Sucrest Corp. v. m/v Jennifer

• Decision Date: 11 August 1978
• Docket Number: Civ. No. 74-28-ND.
• Citation: 455 F. Supp. 371
• Parties: SUCREST CORPORATION, Plaintiff, v. M/V JENNIFER, etc., and Matthew Shipping, Limited, Defendants.
• Court: U.S. District Court — District of Maine

455 F. Supp. 371

SUCREST CORPORATION, Plaintiff, v. M/V JENNIFER, etc., and Matthew Shipping, Limited, Defendants.

Civ. No. 74-28-ND.

United States District Court, D. Maine, N. D.

August 11, 1978.

COPYRIGHT MATERIAL OMITTED

Martin R. Johnson, Portland, Me., John P. Conroy, New York City, for plaintiff.

Thomas R. McNaboe, Portland, Me., Byron King Callan and Joseph M. Brush, New York City, for defendants.

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND DIRECTION FOR ENTRY OF JUDGMENT

GIGNOUX, District Judge.

This action arises out of a nautical mishap which occurred in May 1974, when the dry cargo vessel M/V JENNIFER, while carrying a bulk cargo of salt water damaged raw sugar from Saint John, New Brunswick, Canada, to Brooklyn, New York, developed a severe port list off Bar Harbor, Maine, because of a transverse shift of the cargo. The JENNIFER put into Bar Harbor where she eventually was purposefully stranded for the safety of both the vessel and the cargo. Sucrest Corporation ("Sucrest"), the owner of the cargo has brought an action in rem against the JENNIFER and in personam against the owner of the vessel, Matthew Shipping, Ltd. ("Matthew"), for damages to the cargo, salvage expenses, and the cargo's contribution in General Average. The ship and her owner deny liability for cargo damage and have, in turn, filed a counterclaim against Sucrest in which they seek hull damage, salvage expenses, damages for lost use of the vessel, and the vessel's contribution in General Average. Jurisdiction evidently is predicated upon 28 U.S.C. § 1333(1) (admiralty and maritime jurisdiction) and § 1332 (diversity jurisdiction).¹

By agreement of the parties, the issues of liability have been severed from the damage issues, and tried to the Court without a jury. Having received and considered the evidence and the written and oral arguments of counsel, the Court now makes its Findings of Fact and Conclusions of Law on the issues of liability for the casualty, and directs entry of its judgment as follows:

FINDINGS OF FACT

The Court's Findings of Fact are:

Introduction

1. Sucrest. Sucrest, a New York corporation, is an international sugar refiner. It owns several subsidiary companies including the Revere Sugar Refinery ("Revere") in Charlestown, Massachusetts, and Sucrest Gmbh located in West Germany. Sucrest Gmbh wholly owns Interfood Gmbh ("Interfood"), also headquartered in West Germany. Sucrest Gmbh manufactures specialty food products, and Interfood is a commodity trading corporation.

During April and May 1974, Robert M. Rappaport was president of Sucrest and simultaneously served as a "geschaftsfurer," or, roughly, a managing director, of both Sucrest Gmbh and Interfood.

2. Matthew. Matthew was and is a Canadian corporation having a place of business in Montreal, Province of Quebec, Canada. Matthew acquired title to the JENNIFER, formerly the LORNA P, on April 30, 1974. Prior to acquiring title to the JENNIFER, Matthew had time-chartered the vessel on several occasions.

During April and May 1974, Henry C. Druce was general manager of Matthew. At that time, Captain James Rooney served as assistant general manager and acted as marine superintendent for the company.

3. The JENNIFER. The JENNIFER, a Canadian flag motor vessel built in 1964, had an overall length of 204 feet, a beam of 36 feet, and a summer draft of 15' 3". She was designed as a single hold, single hatch carrier of dry bulk cargo. Her hatch measured approximately 68 feet by 23 feet and opened into a hold 110 feet long and 35 feet wide. The bilge arrangement in the hold consisted of four bilge wells, two forward and two aft. Each well was located on the outboard corner of the hold. They were fitted with perforated covers known as strainer plates and were about two feet deep.

The JENNIFER was powered by a single screw, eight cylinder diesel engine of approximately 1200 horsepower which was capable of driving her at speeds up to 11 knots.

The JENNIFER was lost at sea in the latter part of 1974 in an incident unrelated to the instant action.

4. The Ship's Personnel. From April 30, 1974, when Matthew took title to the JENNIFER, until May 10, 1974, Rooney served as temporary master of the vessel. Rooney had held a British Master's Certificate since August 1963. Prior to 1974, he had last sailed as master in 1968. His previous sailing experience had included the carriage of three shipments of bulk sugar from Cuba to China.

On May 10, Rooney turned the JENNIFER over to Captain George H. Anderson, whom Captain Robert Lyon, another Matthew employee, had hired in St. John to take the vessel with a bulk cargo of salt water damaged raw sugar from St. John to Brooklyn. After discharging the sugar, Anderson was to have proceeded with the JENNIFER to Philadelphia to pick up other cargo. Anderson held an unlimited Canadian Master's Certificate, issued in March 1946. Prior to the JENNIFER, Anderson's latest seagoing command had been in 1973. He had no previous experience in the carriage of raw bulk sugar.

Chief Officer of the JENNIFER in May 1974, during the voyage here in issue, was Ronald Cartwright. Shortly before Cartwright joined the vessel, he had been hired by Rooney in Montreal for a shore position with Matthew. His seagoing duty aboard the JENNIFER was to have been limited to the voyage scheduled to end at Brooklyn. Cartwright was issued a First Mate's Foreign Going License by the British Board of Trade in 1958. He assumed a shore position in 1961 and had not returned to sea as a First, or Chief, Officer until he joined the JENNIFER. As Chief Officer of the JENNIFER, Cartwright was in charge of cargo supervision and stowage. Although he previously had observed cargos of raw bulk sugar on several occasions, he never before had carried the cargo.

5. Raw Bulk Sugar. The carriage of raw sugar in bulk is a relatively recent phenomenon which commenced in the early 1950's. Raw bulk sugar normally is a passive, stable cargo. It is not included among the numerous cargos listed in the dangerous cargo acts of Canada, the United Kingdom, or the United States. E. g., 46 U.S.C. § 170, 46 C.F.R. Part 146 et seq. (1977). Raw bulk sugar usually has a moisture content of .05%, a polarization of 98%, and an angle of repose of at least 32°.²

The Purchase of the Sugar

6. The sugar cargo that is the subject matter of this action consisted of raw Australian sugar in bulk which had been damaged by salt water in early 1974 while aboard the M/V GORDION, bound for St. John. At St. John, the consignee of the sugar rejected a portion of the shipment due to the salt water contamination. Laurentide Trading Co., Ltd. ("Laurentide"), a salvage company, then purchased the rejected shipment with the intent of reselling the cargo to another refiner.

7. In early April 1974 representatives of Laurentide contacted representatives of Sucrest with regard to the possible sale of the sugar to Sucrest. On April 9, 1974, Delfin Bacani, assistant laboratory director for Revere, a Sucrest subsidiary, inspected the sugar at St. John in behalf of Sucrest. Part of the sugar was stored inside the Metro Warehouse in St. John. Bacani described the sugar in the warehouse as approximately " 1/3 soupy magma and 2/3 wet sugar."³ The remainder of the sugar was kept outside in an open pit. Some of the sugar left outside was covered by canvas tarpaulins; the rest was exposed to the elements. Bacani and his supervisor, Warren L. Reed, advised Sucrest that the sugar still was refinable and that if the purchase price was low enough, Sucrest could profit from the damaged cargo.

8. The negotiation between Laurentide and Sucrest culminated in a written Memorandum of Agreement signed at the Sucrest offices in New York City on April 24, 1974. Under the terms of the Memorandum, the buyer was to purchase the sugar at $.09 per pound and was to pay loading, unloading and transportation charges. Transportation of the cargo from St. John to Brooklyn was to be by ship.

Throughout the negotiations Sucrest was assumed to be the buyer. Sucrest officials represented the buyer, and draft memoranda listed Sucrest as the buyer. However, at the April 24 conference, Sucrest representatives asked Laurentide permission to substitute Interfood as buyer. Sucrest wished to make the change for inter-corporate business purposes. Laurentide agreed to the substitution provided that payment for the cargo would then be guaranteed by a letter of credit issued on a New York bank. Sucrest accepted this condition and Interfood was listed as the buyer. Rappaport, Sucrest's president, signed the Memorandum for Interfood in his capacity as geschaftsfurer. No other Interfood officials or employees participated in the transaction with Laurentide. Two days later, on April 26, 1974, Interfood sold the sugar to Sucrest for $.17 per pound.

9. Pursuant to the agreement with Laurentide, Sucrest arranged with its banker, the Chase Manhattan Bank ("Chase") in New York City to obtain a letter of credit to finance the transaction. The letter of credit nominally was issued on the account of Interfood and named Laurentide as the beneficiary. At the time the letter of credit was procured, Interfood had no account with Chase and, as a practical matter, Chase issued the letter of credit on the credit of Sucrest.⁴

The terms of the Memorandum of Agreement provided that Laurentide would receive partial payment on the letter of credit upon presentment of a bill of lading showing delivery of the sugar aboard the carrier at St. John. The balance was to be paid upon discharge of the sugar at its port of destination. Laurentide subsequently received payment from Chase on two occasions, pursuant to the Memorandum. On each occasion Chase charged Sucrest, not Interfood, for the sum it had paid to Laurentide. Chase also endorsed the bill of lading which it had received from Laurentide to Sucrest, not Interfood. The bill of lading was never negotiated between Interfood...