Standard Oil Co. of California v. United States

• Decision Date: 17 February 1945
• Docket Number: No. 3490-BH.,3490-BH.
• Parties: STANDARD OIL CO. OF CALIFORNIA v. UNITED STATES et al.
• Court: U.S. District Court — Southern District of California

59 F. Supp. 100

STANDARD OIL CO. OF CALIFORNIA v. UNITED STATES et al.

No. 3490-BH.

District Court, S. D. California, Central Division.

February 17, 1945.

Lawler, Felix & Hall and Marcus Mattson, all of Los Angeles, Cal., for libelant.

Charles H. Carr, U. S. Atty., of Los Angeles, Cal., and Lillick, Geary, McHose & Adams and Augustus F. Mack, Jr., all of Los Angeles, Cal., for respondents.

HARRISON, District Judge.

This is a proceeding in admiralty wherein libelant seeks damages under the Suits in Admiralty Act, 46 U.S.C.A. §§ 741-752, for the commingling of part of a cargo of gasoline and Diesel oil shipped on the tanker "Egg Harbor," a vessel owned and operated by the United States of America, by and through the War Shipping Administration.

This case presents two broad questions of law, namely:

1. Does the Carriage of Goods by Sea Act apply to the shipment involved?

2. Did the War Shipping Administration exceed its power in executing a charter party wherein it created a liability against the United States for all provable damages including attorney's fees?

According to the evidence the "Egg Harbor", a Swan Island tanker, on its maiden voyage to Point Wells, Washington, received from the libelant at San Pedro, California, 60,933.31 barrels of marketable Standard Diesel furnace oil, and at El Segundo, California, 63,789.52 barrels of marketable Standard gasoline. Upon arrival at Point Wells, Washington, tests were taken by means of lowering small containers into the tanks. Observing and smelling the contents, failed to disclose any contamination. The libelant also took samples at the dock end of the hose when the pumping of both products began and at spaced intervals thereafter. By this means, it was discovered about three hours after pumping commenced, that contaminated gasoline was being discharged. The pumps were immediately shut down but later pumping was resumed, and the contamination continued. Thereafter, the Diesel oil was unloaded separately without contamination. After the Diesel oil was unloaded, the remainder of the gasoline was removed free from contamination. Later, on the following day, it was discovered through laboratory tests that part of the Diesel oil had been contaminated with gasoline. As a result of this commingling 8,140 barrels of Standard gasoline and 23,131 barrels of Diesel oil were so contaminated by the admixture as to require reprocessing. And in addition thereto, 11,339 barrels of Standard gasoline and 2,376 barrels of Standard Diesel oil already in the shore tanks into which the contaminated products were pumped became so contaminated by this admixture as to also require reprocessing.

All the above oil products had to be reprocessed at the libelant's plant in El Segundo, California, as they had no market value in their contaminated condition at Point Wells, Washington. If libelant is entitled to recover damages for all the oil contaminated, it would be entitled to recover the sum of $49,158.12. On the other hand, if it is entitled to recover only for that portion of the cargo damaged, it would be entitled to the sum of $32,914.56.

The first question to be determined is whether the Carriage of Goods by Sea Act covers the shipment of oil involved. The libelant contends that it does, while the respondent holds to the contrary, because the vessel was operating under a charter for the full capacity of the vessel and therefore respondent was free to contract as a private party. Under this reasoning the parties were in the relationship of a bailor and bailee. Respondent then refers to paragraph 19 of the charter party which provides:

"Except as may otherwise be indicated in Part I, the vessel shall not be responsible for * * * any consequences arising out of shipping more than one grade of cargo."

It naturally follows that if the Carriage of Goods by Sea Act does not apply, the libel must be dismissed because of the above provision. But it appears clear to me that said act, 46 U.S.C.A. § 1300 et seq., clearly applies and the rights and liabilities of the parties are controlled thereby. Paragraph 25 of the charter party is entitled "Clause Paramount" and reads as follows:

"All Bills of Lading issued hereunder shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States, approved April 16, 1936, which shall be deemed to be incorporated therein, and nothing therein or herein contained shall be deemed a surrender by the Owner of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of any Bill of Lading issued hereunder be repugnant to said Act to any extent, such term shall be void to that extent but no further."

The Carriage of Goods by Sea Act is made applicable to the carriage of goods between ports of the United States if the "bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea between such ports" contains "an express statement that it shall be subject to the provisions of this Chapter and Section 25 of Title 49." Reading paragraph 25 of the charter party in connection with this language in the Carriage of Goods by Sea Act leads to the inescapable conclusion that there was a sufficient incorporation of the Act to make it a part of the contract of carriage.

Respondent relies strongly on The G. R. Crowe, 2 Cir., 294 F. 506. In that case action was brought to recover for loss of gas and oil caused by leakage. The cargo was shipped under a charter party for the full capacity of the vessel. The court held that the agreement between the parties for the full capacity of the vessel amounted to a contract for private carriage and therefore the Harter Act, 46 U.S.C.A. § 190 et seq., a predecessor to the Carriage of Goods by Sea Act, did not apply. This view has been substantiated by numerous other decisions both prior and subsequent to the Crowe case. Hine et al. v. New York & Bermudez Co., D.C., 68 F. 920; The Fri, 2 Cir., 154 F. 333; Lake Steam Shipping Co. v. Bacon, D.C., 129 F. 819; The Royal Sceptre, D. C., 187 F. 224; The Rokeby, D.C., 202 F. 322; The Elizabeth Edwards, 2 Cir., 27 F.2d 747. While a common element exists between these cases and the one at bar in that the parties have contracted for the full capacity of the vessel and have thereby placed the respondent in the position of a private carrier, there also exist fundamental differences. In the instant case there was an express incorporation of the Carriage of Goods by Sea Act into the charter party,— an element entirely lacking in the cases cited by the respondent. Furthermore, under the Carriage of Goods by Sea Act, which is controlling in this case, there is a provision giving effect to its incorporation in the charter party. This provision is not found in the Harter Act under which the Crowe and like cases were decided.

Even under the Harter Act cases have recognized that it may be incorporated into contracts where it would not otherwise govern by its own force. In Framlington Court, 5 Cir., 69 F.2d 300, 304, it was stated:

"Having incorporated the Harter Act by reference in the charter, the parties are bound to take it with its burdens as well as its benefits and it is controlling."

In Warner Sugar Refining Co. v. Munson S. S. Line, D.C., 23 F.2d 194, 196, the court said:

"The charter party now under consideration gave the charterer the full capacity of the ship Munamar, and as such it was not a common carrier, and the Harter Act * * * would not of its own force have applied, but the contracting parties have expressly made it a part of their contract, which they were at liberty to do."

See also The Vermont, D.C., 47 F.Supp. 877; The Agwimoon, D.C., 24 F.2d 864.

It is therefore apparent that the parties could do exactly what they did do, namely, make the Carriage of Goods by Sea Act a part of their charter notwithstanding the fact that the respondent was contracting as a private carrier. It would appear therefore that paragraph 19, in so far as it attempts to relieve respondent from its own responsibilities, is in conflict with the terms of the Carriage of Goods by Sea Act and is inapplicable. 46 U.S.C.A. § 1303(8).

Having determined that the Carriage of Goods by Sea Act applies, the responsibility of the respondent under the Act must then be determined.

Title 46 U.S.C.A. § 1303 provides as follows:

"(1) The carrier shall be bound, before and at the beginning of the voyage, to exercise due diligence to—

"(a) Make the ship seaworthy;

"(b) Properly man, equip, and supply the ship;

"(c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.

"(2) The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried."

And § 1304 of Title 46 U.S.C.A. places the burden of proving the exercise of due diligence upon the carrier whenever the loss has resulted from unseaworthiness.

At the outset it should be noted that in undertaking to transport oil the respondent charged itself with a high degree of care. As stated in The Turret Crown, 2 Cir., 297 F. 766, 768:

"Oil is much more difficult to contain than water. Small leaks in a water tank tend to correct themselves by the formation of rust; whereas oil not only does not cause rust, but tends to dissolve rust * * *." The Arakan, D.C., 11 F.2d 791; American Linseed Co. v. United States, D.C., 40 F.2d 657.

This statement becomes more important when considered in the light of the testimony of two expert witnesses as to the necessity of using spectacle flanges in blocking off one tank in the vessel from another. A spectacle flange consists of two metal fittings connected by bolts and separated by a flat, round piece of sheet metal. When installed in a length of pipe this metal flange acts as a dam by blocking off the flow of...