Texport Oil Co. v. M/V AMOLTNTOS
| Decision Date | 09 December 1993 |
| Docket Number | D,800,Nos. 652,s. 652 |
| Citation | 11 F.3d 361 |
| Parties | , 27 Fed.R.Serv.3d 1134 TEXPORT OIL CO., Appellant, Cross-Appellee, v. M/V AMOLYNTOS, Its engines, boilers, tackle and Amolyntos Shipping Co. Ltd., Appellees, Cross-Appellants. ockets 93-7579, 93-7657. |
| Court | U.S. Court of Appeals — Second Circuit |
John R. Foster, New York City (Waesche, Sheinbaum & O'Regan, on the brief), for appellant, cross-appellee.
James M. Textor, New York City (Joseph F. DeMay, Jr., and Cichanowicz Callan & Keane, on the brief), for appellees, cross-appellants.
Before: FEINBERG, TIMBERS, and MINER, Circuit Judges.
This is an appeal from a judgment entered in the Eastern District of New York, Arthur D. Spatt, District Judge, 816 F.Supp. 825 (E.D.N.Y.1993), for incidental damages sustained by the Texport Oil Company (Texport) when its gasoline was contaminated by residue in the cargo hull of the cargo vessel the M/V Amolyntos (Amolyntos). The Amolyntos was held liable for the incidental costs incurred by Texport in the restoration of Texport's gasoline to a marketable form.
On appeal, Texport requests a remand for a new determination of damages and a declaratory judgment that it is entitled to indemnification on a demurrage claim. The Amolyntos filed a cross-appeal one business day beyond the statutory fourteen-day limit. Fed.R.App.P. 4(a)(3). The Amolyntos alleges in its cross-appeal that the court erred (1) in holding that Texport's damages were cognizable under the Carriage of Goods by Sea Act (COGSA); (2) in applying the collateral source rule because a COGSA claim for damages is essentially a contract claim and the rule should not be applied to a contract case; and (3) in ruling that the Amolyntos should not recover costs under Fed.R.Civ.P. 68.
We reject Texport's claim for damages. We grant Texport's request for a declaratory judgment that it is entitled to indemnification on a demurrage claim. With respect to the Amolyntos' cross-appeal, we hold that the late filing of the notice of appeal is not a jurisdictional bar. We reject the Amolyntos' cross-appeal on the merits.
We affirm in part and reverse and remand in part.
We summarize only those facts and prior proceedings believed necessary to an understanding of the issues raised on appeal.
Texport is a Houston-based oil and gasoline trading company that buys, blends, and sells gasoline and other products. In April 1990 Texport bought approximately 60,000 MT of Romanian gasoline from Bulk Oil, a Swiss company. The gasoline was purchased on C.I.F. terms so that the cost included insurance and freight. As sold, the gasoline was not marketable in the United States because the octane level was too low to meet United States standards. Texport intended to add 40,000 to 50,000 barrels of toluene to raise the octane level and lower the vapor pressure in order to meet those standards. The toluene was to be added in one blending process that could be completed within twenty-four hours. The blending would be done after the cargo was off-loaded from the Amolyntos in New York.
The seller, Bulk Oil, arranged for the carriage of the gasoline to New York aboard the Amolyntos. In two separate shipments prior to the instant shipment, the Amolyntos had carried coal and number six heating oil, which has a much darker hue than gasoline.
The Amolyntos arrived at Constanza, Romania, on April 14, 1990. It was examined by surveyors retained by both Bulk Oil and the Romanian shipper. The surveyors twice rejected the Amolyntos because the port duct keel area was dirty. The starboard duct keel tunnel was not used at all because it was so dirty. Finally, the gasoline was loaded the next day. The vessel left Constanza on April 20, 1990. It arrived at New York on May 10, 1990.
When the Amolyntos arrived at New York, surveyors took several sets of gasoline samples. An independent company compared the samples taken in New York with samples taken in Romania. It found that several of the New York samples were substantially darker than the Romanian samples. Darker gasoline is less marketable than clear gasoline. Texport notified the cargo insurers in London of a possible cargo contamination. The cargo insurers came to New York and took two sets of samples over a period of eight days. They found that the gasoline was darker than when it had been loaded on the Amolyntos.
In order to sell the gasoline at the intended price, Texport mixed clear gasoline with the discolored gasoline at approximately nine parts to one. Although Texport had intended to blend the gasoline with toluene, the blending process that was now required was much more complicated. The toluene blending would have been done in a simple procedure within a twenty-four hour period. Such blending would have been done either in transit on board the barge that carried the gasoline from the Amolyntos to the on-shore terminal or in a tank at the terminal. Instead, the necessary additional blending required approximately fifty blends, took several weeks to complete, and required additional storage. The end result was gasoline that was saleable at the originally-intended color and price. Texport sold the gasoline to a third party at the market price with no discounts.
To cover its additional costs, Texport filed an insurance claim. Although it was unable to calculate its actual additional blending costs, Texport did submit the estimated blending costs and actual incidental expenses, including extra laboratory and barge expenses. The insurance claim eventually was settled with the London insurers. Texport received $650,000 and whatever subrogation rights the insurance company had against the Amolyntos.
Texport commenced the instant action for damages against the Amolyntos. Texport Oil Co. v. M/V Amolyntos, 816 F.Supp. 825 (E.D.N.Y.1993). On March 24, 1993, the court held the Amolyntos liable for the damages that Texport directly incurred in ameliorating the darkened condition of the gasoline. The court held that Texport had not proven the actual cost of blending but had proven the incidental costs incurred in the restoration of the gasoline to a marketable form. The court awarded Texport $180,410.33 in incidental damages. Non-compound prejudgment interest also was awarded. In addition, the court held that the collateral source rule should apply so that the damages paid by the Amolyntos would not be reduced by the insurance payments made to Texport by the insurance company.
On appeal, Texport requests a remand, claiming that it is entitled to fair market damages based upon diminution in the value of the gasoline. Texport further requests a declaratory judgment that it is entitled to indemnification for the demurrage caused by the additional blending time.
The Amolyntos cross-appeals, claiming that the district court erred (1) in finding that the cargo was damaged; (2) in applying the collateral source rule to this COGSA claim for damages; and (3) in ruling that the Amolyntos should not get costs under Fed.R.Civ.P 68. The cross-appeal was filed one business day late.
(1) Calculation of Damages
The court awarded damages based upon Texport's incidental expenses and prejudgment interest. Texport asserts that the court erred and should have awarded damages based upon diminution in market value. After reviewing the court's decision, we hold that there was not an abuse of discretion. As to this, we affirm.
The general measure of damages is the difference between the fair market value of the goods at their destination in the condition in which they should have arrived and the fair market value of the goods in the condition in which they actually did arrive. Kanematsu-Gosho Ltd. v. M/T Messiniaki Aigli, 814 F.2d 115, 118 (2 Cir.1987) (citing Encyclopaedia Britannica, Inc. v. SS Hong Kong Producer, 422 F.2d 7, 18 (2 Cir.1969), cert. denied, 397 U.S. 964, 90 S.Ct. 998, 25 L.Ed.2d 255 (1970)). This is not a hard and fast rule. When circumstances suggest a more appropriate alternative, the fair market test may be superseded by another method of calculating damages. Illinois Cent. R.R. v. Crail, 281 U.S. 57, 64-65, 50 S.Ct. 180, 74 L.Ed. 699 (1930). Ultimately, under COGSA, "[i]n no event shall the carrier be liable for more than the amount of damage actually sustained". 46 U.S.C. Sec. 1304(5) (1988).
In the instant case, Texport was able to salvage the tainted gasoline by blending it with clean gasoline. There is no dispute that the value of the gasoline that arrived in New York was less than its value when it was loaded on the Amolyntos in Romania. After the blending process, however, Texport was able to sell all of the blended gasoline--including the reconditioned gasoline and all of the blending gasoline--at the full market price. Since Texport sustained no diminution in the value of the gasoline, the court was correct in not measuring Texport's damage by the fair market value.
Texport was able to prove its incidental damages. The costs were incurred in reconditioning the gasoline that was damaged due to the Amolyntos' neglect. Since the gas was sold at full market value, Texport's incidental damages are the most accurate measure of its true damages and thus a valid alternative for measuring damages in a COGSA action.
We affirm the district court's holding that the Amolyntos is liable to Texport for the incidental damages.
(2) Declaratory Relief for Indemnification of the Demurrage Claim
Texport requested that the court enter a declaratory judgment stating that Texport is entitled to be indemnified by the Amolyntos for the extra vessel rental expense, known as demurrage. The court denied that request.
According to the original agreement between Bulk Oil and Texport, the latter was required to pay the costs for any time over three days spent in discharging the Amolyntos. Since the blending was more involved than expected, Bulk Oil presented...
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