Sinclair Refining Co. v. Sun Oil Co.
| Citation | 79 F. Supp. 1005 |
| Parties | SINCLAIR REFINING CO. v. SUN OIL CO. THE PATRICK J. HURLEY. THE AMERICA SUN. |
| Decision Date | 30 September 1948 |
| Court | U.S. District Court — Southern District of New York |
Burlingham, Veeder, Clark & Hupper, of New York City (Stanley R. Wright, of New York City, of counsel), for libellant.
Mendes & Mount, of New York City (Henry W. Dieck and Wilbur H. Hecht both of New York City, of counsel), for claimant.
The steamship "Patrick J. Hurley" was in collision with the motor-vessel "America Sun" on March 12, 1942. On April 14, 1942 the Sinclair Refining Company, owner of the "Patrick J. Hurley," libelled the "America Sun" in this Court, and its owner, the Sun Oil Company, appeared as claimant to defend. The parties settled the collision liability by a consent decree, each conceding fault and agreeing to bear half its own damages. A balance was therefore payable to Sinclair Refining Company, the owner of the more seriously damaged ship. Most items of damage the parties agreed on; the disputed items, and the question whether interest should be allowed, were referred to a Special Commissioner, on August 23, 1945. Due to the illness and subsequent death of the Commissioner first appointed, it was necessary to designate a successor, whose report was filed on December 11, 1947, and I must pass on the exceptions filed by the parties. They fall into three groups. In the first two, Sun Oil Company objects to an allowance of damages for the detention of the "Patrick J. Hurley" following the collision, and objects to the inclusion of insurance premiums as an item of damages. In the third, Sinclair Refining Company objects to the disallowance of all interest on the award.
As a result of the collision, the "Patrick J. Hurley" was laid up for repairs for thirty-four days. The Commissioner decided that the Sinclair Refining Company had sustained a loss thereby, and measured it as follows. On the 18-day voyage preceding the collision, the "Patrick J. Hurley" had carried oil at a cost of 24½¢ a barrel, which was 30¾¢ lower than the government-established tanker rate for petroleum products shipped from the Gulf to North Atlantic ports. 30¾¢, multiplied by 119,432.07 barrels, the number carried on that voyage, divided by 18, results in earnings of $2,040 a day. The Commissioner assumed the daily earnings during the detention would have been the same as those of the prior voyage. Thus, $2,040 multiplied by the 34 days of detention yielded $69,360 as detention damages.
The Sun Oil Company objects to the allowance of any detention damages, asserting there was no proof that the detention caused loss, and, if damages are allowable, objects to the Commissioner's method of computing them. I hold that this exception must be sustained. The Commissioner has in effect allowed as detention damages an amount which would have been the net cost to the Sinclair Refining Company of chartering a substitute for the "Patrick J. Hurley" during the period of its detention had such a substitute been procured. I do not find in the record the evidence that is necessary to justify such an award.
The evidence shows that the Sinclair Refining Company was engaged in the purchase, refining, transportation, and sale of petroleum products. To bring crude oil to its refineries in 1942, it used every available means, including tank cars, pipelines, and its own tankers, twenty-one in number at the time of the collision. Transportation by tanker was cheaper than by tank car and pipeline. The transportation of Sinclair's own products kept these vessels busy, since there was an extraordinarily great demand for tankers and petroleum products. At the time of the collision, the "Patrick J. Hurley" was proceeding in ballast to a Gulf port, where it would have loaded oil. This oil was not set aside for it, but would merely have been drawn off from a large stock in storage. The "Patrick J. Hurley" would have carried the oil to the Sinclair refinery at Marcus Hook, Pennsylvania, which was operating under wartime pressure at what was termed full capacity, though it is likely that more crude oil could have been refined there had it been available. I do not know what happened to the oil which the "Patrick J. Hurley" would have carried had it not been detained. One witness testified that it was probably refined at Houston, Texas, and sold. No vessel was chartered to substitute for the "Patrick J. Hurley," for none was to be had.
Where a substitute is actually chartered to transport cargo that would otherwise have been shipped on the vessel detained, there is no doubt that the cost of the substitute is properly awarded as an element of damage. The Glendola, 2 Cir., 1931, 47 F.2d 206, certiorari denied, Standard Oil Co. v. Glendola S. S. Corp., 1931, 283 U.S. 857, 51 S.Ct. 650, 75 L.Ed. 1463.
Where no substitute is procured, however, and the owner of the detained vessel makes some other arrangement for the flow of the goods that would have been transported on the injured vessel, the problem is different. The applicable legal principles in such a case were thoroughly explored by the Supreme Court in Brooklyn Eastern District Terminal v. United States, 1932, 287 U.S. 170, 53 S.Ct. 103, 77 L.Ed. 240. In that case the petitioner was in the business of towing car floats for railroads by tug, and its business was sufficient to occupy three tugs. One of its tugs was disabled and, instead of hiring an extra tug as a substitute, petitioner used its two other tugs overtime. The District Court, confirming the Commissioner's report, allowed demurrage at the rate of $150 a day, the market hire of another tug, for each of the seventy-eight days that the tug was withdrawn for repairs. On appeal the Circuit Court of Appeals for the Second Circuit excluded that item, 1932, 54 F.2d 978, and this determination was affirmed by the Supreme Court.
While the Brooklyn Eastern District Terminal case involved a vessel for hire rather than one transporting the owner's own goods, the Supreme Court clearly saw no legal difference in these fact...
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