prepared its own sample for analysis. The "vessel composite"
analysis yielded a water by distillation content of 0.15% and
a water and sediment content of 0.05%. E.W. Saybolt's sample
yielded a water by distillation content of 2.5%, and a water
and sediment content of 2.4%.
E.W. Saybolt issued a letter of protest to the RUTH M at
LOOP. This letter protested an increase in free water "measured
under cargo onboard at discharge port compared with load port
measurements . . ." of 12,696 barrels and further noted that
the RUTH M loaded 596,350 barrels of crude oil and discharged
583,699.67 barrels for an in transit difference of 12,650.33
barrels, or 2.12% of the crude oil cargo carried aboard the
RUTH M, the difference being free water. At $8.80 a barrel this
represented a loss of $110,924 attributable to the free water
taken on board at Rabon Grande. The loading and testing and the
absence of any intervening events or conditions establish that
the water was contained in the untested liquid placed on board
by Pemex just prior to the sailing of the RUTH M.
The Maya crude discharged from the RUTH M was pumped from the
LOOP to the Clovelly Salt Domes, with other similar crudes, or
directly to Marathon's refinery at Garyville, Louisiana,
depending on the processing requirements. The quantity of Maya
crude oil from the shipment in question received by Marathon's
refinery is not known, but it can be inferred that 595,693
barrels of Maya crude oil that Marathon purchased from MIPSCO
under the MIPSCO invoice of June 5, 1986 were in fact received.
No evidence shows otherwise.
On May 30, 1986, Pemex issued Invoice No. 20805 to MIPSCO in
the amount of $9,111,763.00 for 299,974 barrels of Isthmus
crude oil with a price of $12.90 a barrel and 595,693 barrels
of Maya crude oil with a price of $8.80 a barrel.
Earlier in May excessive free water was found by Marathon to
have entered a shipment of oil lifted from Mexico by the
GARYVILLE for Marathon.
On June 5, 1986 MIPSCO issued Invoice No. CO-512 to Marathon
in the amount of $9,111,763.00 for 299,974 barrels of Isthmus
crude oil and 595,693 barrels of Isthmus crude oil. Sometime
after June 24, 1986 MIPSCO paid Pemex the invoice amount for
This action was instituted in 1987 by MIPSCO, an action
ratified by affidavit of April 25, 1989 submitted by a vice
president of its parent Marathon submitted in the course of
Conclusions of Law
MIPSCO Has Failed to Prove Damages
By its June 5, 1986 invoice MIPSCO charged Marathon for the
sale of 595,693 barrels of Maya crude oil at the price of $8.80
per barrel and was paid. Since the same quantity of Maya crude
oil purchased by MIPSCO from Pemex was sold by MIPSCO to
Marathon at the same price per barrel, no monetary loss was
thereby sustained. Thyssen Steel Caribbean, Inc. v. Palma
Armadora S.A., et al., 1984 AMC 1133, 1137 and 1138, 1983 WL
674 (S.D.N.Y. 1968), aff'd, 742 F.2d 1441 (2d Cir. 1984); see,
B.F. McKernin & Co., Inc. v. United States Lines, Inc.,
416 F. Supp. 1068 (S.D.N.Y. 1976).
Further, no assignment or other tangible evidence of transfer
to MIPSCO of any loss of Marathon was made.
By as early as June 6, 1986, MIPSCO knew that approximately
14,000 barrels of water were found aboard the RUTH M at the
discharge port. The Contract required payment within thirty
days after the bill of lading date, or by June 29, 1986.
Notwithstanding its knowledge of the existence of about 14,000
barrels of water, MIPSCO chose to pay Pemex.
Further, the contract of carriage for the crude oil in
question was the charter-party dated May 20, 1986, between ITI
and Hancock Shipping, another subsidiary of Marathon, as
charterer. One of the consequences of the charterparty being
the contract of carriage is that the bill of lading issued for
the Maya crude oil was not issued as a document of title
evidencing a contract of carriage, but rather as a receipt
evidencing only that Maya crude oil was loaded aboard the RUTH
M. Vanol U.S.A.
v. M/T CORONADO, 663 F. Supp. 79 (S.D.N.Y. 1988); 2A Benedict's
on Admiralty, §§ 33-34.
No evidence was presented by MIPSCO which shows that the bill
of lading was negotiated to Marathon or some other entity as a
holder in due course. Since MIPSCO was not a party to the
contract of carriage, MIPSCO's cause of action against ITI may
only sound in tort. EAC Timberland v. Pisces, Ltd.,
745 F.2d 715 (1st Cir. 1984).
MIPSCO Has Standing to Sue on Behalf of Marathon
MIPSCO maintains that it has standing to sue on behalf of
Marathon under three theories — that of a consignee on the
bill of lading; an agent for Marathon; and as a subsidiary of
MIPSCO can initiate an admiralty action in its own name,
subject to the ratification of its principal, based from the
following language from The North Carolina, 40 U.S. (15 Pet.)
40, 49, 10 L.Ed. 653 (1841):
. . and we consider it as well settled, in
admiralty proceedings, that the agent of absent
owners may libel, either in his own name, as
agent, or in the name of his principals, as he
thinks best; that the power of attorney,
subsequent to the libel, is a sufficient
ratification of what he had before done in their
behalf . . .
The North Carolina was relied upon as the statement of the
traditional position by the Second Circuit Court of Appeals in
Aunt Jemima Mills Co. v. Lloyd Royal Belge, 34 F.2d 120, 121
(2d Cir. 1929). See also National Safe Corp. v. Texidor
Security Equipment, 101 F.R.D. 467, 469 (D.P.R. 1984) (the
"mere" ratification by the principal will cure any objection
brought that the plaintiff has no standing); Escriptorio
Suplicy, Inc. v. Companhia De Navegacao Maritima Netumar, 1978
A.M.C. 138, 140 (S.D.N.Y. 1977) (shipping agent proper
plaintiff); Socomet, Inc. v. S/S SLIEDRECHT, 1975 A.M.C. 314,
317 (S.D.N.Y. 1975) (subsidiary entitled to be plaintiff, as
court found the parent [owner of cargo] had ratified the suit).
Further, since MIPSCO is a wholly-owned subsidiary of
Marathon, initiation of suit by MIPSCO on its parent's behalf
was proper. In Unilever (Raw Materials) Ltd. v. M/T STOLT BOEL,
77 F.R.D. 384, 389 (S.D.N.Y. 1977), the initial lawsuit was
initiated by the shipper, which was a subsidiary, and an
amended complaint was filed substituting the parent. The court
found this was a proper substitution and noted that its
decision was based on longstanding admiralty precedent which
recognized the "persistent difficulty in maritime cargo
shipment cases of naming the real party in interest." See
Unilever, supra, 77 F.R.D. at 389.
MIPSCO may rely on this admiralty precedent to maintain this
suit on behalf of Marathon but, of course, the right to sue
does not obviate the need to establish the elements of a cause
of action on behalf of Marathon.
Marathon Has Failed to Prove Damages
Marathon did not own or have title to the Maya crude oil
until after the crude oil was discharged from the RUTH M at the
discharge port. On June 3, 1986 the Maya crude oil was
discharged at the LOOP. By invoice dated June 5, 1986, Marathon
purchased the same quantity of Maya crude oil at the same price
as MIPSCO had purchased from Pemex. Marathon did not purchase
the bill of lading.
The purchaser of cargo, following discharge of the discharge
port, has no cause of action against the carrier. Firestone
Plantations Co., et al. v. Pan Atlantic S.S. Corp., 77 F. Supp. 401
(S.D.N.Y. 1948). In Firestone, the parent corporation of
the shipper sought to intervene as a party plaintiff. The
action was dismissed for failure of the parent corporation to
prove a loss. The cargo in question was purchased from the
shipper by a non-party while the cargo was aboard the vessel at
the loadport. The parent corporation/purchaser then bought the
cargo from the non-party after the cargo was discharged from
the vessel at the discharge port. The
price paid by the parent corporation/purchaser was the same as
paid by the nonparty to the shipper. In holding that the parent
corporation/purchaser sustained no loss as against the carrier,
the court stated:
Here, [the non-party] paid in the first instance
for the rubber while it was afloat, and by
invoices all dated December 15, 1942, over 30 days
after delivery to the dock in New York, it sold to
the [parent corporation/purchaser] not by transfer
of the bills of lading or by creating any special
property therein, but by independent transaction.
If any cargo loss was sustained, it was by the
cargo owner, but none was proved, since the sale
was for the same price that [the non-party] had
Id. at 402.