Socony Mobil Oil Co., Inc. v. Texas Coastal & Intern., Inc.

• Decision Date: 23 September 1977
• Docket Number: No. 75-3479,75-3479
• Citation: 559 F.2d 1008
• Parties: SOCONY MOBIL OIL COMPANY, INC., Mobil Oil Company, Ltd. and Mobil Oil, A. G., Plaintiffs-Appellants Cross-Appellees, v. TEXAS COASTAL AND INTERNATIONAL, INC., Steamtanker Padre Island, Inc., in personam, and the Steamtanker "Padre Island", her engines, tackle, etc., in rem, Defendants-Appellees Cross-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1008

559 F.2d 1008

SOCONY MOBIL OIL COMPANY, INC., Mobil Oil Company, Ltd. and Mobil Oil, A. G., Plaintiffs-Appellants Cross-Appellees, v. TEXAS COASTAL AND INTERNATIONAL, INC., Steamtanker Padre

Island, Inc., in personam, and the Steamtanker

"Padre Island", her engines, tackle,

etc., in rem,

Defendants-Appellees

Cross-Appellants.

No. 75-3479.

United States Court of Appeals, Fifth Circuit.

Sept. 23, 1977.

H. Barton Williams, Nashville, Tenn., George Stelljes, Jr., Jacksonville, Fla., Warren H. Greene, Jr., Mobil Oil Corp., New York City, for plaintiffs-appellants cross-appellees.

James F. Moseley, Jacksonville, Fla., for defendants-appellees cross-appellants.

Glickstein, Crenshaw, Glickstein & Hulsy, Jacksonville, Fla., for Merritt-Chapman.

Arthur Roth, Miami, Fla., Adams & Adams, Jacksonville, Fla., for intervenors.

Appeals from the United States District Court for the Middle District of Florida.

Before GEWIN, RONEY and HILL, Circuit Judges.

RONEY, Circuit Judge:

Plaintiffs successfully demonstrated to the trial court that three cargoes of their oil, loaded in good condition on the Steamtanker PADRE ISLAND, were contaminated with water when discharged after each voyage. Awarded $131,316.34, plaintiffs appeal the denial of prejudgment interest. Defendants cross-appeal as to liability. We reverse the denial of prejudgment interest but affirm on liability, the findings of fact not being clearly erroneous.

Plaintiffs chartered the S/T PADRE ISLAND to transport oil products to various parts of the globe. The first voyage under this charter was without incident, but each of three subsequent voyages forms a cause of action in this case. After each of those voyages, made under bills of lading, the cargo of bunker fuel oil was found contaminated with water after discharge.

In reviewing findings of fact, the proper placement of the burden of proof is important. Although the trial spawned an intricate dispute over whether the Carriage of Goods by Sea Act, (COGSA) 46 U.S.C.A. §§ 1300 et seq., applied, at oral argument, both parties informed the Court that, in their estimation, this issue no longer makes a difference in the outcome of the appeal. Since "if bills of lading are issued in the case of a ship under charter party, they shall comply with the terms of this chapter, . . ." 46 U.S.C.A. § 1305, and since each voyage was made under a bill of lading, we conclude that the burden of proof rules of the Carriage of Goods by Sea Act apply. 46 U.S.C.A. § 1304(1) provides the proper burden of proof allocation: "Whenever loss or damages has resulted from unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier . . . ."

In a case of this kind, the shipper need only show that cargo was loaded in undamaged condition, and discharged in contaminated condition, to establish a prima facie case. The carrier then has the burden of showing that the vessel was seaworthy or that due diligence was used to make it seaworthy. United States v. Lykes Bros. Steamship Co., Inc., 511 F.2d 218 (5th Cir. 1975); M. W. Zack Metal Co. v. S. S. Birmingham City, 311 F.2d 334 (2d Cir. 1962), cert. denied, 375 U.S. 816, 84 S.Ct. 50, 11 L.Ed.2d 51 (1963). This, together with Rule 52(a), Fed.R.Civ.P., which prevents an appellate court from disturbing the findings of a trial court unless clearly erroneous, even if the appellate court might have reached different conclusions on the evidence, frames the consideration of the factual arguments made on this appeal.

Venezuela New York

On October 8, 1965, the PADRE ISLAND loaded a cargo of fuel at El Palito, Venezuela, destined for Staten Island and Albany, New York. Before the cargo was loaded the cargo tanks were examined and found to be free of water. Tests of the cargo before loading revealed insignificant water content.

The PADRE ISLAND discharged a portion of its cargo in New York City without incident. The balance of the cargo was discharged at Albany. The cargo was not tested in the vessel's cargo tanks before discharge but was tested some time later from the shore tanks at Mobil's Albany facility. At that point the cargo was found to be contaminated with water.

The district court concluded that the crew of the PADRE ISLAND had taken cargo and placed it in its own fuel tanks, and substituted water into the cargo tanks, thus contaminating the cargo. The evidentiary support for this finding was the testimony of the supervisor of the Mobil Albany facility. The testimony was based on what a watchman had told the night supervisor, who then had reported to the witness. The defendants press upon this Court the hearsay nature of the testimony thus relied upon. They also contend that the plaintiffs failed to make a prima facie case in that the proof of contamination of cargo was too distant from time and place of discharge to indicate whether contamination was caused on the vessel or due to water existing in the shore tanks before discharge. See Miami Structural Iron Corp. v. Cie Nationale Belge De T. M., 224 F.2d 566 (5th Cir. 1955).

The hearsay problem complained of by the defendants is not without merit. It overlooks, however, the limited elements which the plaintiffs were required to prove in order to recover. If the evidence sufficiently demonstrates that the oil was "dry" when loaded in Venezuela, and had significant water content when discharged in Albany, the defendant was obliged to come forward and explain why. The explanation of the plaintiffs that it was due to a pilfering of cargo by the ship was a gratuitous one which they were not obliged to advance. Since the defendants did not offer, as to this voyage, any evidence to show that the cause of the damage was within one of the exceptions to carrier liability found in the Carriage of Goods by Sea Act, this Court need only review the findings of cargo condition on loading and discharge to determine if the award for plaintiffs can be affirmed.

There is ample evidence to show that the cargo was loaded in good condition. Not only did plaintiffs introduce chemical tests of the cargo taken from its Venezuelan tanks before loading, but the cargo was in sound condition when the ship arrived in Staten Island, thus permitting the inference that it was sound when loaded. It is the question of the cargo's condition on discharge that is difficult. Defendants maintain that since the only evidence as to contamination came from samples taken from shore tanks two days after discharge of the cargo, plaintiffs did not make out a prima facie case. The cases they rely on, however, are not apposite.

For instance, defendants rely on Miami Structural Iron Corp. v. Cie Nationale Belge De T. M., 224 F.2d 566 (5th Cir. 1955). That case concerned a cargo of steel, which was not inspected until five or six days after discharge. The Court held that there was a failure to prove that the goods were discharged in a damaged condition, instead of having been damaged after discharge. Defendants argue from this case that it is impossible to tell, on the facts before us, whether the cargo of oil discharged in Albany was contaminated on discharge, or was contaminated by events which occurred subsequent thereto. This ignores, however, the intrinsic difference between a cargo of steel and one of fuel oil. Steel will naturally deteriorate if left exposed to the elements for a period of time. While the nature of the damage to the cargo is not specified in Miami Structural, the type of cargo there involved suggests that the damage must have been some form of rusting or warping. These are conditions which would be exacerbated if the cargo is left uninspected for a period of days after discharge, rendering a finder of fact unable to determine if the damages occurred on board the transporting vessel, or subsequently. Here, since it is undisputed that the cargo was discharged into a covered tank, the amount of time which passes prior to inspection does not increase the likelihood that the cargo will be damaged due to water contamination. The same two alternatives continue to be present. The water was either introduced on board the vessel, or was preexisting in the shore tank. Cf. Empire Aluminum Corp. v. S. S. Korendijk, 391 F.Supp. 402, 1974 A.M.C. 2213 (S.D.Ga.1973) (equally likely that possibly uncovered aluminum cargo was damaged after discharge as by sea water while on vessel).

The district court was thus faced with two possibilities. In drawing an inference, however, the court could recognize the fact that absent evidence to the contrary it would be unusual for an oil company to maintain shore tanks so that they had large quantities of water in them just prior to the receipt of a cargo of oil. Furthermore the court's implicit conclusion that there was no water preexisting in the shore tanks at Albany, and that the water was introduced prior to the discharge of the cargo from the ship is a finding which we may disturb only if clearly erroneous. Fed.R.Civ.P. 52. Any source of doubt on this issue is precluded by the testimony of Joseph Lombardo, a Mobil Oil laboratory technician. He testified as follows:

Q: Do your books and records reflect what the condition of tank 15 was before the PADRE ISLAND arrived?

(Tank 15 is the Albany shore tank into which the cargo was discharged).

A: Off hand, I would say it was empty.

Q: Now, when you say empty, you mean it didn't have any petroleum product in it?

A: Any product in it. I didn't go in and look; I didn't know.

Considering the evidence as to the ship's condition, introduced as to the subsequent counts of the complaint, and the strong likelihood that Mobil maintained its shore tanks free from water, the conclusion of the district court that the cargo left the vessel at Albany in a contaminated condition is not reversible.

Defendants also argue, on the strength of the Carriage of Goods by Sea Act, 46 U.S.C.A. § 1303(6) that the failure of Mobil to have given notice of the cargo damage...