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ATLANTIC REF. CO. v. UNITED STATES

July 20, 1948

ATLANTIC REFINING CO.
v.
UNITED STATES. THE POINT BREEZE



The opinion of the court was delivered by: KIRKPATRICK

The libellant, owner of the M/V Point Breeze, filed this libel to recover a balance of charter hire due for the months of January and February, 1945. The respondent claims, as a set-off, towage services during the month of July, 1944, from Aruba, West Indies, to the Port of New York. The services were made necessary by reason of the fact that the starboard generator of the Point Breeze became disabled en route to Aruba and she could not maintain convoy speed on the home voyage without the assistance of a tug. A tug was provided and with its assistance the Point Breeze arrived at Bayonne, New Jersey, on August 4, 1944, and there discharged her cargo. On the same day an Amended Charter became effective by agreement of the parties and the libellant contends that, since the claim for towage services arose before the Amended Charter became effective, it is a claim growing out of a different transaction from the one upon which the libel is based and that, therefore, it cannot be used as a set-off in a court of admiralty.

In the first place I think that the chartering of the Point Breeze by the United States for the period beginning April 20, 1940, to end with the voyage current at the termination of the war emergency (but actually ending with her sale to the government May 4, 1945) was one transaction. It is true that the charter was amended in various particulars at several different times, by what were called addendums, changing the rate of hire and insurance valuation and that on August 4, 1944, what was called an 'Amended Charter' was put into effect. Strictly speaking, each time a change occurred there was a new meeting of minds of the parties and no one can dispute Judge Hough's pronouncement in United Transportation & Lighterage Co. v. New York & Baltimore Transp. Line, D.C., 180 F. 902, 904, that 'A contract once made cannot be modified except by a new meeting of minds, and, when such mind meeting occurs, a new contract springs into existence.' But, when it comes to applying the admiralty rule that the respondent may not set off a claim not growing out of the same transaction as that which forms the basis of the libel, there is no need to take a legalistic view of the situation. Technically, there were new contracts made but in the view of the law as well as in the minds of these parties themselves the hiring of this vessel was one transaction. The charterer's complete control of its movements has been continuous and uninterrupted from the beginning and this, it seems to me, is the essential thing. So far as it adds anything, it is plain that the parties to the contract took this view of it. The recitals of the Amended Charter describe it as an agreement 'to amend the Charter effective upon the date hereinafter set forth so that such Charter will be as follows:'

 I, therefore, conclude that the set-off claimed by the respondent is properly raised by its answer.

 The respondent contends that the libellant failed to use due diligence to maintain the Point Breeze in a seaworthy condition and that the breakdown of the starboard generator and the towing services required because of it were due to the owner's failure in this respect.

 The burden of proof, that the owner did not exercise due diligence and that failure to do so resulted in the accident to the generator, was upon the charterer.

 The cases cited by the charterer for the proposition that the burden was upon the shipowner are mostly Harter Act cases and do not apply to the situation here. The Harter Act, 46 U.S.C.A. § 190 et seq., provides a statutory exemption from liability upon a certain condition, namely, that the owner exercise due diligence and, of course, the owner must show that he has complied with the condition in order to bring himself within the exemption. Hence, the burden of proof in such cases is necessarily upon the owner.

 The other cases cited by the libellant upon this point decided no more than that, when certain types of unseaworthiness develop within a comparatively short time after the ship leaves port, the presumption is that the condition existed before she sailed and that, therefore, an absolute warranty of seaworthiness contained in the charter had been breached. The Edwin I. Morrison, 153 U.S. 199, 14 S. Ct. 823, 38 L. Ed. 688, and American Asiatic Co. v. Robert Dollar Co., 9 Cir., 282 F. 743.

 The rule as to the burden of proof and presumptions in the present case may be stated as follows:

 The owner's duty to the charterer arose from the contract between them and the measure of it in respect of the generators was due diligence to maintain them in a seaworthy and workable condition. The vessel at the time of the breakdown was in the exclusive possession and control of the owner and in such case the charterer has a prima facie case as soon as he shows those facts. This showing, however, merely imposes upon the owner the duty of going forward with the evidence. It does not, properly speaking, constitute evidence of negligence (in this case, absence of due diligence) or raise a presumption of negligence.

 In the present case the owner accepted this duty and proceeded to show exactly what happened and how the breakdown occurred. When it had done so, the force and effect of the charterer's prima facie case disappeared. The action, it must always be borne in mind, is for breach of contract, and at that point, unless it has affirmatively appeared from the evidence produced by the shipowner that the breakdown was caused by failure to exercise due diligence in accordance with the terms of the contract, the burden reverts to the charterer (or perhaps more properly the burden originally upon him is revived) and it becomes incumbent upon him to produce evidence of the owner's failure to use due diligence, for, otherwise, his case fails.

 In the present case the charterer produced no evidence relating to the cause of the breakdown and the question, therefore, is whether it affirmatively appears from the evidence produced by the owner that it was caused by want of due diligence or, conversely, that it could have been prevented by the exercise of due diligence.

 The foregoing statement of the rule is substantially that which this Court made in Delaware Dredging Co. v. Graham, D.C., 43 F.2d 852. In that case, as in this, the loss occurred at a time when all the instrumentalities were in the exclusive possession and control of the respondent.

 The evidence before me does not show that the breakdown of the generator was caused by negligence or want of due diligence on the part of the charterer or that it could have been avoided by reasonable inspection -- that is, such inspection as prudent and careful shipowners give their ships.

 The testimony shows that the breakdown was due to a spacer piece in the armature coming loose and getting into the air space between the moving and stationary parts of the generator, thus grounding the generator and physically damaging it. The spacer pieces are small pieces of metal welded in position between laminated sections of the armature. Nine generators of this type had been in use since 1927 and no such mishap had occurred previously. The spacer pieces were welded in position so that it was not considered necessary to examine them. Such an examination would entail the disassembling of the entire unit and the individual inspection of several hundred little pieces of steel inserted in the spaces of the armature. It appears to be the fact that it had never been considered necessary and had ...


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