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STANDARD OIL CO. v. UNITED STATES

October 14, 1952

STANDARD OIL CO. OF NEW JERSEY
v.
UNITED STATES (two cases). UNITED STATES v. ESSO STANDARD OIL CO. THE ESSO MANHATTAN



The opinion of the court was delivered by: WRIGHT

These actions which have been consolidated for trial are cross-suits arising out of the break-up of the Tanker Esso Manhattan on March 29, 1943 while out-bound in ballast in the swept channel approach to New York harbor. The central issue involved is whether the break-up of the vessel was due to a war risk.

The Esso Manhattan is a standard T-2 tankship built to government design for the Standard Oil Company. She was completed in August 1942. Immediately on completion the vessel was time-chartered to the government under a standard form of Tanker Requisition Time Charter Party pursuant to which the government issued war risk insurance coverage and the owner agreed to assume or insure against marine risks. A group of private underwriters underwrote 75% of the marine risk and the government insured the other 25%. The Esso Manhattan had completed three voyages prior to March 29, 1943. On her last voyage before the disaster the Esso Manhattan grounded in the harbor of Aruba.

 After discharging her cargo at Bayonne, New Jersey, on March 28th the Esso Manhattan commenced taking on ballast during the night. At 8 A.M. on March 29th when she cast off and proceeded toward the sea, the Esso Manhattan had not completed her ballasting. At that time she had filled No. 1 port and starboard wing tanks and Nos. 2 and 9 center tanks to an ullage of four feet. No. 9 port and starboard wing tanks were intended to be equalized with about 4 feet of water. Because of a leaky value, however, substantially more water may have been admitted into them. After getting underway ballasting was resumed and at the time of the break-up, in addition to the ballast taken on at the dock, 4 feet of water had been gravitated into Nos. 2 and 3 wing tanks, port and starboard, with ballasting continuing.

 The Esso Manhattan passed Ambrose light and entered the swept channel at about 10 A.M. The swept channel was about 5,000 yards wide marked by center line buoys approximately three miles apart starting at I buoy at the inshore end and continuing some thirty miles south and east to A buoy.

 The weather was clear. The water temperature was 38 degrees and the air temperature was slowly rising from about 35 to 40 degrees. There was a moderate breeze and a long moderate ground swell setting onto the vessel as she proceeded at full speed out the swept channel.

 As the Esso Manhattan was nearing B buoy at 12:05 P.M. still proceeding full speed ahead, she broke in half. At the time she was being observed by a blimp overhead which was escorting her through the swept channel. A second blimp was patrolling some distance ahead of the vessel and an acoustic and magnetic mine-sweeping flotilla was sweeping in the channel. As a matter of fact, sweeping was going on in the channel on a twenty-four hour basis. Also patrolling in the area some five miles away was the Kimball, a Coast Guard Cutter equipped with sonar. *fn1"

 On breaking, the hull of the Esso Manhattan in the vicinity of the break rose several feet in the water as the bow and stern dipped under the weight of the ballast. The break was accompanied by a loud noise variously described as rending plate, a grinding crash and as an explosion. The engines of the vessel kept ahead for about a minute after the break when they were shut off by an emergency trip lever. The vessel after breaking was held together by a light spar deck topside and momentarily by the bottom plating below.

 The vessel was abandoned by the master and crew who were picked up by the Kimball. There were no injuries. Shortly thereafter the two halves of the vessel began to separate, pivoting on the port side at the break and forming a right angle. In this position the halves worked together in the seaway for some time before they completely separated and floated free of each other. Salvage vessels, after shifting the ballast in the two halves to facilitate towing, brought them into Bayonne, New Jersey, where preparation was made to have them brought to Todd Shipyard for rejoining and repair. The repairs had to be performed at the Todd Shipyard because Todd was the only yard with the necessary dock facility available. Also both the government and Standard had master repair contracts with Todd together with permanent inspectors stationed there to supervise the work.

 One Gillespie of the Insurance Division of the War Shipping Administration requested Salvage Association, Inc., to survey the vessel in order to determine the extent of the damage and its cause. Gillespie entered his wartime service with the government from the private insurance field where as an average adjuster he was accustomed to dealing with the Salvage Association. The association was formed by and is owned by corporations constituting the private American insurance market, which corporations have underwritten 75% of the marine risk on the Esso Manhattan and which will bear that percentage of the loss if it should be found that the Esso Manhattan's damage resulted from marine risk.

 The survey of the Esso Manhattan was conducted for the Salvage Association by one Sileo. After an investigation based primarily on the physical condition of the two halves of the vessel after they had been salvaged and without considering in any way the physical condition of the vessel immediately following its fracture, without consulting the numerous experts who investigated the matter, and without having available the reports on the subject by the Navy Board, the Bureau of Standards and the Brooklyn Polytechnic Institute, Sileo concluded that the damage to the Esso Manhattan was caused by an external contact explosion in the area of the fracture near the turn of the bilge. This conclusion was approved by Captain Bull as the head of Salvage Association, and Gillespie was so advised. Gillespie reported the conclusion of the Salvage Association to the Chief of Maintenance and Repair, War Shipping Administration, who gave instructions that the Esso Manhattan should be repaired under the government's master contract at Todd Shipyard. The Esso Manhattan was so repaired and the cost of repair was charged to and paid by the government. There is no issue in this case that the repairs were improperly performed or that the charge therefor was excessive. It appears without doubt that if Standard had assumed responsibility for the repairs, Todd Shipyard would have made them and the cost would have been the same.

 It is the government's contention that these repairs were paid for by the United States under a mistake of fact and consequently it should be allowed to recover the monies thus expended. Standard on the other hand contends, first, that the government assumed responsibility for the repairs after an investigation of the cause of the casualty and that subsequent to such assumption, the government cannot be allowed to change its opinion as to its cause. It further urges that in any event the evidence shows the damage of the Esso Manhattan was the result of a war risk and consequently, under the war risk policy, the government is required to pay for its repair.

 Before proceeding into an analysis of the evidence in this case Standard's first defense must be considered. Standard, in asserting that the government has merely changed its opinion as to the cause of the Esso Manhattan disaster and therefore cannot be heard to say that it acted under a mistake of fact, relies on several cases decided by the Supreme Court in which the government was not allowed to reclaim alleged overpayments. *fn2" The facts in those cases, however, are substantially different from the facts in the case at bar and the decisions therein do not preclude an independent assay of the evidence in this case to determine whether or not there has been a mistake of fact. The cases Standard cites all admit that money paid under a mistake of fact is recoverable but hold that in the circumstances of those cases there was no mistake of fact.

 Here there can be no question but that the decisive issue is one of fact. Was the fracture of the Esso Manhattan the result of a structural weakness unattended by an explosion? It cannot be seriously urged that the answer to this question does not involve a finding of fact. If it is a fact that the Esso Manhattan ruptured from structural weakness unaccompanied by explosion, then the government paid for the repairs of the Esso Manhattan under a mistake of fact. And it is for this court to determine what is the fact.

 It is conceded, as it must be, that when the United States goes into the insurance business, it participates therein subject to the same conditions as private citizens. Standard Oil Company of New Jersey v. United States, 267 U.S. 76, 45 S. Ct. 211, 69 L. Ed. 519; United States v. National, Exchange Bank of Baltimore, 270 U.S. 527, 46 S. Ct. 388, 70 L. Ed. 717; Cooke v. United States, 91 U.S. 389, 23 L. Ed. 237. But this court has been cited to no case wherein it has been held that a private insurer would be without recourse in the circumstances of this case. It must be remembered that the actions under scrutiny took place under wartime conditions, when expedition was the watchword, when the government was ...


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