929 F.2d 49 | 2d Cir. | 1991
Lead Opinion
Plaintiff, Crescent Oil and Shipping Services, Ltd. appeals from the July 9, 1990 order of the Southern District of New York, Lowe, Judge, granting summary judgment to defendants, Phibro Energy, Inc., and its parent corporation, Salomon Inc., and denying Crescent’s cross-motion for summary judgment. We affirm.
This case arises out of the interpretation of the pricing terms of a contract for the sale of oil. The material facts are undisputed. In November 1987, Crescent contacted First National Crude Oil Brokers to assist Crescent in the sale of Malongo crude oil from Angola. First National identified Phibro as a potential buyer, and began negotiations with Phibro’s oil traders, on Crescent’s behalf. These negotiations culminated in an agreement whereby Phibro agreed to purchase approximately 120,000 metric tons of oil to be delivered at Crescent’s expense on a tanker, the Petrol de Oro, chartered by Crescent. On November 18, First National confirmed the terms of the contract by telex (Broker’s Confirmation).
The Broker's Confirmation provided that the price would be based upon the average
Delivered price per net U.S. barrel based on outturn quantity/quality ... in accordance with the average of the WTI2 settlement prices on the New York Mercantile Exchange for January3 (or if in the unlikely event at the date of NOR, January is off the board, then other applicable front month), one day before NOR, NOR date, and one day after NOR at discharge port.4
The Broker’s Confirmation also contained a separate “Lighterage”
In its November 24 telex, Phibro exercised its contractual right by notifying Crescent that Texas City, Texas would be the discharge port. On the same day, Crescent confirmed this designation in a telex to Phibro.
On December 8, Phibro telexed Crescent its request that the Petrol de Oro proceed to the Galveston Lighterage Area to offload some of its oil.
Because the contract price of the oil was based on the date of tender of the NOR at discharge port and because the price of WTI dropped significantly between the 14th and 17th of December, the fact that there were two NORs tendered for this crude oil is significant. Claiming that the second NOR, tendered at Texas City, was the one contemplated by the contract, Phib-ro paid Crescent based on the price of WTI on the 16th, 17th and 18th of December 1987.
Asserting diversity jurisdiction,
I.
Because this court is sitting in diversity jurisdiction and the lawsuit was brought in the Southern District of New York, New York choice of law principles govern. See Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). New York courts, in construing contracts, would apply the law of the jurisdiction having the greatest interest in the litigation.
II.
The district court held that the maritime custom and usage evidence explaining “discharge port” submitted by Crescent supporting its motion for summary judgment was irrelevant because the contractual language was “clear and unambiguous”. We disagree. The meaning of “discharge port” is not so clear as to preclude consideration of explanatory evidence.
The oil contract is governed by the Uniform Commercial Code because it is an agreement for the sale of goods. See Conn.Gen.Stat.Ann. § 42a-2-102 (West 1960). Although extrinsic evidence may not be used to vary or contradict the express terms of a writing embodying the parties’ final agreement,
Nevertheless, the parol evidence proffered by Crescent does not support its contention that the NOR given at the light-erage area was the relevant NOR under the pricing provision. To survive Phibro’s motion for summary judgment, Crescent had the burden of producing evidence of usage of trade or course of performance between the two parties that would show an intent by the parties to give effect to the NOR tendered at the Galveston Light-erage Area. See e.g. Conn.Gen.Stat. Ann.Law § 42a-l-205(2) (“The existence and scope of such [a usage of trade] are to be proved as facts.”). However, the evidence submitted by Crescent does not raise a genuine issue of fact as to whether the parties intended “discharge port” to include the Galveston Lighterage Area.
Crescent first claims that Phibro’s December 7 telex, which designated Texas City as the discharge port, “extended” the port to the Galveston Lighterage Area. However, Phibro’s telex merely directed the Petrol de Oro to lighter at Galveston before discharging the remainder of the Malongo cargo in Texas City. This telex cannot be construed as a manifestation of intent by Phibro to include the Lighterage Area as part of the discharge port.
Crescent also asserts that, according to the deposition of two Crescent employees, Phibro assured Crescent that it would be a one-port discharge. This evidence is inap-posite to the issue of what the parties intended by “discharge port”. Further, the testimony of Crescent’s employees regarding the assurances of Phibro does not constitute course of dealing or performance evidence, nor does it involve usage of trade as required by § 42a-2-202(a). The testimony is simply parol evidence subject to the more stringent mandate of § 42a-2-202(b), which permits supplemental evidence of consistent terms only if the court does not find that the writing was integrated. In this case, the confirmation telex by Crescent expressly stated that the telex contained the entire agreement of the parties. As the contract was integrated, extrinsic evidence other than evidence of the course of dealing or performance, and usage of trade, should not be considered.
Crescent argues that Phibro’s own chartering department relied upon the NOR of December 14th (but not the one for the 17th) to calculate demurrage.
Alternatively, Crescent argues that the lower court should have held that the geographical limits of the “discharge port” extended to the Galveston Lighterage Area. We disagree.
The lighterage area and the discharge port are not treated synonymously in the contract. Only laytime and demurrage were to be calculated at the lighterage
We have considered Crescent’s other arguments and find they do not merit discussion.
We affirm the summary judgment in favor of Phibro.
. Crescent also sent a telex to Phibro on November 19 setting forth the terms of the contract. Phibro responded to Crescent’s telex with its own contract telex on November 24. The terms of all three telexes were substantially identical, except as set forth below.
. “WTI” is West Texas Intermediate, a grade of crude oil on which futures are publicly traded and prices quoted on the New York Mercantile Exchange.
. January is an expiration month for futures contracts traded on the New York Mercantile Exchange. It is the settlement prices of these contracts trading on the Mercantile Exchange that formed the basis for the price in the parties’ contract.
. The “discharge port” is the port at which Crescent was to deliver the oil. This port was to be designated by Phibro.
. Lighterage refers to the process of off-loading a portion of one vessel's cargo onto another vessel prior to entering a port. This allows the first vessel (which, if fully loaded, rides too low in the water) literally to ride lighter in the water, and travel safely into port.
. When fully loaded, the draft of the Petrol de Oro was fifty one feet, too deep to permit entry into the port of Texas City, which has a draft limit of forty feet.
. At appellate oral argument, Crescent represented that nearly forty percent of the Petrol de Ora’s Malongo cargo was lightered.
. 28 U.S.C. § 1332 (1982). Crescent is incorporated in Liberia and has its principal place of business in Switzerland, Phibro is incorporated in Delaware and has its principal place of business in Connecticut, and Salomon is incorporated in Delaware and its principal place of business is in New York.
.In the confirmatory telexes between the parties, Phibro requested that Texas law apply to contractual construction issues in court, while Crescent requested that English law apply. Because there was no assent to either parties’ choice of law, New York courts would not give effect to either request. Cf. N.Y.U.C.C. Law § 1-105 (McKinney Supp.1990) (giving effect to an agreement between the parties as to the choice of law governing a U.C.C. contract) (emphasis added); New York Jurisprudence 2d, § 33, at 608-09 (1982) (parties’ choice of law selection generally enforced if it can be ascertained).
. Crescent confirmed the Broker’s Confirmation with a telex which stated that the “contract contains the entire agreement of both parties and cannot be modified unless in writing.”
. Corbin wrote:
There are, indeed, a good many cases holding that the words of a writing are too 'plain and clear’ to justify the admission of parol evidence as to their interpretation. In other cases, it is said that such testimony is admissible only when the words of the writing are themselves ‘ambiguous’. Such statements as*53 sume a uniformity and certainty in the meaning of language that do not in fact exist; they should be subjected to constant attack and disapproval.
Corbin on Contracts § 542 at 108-110 (1960).
. The owner or charterer of a vessel often charges a demurrage fee for the amount of time, beyond that agreed upon, that the vessel is delayed in discharging or lightering its cargo.
Dissenting Opinion
dissenting:
“Generally speaking, the practical interpretation of a contract by the parties to it for any considerable period of time before it comes to be the subject of controversy is deemed of great, if not controlling, influence.” Old Colony Trust Co. v. City of Omaha, 230 U.S. 100, 118, 33 S.Ct. 967, 972, 57 L.Ed. 1410 (1913); see also 4 Willi-ston on Contracts § 623, at 789-90 (3d ed. 1961). Connecticut law, which governs the instant contract, has long recognized this principle of contract construction. See, e.g., Ruscito v. F-Dyne Elecs. Co., 177 Conn. 149, 170, 411 A.2d 1371, 1381 (1979); Beach v. Beach, 141 Conn. 583, 591, 107 A.2d 629, 633 (1954) (parties’ conduct is “strong presumptive evidence” of contract’s meaning).
A practical construction of the contract in this case indicates that Galveston Light-erage Area and Texas City were both “discharge ports” (or “disports”) within the meaning of the contract.
* In a telex dated November 24, 1987, Crescent informed Phibro that it “ha[d] advised [the] owners of [the] final discharge port [was] Texas City” (emphasis added). Use of the qualifier “final” suggests that Crescent considered that there would be another, non-final discharge port, i.e., the lightering area.
* Similarly, in a telex of December 7, 1987, Phibro requested Crescent to inform the Petrol de Oro that, after light-erage, the vessel was to proceed to Texas City “for completion of discharge” (emphasis added), thus suggesting that discharge would commence at an earlier point, i.e., the lighterage area.
* The contract provides for a “mutually agreed independent inspector” to determine the quantity and quality of the cargo “at disport.” At Phibro’s instruction, an inspection was performed not only at Texas City, but also at the lighterage area.
* The contract provides for title and risk of loss to pass to Phibro “when product reaches vessel’s flange connection at discharge port.” In fact, the cargo bound for Corpus Christi passed the Petrol de Oro’s flange at the lighterage area.
Where, as here, a contractual provision is fairly susceptible to more than one interpretation, Connecticut law prefers the interpretation that is most reasonable and equitable. See, e.g., Lanna v. Greene, 175 Conn. 453, 458-59, 399 A.2d 837, 841 (1978); Texaco, Inc. v. Rogow, 150 Conn. 401, 408, 190 A.2d 48, 52 (1963). Under my practical interpretation, the term “discharge port” means precisely “port where the cargo is discharged.” Under Phibro’s interpretation, which my colleagues adopt, the term may have little functional relevance, as the pricing term would be set by the NOR at Texas City — the designated disport — even if one-hundred percent of the oil were dis
If there were, as I have argued, two discharge ports, then the December 14 NOR (at Galveston Lighterage Area) should control the pricing term for the lightered oil, while the December 17 NOR (at the Texas City pilot station) should control the pricing term for only that portion of the oil actually delivered to Texas City. Accordingly, I would reverse the grant of summary judgment for Phibro, and remand with instructions to recalculate the price of the Galveston and Texas City oil based on separate pricing schedules.
. In concluding that there were, in effect, two discharge ports, I am cognizant of the fact that the contract refers to only a single "discharge port.” However, it is equally true that the contract contemplates only a single NOR. Given that there were indisputably two NORs, it does not seem unreasonable to conclude that there were also two discharge ports.
. That Phibro had full control over the lightered oil is most clearly demonstrated by the fact that Crescent was not even aware that this oil was transported to Corpus Christi until well after the fact.
