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HYUNDAI CORP. v. HULL INS. PROCEEDS OF THE M/V VUL

August 10, 1992

HYUNDAI CORP., U.S.A., and INCHON IRON & STEEL CO., LTD., Plaintiffs,
v.
THE HULL INSURANCE PROCEEDS OF the M/V VULCA, and VULCAN NAVIGATION CORP. and HYUNDAI MERCHANT MARINE CO., LTD., Defendants



The opinion of the court was delivered by: HAROLD A. ACKERMAN

 Ackerman, D.J.

 On December 31, the M/V Vulca ("Vulca"), on sail from New Jersey to South Korea, sank in the Pacific Ocean approximately 700 miles northeast of Hawaii. The sinking resulted in the complete loss of all cargo on the ship, and this cause of action springs from that loss. Currently before the court is a motion by defendant Hyundai Merchant Marine Co. ("Merchant Marine") for summary judgment pursuant to Fed.R.Civ.P. 56(b). Merchant Marine argues that it is not liable to plaintiffs for damages resulting from the lost cargo.

 I. Standard for Summary Judgment

 Summary judgment may be granted only if the pleadings, supporting papers, affidavits, and admissions on file, when viewed with all inferences in favor of the nonmoving party, demonstrate that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. See Todaro v. Bowman, 872 F.2d 43, 46 (3rd Cir. 1989); Chippolini v. Spencer Gifts, Inc., 814 F.2d 893, 896 (3rd Cir.), cert. dism'd, 483 U.S. 1052 (1987). Put differently, "summary judgment may be granted if the movant shows that there exists no genuine issues of material fact that would permit a reasonable jury to find for the nonmoving party." Miller v. Indiana Hospital, 843 F.2d 139, 143 (3rd Cir. 1988), cert. denied, 488 U.S. 870, 102 L. Ed. 2d 147, 109 S. Ct. 178 (1988). An issue is "genuine" if a reasonable jury could possibly hold in the nonmovant's favor with regard to that issue. See Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 247-48, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). A fact is material if it influences the outcome under the governing law. Id. at 248.

 Within the framework set out above, the moving party essentially bears two burdens: First, there is the burden of production, of making a prima facie showing that it is entitled to summary judgment. This may be done either by demonstrating there is no genuine issue of fact and that as a matter of law, the moving party must prevail or by demonstrating the nonmoving party has not shown facts relating to an essential element of the issue for which it bears the burden. Once either showing is made, this burden shifts to the nonmoving party who must demonstrate facts supporting each element for which it bears the burden as well as establish the existence of genuine issues of material fact. Second, there is the burden of persuasion. This burden is a stringent one which always remains with the moving party. If there remains any doubt as to whether a trial is necessary, summary judgment should not be granted. See Celotex Corp. v. Catrett, 477 U.S. 317, 330-33, 91 L. Ed. 2d 265, 106 S. Ct. 2548 ; Adickes v. S.H. Kress & Co., 398 U.S. 144, 157-61, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970); Advisory Committee's Notes on Fed. Rule of Civ. Pro. 56(e), 1963 Amendment; see generally C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure § 2727 (2nd ed. 1983).

 II. Background

 In the shipping industry, a party wishing to ship cargo from one point to another is a shipper, and the party that contracts to transport the goods -- usually the shipowner -- is the carrier. Often, a shipper will have enough cargo to fill an entire vessel. In this case, the shipper may charter a vessel from the shipowner. A charter agreement is termed a "charter party" and constitutes "a specialized type of maritime contract for the hire of a vessel." Thomas J. Schoenbaum, Admiralty and Maritime Law 381 (1987). Charter parties come in three forms. In a demise charter, the charterer takes full control of the vessel for a certain period of time, controlling its schedule as well as providing the crew and navigation. A time charter, on the other hand, involves the charterer controlling the voyages for a specific time period while the shipowner retains possession of the ship and responsibility for the navigation. In a voyage charter, the charterer contracts to use the ship not for a particular period of time but for a particular voyage. In both time charters and voyage charters, the charterer generally uses the entire ship to ship its cargo. However, unless the charter provides otherwise, a charterer may subcharter the vessel. For example, a time charterer, when not using the entire ship, may contract for a voyage charter party with another shipper. When a carrier loads a shipper's goods on the vessel, the carrier or its agent issues and signs a bill of lading. A bill of lading not only acknowledges the receipt of cargo but also provides a contract of carriage between the shipper of cargo and the carrier of the cargo.

 In this case, the undisputed facts disclose the following scenario:

 On October 5, 1989, defendant Merchant Marine entered into a voyage charter party with a shipper called Clarendon Ltd. In this charter, Clarendon contracted to have Merchant Marine arrange for the shipment of Clarendon's cargo. The voyage charter specified that Clarendon would provide to Merchant Marine a cargo of scrap for a ship voyage.

 The Voyage Charter Party provided (Merchant Marine is referred to as "owners" and Clarendon is referred to as "charterer"):

 Owners are to be responsible for loss of or damage to the goods . . . only in case the loss, damage or delay has been caused by the improper or negligent stowage of the goods . . . or by personal want of due diligence on the part of the Owners or their Manager to make the vessel in all respects seaworthy and to secure that she is properly manned, equipped and supplied or by the person act or default of the Owners of their Manager.

 On October 6, 1989, Merchant Marine negotiated a time charter party with Vulcan Navigation Corporation ("Vulcan"), the owner of a ship called the Vulca, for the purpose of transporting the cargo of goods covered by the voyage charter between Merchant Marine and Clarendon. Under this time charter, Merchant Marine contracted from Vulcan to use the Vulca for a particular period of time. As with most time charters, the shipowner -- in this case Vulcan -- retained possession and control of the ship during the chartering period. The time charter in this case provided that:

 The Captain (although appointed by the Owners), shall be under the orders and direction of the Charterers as regards employment and agency; and Charterers are to load, stow, discharge and trim the cargo at their expense under the supervision of the Captain, who is to sign Bills of Lading . . . .

 However, at Charterer's option, Charterers or their agents may sign Bills of Lading on behalf of the Master . . The Charterers shall indemnify the Owners against all consequences or liabilities that may arise from any inconsistency between this Charter and any Bills of Lading signed by the Charterers or their agent."

 In November of 1989, Clarendon nominated Overseas Shipping, Inc., to serve as a port agent to issue a bill of lading for the cargo of scrap. On November 5, 1989, the Master of the Vulca issued a notice authorizing "Overseas Shipping, Inc" to sign and issue bills of lading for Clarendon's scrap metal cargo. The bill of lading was issued to Clarendon, but subsequently was negotiated to plaintiff Hyundai Corporation, U.S.A. ("Hyundai"), when the cargo of scrap was sold by Clarendon to Hyundai. *fn1"

 The Vulca sailed from New Jersey on November 15, 1989, first proceeding to the Panama Canal. At the Canal, the Vulca was delayed for repairs. After the repairs were made, the ship sailed to Long Beach, California. In Long Beach, the ship underwent additional repairs. Finally, on December 22, 1989, the ship left California for the last leg of its voyage to Korea. On December 31, 1989, the Vulca sank approximately 700 miles northeast of Hawaii.

 With the cargo lost, Hyundai and Inchon Iron & Steel, the cargo underwriter, brought this action against the shipowner Vulcan and the time charterer Merchant Marine for recovery of damages due to the lost cargo. A default judgment eventually was issued against Vulcan.

 Now before the court is a motion for summary judgment by defendant Merchant Marine. Merchant Marine argues that since it did not authorize the bill of lading covering the lost cargo, and since it did not commit any acts resulting in the loss of the ...


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