The opinion of the court was delivered by: WEINER
Trial of the damage issues took place on April 21, 1980. At that trial, BP/Sohio and the Queeny interests submitted to the Court a document entitled "Offer of Proof of Claim in Lieu of Trial". That document contained a stipulation authorizing the Court to enter judgment at the conclusion of the damages trial in BP/Sohio's favor against the Queeny interests.
Those parties concluded that the total of BP/Sohio's provable damages is $ 16,188,531.00. The stipulation and offer of proof did not address the issues of prejudgment interest, the interest rate as to either prejudgment or post-judgment interest, or the award of costs.
As between the Corinthos interests and the Queeny interests, no stipulation has been entered into regarding the amount of damages to be awarded. Thus, as to the damage claims of the Corinthos interests, the Queeny interests have identified four issues to be resolved. Briefly stated, these issues are: (1) What value is to be placed on the Corinthos; (2) Is Corinthos entitled to recover sums paid pursuant to Greek Law on various personal injury claims; (3) Is Corinthos entitled to prejudgment interest as to the damages awarded as compensation for the value of the Corinthos; and (4) Is Corinthos entitled to prejudgment interest as to the personal injury claims paid pursuant to Greek Law?
Turning first to the question of whether BP/Sohio is entitled to prejudgment interest, the Queeny interests contend that because BP/Sohio grossly overstated its original claim by demanding $ 25,986,936.00, the parties could not bring a quick resolution to the case by entering into meaningful settlement negotiations. The Queeny interests argue that BP/Sohio's negotiation actions amounted to a bad faith representation of their damages, and therefore, prejudgment interest is not recoverable.
Neither the Queeny nor the BP/Sohio, nor the Corinthos interests acted with haste in this matter. There was a constant barrage of requests by both sides for continuances and delays.
In BP/Sohio's case, as in the Corinthos' case, it was uncertain who would bear legal responsibility for the damages suffered. In a situation where liability is contested, the give and take which normally occurs during settlement negotiations often produces demand and offer figures which are at opposite ends of the spectrum. Unless a settlement occurs, the Court cannot expect the damaged party to undervalue the extent of its damages nor the responsible party to overvalue its offer. Both parties are expected to negotiate in good faith.
Regarding the award of prejudgment interest in admiralty cases, no statutory provision exists. It is therefore left to the sound discretion of the Court to determine whether prejudgment interest should be awarded. Dow Chemical Co. v. M/V Gulf Seas, 593 F.2d 613 (5th Cir. 1979); Mid-America Transportation Company, Inc. v. Rose Barge Line, Inc., 477 F.2d 914 (8th Cir. 1973); Gardner v. The Calvert, 253 F.2d 395, cert. denied, 356 U.S. 960, 78 S. Ct. 997, 2 L. Ed. 2d 1067 (1958); Maryland Shipbuilding & Drydock Co. v. Patapsco Scrap Corp., 169 F. Supp. 605 (D.Md.1959). Generally, in an admiralty case, prejudgment interest should be granted unless there are exceptional or peculiar circumstances. Socony Mobil Oil Co. v. Texas Coastal and International, 559 F.2d 1008 (5th Cir. 1977); Mid-America Transportation Company, Inc. v. Rose Barge Line, Inc., supra; Sea-Land Service, Inc. v. Eagle Terminal Tankers, 443 F. Supp. 532 (W.D.Wash.1977).
There are three basic factors which can result in the disallowance of prejudgment interest. The first factor is unreasonable or unexplained delay in the prosecution of the case which results in prejudice to the opposing side. O'Donnell Trans. Co., Inc. v. City of New York, 215 F.2d 92, 95 (2nd Cir. 1954); The Russell No. 3, 82 F.2d 260, 263 (2nd Cir. 1936). The second factor is a bad faith estimate of damages. Patterson Terminals, Inc. v. S.S. Johannes Frans, 209 F. Supp. 705, 711 (E.D.Pa.1962); Maryland Shipbuilding & Drydock Company v. Patapsco Scrap Corporation, supra; Detroit & Cleveland Navigation Company v. The Steamer Elbert H. Gary, 161 F. Supp. 570, 578 (E.D.Mich., S.D.1958). The third factor is where there are no actual damages incurred.
There is no question but that BP/Sohio suffered damage. In determining whether to award prejudgment interest we shall therefore examine and review the first two factors referred to above.
An examination of the records reveals that a finger cannot be pointed at any one party, accusing it alone of unreasonable delay. There have been many delays occasioned by the acts of all parties at one time or another. In any case, the initiative is always with the plaintiff. It should want to proceed to trial in haste to recover its damages. Any delays should work to its disadvantage. A plaintiff does not have the right to drag its cause because it expects to get prejudgment interest.
The factor concerning a bad faith estimate of damages is our next concern. The original claim of BP/Sohio was $ 25,986,936.00. At the trial of the damage issues on April 21, 1980, BP/Sohio and Queeny filed a stipulation with the Court authorizing the entry of judgment in BP/Sohio's favor in the sum of $ 16,188,531.00, representing the provable damages.
Reviewing all of the circumstances of this case, with the wide variance between the estimate of damage and the provable damage, which provable damage was not resolved until more than five years after the accident, and the delays in bringing this case to trial, the Court is of the opinion that there should be no allowance of prejudgment interest.
The measure of damages, when there is a total loss of a vessel, is its market value at the time of the loss. The Supreme Court discussed the measure of damages in the case of a total loss of a vessel in Standard Oil Company of New Jersey v. Southern Pacific Company, 268 U.S. 146, 45 S. Ct. 465, 69 L. Ed. 890 (1925). The Court stated:
"It is fundamental in the law of damages that the injured party is entitled to compensation for loss sustained. Where property is destroyed by wrongful act, the owner is entitled to its money equivalent, and thereby to be put in as good position pecuniarily as if his property had not been destroyed. In case of total loss of a vessel, the measure of damages is its market value, if it has a market value, at the time of destruction. The Baltimore, 8 Wall. 377, 385, 75 U.S. 377, 19 L. Ed. 463. Where there is no market value such as is established by contemporaneous sales of like property in the way of ordinary business, as in the case of merchandise bought and sold in the market, other evidence is resorted to. The value of the vessel lost properly may be taken to be the sum which, considering all the circumstances, probably could have been obtained for her on the date of the collision; that is, the sum that in all probability would result from fair negotiations between an owner willing to sell and a purchaser desiring to buy. Brooks-Scanlon Corporation v. United States, 265 U.S. 106, 123, 44 S. Ct. 471, 474, 68 L. Ed. 934. And by numerous decisions of this Court it is firmly established that the cost of reproduction as of the date of valuation constitutes evidence properly to be considered in the ascertainment of value. Southwestern Bell Telephone Co. v. Public Service Commission, 262 U.S. 276, 287, 43 S. Ct. 544, 546, 67 L. Ed. 981, and cases cited; Bluefield Co. v. Public Service Commission, 262 U.S. 679, 689, 43 S. Ct. 675, 677, 67 L. Ed. 1176; Georgia Ry. & Power Co. v. Railroad Commission, 262 U.S. 625, 629, 43 S. Ct. 680, 67 L. Ed. 1144; Brooks-Scanlon Corporation v. United States, supra, 265 U.S. at 125, 44 S. Ct. at 475; Ohio Utilities Company v. Public Utilities Commission, 267 U.S. 359, 45 S. Ct. 259, 69 L. Ed. 656. The same rule is applied in England. In re Mersey Docks and Admiralty Commissioners (1920), 3 K.B. 223; Toronto City Corporation v. Toronto Railway Corporation, (1925) A.C. 177, 191. It is to be borne in mind that value is the thing to be found and that neither cost of reproduction new, nor that less depreciation, is the measure or sole guide. The ascertainment of value is not controlled by artificial rules. It is not a matter of formulas, but there must be a reasonable judgment having its basis in a proper consideration of all relevant facts. Minnesota Rate Cases, 230 U.S. 352, 434, 33 S. Ct. 729, 754, 57 L. Ed. 1511.
The Corinthos was a steam turbine propelled tanker with a horsepower of 17,000, built in 1963 at a cost of $ 5,194,000.00.
It had gross tons of 30,705, net tons of 20,935, and its deadweight tonnage was 56,882. It was 723.7 feet in length, and 106 feet in breadth. Its depth was 52 feet, 35 inches. The Corinthos had a speed of 161/4 knots. It was a single deckhouse tanker. The deckhouse was located aft of all cargo tanks and contained all officer and crew accommodations. In addition, this enclosure also housed all propulsion machinery, and was topped by the wheelhouse and other navigating spaces. The cargo space on the Corinthos was separated into six tanks numbered fore to aft. The forwardmost tank was divided into port and starboard units, and the remaining five tanks were further divided into port, starboard and center spaces for a total of seventeen cargo tanks. The aft cargo pump room was located aft of the No. 6 center cargo tank, and just forward of the deckhouse.
Queeny called as its expert witness as to value a ship broker, Robert J. Pierot of Jacques Pierot, Jr. and Sons, Inc., ship brokers since 1894. He testified that he has been with the firm since 1952 as a broker and valuator of ships, and that the firm is involved in transactions for sale and purchase of over one hundred vessels per year. Mr. Pierot testified that the tanker market in late January, 1975, was "disastrous", that it had dropped tremendously. The Corinthos was a steam turbine ship. The witness pointed out that a steam turbine propelled ship consumes more fuel than a diesel propelled ship, and that with rapidly escalating fuel cost at the time of this collision, steam propelled vessels were less economic, and that fact was reflected in their market value.
Pierot defined market value as "what a willing buyer and a willing seller would sell it". He testified that the factors which determine market value include the sale of similar vessels, availability of similar vessels for sale on the market, and his estimation of what a willing buyer would pay for a similar vessel. He testified from a document marked Q-69 that a similar vessel named the Golar Martita was sold on January 31, 1975, for $ 1,200,000.00. The Golar Martita was a steam turbine tanker built in 1958, and was 42,270 tons deadweight. It had a horsepower of 16,500, gross tons of 25,337, and net tons of 16,928. It was 710 feet in length, 92 feet, 61/2 inches in breadth, had a depth of 48 feet, 7 inches, and had speed of about 16 knots. The witness stated that although the Golar Martita was built five years before the Corinthos was built, the difference in age would not have been a substantial factor in the valuation of the vessels toward the end of January, 1975. The witness placed very little value on the charter under which the Corinthos was operating. He said that a charter may have an enhancing value of the price of a vessel and it might have a depressing value, depending on the particular form of the charter.
Corinthos relied on the testimony of Eric Bates and Edward F. Ganly, vessel appraisers. Mr. Ganly testified that he was a 1936 graduate of Webb Institute of Naval Architecture with a bachelor's degree in Naval Architecture and Marine Engineering. He was employed as a marine surveyor from 1937 to 1961, at which time he began his own business. He was active in the business until he sold it in 1978. He testified that beginning in 1940 he calculated values of many different types of floating equipment, and that through the years he has appraised over a thousand vessels. His testimony at the trial was an affirmance of the valuation placed upon the Corinthos by Eric Bates.
Mr. Bates is a chartered engineer. He was employed in the technical design department of a shipbuilder from 1935 to 1939. From 1940 to 1946 he was an engineer in the Royal Navy. He was employed by British Petroleum from 1946 to 1971. From 1971 to 1978 he was a marine surveyor with Ganly Briggs, Inc.
Mr. Bates' testimony was introduced at the trial by way of depositions taken on November 24, 1978 (Exhibit C 335A) and on January 13, 1978 (Exhibit C 335B). Mr. Bates testified that Ganly Briggs, Inc. were marine surveyors. While employed by them he conducted valuations of vessels as well as surveying.
Mr. Bates testified that in making a valuation of a vessel the important information to be obtained are the carrying capacity which is deadweight tonnage, the speed in knots, and the age of the vessel (Bates Deposition, p. 20, Exhibit 335A). He stated that he looked at sales of comparable vessels in making a valuation. Bates testified that after searching the records, he had found no comparable vessels of similar size, age and capacity to the Corinthos which had been sold at about the time of the Corinthos loss. The Corinthos interests argue that in the absence of comparable sales, there can be no market value of a vessel. They claim that under these circumstances we must refer to the other factors regarding the Corinthos, such as her age, capacity, speed, marine hull insurance, marine risk insurance, profitable charter operation, and reputation among major tank operators. Bates valued the Corinthos as of the date of loss at $ 7,981,400.00. In his valuation of the Corinthos Bates relied upon the sale of a vessel by the name of Thorhild which was sold in November, 1974. The witness testified that the Thorhild had a deadweight of 52,500 tons and was sold for $ 7,600,000.00. By dividing the tonnage into the sales price, Mr. Bates arrived at a figure of $ 144.76 per deadweight ton. He stated that the Thorhild was 153/4 knots whereas the Corinthos was 161/4 knots. He placed a factor for the 1/2 knot difference at 1.025. Thus, he multiplied $ 144.76 by 1.025 and obtained a figure of $ 148.38 per deadweight ton in making his valuation of the Corinthos.
Mr. Bates testified that he used discounted cash flow for depreciation purposes, and in this valuation, he used 5%. He therefore took 5% of the Corinthos deadweight tonnage of 56,882 and came up with 54,120. He multiplied 54,120 by $ 148.40 (dollars per deadweight ton), giving him a gross valuation of $ 8,031,400. Still using the sale of the Thorhild as his basis for valuation of the Corinthos, Mr. Bates testified that the Thorhild had just come out of a four year survey and had in it $ 200,000.00 worth of work which the new owner would not have to spend himself. He went on to say that at the time he valued the Corinthos it was approximately one year after it had a major survey. He testified "One year in four is one quarter. One quarter of $ 200,000.00 is $ 50,000.00; and, therefore, I deducted $ 50,000.00 from the computation of dollars per deadweight times the deadweight of the Corinthos ...". Thus, by deducting $ 50,000.00 from $ 8,031,400.00 Mr. Bates arrived at his valuation of the Corinthos of $ 7,981,400.00. We find that that market value is grossly overstated.
Mr. Bates failed to take into consideration that the Thorhild was a motor vessel, and there was testimony that there were very extensive favorable credit terms which was a factor in increasing the sales price of the vessel. Another Corinthos witness was George Bisbas, director of N.J. Goulandris (Agencies), Ltd., which was the agent for Villaneuva Compania Naviera, S.A., owner of the Corinthos. His testimony was that the Corinthos had a charter to a first rate oil company, Amoco, which charter had twenty-eight months to run from the date of the loss of the Corinthos. He computed the net profit under the charter as $ 204,975.00 per month which when multiplied by the twenty-eight months remaining under the charter, totals $ 5,740,000.00 as the net profit expected in the operation of the Corinthos under the Amoco charter. The Corinthos interests, however, agree that they are not claiming loss of future earnings under the charter. They claim that the vessel's value was substantially enhanced by the charter earnings.
The only charter introduced into evidence is a charter between Marceloso Compania Naviera and Amoco Trading International, Ltd. The charter is for a vessel named the Antipolis. The charter provided that other vessels named in the charter may be substituted for the Antipolis. At the time of the collision, the Corinthos was a substituted vessel under this charter.
We do not give much weight to the value of this charter in determining the value of the Corinthos. There has been no evidence as to the length of time the Corinthos operated under the charter. The Corinthos owner was not a party to the charter. The Corinthos could have been substituted for by another vessel. We find that, under those circumstances, this charter could not enhance the value of the Corinthos. If the Corinthos had been for sale, a prospective purchaser would certainly want to know how he could be assured of the anticipated profits to be gained under this charter if he were to place any value upon it in determining the market value of the vessel. This court in having to determine the market value of the Corinthos stands in the shoes of a prospective purchaser of the vessel.
What we must do is arrive at a sum which could have probably been obtained for the Corinthos had she been sold just prior to the collision on January 31, 1975. It is the sum a willing purchaser would have paid for the vessel in sound condition on that date. Such a sales price can never be exact since such a sale never took place. We must approximate the market value of the vessel taking all other factors into consideration.
We shall examine the sales of the vessels, Golar Martita and Thorhild, and their comparison with the Corinthos.
We reject the comparison by which Mr. Bates determined the market value of the Corinthos. His use of the sale of the Thorhild for obtaining his calculations for valuation of the Corinthos was not proper. The Corinthos was "a steam turbine propelled tanker whereas the Thorhild was a motor vessel. With the rapidly declining tanker market in late January 1975, and the rapidly escalating fuel cost at that time, the market value of steam turbine vessels was much lower than motor vessels since steam propelled vessels were less economic because they consumed more fuel than diesel propelled vessels. Another reason the sales price of the Thorhild is not controlling in valuing the Corinthos is that the Thorhild was sold in November 1974, whereas the market value of the Corinthos must be determined as of January 31, 1975. Both Mr. Pierot and Mr. Bates agreed that the market for ships in the January 1975 was a very poor market. (Bates Deposition, p. 63, Exhibit C 335A) (Pierot Testimony, N.T. 1619).
In contrast, the comparison used by Mr. Pierot appears more sound. The Golar Martita was sold on January 31, 1975, the exact date of the Corinthos loss. They were both steam turbine propelled vessels. The Corinthos had a speed of 161/4 knots, and the Golar Martita had a speed of 16 knots. The vessels had similar horsepower, the Corinthos 17,000, the Golar Martita 16,500. The deadweight tonnage of the Corinthos was 56,882, the Golar Martita 42,270. The Corinthos length was 723.7 feet, the Golar Martita 710 feet. Their breadth and depth were also similar, the Corinthos breadth being 106 feet, the Golar Martita 92 feet, 61/2 inches; Corinthos depth 52 feet, 35 inches, the Golar Martita 48 feet, 7 inches. The one very distinguishing feature between the two vessels was age. The Corinthos was built in 1963, the Golar Martita in 1958.
If we were to use the same method for calculations which Mr. Bates used, but substituted the Golar Martita for the Thorhild, we would divide the deadweight tonnage of 42,270 of the Golar Martita into its sales price of $ 1,200,000.00 and obtain $ 28.39 for the per deadweight ton. Multiplying the per deadweight ton figure of $ 28.39 by the deadweight tonnage (after deducting the 5% depreciation) of 54,120 we get the result of $ 1,614,879.98 as the market value of the Corinthos. We have not deducted any variable for the yearly survey, since no information of any survey expenses were given concerning the Golar Martita. Obviously the market value for the Corinthos was greater than $ 1,614,879.98. Even Mr. Pierot, called by the Queeny interests as their expert witness, valued the Corinthos at $ 2,500,000.00. We shall therefore examine other factors which might increase the value of the Corinthos.
In arriving at the market value of the Corinthos we have examined its deadweight tonnage as compared to the other vessels which were used for comparison by the experts who testified in this case. It is important to consider the deadweight tonnage because as Mr. Bates testified, "Combined with the speed, it is the earning power of the vessel." (Bates Deposition, p. 31, Exhibit C 335A). The Golar Martita had deadweight tonnage of 42,270, the Thorhild 52,500, the Corinthos 56,882. The Golar Martita had speed of 16 knots, the Thorhild 153/4 knots, and the Corinthos 161/4 knots. Thus the Corinthos was the fastest and had the largest carrying capacity or deadweight tonnage of the three vessels. These factors raise the value of the Corinthos. Also, the Golar Martita was five years older than the Corinthos. That also enhances the value of the Corinthos over that of the Golar Martita.
If we were to use the previously discussed value of $ 1,614,879.98 for the Corinthos as our base figure, we will add the factors which we feel have enhances that value. The speed of the Corinthos was 161/4 knots compared to 16 knots for the Golar Martita. That quarter knot has a factor of 1.0125. Multiplying 1.0125 by the value of $ 1,614,879.98 gives us a resulting value of $ 1,635,065.98. We have determined that the deadweight tonnage or carrying capacity of the Corinthos was 56,882 compared to 42,270 for the Golar Martita. The Corinthos has therefore 331/3% more carrying capacity. Thus by dividing $ 1,635,065.98 by three we have a resulting figure of $ 545,021.99, which when added to $ 1,635,065.98 gives us a Corinthos value of $ 2,180,087.97. We now consider the age of the vessel. The Golar Martita was five years older than the Corinthos. A vessel is usually thought to have a life span of twenty years. If we therefore take 25% (5 years at 5% per year) of $ 2,180,087.97 we have a result of $ 545,021.99, which when added to $ 2,180,087.97 gives us a market value of the Corinthos of $ 2,725,109.96.
CORINTHOS CLAIMS FOR REIMBURSEMENT OF ...