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CAMDEN IRON & METAL, INC. v. BOMAR RESOURCES

August 9, 1989

CAMDEN IRON & METAL, INC., Plaintiff,
v.
BOMAR RESOURCES, INC., Defendant



The opinion of the court was delivered by: COHEN

 MITCHELL H. COHEN, SENIOR UNITED STATES DISTRICT JUDGE

 I. BACKGROUND

 Plaintiff, Camden Iron & Metal, Inc., ("Camden Iron" or "plaintiff"), a New Jersey corporation, instituted this action for an alleged breach of contract for the sale of scrap metals against Bomar Resources, Inc., ("Bomar" or "defendant"), a Netherlands Antilles corporation with a principal place of business in New Jersey. *fn1" Plaintiff alleges that defendant breached a contract entered into on November 13, 1986 (whereby plaintiff was to furnish to defendant approximately 23,000 long tons *fn2" of scrap metal and trim, load and stow it aboard a vessel nominated by defendant), when the ship chartered by defendant was "unsafe, unsound and not capable of proper loading." Complaint paras. 1, 3. Plaintiff's prayer for damages includes loss of profit on the underlying contract of sale and "costs attributable to defendant's failure to furnish a proper and sound vessel to take delivery," id. at para. 6, the sum of which plaintiff has calculated to be $ 245,096.02. Joint Final Pre-Trial Order ("JFPTO") at 5, 17.

 Defendant countersued, maintaining, inter alia, that Camden Iron unilaterally breached a contract entered into on November 7, 1986 to sell 11,700 long tons of steel scrap to defendant (Count I of Counterclaim); that Camden Iron breached the November 13, 1986 contract by refusing to load the vessel supplied by Bomar despite the fact that it was ready for reasonably timely surveying and loading (Count II of Counterclaim); *fn3" that as a result of Camden Iron's breach of the November 13, 1986 contract, Bomar suffered damages for detaining and deviating the vessel it nominated (Count III of Counterclaim); *fn4" and that as a result of Camden Iron's breaches of both the November 7, 1986 and November 13, 1986 contracts, Bomar seeks compensatory and punitive damages because those breaches were "done with [a] conscious, willful intent to injure defendant and its business reputation," and plaintiff did in fact so damage Bomar's business reputation (Count IV of Counterclaim). Bomar prays for damages on its counterclaims in the amount of $ 1,554,423.64. JFPTO at 9.

 This case was tried to the Court without a jury. To ascertain the sequence of events from "mere negotiation" to the existence (or not) of a valid contract, and ascribe responsibility for the failure to successfully complete the performance phase of the bargain, we have carefully considered the exhibits admitted into evidence, the oral arguments of counsel concerning objections that arose during the course of the trial, the post-trial submissions of the parties and, most importantly, the credibility of the witnesses. With respect to the latter, we have carefully scrutinized all the testimony given, the circumstances under which each witness testified, and every matter in evidence which tends to show whether a witness is worthy of belief. We have considered the skill, knowledge, intelligence and maritime experience of each witness called to the stand, as well as his manner and demeanor while testifying. Finally and significantly, we have appraised the opportunity of each witness to physically observe the condition of the vessel nominated by Bomar, that is, when and where each review took place. We issue this opinion in lieu of findings of fact and conclusions of law, pursuant to Fed. R. Civ. P. 52.

 II. FACTS

 On November 6, 1986, Bomar agreed to purchase 11,700 long tons (plus or minus ten percent) of steel scrap from Camden Iron according to the following schedule: (a) approximately 5,000 long tons of number one steel at $ 80 per long ton; (b) approximately 3,000 long tons of number two steel at $ 76 per long ton; (c) approximately 2,500 long tons of engine motor blocks at $ 83 per long ton; and (d) approximately 1,200 long tons of number two bundles at $ 60 per long ton. This agreement and the terms thereof were memorialized in a telex transmitted from Bomar to Camden Iron that day. (D-2). *fn5" The shipping term was to be "FOBST VESSEL *fn6" CAMDEN, NEW JERSEY", (D-2), which means that Camden Iron would bear the risk and expense of trimming and stowing the cargo aboard a vessel nominated and paid for by Bomar. Daniel Lewis, who in November and December of 1986 "headed up scrap operations for Bomar," (T2 at 3), testified that this November 6, 1986 contract was never performed because John Bantivoglio, President of Camden Iron, upon learning that Bomar intended to load additional scrap cargo purchased from one of Camden Iron's competitors, Northeast Export, onto the ship to be provided by Bomar, "advised that he did not want to contribute to the cargo that would be loaded by that other party." (T2 at 9). Mr. Lewis maintained that his response to Mr. Bantivoglio's "advice" that he would not load the cargo was to "negotiate a way that we could work around that." (T2 at 10). Ultimately, Mr. Lewis chose to purchase the full amount of scrap steel needed by Bomar at that point in time (23,000 long tons) from Camden Iron. (T2 at 10). The foregoing testimony of Mr. Lewis represents the sole version of the events that transpired concerning Bomar's decision to enter into a subsequent contract with Camden Iron. No other evidence introduced by either party, demonstrative or parol, addresses this early stage of the Camden Iron/Bomar transaction, let alone controverts or corroborates it.

 Having decided to purchase the full extent of its scrap requirements from Camden Iron, on November 13, 1986, Bomar agreed to increase its purchase of steel scrap from Camden Iron to 23,000 long tons (plus or minus ten percent) according to the following schedule: (a) approximately 10,850 long tons of number one steel at $ 80 per long ton; (b) approximately 4,650 long tons of number two steel at $ 76 per long ton; (c) a minimum of 5,500 long tons of engine motor blocks at $ 83 per long ton; and (d) a minimum of 2,000 long tons of number two bundles at $ 60 per long ton. This agreement and the terms thereof were confirmed by telex from Bomar to Camden Iron that day. (P-1). One of the covenants agreed upon was that the final weight and quality of the cargo would be determined "BY AN INDEPENDENT MARINE DRAFT SURVEYOR AND INDEPENDENT QUALITY INSPECTOR, WHOSE NOMINATION SHALL BE MUTUALLY AGREED AND WHOSE COSTS SHALL BE SHARED EQUALLY." (P-1). Another stipulation was that payment was to be "Cash Against Normal Shipping Documents." (P-1). Like the November 6, 1986 contract, the shipping terms were "FOBST VESSEL CAMDEN, NEW JERSEY." (P-1). The penultimate paragraph of this telex acknowledgment states that "THIS CANCELS AND SUPERCEDES OUR PREVIOUS TLX OF NOVEMBER 6, 1986." (P-1). Finally, this telex closed by noting that "ALL OTHER TERMS AND CONDITIONS AS PER RELEVANT CHARTER PARTY AND STANDARD BUYING TERMS OF BOMAR RESOURCES, INC." (P-1).

 Mr. Lewis testified that it was his "belief" that at some point in November of 1986, Bomar advised Camden Iron of its nomination of the M/V Kalli ("Kalli"), *fn7" and that despite the fact that this designation was subject to Camden Iron's approval, Bomar received no notice of rejection from Camden Iron prior to the Kalli's arrival in the Port of Camden. *fn8" (T2-12). Camden Iron did however, advise Robinson & Mastrangelo, Inc., ("R&M"), shipping agents for Bomar, that apropos of certain information conveyed by the Master of the Kalli concerning its bale cubic capacity, it "could not load 20-2100 tons" and would even be difficult to load 19,500 tons. This is confirmed by a telex from R&M to Bomar, with a copy to Camden Iron, dated December 5, 1986. (P-2). Similarly, on December 9, 1986, Tager Shipping Co. ("Tager"), (Camden Iron's shipping agents) telexed Bomar about its concern over the Kalli's bale cubic capacity. (P-3). This telex communicated that Camden Iron "CANNOT BE HELD RESPONSIBLE IF VESSEL UNABLE TO LOAD A CARGO OF 20,700 LONG TONS OR MORE." (P-3). *fn9" Tager asked that Bomar acknowledge receipt of this telex. (P-3). There is no evidence or testimony which establishes that Bomar did so respond.

 On December 14, 1986, late in the evening, the Kalli arrived at South Jersey Port Corporation's ("SJPC") Beckett Street Terminal in Camden, New Jersey. R&M presented its "Notice of Readiness" (the document by which the charterer of a vessel notifies the cargo supplier that the vessel is now ready to commence loading) to Tager during the afternoon of December 15, 1986. A draft survey was attempted on December 15, 1986 by Captain Geiser (representing Hyundai Corporation), *fn10" Captain Cole (representing Bomar) and Peter Kelman (representing Camden Iron). Mr. Kelman testified that all three surveyors concurred that the Kalli could not be accurately surveyed that day, because of their inability to account for excessive water present in the three conveyor ducts which run the full length of the ship. (T1 at 68-70, 75). In the three to four hours these draft surveyors were on board, Mr. Kelman estimated that some fifteen to twenty tons of water leaked out of the Kalli's forepeak tank (a "ballast" tank). (T1 at 71). Upon "sounding the tanks" (the process of calculating the weight of liquids present on a ship), the three surveyors quantified a "draft survey constant" of 1,500 tons, when 300 to 400 would have been "normal" for a ship like the Kalli. (T1 at 66, 68). See also (P-10) (handwritten mathematical calculations of Mr. Kelman on behalf of all three surveyors to determine constant, executed contemporaneously on December 15, 1986). Although the "normal" surveying methodology is to have the vessel's tanks "pressed up" before undertaking any sounding, Mr. Kelman's request that the Kalli's tanks be pressed up was denied by the ship's First Officer, who explained that "owing to the vessel's age . . . he [the First Officer] did not want to put this excessive strain on the tank tops because he was afraid . . . that he may . . . inadvertently flood the holds." (T1 at 65-66, 80-81). In addition to the refusal of the Kalli crew to press up its tanks and the surveyors' general inability to obtain an accurate draft survey on December 15, 1986, Mr. Kelman testified about several observations he made concerning the physical condition of the vessel itself.

 First, Mr. Kelman noted his concern that the hatch coamings *fn11" although rusted to a degree within tolerable limits, were palpably narrow given the type of leading technique that Camden Iron intended to utilize at the Beckett Street Terminal (fourteen by twenty-seven foot loading "pans"). (T1 at 72). See infra. Second, Mr. Kelman took cognizance of the fact that the Kalli, which was designed to carry ores and grains on the Great Lakes, *fn12" had a conveyor system running along the bottom of its holds which remained "uncovered" and fully "exposed." (T1 at 72). The testimony of Mr. James MacFarland, the Tager executive charged with responsibility for Camden Iron's interests in the subject transactions, highlights the significance of Mr. Kelman's concerns for Camden Iron. *fn13"

 Mr. MacFarland pointed out that under the terms of the November 13, 1986 contract, any damage to the hatch openings or coamings incurred during loading would have been Camden Iron's responsibility, (T1 at 26), and the confluence of the Kalli's unusually small hatch size and SJPC's pan loading technique would have compromised the watertightness of the vessel if inadvertent contact was made between the pans and the hatches. (T1 at 22, 23). Captain Kenneth Mistry (who was retained by R&M to attend a draft survey scheduled for December 17, 1986) testified on behalf of Bomar that the "hatch openings will slow down operations very much." (T1 at 154). On the subject of small hatches, Joseph Balzano, Port Director of SJPC testified that:

 
there was no doubt that it was very tight for a scrap pan to enter or exit the hatch. I knew that if it was attempted, that there would be damage [due to] no fault of the crane operators but just . . . the normal swinging of the scrap pan.

 Captain Mistry's testimony established that maneuverability, that is, the ability to safely place materials inside the Kalli's hold via loading pans, becomes increasingly restricted "as the cargo rises." (T1 at 158). Captain Mistry elaborated on this further during his cross examination:

 
A. When the cargo rises above a certain area, with the hopper tanks and other things over there, they would be restricted. So, therefore, you would need another method of getting the cargo away from the openings after a certain weight is reached.
 
Q. Now if this were a standard bulk cargo carrier with a wider hatch opening, you won't have that problem. You could just move the pan to the various sides.
 
A. Yes. And you put it down.

 (T1 at 159).

 Like its responsibility for the condition of the hatch coamings, according to Mr. MacFarland, Camden Iron would also have been responsible for any damage to the conveyor system in its uncovered state which may result from loading extremely heavy steel scrap cargo directly upon it. (T1 at 26). Although any damage to the conveyor system would not actually have been charged to Camden Iron because the Kalli was on its "terminal voyage" (the vessel itself was to be scrapped at the discharge port in Korea), this fact was never made known to Camden Iron or Tager. (T1 at 48-49.) See also (T1 at 153) (Master and Chief Officer of Kalli informed Captain Mistry that vessel was on "graveyard voyage"). In addition to testifying about the hatch size problem, the exposed conveyor problem and the vessel capacity problem, see supra, Mr. MacFarland also testified about two additional obstacles to the execution of the November 13, 1986 contract, from Camden Iron's point of view.

 According to Mr. MacFarland, the usual vessel tendered for "bulk cargo type loading" of scrap metal has five or six hatch openings, whereas the Kalli had fifteen. (T1 at 21). In his estimation, the larger number of hatch openings "made access into the lower holding . . . much more restricted than normal." (T1 at 21). Presumably, the numerosity of hatches would contribute to significant slowing down of loading operations, as Captain Mistry observed. (T1 at 154). See supra.

 Mr. MacFarland also asseverated that the Kalli's unloading arm, which extended some 220 feet across the length of the ship, could not be moved more than 10 to 20 degrees in either direction, thereby impeding access to at least some of the hatches. (T1 at 53). Nevertheless, even if the unloading arm could have been moved while the Kalli was berthed at Camden, Mr. MacFarland urged, it would have had to have been swung over the port side (the loading cranes accessed the vessel along her starboard side), some two hundred feet into the navigable waterway. (T1 at 21). To this, Mr. MacFarland opined, there was a "good chance, a good probability" that the Coast Guard would have objected. (T1 at 21).


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