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INTERN. ORE & FERT. v. SGS CONTROL

August 23, 1990

INTERNATIONAL ORE & FERTILIZER CORP., PLAINTIFF,
v.
SGS CONTROL SERVICES INC., DEFENDANT.



The opinion of the court was delivered by: Tenney, District Judge.

OPINION

Plaintiff, International Ore and Fertilizer Corporation ("Interore"), brings this breach of contract, breach of warranty, negligence and misrepresentation action against defendant, SGS Control Services, Inc. ("SGS"), alleging that SGS improperly inspected and certified as suitable the holds of a ship hired by Interore to ship fertilizer from Tampa, Florida to New Zealand. Specifically, plaintiff contends that an SGS inspector did not perform a workmanlike inspection of the cargo holds in that he failed to observe a residue of barley in each hold. Plaintiff claims that the barley contaminated the fertilizer and ultimately caused New Zealand authorities to reject the cargo in those holds. The case was bifurcated and the liability portion was tried to the court which, for the reasons set forth below, denies recovery under the breach of contract claim but finds that defendant is fifty percent liable on the claim of negligent misrepresentation. The following, including those additional facts referred to in the Discussion, constitutes the court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a).

FINDINGS OF FACT

Background

1. Interore is a Delaware corporation with its principal place of business in New York, New York. It is a vendor of fertilizer products in the international market. Stipulated Fact 1; see Tr. 3-4.

2. SGS is a New York corporation with its principal place of business in New York, New York. It provides inspection, testing and control services in connection with the movement of bulk cargoes. Stipulated Fact 2.

3. On or about May 29-30, 1985, Interore entered into a contract to sell 22,202 metric tons of compound fertilizers to East Coast Fertilizer Company Limited ("East Coast") for $4,118,287. See Stipulated Fact 5.

4. Interore's agreement with East Coast was on a cost and freight basis, whereby title to the product passed as soon as it was loaded on the ship and East Coast was responsible for securing its own insurance for the product. Tr. 52.

5. This was the first such arrangement that Interore had entered into with East Coast, but it had provided fertilizer to a buyer in New Zealand on one prior occasion. Tr. 50.

6. On June 7, 1985, Interore entered into a voyage charter party agreement to charter the vessel M/V ADELINA to transport the fertilizer from Landskrona, Sweden and Tampa, Florida to Napier, New Zealand. Pl.Exh. 2, Complaint ¶ 7.*fn1

7. The agreement with East Coast required Interore to secure the services of a hold inspector. On June 19, 1985, Interore entered into a contract with SGS to inspect the holds of the ADELINA when it arrived in Tampa to determine whether they were suitable to load fertilizer, and also to supervise the loading, sampling, and chemical analyses of the fertilizer. Stipulated Fact 5; Tr. 11. The loading and sampling services were performed without incident and are not part of this complaint.

8. Interore had hired SGS to perform similar services 200-400 times previously. Tr. 12. As in the past, the oral agreement between plaintiff and defendant was memorialized in a telex sent by Interore to SGS, which stated in pertinent part:

  Pls act our behalf performing inspection,
  sampling and analysis. Pls issue flwg docs: 1)
  Cert of hold inspection, confirming vsls holds
  were clean, dry and suitable.

Pl.Exh. 19; see Tr. 13-14.

9. Interore paid SGS $150 (three holds at fifty dollars per hold) for the cleanliness survey, and an additional $1,859.92 for the other services. Pl.Exh. 30.

The Ship and its Prior Cargos

10. The ADELINA is a 16,356 ton bulk carrier of Greek registry built in 1977 and owned by Blue Falcon Shipping Corp. The vessel has five cargo holds. Holds two, three, four and five each measure 26.4 meters long, 24.6 meters wide, and 14.23 meters high. Hold one is slightly narrower at the front. Tr. 176; Pl.Exh. 1; Def.Exh. C, D. The holds are separated fore and aft by vertical bulkheads. See Tr. 183.

11. At the aft end of each hold is an "Australian" ladder, a staircase or step ladder running at an angle rather than vertically, with hand tailings and steps rather than rungs. See Pl.Exh. 21 (Picture 21). There is a standard vertical ladder attached to the forward bulkhead. Pl.Exh. 21 (Picture 21). The Australian ladder is accessed through a manhole cover on the deck of the ship. Tr. 180-81.

12. On the port and starboard side of each hold are vertical ribs protruding out from the hull a distance of approximately two feet. See Pl.Exh. 21 (Pictures 1, 22). The ribs extend from the top of the hold to about eight feet off the floor where the lower section of the hold wall runs off at a forty-five degree angle toward the floor. Tr. 237, Def.Exh. D. The angled portion of the hold's wall covers the ship's wing tanks and measures twelve feet from the floor of the hold to the point at which it joins the side of the hull.

13. Horizontal bars, called stringers, are attached at regular intervals to the front of the vertical ribs, forming a checkerboard pattern on the port and starboard side of each hold. Pl.Exh. 21 (Picture 1); Def.Exh. D. Stringers are not commonly found in bulk carriers built today, but are quite common in older ships such as the ADELINA. Tr. 401.

14. Nested between some of the ribs are vertical pipes running along the hull from the top of the hold to the top of the wing tank. Each pipe is protected by a series of short, horizontal bars affixed to the front of the two ribs between which the pipe sits. Pl.Exh. 21 (Picture 1). Although they extend downward only as far as the top of the wing tank, these short horizontal bars resemble and can be used as a ladder. Tr. 184-85.

15. At the top of each hold is a square hatch opening. The dimensions of the opening on hold one are 12.5m x 8.6m, and 16.7m x 12m on holds two, three, four and five. Def.Exh. C. Around the opening of the hatch, supporting the deck of the ship, are a series of deck beams. These consist of a vertical beam approximately three feet high with a horizontal lip on the lower edge, which protrudes out several inches on either side of the vertical beam. See Tr. 182; Pl.Exh. 20 (Picture 22).

16. On December 17, 1984, the ship carried a full cargo of barley from England to Iran. Pl.Exh. 13, 27, 28. The holds were filled to the top with the grain. Tr. 178, 254. On April 30, 1985, the vessel carried a cargo of iron ore and coal from South Africa to Rotterdam, Sweden. Pl.Exh. 13, 27, 28.

17. After the coal was discharged, the crew of the ship cleaned and painted the cargo holds. Tr. 166-67, 322-23. The cleaning was inadequate because the crew failed to remove a substantial amount of barley grains from pockets behind the stringers and the protruding lips of the deck beams. In addition, the crew painted over some of the barley that was left in the hold, although a substantial amount of barley remaining was not painted over. Pl. Exh. 20 at 3-5.

The Inspection in Landskrona

18. The ADELINA arrived in Landskrona on June 10, 1985, where it was to be loaded with 7,353 metric tons of fertilizer into ...


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