Amstar Corp. v. M/V Alexandros T. (472 F. Supp. 1289, 1979)

ALEXANDER HARVEY, II, District Judge:

The sole question presented in this civil action is the amount of damages due from a shipowner to the owner of a cargo of raw sugar which was delivered in a damaged condition.

Amstar Corporation, the plaintiff (hereinafter “Amstar”), operates a sugar refinery in the City of Baltimore. On January 31, 1976, a shipment of raw sugar arrived at Amstar’s Baltimore refinery on board the M/V ALEXANDROS T., a cargo vessel owned by the defendant Nava Shipping Co., Ltd. (hereinafter “Nava”). During the ocean voyage which had preceded the arrival of the vessel in the Port of Baltimore, large amounts of sea water entered all four hatches and damaged the raw sugar. Invoking this Court’s admiralty and maritime jurisdiction, Amstar is here seeking damages from the ship and its owner for the losses sustained. The defendants have admitted liability but have contested the award of damages to plaintiff.

Following extensive pretrial proceedings and the entry of a Pretrial Order, the case came on for trial on the issue of damages alone. The trial lasted over a period of some five days, and various expert and other witnesses testified. The evidence pertaining to many of the questions raised was conflicting, and in making its findings, the Court has given due regard to the credibility of the witnesses and the weight their testimony deserves. The Court’s findings of fact and conclusions of law, under Rule 52(a) of the Federal Rules of Civil Procedure, are embodied herein, whether or not expressly' so characterized.

Plaintiff asserts that it is entitled to recover damages in the amount of $160,-944.31, plus interest and costs. Defendants contend (1) that plaintiff has failed to prove any damages at all; (2) that, in the alternative, plaintiff’s losses amounted to no more than $5,109.76; and (3) that, as a third alternative, if the Court agrees with plaintiffs methodology for computing damages, plaintiff would be entitled to recover merely $34,897.20.

I

The facts

Many of the background facts have been stipulated. The M/V ALEXANDROS T. is a motor vessel registered in Cyprus and owned by the defendant Nava Shipping Co., Ltd., a Cypriot corporation with offices in Nicosia, Cyprus. At all times pertinent to this action, the vessel was being operated under a time charter between Nava and Eastern Mediterranean Maritime Limited. On December 17, 1975, the time charterer entered into a bulk sugar charter with Westway Trading Corporation of New Jersey (hereinafter “Westway”) for the carriage of a cargo of approximately 4,000 long tons of raw sugar from Nicaragua to any one of several designated ports in the United States, including Baltimore. The next day, plaintiff Amstar contracted to purchase from Westway 4,000 long tons of sugar to be shipped on the ALEXANDROS T.

Pursuant to the bulk sugar charter, the ALEXANDROS T. took on a bulk cargo of raw sugar in the port of Corinto, Nicaragua. The cargo was loaded in good order and condition, loading having been completed on January 15, 1976, and clean bills of lading were then issued. On January 23, 1976, Amstar designated Baltimore as the port of discharge for the sugar it had purchased from Westway. When the vessel arrived at Baltimore Anchorage on January 29, 1976, Amstar was the owner of the cargo of sugar.

On January 31, 1976, a Saturday, the ALEXANDROS T. proceeded to the Am-star pier in Baltimore and docked at about 7:00 A.M. that day. Shortly thereafter, hatches Nos. 1 and 3 were opened and discharge of the raw sugar commenced. The Amstar facility in Baltimore discharges bulk sugar by the use of two gantry cranes which lower large clamshell grabs into the holds of ships which dock at the Amstar pier. Each lift of a grab removes approximately 14,000 pounds of sugar. The grab drops the raw sugar into hoppers on the pier, and the hoppers in turn feed conveyor belts which carry the sugar up to and through the scalehouse and ultimately into the raw sugar warehouse. The raw sugar is carried on conveyor belts along the pier and then into the scalehouse, which consists of three hoppers, one beneath the other.

As the sugar is unloaded, it is necessary that it be weighed and sampled so that the proper price can be established for a particular shipment. Sampling at Amstar’s facility is ordinarily accomplished by an automatic sugar sampling device, which is a part of the bottom or discharge hopper and which includes a constantly rotating auger, three inches in diameter. Rotating at a constant speed, the auger is designed to take out continuous samples of the raw sugar passing through the bottom hopper and to deposit the sampled sugar into cans which have a 35-pound capacity. Sugar from the sample cans is then mixed and placed in 8-ounce jars, which are subsequently delivered to various laboratories for testing.

Henry Kief is manager of the Raw Sugar and Customs Department of Amstar’s Baltimore facility. Shortly after 7:15 A.M. on January 31, 1976, Kief arrived at the pier, went aboard the ALEXANDROS T. and observed that salt water had wetted the sugar in the two hatches then open. Kief requested that the remaining two hatches be opened, and he observed wet raw sugar in hatches Nos. 2 and 4 as well. Each hatch held approximately 2,200,000 pounds of raw sugar. At 8:45 A.M., the discharge of the cargo was halted because Kief had concluded that the sugar was more damaged than he had first supposed. Kief then telephoned Mr. Richard Tierney, his superior in New York, who, among other things, ordered that a marine surveyor be engaged to make a proper determination of the cause and extent of the damage.

While on the scene, Kief consulted with Thomas Augulis of R. Markey & Sons, Inc. (hereinafter “Markey”), an independent sugar sampling firm, which had been engaged by Westway to sample the cargo. Kief and Augulis agreed that it would not be possible to segregate the wet sugar from the dry, and they decided that the cargo would have to be discharged with the wet and the dry sugar commingled. Kief and Augulis also concluded that the automatic sampler would not give reliable readings because of the large amount of wet sugar which would be passing through the bottom hopper. Accordingly, it was decided that Kief should take hand samples from each of the four hatches and that these hand samples would be used instead of the automatic sampling device for computing the price at which the sugar would be sold.

Unloading operations were accordingly resumed and continued throughout the day. During the unloading, Kief went into each of the four hatches and, using a small scoop, filled eight separate 35-pound cans with samples of raw sugar. Four of the cans were filled with wet, damaged sugar, and four of the cans were filled with dry, undamaged sugar. Sugar from these cans was then mixed, placed in jars and sent to various laboratories for testing. The resulting tests were used for determining the price paid by Amstar to Westway for the sugar it received and are also relied upon here by Amstar in calculating its damages.

At approximately 9:00 A.M. on January 31,1976, Ramsay, Scarlett & Co., agents for the time charterers, had contacted a Baltimore law firm, which was the local representative of West of England Shipowners Mutual Insurance Association Limited, the liability insurer of the vessel. The request was made that a representative of the law firm make an immediate investigation aboard the ALEXANDROS T. with regard to a possible claim for cargo damage. At approximately 9:30 A.M., an attorney from that law firm engaged marine surveyor Sumner R. Dolber, of Edward F. Carter & Associates, to assist in the investigation. One half-hour later, the attorney and Dolber arrived at the ship and commenced their investigation. The attorney primarily interviewed the ship’s master, Captain P. Daskalakis, and Dolber observed the discharge of the sugar, which by that time had been started up again and was continuing.

At approximately 11:15 A.M., Paul Trapani, a marine surveyor from Baltimore Cargo Surveyors who had been engaged by Amstar, arrived at the ship to begin his survey. He proceeded to the office of the ship’s master, where he found the ship’s attorney and Dolber. Trapani began his survey by inquiring into the cause and extent of the cargo loss but was then asked to leave the ship by the attorney. Trapani complied and left the ship. However, Kief remained on board and continued to supervise the unloading operations and to take samples of the damaged and sound sugar. Discharge was completed by 6:15 P.M., and the ship then left the Amstar pier and proceeded to anchorage in the Baltimore harbor. On Monday, February 2,1976, this civil action was filed, and the ALEXANDROS T. was arrested by the United States Marshal.

II

The applicable principles of law

In a cargo damage case, the primary objective in awarding damages is to indemnify the plaintiff for the loss sustained by reason of the carrier’s fault. Interstate Steel Corp. v. SS CRYSTAL GEM, 317 F.Supp. 112, 121 (S.D.N.Y.1970); Wood, Damages in Cargo Cases, 45 Tul.L.R. 932, 942 (1971). The plaintiff, of course, bears the burden of proving the fact of damages and also the quantum of damages. Interstate Steel Corp. v. SS CRYSTAL GEM, supra; O’Brien Bros., Inc. v. THE HELEN B. MORAN, 160 F.2d 502, 504-05 (2d Cir. 1947).

In a case involving damaged cargo, the measure of damages is the fair market value at the port of destination of the goods in a sound condition less the fair market value of the goods in their damaged condition. Elia Salzman Tobacco Co. v. THE SS MORMACWIND, 371 F.2d 537 (2d Cir. 1967); Holden v. SS KENDALL FISH, 262 F.Supp. 862 (E.D.La.1966), aff’d 395 F.2d 910 (5th Cir. 1968); Wood, Damages in Cargo Cases, 45 Tul.L.R. 932 (1971). If goods are to be added to the stock of the owner, the term “market value” means the wholesale or bulk price. National Distillers Products Corp. v. Companhia Nacional de Navegacao, 107 F.Supp. 65, 70 (E.D.Pa.1952). For commodities such as sugar or grain, the simplest proof of damages consists of published market listings at the port of destination. Wood, Damages in Cargo Cases, 45 Tul.L.R. 932, 937 (1971).

Ill

The fact of damage

Defendants first contend that plaintiff has failed to prove any damages at all. Such an argument amounts to the contention that the commercial value of a cargo of raw sugar is in no way diminished when large quantities of salt water come into contact with the sugar during an ocean voyage. To state the proposition is to demonstrate its inherent weakness.

In a case such as this one where liability has been established, the precise amount of the damages to be awarded need not be shown with mathematical certainty. Association of Maryland Pilots v. Baltimore & Ohio RR Co., 304 F.Supp. 548 (D.Md.1969); McCormick, Damages, § 27. Although damages may not be based on speculation or conjecture, a plaintiff need do no more than present sufficient evidence from which damages can be determined on a rational basis. Nisshin Fire & Marine Insurance Co., Ltd. v. MV WASHINGTON MAIL, 573 F.2d 1315 (9th Cir. 1978).

In this case, there can be little doubt that large quantities of sea water entered all four of the ship’s hatches and damaged the raw sugar. The hatch covers of this 19-year old vessel were rusted and in a deteriorated condition, permitting salt water to penetrate and thoroughly saturate the vessel’s cargo during the ocean voyage from Corinto, Nicaragua to Baltimore, Maryland. Indeed, defendants have conceded liability in this case.

Moreover, the testimony of Amstar’s employee Kief and Markey’s employee Augulis, both of whom were present during the unloading operation on the morning of January 31, establishes the extent of the damage. Kief, who was on the scene all day and who actually entered and did sampling work in all of the hatches, found salt water in every one of them, with hatch No. 3 being the worst. In No. 4, the saturation extended all the way to the bottom of the hatch, and Kief found himself knee-deep in syrup when most of the cargo had been removed from that hatch. In hatch No. 3, he constructed a three-foot-high dam to prevent the water from saturating other parts of the cargo, but the dam finally broke during the unloading. Kief, who was in the best position of any witness to make such an estimation, concluded that 50% of the entire cargo had been damaged by sea water. Following discharge of the entire cargo, large amounts of water and syrup remained in hatch No. 3 and approximately 100 gallons of sea water in hatch No. 4.

Augulis was also on board the vessel during a good part of the day of the discharge. He did not enter the hatches but observed them from the deck, and his testimony confirms that of Kief. Augulis described streaks in the raw sugar caused by the water, and testified that in various places the water lay in puddles like a pool. According to Augulis, salt water breaks down the grain of raw sugar, making it deteriorate and turn into a liquid like a syrup. In the report he rendered to his employer, he stated that the cargo was “inundated with sea water.” In his opinion, 60% of the cargo had been damaged by the sea water.

Full credit will be given to the testimony of both Kief and Augulis in this case. They were on the scene and the observations of each confirm those of the other. On the record here, this Court finds and concludes that plaintiff has clearly met its burden of proving that it in fact sustained damage to the raw sugar it owned as the result of the admitted fault of the defendants.

IV

The quantum of damages

(a) Expenses of handling and testing

Having proved the fact of damage, plaintiff is undoubtedly entitled to recover additional expenses caused by the handling and testing of the damaged cargo. Because damaged cargo was involved, additional stevedoring costs were incurred as were extra weighing and sampling costs, amounting to $5,109.76. Defendants concede that if this Court finds that plaintiff has met its burden of proving the fact of damage, this amount is properly a part of the judgment to be entered.

(b) Loss of value of the damaged sugar

The principal contest in this case arises because of the manner in which plaintiff has calculated the fair market value of the damaged sugar. Using the commercial spot price for raw sugar, Amstar has calculated its damages by subtracting the market value per pound of the damaged sugar from the market value per pound of the sound sugar and then multiplying the difference by the amount of damaged sugar it received. Using these figures, Amstar calculates this part of its loss at $155,834.55. Amstar paid Westway $1,345,077.00 for the cargo and is thus here claiming that the loss it suffered because it received damaged instead of sound sugar amounted to approximately 11.6% of the cost of the entire shipment. For an understanding of the methodology employed by plaintiff for calculating its damages, some discussion of raw sugar and its properties is necessary.

In its raw state, sugar consists of sucrose, invert sugars and non-sugar solids. When a refinery like Amstar purchases raw sugar, it is interested in the sucrose it is buying and not in any of the other elements. The refining process separates the sucrose from the non-sucrose elements of raw sugar and then uses the sucrose to turn out refined sugar products. Accordingly, the price of raw sugar is determined by the percentage of sucrose it contains. The term “polarity” refers to the percent of sucrose present in raw sugar. The higher the polarity, the greater the percent of sucrose.

The central market for trading in raw sugar in the United States is the New York Coffee and Sugar Exchange, located in New York City. Raw sugar is traded on the Exchange on the basis of its polarity and is bought and sold on the Exchange at a standard 96° polarity (or 96% sucrose content). However, bulk sugar in its raw state may vary up or down from a polarity of 96°. Therefore, in determining the value of a cargo of raw sugar, its polarity must first be determined, and the spot price for a particular day is then adjusted either up or down, depending upon the polarity of the particular shipment of raw sugar.

In view of the importance of polarity in determining the price of a shipment of raw sugar, it is necessary that each shipment be weighed, sampled and tested. Formerly, hand sampling was used for this purpose, but in recent years, Amstar has had an automatic sampling device included as a part of its unloading machinery and equipment.

Amstar paid Westway for this shipment of raw sugar in accordance with the customary industry practice. The contract price was to be adjusted depending upon the actual weight and polarity of the cargo, pursuant to a commercially accepted formula. The spot price for Friday, January 30, 1976 (which was the last trading day of the Coffee and Sugar Exchange before delivery on Saturday, January 31, 1976) was 14.90