several thousand gallons of Phillips' gasoline and resulting in substantial damage to the Stokes Terminal.

The trial court found that "the remains of a fire built by Stokes' employees" on a lot adjacent to the terminal on the morning of January 26, 1981 ignited the gasoline. The employees built the fire in order to dispose of debris, including remains of a house that had been razed on the property earlier. Cub Stokes testified that he used water to extinguish the fire, but Scarborough and Forsythe stated they had covered it only with sand. All three testified that the debris fire had been extinguished by 3:00 or 4:00 p.m., yet others testified that it continued to burn late into the evening.

II.

Claiming that Marine and Stokes were negligent, Phillips sued for recovery of the value of its lost gasoline. Phillips also alleged that Stokes and its three defendant officers were contractually liable for the loss. Stokes counterclaimed against Phillips and cross-claimed against Marine for their respective negligence in contributing to the cause of the fire that also heavily damaged Stokes' facility. Stokes also sought indemnification from Marine for any sum the court might require it to pay to Phillips. Marine counterclaimed against Phillips and cross-claimed against Stokes, seeking indemnification for any amount the court might require that it pay another party.

The trial court found that "the fire and ultimate loss of gasoline and damage to the terminal was caused by a combination of the negligence of Marine and the negligence of Stokes." 639 F.Supp. at 297. Marine was found negligent for "failure to adequately check the valves and to pump the right amount of gasoline, [which] was a proximate cause of the overflow and the subsequent fire." Id. The court found that Stokes was negligent for failing to monitor the flow of gasoline into the tank, for violating Kentucky Revised Statute 227.300(1) which required certain safety measures relating to the transfer of flammable liquids, and for failing to extinguish the debris fire that ignited the gasoline, all of which were a proximate cause of the explosion and fire.

The trial court calculated Phillips' lost fuel damages to be $304,923.60 and held Stokes liable for that entire amount based upon its contract with Phillips. Further, the district court found Stokes to have been seventy-five percent negligent and Marine twenty-five percent negligent in causing the fire, and apportioned the damages payable to Phillips accordingly. The court then stated:

Of course, Phillips is entitled to only one recovery. Therefore, if it recovers from Stokes in contract for its entire loss, it cannot recover from Marine. Instead, Stokes will have a right of indemnity from Marine....

639 F.Supp. at 299. The court also concluded that the evidence supported Stokes' claim that the damage to the terminal was $202,532.02 and awarded Stokes twenty-five percent of that amount from Marine. The court added prejudgment interest, calculated from the date of the accident, of eleven percent per annum to each damage award.

Stokes and Marine have taken an appeal and cross-appeal respectively. Stokes appeals the trial court's apportionment of fault between itself and Marine. Marine appeals the trial court's award of damages to Stokes, its refusal to apply a warranty of workmanlike performance, the admission of certain documentary evidence, the determination of damages, and the award of prejudgment interest. We take up each assignment of error in turn.

III. Apportionment of Liability

Stokes claims the district court erred in apportioning seventy-five percent of responsibility for the fire to Stokes and twenty-five percent to Marine. Its argument is based upon the theory that: 1) the evidence does not support the district court's finding that Stokes' employees negligently failed to extinguish the debris fire that was the source of ignition for the explosion, and 2) the court applied the wrong standard of care to Stokes' obligation to monitor the shore tank.

In United States v. Paducah Towing Co., 692 F.2d 412 (6th Cir.1982), this court stated the standard of review in an admiralty case as follows:

The district court's findings of fact in an admiralty proceeding may not be set aside unless they are clearly erroneous. Fed.R.Civ.P. 52(a); McAllister v. United States, 348 U.S. 19, 75 S.Ct. 6, 99 L.Ed. 20 (1954). Under this limited standard of review, we will reverse a decision if we are left with the firm conviction that the district court has made a mistake. United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541, 92 L.Ed. 746 (1948); Alexander v. Youngstown Board of Education, 675 F.2d 787, 795 (6th Cir.1982); Johnson v. United States, 600 F.2d 1218, 1222 (6th Cir.1979). We must review the entire record and set aside a district court's finding of negligence if there is clear error in its decision. See McAllister, 348 U.S. at 20-21, 75 S.Ct. at 7-8; Ingram Corp. v. Ohio River Co., 505 F.2d 1364, 1369 (6th Cir.1974).

Although an appellate court will not overturn a district court's finding of negligence unless clearly erroneous, a court of appeals is not so restricted when it considers whether the district court properly defined the standard of care used to evaluate the conduct of the parties. That presents a question of law. In determining the proper standard of care, therefore, we may freely review the district court's conclusions.

692 F.2d at 421-22.

Based on the trial testimony, we cannot agree with Stokes that the district court's finding that the debris fire started by Stokes' employees was the source of ignition was clearly erroneous. There was conflicting testimony whether the debris fire had...