Case: SOUTHEASTERN OIL FLORIDA, INC. v. THE UNITED STATES
Abbreviation: Southeastern Oil Florida, Inc. v. United States
Decision Date: 1953-09-30
Docket Number: No. 49518
Citation: 127 Ct. Cl. 480
Volume: 127
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: SOUTHEASTERN OIL FLORIDA, INC. v. THE UNITED STATES
Judges: Madden, Judge; Whitaker, Judge; Littleton, Judge; and Jones, Chief Judge, concur.
Pages: 480–505

Head Matter:
SOUTHEASTERN OIL FLORIDA, INC. v. THE UNITED STATES
[No. 49518.
Decided September 30, 1953]
Mr. Robert K. MoOonnaughey for the plaintiff. Messrs. Shea, Greenman, Gardner <& McGonnawghey were on the brief.
Mr. Kendall M. Barnes, with whom was Mr. Assistant Attorney General Warren E. Burger, for the defendant.

Opinion:
Howell, Judge,
on September 30, 1953, delivered the opinion of the court:
This suit was brought by Southeastern Oil Florida, Inc., to recover money withheld by the defendant for the contamination of aviation gasoline transported by the plaintiff for the defendant and to recover for certain transportation and demurrage charges in connection with the contaminated gasoline. Plaintiff's petition seeks a judgment of $37,710.66.
The main issues in the case are: (1) whether the plaintiff's claim is barred by its failure to exhaust its administrative remedies under its contract with the defendant; and (2) whether the contamination of the aviation gasoline was caused by plaintiff's negligence in failing properly to clean and prepare the barge which transported the gasoline. Other issues relate to the amount of damages plaintiff may recover if it should be determined that plaintiff is entitled to recover.
Plaintiff entered into Navy Contract N5sx-6690 with defendant for, among other things, the transportation of Navy-owned aviation gasoline from Port Everglades and Jacksonville, . Florida, to the Naval Air Station at Banana Fiver, Florida.
This contract and its accompanying schedule provided that:
SCHEDULE

IH. RESPONSIBILITY EOR GOVERNMENT-OWNED MATERIAL
(g) The transportation of any Government owned product or material by barge shall be at the Government's sole risk of loss and damage from any and all causes whatsoever except loss and damage caused directly by bad faith, wilful misconduct or negligence of the contractor, its employees and agents in the care and custody of the cargo or by lack of due diligence in furnishing a seaworthy craft.
The barge which transported the aviation gasoline which become contaminated was named the Walker 17. On July 12, 1946, it was loaded with 177,220.96 gallons of aviation gasoline owned by the defendant and drawn from plaintiff's leased Shore Tank No. 3 at Port Everglades, Florida. The hatches of the Walker 17 were then sealed, and it was towed by plaintiff to Banana Eiver, Florida, arriving there on or before July 15,1946.
Upon its arrival a sample of the gasoline was taken by the defendant, and tests showed the gasoline had become contaminated. The tests disclosed a gum content averaging 17 milligrams (mg.) per 100 milliliters (ml.) of gasoline whereas the specification requirements were for a maximum of 5 mg. of gum per 100 ml. of gasoline. Defendant thereupon refused to accepted the gasoline or to authorize its discharge at Banana Eiver, and on July 19, 1946, pursuant to defendant's authorization, plaintiff towed the Walker 17 to plaintiff's storage facilities at Jacksonville, Florida.
Subsequently, on August 7, 1946, a conference was held between representatives of the parties, and an interim oral agreement was entered into which was designed to dispose of the Walker 17's cargo as promptly as possible and to establish an agreed basis for minimizing the loss to whichever party would eventually have to bear it. Plaintiff then proceeded, from August 23, 1946 to November 11, 1946, to discharge the contaminated gasoline into plaintiff's shore storage tank at Jacksonville, and simultaneously to blend it with a low lead content ethyl gasoline. Upon completing the discharge of the contaminated gasoline on November 11, 1946, plaintiff notified defendant immediately, and on December 5,1946, the Navy permitted the release of the Walker 17 to the plaintiff.
By letter of December 27,1946, the contracting officer notified plaintiff that it had been determined that the aviation gasoline in question had been contaminated as a result of plaintiff's negligence in failing properly to clean and condition the Walker 17 prior to loading, and that demand was being made upon plaintiff to replace the gasoline or to reimburse the Navy for its value (see finding 37).
The contracting officer subsequently issued Ms decision and findings of fact, dated November 20, 1947, in which he determined that plaintiff was liable to the defendant for the contamination of the aviation gasoline in the amount of $31,051.84 or the replacement of the gasoline (see finding 38). In December 1947, the defendant charged the plaintiff $31,051.84 for the value of the gasoline by withholding that amount from payments due plaintiff under other contracts between the parties.
In December 1947, plaintiff filed a timely appeal with the head of the department from the decision of the contracting officer. The defendant's counsel moved to dismiss the plaintiff's appeal on the ground that it presented only issues of law. In February 1950, the head of the department not having made any decision on the defendant's motion, the plaintiff filed the instant suit in this court. On March 10, 1950, the Board of Contract Appeals, as the representative of the head of the department, denied the defendant's motion, and indicated that it would receive evidence in the case. No evidence has been presented before the Board.
We take up first the defendant's contention that this court is barred from considering plaintiff's claim because of plaintiff's failure to exhaust its administrative, remedies under Section 20 of its contract with the defendant. Section 20 of the contract provides that:
Section 20. Disputes. — Except as otherwise specifically provided in this contract, all disputes concerning questions of fact arising under this contract shall be decided by the contracting officer, subject to written appeal by the Contractor within thirty days to the Secretary of the Navy, whose decision shall be final and conclusive.
Defendant argues that because plaintiff's appeal to the head of the department is still pending, this court has no jurisdiction of plaintiff's claim. It is true that a contractor must exhaust the administrative remedies provided in its contract before it is entitled to bring suit in this court. United States v. Blair, 321 U. S. 730, 735; United States v. Holpuch Co., 328 U. S. 234, 240. These cases also set forth the exception to this rule, however, which is that a contractor is not prevented from suing in this court where the administrative appeal procedure provided in its contract is, in fact, inadequate or unavailable. In the Blair case, the Supreme Court recognized that (p. 736):
If it were shown that the appeal procedure provided in the contract was in fact inadequate we would have quite a different case.
Likewise, in the Holpuch decision, the Supreme Court stated that (p. 240) :
And in the absence of some clear evidence that the appeal procedure is inadequate or unavailable, that procedure must be pursued and exhausted before a contractor can be heard to complain in a court.
In this case, the plaintiff having appealed to the head of the department, and the head of the department having failed for more than two years to indicate whether he would or would not take jurisdiction of the appeal, the plaintiff was justified in regarding the administrative appeal procedure as inadequate and in filing its suit in this court. Having filed its suit, it was not required to abandon that suit and resume the administrative procedure. See Latvian State Steamship Line v. United States, 115 C. Cls. 811, 814.
With respect to whether plaintiff was negligent in failing properly to clean and prepare the barge Walker 17 for transporting the aviation gasoline, the defendant argues that the doctrine of res ipsa loquitur applies because the defendant has shown that the gasoline was not contaminated when it was loaded on the Walker 17 but that it was contaminated when it reached its destination. We agree that the doctrine applies here since the barge was under the plaintiff's exclusive control, and that such circumstances shifted the burden of going forward with the evidence to the plaintiff to show its freedom from negligence. Sweeney v. Erving, 228 U. S. 233, 240-241.
Plaintiff, however, has proceeded to show that it exercised reasonable care in cleaning and preparing the barge for transporting the aviation gasoline. It has shown that the barge was given the customary type of cleaning for the purpose of transporting aviation gasoline by a commercial tank cleaning company (see finding 12); that after the cleaning, the barge was observed to be exceptionally clean and free from rust scale or petroleum residue (see findings 13 and 14), and, that the condition of the barge was found to be satisfactory by the naval inspector who examined the barge's tanks by looking down the hatches immediately prior to the loading of the gasoline (see finding 15).
Defendant contends that the evidence shows that the barge had, prior to its being cleaned, carried "black oil," and that consequently plaintiff was negligent in failing to "upgrade" the barge, i. e. to carry successively such products as kerosene and housebrand gasoline which would remove by solvent action most of any "black oil" which had penetrated into and adhered to the interior crevices of the barge's tanks.
The record as a whole persuades us that the Walker 17, prior to its being cleaned, had probably carried a "black oil" one grade lighter than the Bunker C grade of "black oil" (see findings 10 and 11). We have reached this conclusion on the basis of all the evidence, but especially in view of the fact that Mr. Williams of the commercial company which cleaned the barge stated, both before and after the contamination occurred, that the barge had contained a "black oil." Mr. Williams saw the barge's condition when he supervised the cleaning of the barge, and he made these statements regarding "black oil," first, to Mr. Pickren, a commercial chemist, as they were inspecting the barge prior to its being loaded, and second, to Mr. Fentress, the Naval Intelligence officer, shortly after the barge's cargo had been found to be contaminated.
It is our conclusion, however, that the defendant has failed to show that plaintiff was negligent in cleaning and preparing the barge to carry aviation gasoline in view of its having previously carried a "black oil" one grade lighter than Bunker C. Although the evidence offered by the defendant tended to show that, at the time of the trial in 1951, "upgrading" had become a usual procedure for converting "black oil" barges for use in carrying aviation gasoline, we think the evidence established that such was not the customary procedure in the trade at the time the Walker 17 was cleaned in 1946.
Consequently, we conclude that the defendant has failed to show that plaintiff did not exercise reasonable care in cleaning and preparing the Walker 17 for the carriage of aviation gasoline.
Regarding the amount of damages to which plaintiff is entitled, defendant contends that if plaintiff is not liable for the contamination, plaintiff's recovery should be $19,015.88. Plaintiff argues, however, that its damages amount to approximately $36,642.66 (see finding 8). This difference in amounts is due to disputes as to the applicable value of the contaminated gasoline, as to whether plaintiff is entitled to transportation charges in towing the contaminated gasoline from Banana River to Jacksonville, and as to whether plaintiff is entitled to demurrage charges for the retention of the Walker 17 while its cargo was being discharged at Jacksonville.
Defendant contends that an oral agreement entered into between the parties on August 7, 1946 (see finding 23) is controlling as to the measure of plaintiff's damages. This agreement provided that, pending future conference^ to determine responsibility for the contamination, the plaintiff would blend the contaminated gasoline with its own commercial stocks. If plaintiff were not liable for the contamination, plaintiff would pay the defendant 9 cents per gallon for the gasoline, but if plaintiff were liable, it would replace it in kind. Also if plaintiff were liable, it was agreed that plaintiff would be allowed to buy the replacement gasoline from refineries at Baton Rouge, Louisiana, under the Navy supply contract at not exceeding 9% cents per gallon.
Pursuant to the agreement, plaintiff blended the contaminated gasoline with commercial ethyl gasoline at Jacksonville from August 23,1946, to November 11,1946. Subsequently, by letter dated December 27,1946, def endent notified plaintiff that plaintiff was liable for the contamination and that demand was being made upon it to replace the aviation gasoline or to reimburse the Navy for its value. The defendant did not, however, make available to the plaintiff an oppor tunity to buy replacement gasoline under the Navy supply contract.
We agree with the defendant that this oral agreement is binding upon the parties as to the measure of plaintiff's damages. There is nothing in the record to indicate, as plaintiff suggests, that defendant's representatives were without authority to enter into this agreement, and we cannot presume such a lack of authority. See United States v. Chemical Foundation, 272 U. S. 1, 14-15; Oak Worsted Mills v. United States, 68 C. Cls. 539, 557.
We see no reason, moreover, why the defendant's failure to hold conferences or to make available to the plaintiff an opportunity to buy replacement gasoline under the Navy supply contract would render the provisions of the agreement inapplicable. If plaintiff were liable for the contamination, the defendant would still be legally bound to permit replacement at 9% cents per gallon under its Navy supply contract as plaintiff admits in its brief. Likewise, if plaintiff were not liable, plaintiff would still be bound to pay the defendant 9 cents per gallon for the gasoline.
Plaintiff's damages with respect to the applicable value of the contaminated gasoline should therefore be measured by the difference between the $31,051.84 withheld by the Navy and the value of the contaminated gasoline at 9 cents per gallon ($15,949.89). Plaintiff's damages with respect to the value of the contaminated gasoline are thus $15,101.95.
In addition, the defendant concedes that plaintiff is entitled to transportation charges of $1,949.43 from Port Everglades to Banana River, demurrage charges of $768.00 on the tug Maxine, and demurrage charges of $1,196.00 on the barge from July 15 through August 7,1946. The plaintiff claims, however, that it is also entitled to $1,949.43 for transporting the contaminated gasoline from Banana River to Jacksonville and an additional $5,680.00 for demurrage charges for the retention of the Walker 17 until the barge was permitted to be released to it by the Navy on December 5,1946.'
Because the transportation of the gasoline from Banana River to Jacksonville was agreed to by the parties on account of th.e hazard the barge created at the Banana River docks, and because the barge was subject to Navy orders and contained Navy property, we think this transportation was on behalf of the Navy and that plaintiff is entitled to the contract price of $1,949.43 for the transportation.
We also think plaintiff is entitled to additional demurrage charges of $5,680.00 to December 5, 1946. During that period, the barge was under the Navy's control, and the contract provided that demurrage should be charged while the barge was held by the Navy. In addition, it appears to us that the oral agreement reasonably contemplated that the barge would be used while plaintiff was blending the contaminated gasoline with its commercial stocks.
Accordingly, plaintiff is entitled to recover $26,644.81.
It is so ordered.
Madden, Judge; Whitaker, Judge; Littleton, Judge; and Jones, Chief Judge, concur.
FINDINGS OF FACT
The court having considered the evidence, the report of Commissioner C. Murray Bernhardt, and the briefs and argument of counsel, makes findings of fact as follows;:
1. On and before July 1, 1945, plaintiff's business was carried on by a partnership of Gordon Duke and John N. Blow, doing business as Southeastern Oil. That partnership was succeeded on May 1,1946, by Southeastern Oil, Inc., a corporation duly organized and existing under the laws of the State of Florida. On September 1, 1948, the name of that corporation was changed to Southeastern Oil Florida Inc., the plaintiff here. The plaintiff has succeeded to all assets, rights and liabilities of its predecessors.
2. The United States Navy Department withheld payment of $9,043.01 due plaintiff on invoices submitted December 31, 1947, by plaintiff for services rendered by plaintiff in the storage, handling and transportation of aviation gasoline for defendant during December 1947, pursuant to Navy Contract N6sx-1266, for the reason assigned on the voucher, viz:
Less $9,043.01 to partially liquidate indebtedness totaling $31,051.84 for contaminated gasoline furnished under Contract N6SX-1266.
3. The Navy Department further withheld payment of $22,008.83 due plaintiff on invoices submitted December 22, 1947, by plaintiff for fuel oil sold to defendant pursuant to Navy Contract N7s-3083, for the reason assigned on the voucher, viz:
Less $22,008.83 to completely liquidate indebtedness totaling $31,051.84 for contaminated gasoline furnished under Contract N6sx-1266.
4. The claim for $31,051.84 asserted by the defendant against the plaintiff and relied upon by the defendant as the basis for the deductions (Findings 2 & 3, supra), rests upon alleged negligence of plaintiff resulting in the contamination of aviation gasoline transported by the plaintiff in the barge Walker 17 in July 1946, under Navy Contract N5sx~ 6690 hereafter described, and the questions in controversy in this case arise not under Contract N6sx-1266 but exclusively under Contract N5sx-6690, except as to questions concerning the plaintiff's claims for demurrage under a contract hereafter described, identified as Navy Contract N6sx-2275.
5. On June 15, 1945, plaintiff entered into Navy Contract N5sx-6690 with defendant for, inter alia, the transportation of Navy-owned aviation gasoline from Port Everglades, Florida, and from Jacksonville, Florida, to the Naval Air Station at Banana Biver, Florida. It was effective during the period beginning July 1,1945, and ending July 31,1946, and was replaced, effective August 1, 1946, by a similar contract identified as N6sx-2275.
6. Contract N5sx-6690 and its accompanying Schedule provided:
SCHEDULE
I. SERVICES TO BE PERFORMED AND PRICES
The services to be performed hereunder and the prices to be paid for such services are as follows:
1 tern Movement of Aviation Gasoline Estimated. Price Esti-Quantity per Gal- mated (Gallons) Ion Total
9. NAS Banana River, Fla., 2 from commercial terminals) at Port Everglades, Florida, into storage at NAS, Banana River, Florida, via barge in minimum loads of 175,000 gallons. 4, 960, 000 $. 011
9b. From commercial terminals at Jacksonville, Florida, into storage at NAS, Banana River, Florida, via barge in minimum loads of 175,000 gallons. $ $. 011
(a) Whenever a receiving activity for any reason is unable to accept delivery of a full barge load and there remains in said barge a measurable quantity of gasoline, such barge shall not be used by the contractor for any purpose other than in the service of the Government unless said barge is released by the Naval Inspector or other authorized Navy representatives,, provided, however, that the contractor shall be paid at the established rate lawfully in effect upon the date of delivery for any detention of equipment in excess of three hours after notification to stop discharge.
*
III. RESPONSIBILITY FOR GOVERNMENT-OWNED MATERIAL
(a) Title to any Government product or material in the possession of or under the custody of the contractor by reason of this contract shall at all times remain in the Government .
$ $ $ $ $
(g) The transportation of any Government-owned product or material by barge shall be at the Government's sole risk of loss and damage from any and all causes whatsoever except loss and damage caused directly by bad faith, wilful misconduct or negligence of the contractor, its employees and agents in the care and custody of the cargo or by lack of due diligence in furnishing a seaworthy craft.
Hi Hi H¡ # *
V. INSPECTION
(a) Unless otherwise indicated, inspection for services performed both as to quality and quantity thereof shall be made by the Naval Inspector at such time and place as may be designated herein. The decision of such Inspector shall be final.
(b) The Naval Inspector shall have the right to inspect at any reasonable time and as often as he may deem necessary the tanks, vessels, lines, and all other equipment used by the contractor in the performance of this contract.
(c) Tests to determine the possibility of contamination shall be made under the supervision of the Naval Inspector and upon the basis of such samples as may be selected by him.
* $
VI. ORDERS

(c) The Government reserves the right hereunder to require the contractor to furnish such reports or execute such forms as the Government may deem necessary or consistent with operations under this contract and contractor agrees that it will comply promptly with any such requests.
*
XI. Cleaning of Barge Equipment: Where cleaning is required by the Government to render barges suitable for the continued transportation of Government-owned gasoline, the actual cost, substantiated by receipted invoices for such cleaning, shall be paid by the Government. Demurrage charges at the rate of $2.50 per hour shall, be paid by the Government for the time required for the barge cleaning.
The paragraph above quoted, entitled "XI. Cleaning of Barge Equipment", was added to said contract by change order dated August 15,1945.
GENERAL PROVISIONS
Section 20. Disputes. — Except as otherwise specifically provided in this contract, all disputes concerning questions of fact arising under this contract shall be decided by the contracting officer, subject to written appeal by the Contractor within thirty days to the Secretary of the Navy, whose decision shall be final and conclusive.
7. Contract N6sx-2275 provided:
n. BARGE FREE TIME AND DEMURRAGE
(a) Loading: The Government shall be allowed 3 hours free time at loading point for making necessary-connections, after which loading shall be accomplished at a minimum rate of 1,000 barrels per continuous running hour.
(b) Unloading: The Government shall be allowed 3 hours free time at discharging point for making necessary connections, after which discharging shall be accomplished by the Contractor at the rate of 750 barrels minimum per continuous running hour.
(c) Demurrage: For all time used or consumed in excess of free time as set forth in paragraphs (a) and (b) above, demurrage shall be paid at the following rate per running hour or fraction thereof:
$8.00 per hour for Tug
$2.00 per Barge
No demurrage will be paid for time in excess of free time as set forth in paragraph (a) above where loading is accomplished at a terminal operated by the Contractor.
(d) Any demurrage incurred under this contract shall not be computed for individual barge loadings and/or discharges but all free time to which the Government is entitled and all time for which the contractor is entitled to demurrage under the terms hereof shall be accumulated for each month of the contract period. If the total accumulated time for which demurrage is chargeable in any one month exceeds the total accumulated free time allowable during the same month, the Government shall pay the contractor for such excess time at the detention rates stated in the contract. Any excess of free time in any one month shall not be applicable to demurrage in any other month.
(e) Whenever a receiving activity for any reason is unable to accept delivery of a full barge load and there remains in said barge a measurable quantity of gasoline, such barge shall not be used by the contractor for any purpose other than in the service of the Government unless said barge is released by the Naval Inspector or other authorized Navy representatives, provided, however, that the contractor shall be paid demurrage at the rate specified in (c) above for any detention of equipment in excess of three hours after notification to stop discharge.
8.The items for which plaintiff seeks recovery are:
a. Kecovery of amounts withheld for gasoline contamination_$31,051. 84
b. Transportation of gasoline from Port Everglades, Florida, to Banana Biver, Florida, and from Banana Biver to Jacksonville, Florida_ 3,898. 86
c. Demurrage on barge Walker 17_ 7, 056. 00
d. Demurrage on tug Maxine_ 768. 00
Total_$42,774.70
Less:
Alleged market value of contaminated gasoline — 175,201 Gal. at $0.035_ 6,132. 04
Net claim-$36, 642. 66
In the alternative, plaintiff seeks to recover $13,772.80, the difference between $31,051.84 withheld by defendant, and $17,279.04, the alleged value of 177,220.96 gallons of 100/130 aviation gasoline in July 1946 under a Navy supply contract.
Recovery of Amoimts Withheld for Gasoline G ontamination
9. Plaintiff chartered and operated the barge Walker 17, which contained six interconnected tanks and was designed for the transportation of petroleum products. The Walker 17 was not structurally adapted to the carrying of Bunker C oil.
10. For purposes of commercial convenience petroleum fuels are given numbers to denote their grades and characteristics. These numbers range from 1 through 6, number 1 being the lightest fuel oil and subsequent numbers becoming progressively heavier fuels. On this scale the heaviest fuel is Grade 6, commonly known as Bunker C oil, which is a black, viscous substance referred to generally as one of the "black" oils. Number 5 on this scale of values is also a black oil somewhat lighter in body than Bunker O oil, commonly used for household heating purposes, and Number 2 oil is diesel fuel oil. Number 3 oil is a low viscosity, distillate oil.
Black oils have a penetrating effect and will seep into and adhere to the surfaces of minute cracks on the interior of any vessel in which they are stored, whether cracks resulting from structural characteristics or cracks resulting from the prior use of the vessel in carrying gasoline, which has a tendency to cause the formation of rust flakes on contacting metal surfaces.
11. During the period from January 4,1945, through February 11, 1946, the Walker 17 was used for the carriage of gasoline and kerosene, largely aviation gasoline. On February 25, 1946, it carried a load of No. 2 fuel oil. Between that date and June 20, 1946, it was used for the storage of housebrand gasoline and light fuel oil and a black oil that was light in gravity and brown in color, but not as heavy or black as Grade 6 oil.
12. From June 20 through June 26, 1946, the Walker 17 was cleaned by Tank Cleaners, Inc., a firm of professional tank cleaners in Jacksonville, Florida. The cleaning was the customary type given a vessel to prepare it for carriage of aviation gasoline, regardless of the prior petroleum cargo carried.
As of the time of the trial in 1951, the usual procedure in converting a vessel from the carriage of black oil to the carriage of aviation gasoline called for up-grading after thorough cleaning, i. e., using it successively for the carriage of such products as kerosene and housebrand gasoline so as to remove by gradual solvent action most, if not all, of any black oil adhering to inner crevices. But such procedure did not obtain in the trade in 1946.
Plaintiff acted with reasonable care and was not negligent in hiring Tank Cleaners, Inc., and the latter was not negligent in cleaning the Walker 17.
13. Immediately following the cleaning of the Walker 17, it was inspected by a commercial chemist who .issued a "gas-free" certificate. At the time of this inspection the interior of the tanks was exceptionally clean, free of rust scale formation, and free of gas and oil fumes.
14. From June 27 to July 2, 1946, the Walker 17 underwent repairs which involved welding and the use of acetylene torches in proximity to the interior tank surfaces. At that time the interior of the tanks was clean, free of gas, oil residues and rust flakes.
15. The Walker IT carried no cargo from the time of its cleaning and subsequent inspections, and July 11,1946', when it arrived at Port Everglades, Florida, to accept delivery of a cargo of Navy-owned 100/130 aviation gasoline for transportation under Contract N5sx-6690 from Port Everglades to Banana River, Florida. It remained at dockside until the following day with its hatches not sealed. On July 12, it was inspected at Port Everglades by defendant's naval inspector whose duty it was to inspect the barge prior to loading to insure its fitness. Standard naval inspection custom in such cases prevailing at that time and place was to inquire of members of the vessel's crew or other authorized representatives of the owner or operator having knowledge of the facts as to what cargoes had been previously carried, which information affected the degree of inspection which would be made. Mr. Carpenter, plaintiff's representative, advised the naval inspector that the barge had previously been in aviation gas service, but the record does not establish Carpenter's knowledge of prior cargoes carried by the barge. The naval inspector had opportunity to make a complete examination of the interior of the barge prior to its loading, but confined his inspection to sighting down into the interior of the tanks from the overhead hatches, which permitted him to see only a fraction of the interior surfaces of the tanks. Without further inspection and without physically entering the interior of the tanks, the naval inspector then certified the condition of the tanks to be "Satisfactory."
16. On July 12, 1946, the Walker IT was loaded with ITT,220.96 gallons of 100/130 aviation gasoline owned by defendant and drawn from plaintiff's leased Shore Tank No. 3 at Port Everglades. The barge's hatches were sealed upon completion of loading on July 12 and it was towed by plaintiff to Banana River, Florida, arriving there on or before July 15.
17. There was no evidence that, while the Walker IT was at Port Everglades, there had been a deliberate or accidental contamination of the interior of its tanks, through sabotage or other means. Shore Tank No. 3 at Port Everglades and the loading lines from said tank from and through which the Walker IT received its load of aviation gasoline were not the source of the contamination later found in the contents of the Walker 17. Samples of gasoline drawn from vessels loaded from the same shore tank immediately before and immediately after the loading of the Walker 17 were tested and found to be free of contamination.
18. On arrival at Banana Niver, Florida, the seals were broken on one of the Walker 17's tanks and a sample of its aviation gasoline content was taken by defendant for immediate analysis. A complete testing of this sample by defendant, including tests for gum content and sediment, disclosed no sediment but a gum content averaging 17 milligrams (mg.) per 100 milliliters (ml.) of gasoline, as compared to the applicable specification requirement of a maximum of 5 mg. of gum per 100 ml. of gasoline. Three additional samples of the aviation gasoline content of the Walker 17 were taken on July 17 by defendant and, after analysis for gum content only, were found to have gum contents of 17, 21, and 22 mg., respectively, for each 100 ml. of gasoline.
19. Defendant immediately notified plaintiff that the cargo was contaminated and refused to accept it or to authorize its discharge at Banana Fiver. Pursuant to defendant's authorization on July 19, plaintiff towed the Walker 17 to plaintiff's storage facilities at Jacksonville, Florida, arriving there about July 25.
20. Between the arrival of the Walker 17 at Jacksonville and August 9, 1946, further tests were made of its aviation gasoline contents. While these tests, which were separately made by chemists for both plaintiff and defendant, showed excessive gum contents, a sediment of iron oxide particles mixed with oily sludge and fibrous materials, and a trace of sugar, they failed to satisfactorily establish that the quality of the gasoline contents of the vessel after its arrival at Jacksonville would necessarily coincide with or establish the quality upon its arrival at Banana Fiver, because—
a. Femoteness of time.
b. Hatches were left unsealed during this period.
c. Intervening opportunities for collateral contamination.
21. The Walker 17 had not been used prior to July 12, 1946. for the transportation of Bunker C oil. Black oil and/or Bunker C oil were not proven to be the cause of the contamination.
22. The cargo of the Walker 17 was contaminated while in the custody and under the control of plaintiff, but such contamination was not proved by defendant to have been caused directly or indirectly by the bad faith, wilful misconduct or negligence of plaintiff, its employees or agents.
23. On August 7,1946, plaintiff's vice president conferred with Navy officials in Washington. Without fixing the cause of or the responsibility for the contamination of the gasoline, but rather reserving such decision pending an .investigation to be made followed by conferences to be held by defendant in a matter of weeks, the parties entered into an interim oral agreement designed to free the Walker 17 of its cargo as promptly as possible and to establish an agreed basis for minimizing the loss to whichever party would eventually have to bear it. It was estimated that, as contaminated gasoline, the cargo of the Walker 17 would have a market value at Jacksonville of between 1 and 3% cents per gallon, but that it could be blended with commercial ethyl gasoline and sold for 9 cents per gallon as ethyl gasoline at Jacksonville. It was decided that plaintiff would blend the contaminated gasoline with commercial stocks, paying defendant 9 cents per gallon for the contaminated gasoline if it was eventually held not liable for the contamination, and agreeing to replace it with 100/130 aviation gasoline if it was held liable for the contamination. In the event plaintiff was to replace the gasoline in kind, defendant promised to permit plaintiff to buy the replacement gasoline from refineries at Baton Rouge, Louisiana, under the Navy supply contract, plus freight to Port Everglades, Florida. The following telegram sent by the Navy to the Naval Air Station at Jacksonville on August 7,1946, correctly expressed the agreement:
Pending result of discussions as to responsibility for contamination of approx 4200 bbls grade 100/130 avgas loaded at Southeastern Oil Co. Pt Everglades Fla in barge Walker 17 for discharge nas Banana River authority is hereby granted to permit discharge total quantity into Southeastern Oil Co storage in order to free barge X it is understood that in the event South Eastern Oil Co is not liable the contaminated gasoline will be sold to South Eastern Oil Co at $.09 per gal x In the event Southeastern Oil Co is liable they agree to replace in kind X Will advise later when liability is determined X
24. Defendant did not arrange a conference for the purpose of determining the facts of the contamination and fixing liability therefor, as contemplated by the agreement of August 7, 1946.
25. On and prior to December 27, 1946, defendant made demand upon plaintiff to replace the contaminated gasoline with 100/130 aviation gasoline, or to reimburse defendant for the contaminated gasoline involved in the shipment. The record does not disclose what efforts, if any, plaintiff made to comply with this demand, but the Navy did not make available to plaintiff an opportunity to buy replacement gasoline under the Navy supply contract with refineries at Baton Rouge, Louisiana, as had been promised (Finding 23, supra).
26. The Walker 17 remained at Jacksonville from July 25, 1946, to December 5, 1946. While there, from August 23, 1946, to November 11, 1946, the Walker 17 was discharging its contaminated gasoline into plaintiff's shore storage tank. The gasoline remaining in the Walker 17 had a lead content of 4.55 cc. per gallon. It was discharged from the barge as rapidly as supplies of low-lead content commercial ethyl gasoline were available to produce a blended product which would conform with the requirements of Florida law limiting the lead content of gasoline that could be stored or sold within Florida to not more than 3 cc. per gallon. The record does not disclose any objection raised by defendant to plaintiff's decision to blend the contaminated gasoline with low-lead content ethyl gasoline, and the evidence established that the decision was a reasonable one designed to minimize the loss on resale of the blended product. The evidence did not establish that a greater saving could have been anticipated by blending the contaminated gasoline with home-grade regular gasoline having a low-lead content, or that it would have been economically more feasible to have done this in preference to what was actually done.
Plaintiff discharged a total of 175,201 gallons of contaminated gasoline from the Walker 17 into its shore storage tank at Jacksonville. The difference of 2,019.96 gallons between the quantity so discharged and the 177,220.96 gallons originally loaded aboard the Walker 17 was lost by normal evaporation between the time of loading and completion of discharge of the cargo.
27. Upon completing the discharge of the contaminated gasoline on November 11, 1946, plaintiff notified defendant immediately, and the Walker 17 was held at Jacksonville until December 5,1946, when the Navy permitted its release to plaintiff.
28. In December 1947, defendant charged plaintiff $31,-051.84 for the alleged value of the gasoline contaminated by withholding that amount from payments due plaintiff on other contracts (Findings 2 and 3, supra). This was charged at the rate of approximately 17% cents per gallon for 177,-220.96 gallons.
29. The market price available to the Navy for 100/130 aviation gasoline in tanker lots at Baton Rouge, Louisiana, plus freight to Port Everglades, Florida, on August 7,1946, did not exceed 9% cents per gallon, or—
$17,279.04 for 177,220.96 gallons, or $17,082.10 for 175,201 gallons.
30. On August 7,1946, in Jacksonville, Florida, the wholesale market price of ethyl gasoline of the type resulting from the blending by plaintiff described in Finding 27, supra, was 9 cents per gallon, or—
$15,949.89 for 177,220.96 gallons, or $15,768.09 for 175,201 gallons.
31. On August 7,1946, in Jacksonville, Florida, the maximum reasonable market value of the contaminated aviation gasoline then stored in the Walker 17 was 3% cents per gallon, or—
$6,202.73 for 177,220.96 gallons, or $6,132.04 for 175,201 gallons.
CONTRACT TRANSPORTATION CHARGES
32. Pursuant to Navy Contract N5sx-6690, the charge for hauling 177,220.96 gallons of gasoline at $0,011 from Port Everglades to Banana River was $1,949.43, and the charge for hauling the same cargo at the same rate from Banana River to Jacksonville was $1,949.43. The total, $3,898.86, has not been paid plaintiff.
DEMURRAGE FOR WALKER 17
33. The demurrage charge under Navy Contract N5sx-6690 for detention of the Walker 17 from July 15, 1946 through July 31, 1946, was $960 for 16 days, computed at the established rate lawfully in effect at that time of $2.50 per hour. Plaintiff has not been paid.
34. The demurrage charge under Navy Contract N6sx-2275 for detention of the Walker 17 from August 1, 1946 to, but not including, August 23,1946, when the Walker 17 commenced discharging its cargo at Jacksonville, was $1,056 for 22 days, computed at the rate provided by contract of $2 per hour. Plaintiff has not been paid.
35. The demurrage charge under Navy Contract N6sx-2275 for detention of the Walker 17 from August 23,1946 through December 5,1946, when the barge was released by defendant, was $5,040 for 105 days, computed at the rate provided by contract of $2 per hour. Plaintiff has not been paid.
DEMURRAGE FOR TUG MAXINE
36. The tug Maxine towed the barge Walker 17 from Port Everglades, Florida, to Banana River from July 12, 1946, to on or before July 15, 1946. The tug was detained at Banana River from July 15 to July 19, 1946, awaiting decision as to disposition of the cargo of the barge Walker 17. From July 19 to on or before July 26,1946, the tug Maxine towed the barge Walker 17 to Jacksonville, Florida. Upon its arrival at Jacksonville, Florida, the tug Maxine was released. At the established demurrage rates lawfully in effect at that time for detention of tugs the total demurrage charge for the tug Maxine for four days from July 15 through July 18 (both dates inclusive) at $8 per hour, was $768. Plaintiff has not been paid.
COURSE and status of administrative proceedings
37. Under date of December 27, 1946, the Chief of the Bureau of Supplies and Accounts of the Navy Department, the contracting officer, wrote to plaintiff as follows:
‡ ‡ $
As a result of an investigation conducted by the Navy, it has been determined that the cargo of aviation gasoline, Grade 100/130, loaded on the barge, Walker 17, from your company's storage at Port Everglades, Florida, on 12 July 1946, was contaminated as a result of the negligence of the Southeastern Oil, Inc. in failing to properly clean and condition the barge.
Demand is hereby made upon Southeastern Oil, Inc., either to replace in kind, or reimburse the Navy for the 4,220 barrels of Grade 100/130 octane aviation gasoline involved in the shipment.
38. Under date of November 20, 1947, the contracting officer issued a document described as "findings of fact and decision," reading in material part as follows:
FACTS
On or about 12 July 1946, pursuant to the terms and conditions of Contract N6sx-1266, Southeastern Oil Company (hereinafter referred to as Southeastern) loaded on barge "Walker 17" at Southeastern's Port Everglades terminal 4,219 barrels of Navy-owned aviation gasoline grade 100/160 for delivery to Naval Air Station, Banana Biver, Florida.
Upon arrival at destination, inspection of said cargo revealed that it contained a high gum content, making it unsuitable for use as aviation gasoline. It was, therefore, refused.
The quality of the gasoline in the shore tanks was established by tests made prior and subsequent to the lifting by the "Walker 17."
Tests on line samples from the terminal pipe line used in loading revealed that the gasoline in the lines, in all respects, conformed to specifications.
Prior and subsequent cargoes lifted from the same tank by means of the same terminal line were of satisfactory quality, meeting specifications in all respects.
The "Walker 17" was reported by Southeastern representatives to the Naval Inspector at the time of t.bis lifting to have been in aviation gasoline service just previous to drydocking, cleaning and painting, which facts appeared true on vessel inspection, but in fact said barge had been used to store fuel oil as was subsequently admitted by the company.
It is standard Navy petroleum procedure to refuse to load aviation gasoline into a vessel which has previously carried black oil unless that vessel has been cleaned, carried several cargoes of clean distillate fuels and carried several cargoes of motor gasoline without contamination, as Southeastern well knew.
Upon arrival at destination, it being mutually agreed between Southeastern and the Navy that the cargo did not conform to specifications, and in order to release the barge for use, it was mutually agreed that, in the event Southeastern was not liable for the contamination, the gasoline would be sold to it at $0.09 per gallon, but if liable Southeastern would replace it m kind. With this understanding said cargo was discharged and turned over to Southeastern.
The reasonable value of the cargo was $7.36 per barrel, or a total of $31,051.84.
DECISION
In view of the foregoing, it is hereby determined that Southeastern is liable to the Government for the contamination of the cargo of the "Walker 17" in the amount of 4,219 barrels of aviation gasoline grade 100/130, and .is further liable to replace said cargo, or in lieu thereof to pay the Government $31,051.84.
39. Plaintiff appealed to the head of the department within 30 days, and counsel for the Navy moved to dismiss the appeal on the ground that it presented no dispute of fact within the meaning of the "Disputes" Article of the contract. On March 10, 1950, the Board of Contract Appeals, the designated representative of the head of the department, denied this motion, stating in material part as follows:
$ $ $ $ $
8. The contract, fairly construed, provides for the transportation of gasoline by Appellant without negligence in exchange for a stipulated price per gallon. The first issue concerns the question of whether Appellant transported the oil .in the required manner so as to be entitled to payment of the stipulated price. As to that issue the dispute concerns primarily such questions of fact as the type of petroleum products which had previously been transported by the barge, the character and sufficiency of the steps taken by Appellant to clean the barge prior to loading, whether or not the barge was actually clean prior to loading, and the character and adequacy of Appellant's inspection of the barge and supervision of the loading. These questions are not, as counsel for the Bureau contends, subsidiary to some question of law as to the standard of care required of Appellant. They form the heart of the dispute, and the dispute therefore presents a case for determination by the Board under Section 20 of the contract.
9. Appellant's claim for demurrage depends in part on the resolution of the dispute as to whether the contamination was the result of Appellant's negligence. In addition the claim may also involve a further question of fact as to whether the Navy was "unable" to accept contaminated oil, regardless of the cause of the contamination, and a question of law, or possibly of mixed law and fact, as to what rate is referred to by the parties in the phrase "The established rate lawfully in effect." [par. I (a) of the schedule]. The Board considers that judgment should be reserved on the motion to dismiss as to this issue, until evidence on the merits of the case has been presented.
10. The dispute concerning Appellant's claim for the transportation charge for moving the gasoline from Banana River to Jacksonville and the Government's claim that the gasoline be replaced or that in lieu thereof payment in the amount of $31,051.84 be made turns primarily on the same facts as those concerning Appellant's claim for the transportation charge from Port Everglades to Banana River. Whether or not these claims are for unliquidated damages and therefore beyond the authority of the Board to determine depends, at least in part, upon a determination as to whether the Navy's telegram of 7 August 1946 embodied a valid supplemental agreement to the contract providing for determination of the issue in the manner provided by the disputes article. The record presently before the Board is inadequate for an informed decision of this issue and the Board desires further evidence thereon at the time of the hearing on the merits of the appeal.
There has been no decision on the merits of this appeal by the head of the department or the Board of Contract Appeals.
conclusion op law
Upon the foregoing findings of fact, which, are made a part of the judgment herein, the court concludes that as a matter of law the plaintiff is entitled to recover, and it is adjudged and ordered that it recover of and from the United States the sum of twenty-six thousand, six hundred forty-four dollars and eighty-one cents ($26,644.81).
Order Reinstating Opinion
This case comes before the court on motion by plaintiff requesting that the court withdraw its order of December 1, 1953, granting defendant's motion for new trial and set down said motion for new trial for oral argument before the court, and
Upon a review and reconsideration of this case in the light of the full record,
It is ordered this second day of February 1954 that the order of December 1, 1953, granting defendant's motion for new trial be and hereby is vacated and withdrawn, and
It is further ordered that the opinion, findings of fact and conclusion of law rendered in this case on September 30, 1953, be and hereby are reinstated and stand as the final decision in this matter.
If plaintiff recovers for transportation from Banana River to Jacksonville, demurrage charges (item c in finding 8) should be reduced by three days or $180.00
References In error; should be Navy Contract N5sx-6690.