Opinion ID: 354313
Heading Depth: 2
Heading Rank: 1

Heading: The Overseas/Chevron Charter

Text: 7 Appellant's chief contention before the special master was that the Overseas/Chevron agreement is governed by two prior, formally executed contracts still in force. Both contracts incorporated an earned-on-loading freight provision, thereby making the freight actually paid to Overseas ($316,667.52) 4 an element of Chevron's damages. A complete understanding of the relationship between these prior agreements and the Overseas/Chevron charter requires a brief genealogical review of Standard Oil of California (Standard Oil) and some of its affiliates. 8 Chevron, whose function is to market crude oil outside of the United States, is a Standard Oil affiliate. A Standard Oil subsidiary formerly named California Transport Corp., now named Chevron Transport Corp. (California), is a tanker company. Overseas is also a Standard Oil subsidiary and a tanker company. Both of these tanker companies are managed by Chevron Shipping, see note 4 supra, another Standard Oil subsidiary. 9 On April 1, 1959, Standard Oil and California executed a tanker transportation agreement (the 1959 contract) whereby the latter agreed to furnish tankers to Standard and its affiliates, including Chevron, for the transportation of petroleum cargoes. 5 On June 1, 1970, California and Overseas entered into a transportation contract (the 1970 contract). Under this agreement, Overseas contracted to provide vessels in performance of California's obligations to Standard Oil under the 1959 contract, on the terms and conditions specified in the 1959 agreement. Both contracts incorporated by reference the terms of Part II of the Warshipoilvoy 6 form of tanker voyage charter which oblige the charterer to pay freight irrevocably on loading, ship and/or cargo lost or not lost. 7 10 Appellants contend specifically that the Wafra was chartered by Overseas to Chevron, Standard Oil's affiliate, pursuant to the terms of the 1970 contract. They further assert that since the 1970 contract expressly incorporated the terms of the 1959 contract, and since the 1959 contract expressly incorporated the irrevocable freight-on-loading provision of the Warshipoilvoy form of charter, it follows, as the night the day, Brief for Appellants at 21, that the oral Overseas/Chevron charter incorporated by reference the freight payment clause of the Warshipoilvoy charter. 8 Accordingly, the argument runs, Chevron was obligated to pay full freight to Overseas on the entire cargo at the time of loading, thereby entitling Overseas to retain the freight despite the loss of appellants' cargo. 11 In holding that there was no enforceable oral agreement requiring appellants to pay freight irrevocably to Overseas upon loading, the special master focused solely on the activities of Chevron and Texaco with respect to their oral charter. By the time of the Overseas/Chevron charter, Chevron and Texaco had negotiated draft transportation agreements dealing with destination sales, as the one involved here. See note 3 supra. However, the draft agreements had not been executed when the Wafra shipment was made. 9 These unexecuted contracts provided that freight was earned on loading. Appellants argued that the existence of these clauses in all of the drafts was an important indicator that the parties had agreed on freight irrevocably earned upon loading. The special master, however, concluded that an equally plausible inference from the fact that the documents were not executed was that at least one of the plaintiff-appellants (Texaco) was unwilling to assume this freight risk on the cargo shipments. 10 Chevron and Texaco disputed this interpretation. Their witnesses testified that the only point of disagreement related to the handling of backhauls and deadfreight, 11 and that both appellants believed they were operating under an earned freight provision. Nevertheless, the special master found that the plaintiffs (had) not sustained (their) rather heavy burden of establishing that there was an enforceable oral agreement pertaining to the WAFRA shipments which committed them to pay freight irrevocably to Overseas. 12 The special master's report, however, does not refer to the 1959 agreement between Standard and California or to the 1970 agreement whereby Overseas agreed to furnish vessels to carry out California's obligations under the 1959 agreement with Standard Oil and its affiliates. Nor does the report at any point discuss the significance of the Warshipoilvoy charter form included in those agreements. It thus appears that the special master either did not consider the question whether the oral charter between Chevron and Overseas incorporated by reference the 1959 and 1970 agreements and their earned prepaid freight clauses, or, in addressing the question, erroneously failed to distinguish the different bases of the alleged respective obligations of Chevron and Texaco irrevocably to pay freight. Regardless of the terms of the separate transportation agreement between Chevron and Texaco, resolution of their mutual obligations is not determinative of the provisions contained in the Overseas/Chevron charter. For if the Overseas/Chevron charter included the Warshipoilvoy provision, then the freight charges on the entire shipment would be includable in Chevron's damages. 12 13 We are thus left without any findings by the special master on this key mixed question of law and fact, other than his conclusion, based on an entirely separate contract, that appellants did not sustain their burden of proof. At the very least, we must require that specific findings be made on the terms of the Overseas/Chevron charter. 14 Similarly the district court did not distinguish the Overseas/Chevron charter from the Chevron/Texaco charter. In adopting the special master's report, the judge concluded that (t)here was no explicit written agreement on the subject of earned prepaid freight. Texaco Export, Inc. v. Overseas Tankship Corp., No. 72 Civ. 463, at 4-5 (S.D.N.Y., filed May 17, 1977). The district court further noted that the actions of the parties were appropriately construed by the Special Master to have been inconsistent with any such oral agreement or with their prior dealings. Id. at 5. 15 The district court's conclusions are problematic for several reasons. First, it is clear that there were prior written agreements on the subject of earned prepaid freight with regard to the Overseas/Chevron charter. The issue is whether they were incorporated in the charter. Second, it is unclear what actions of Overseas and Chevron concerning their charter were inconsistent and how they were inconsistent. It appears from our reading of the evidence that the parties' conduct was compatible with their assertion that the Overseas/Chevron charter provided for irrevocable freight on loading. Mr. Macauley, vice-president of Chevron Shipping, the management company for California and Overseas, see note 4 supra, testified that the Wafra was chartered by Overseas to Chevron on the basis of the 1970 agreement which was executed to carry out, and incorporated, the 1959 agreement. He further testified that the billing to Chevron and Texaco for the freight was made pursuant to these earlier contracts. Moreover, the freight invoices submitted by Chevron Shipping state that they were in accordance with transportation agreement. The evidence suggests that this reference was either to the 1970 agreement, as Mr. Macauley testified, or to the 1967 transportation agreement, both of which provided for irrevocable freight on loading. See notes 7 & 9 supra. Finally, Chevron's payment of its freight charge to Overseas without complaint or undue delay after the cargo was lost, without ever having taken steps to recover the payment from Overseas, bolsters the conclusion that the Overseas/Chevron agreement provided for prepaid freight. 13 16 Our brief review of the evidence is not an attempt conclusively to find the facts surrounding the terms of the Overseas/Chevron charter ourselves. It does, however, support our suspicion that there was confusion below between the two distinct charters. Not even appellee Getty Tanker's brief satisfactorily meets the point that the terms of the Overseas/Chevron charter present a different issue from the terms of the Texaco/Chevron agreement. 14 In sum, we cannot agree, on the basis of the findings below, that the Overseas/Chevron charter did not include an irrevocable freight-on-loading provision. We therefore remand to the district court for findings on the subject, in view of appellants' contentions, which seem plausible and reasonable enough to warrant the most serious consideration.