Lucky-Goldstar, Intern.(America) Inc. v. Phibro Energy Intern., Ltd.

• Court: Court of Appeals for the Fifth Circuit
• Decided: May 20, 1992
• Docket: 91-2919
• Status: Published

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 91-2919

Summary Calendar

LUCKY-GOLDSTAR, INT'L (AMERICA) INC., Plaintiff-Appellee,

versus

PHIBRO ENERGY INTERNATIONAL, LTD., Defendant-Appellant.

Appeal from the United States District Court for the Southern District of Texas

(March 25, 1992)

Before GARWOOD, HIGGINBOTHAM, and BARKSDALE, Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

Phibro Energy International appeals an adverse judgment in a

bench trial of a suit for breach of contract for the sale of goods

and their transport by sea filed by Lucky-Goldstar International,

Ltd. Phibro contends that the district court erred in striking its

demand for jury trial, because it had diversity jurisdiction, not

maritime jurisdiction. We agree and reverse and remand for further

proceedings. I.

LGI agreed to purchase from Phibro approximately 1,000 metric

tons of toluene, a petroleum by-product. Phibro agreed to ship the

toluene by sea to Singapore between November 1 and November 15,

1990, in a vessel of its nomination and to insure that the toluene

was not commingled with other goods. Title would pass to the buyer

as the toluene passed the ship's flange in the United States.

LGI contended that shipment was six days late and that the

toluene became commingled with another parcel. LGI filed this

suit against Phibro for breach of contract. Phibro demanded a jury

trial. The court granted LGI's motion to strike the jury demand

because, in its view, the contract was "overwhelmingly maritime in

its general nature." Following a bench trial, the district court

granted judgment to LGI.

II.

To support admiralty jurisdiction in a suit for breach of

contract, the underlying contract must be wholly maritime.

1 Benedict on Admiralty § 183 at 12-10 (7th Ed. 1991). Kuehne &

Nagel v. Geosource, Inc., 874 F.2d 283, 290 (5th Cir. 1989). This

contract was not, beyond cavil. A principle purpose of the

contract was the land-based sale of over a thousand metric tons of

toluene. It is well-established that such a sale of goods by

itself would not be "maritime" merely because the seller agrees to

ship the goods by sea to the buyer. Armour & Co. v. Fort Morgan

Steamship Co., 270 U.S. 253, 259 (1926) ("The original contract to

purchase, assemble, and sell the cattle, to charter vessels and

2 therein transport the cattle to Jacksonville, and the agreement of

compromise, are not maritime contracts"); Laredo Offshore

Constructors, Inc. v. Hunt Oil Co., 754 F.2d 1223, 1231-32 (5th

Cir. 1985) ("It is fundamental that the mere inclusion of maritime

obligations in a mixed contract does not, without more, bring non-

maritime obligations within the pale of admiralty law"); Luckenbach

S.S. Co. v. Gano Moore Co., 298 F. 343, 344 (2d Cir. 1924) (L.

Hand, J.), rev'd in part on other grounds, 298 F. 344 (2d Cir.

1924) ("Nor is it possible to treat a contract of sale as maritime

even though its performance involves the carriage of goods on the

seas to the place of delivery. . . . In such matters, the whole

contract must be maritime in its character, and, when the

performance is partly maritime and partly terrene, a court of

admiralty will not assume jurisdiction over it, unless the

nonmaritime features be inconsiderable").

A "mixed" contract containing both maritime and non-maritime

elements may yet be a basis for maritime jurisdiction if either of

two circumstances exist. First, if the character of the contract

is primarily maritime and the non-maritime elements of the contract

are incidental, the incidental non-maritime aspects of the contract

will not defeat admiralty jurisdiction. Kuehne & Nagel, 874 F.2d

at 290. Second, if a contract's maritime obligations are separable

from its non-maritime aspects and can be tried separately without

prejudice to the other, admiralty jurisdiction will support trial

of the maritime obligations. Id.; Jack Neilson, Inc. v. the Tug

Peggy, 428 F.2d 54, 60 (5th Cir. 1970).

3 This contract fits neither of these two circumstances for

"mixed" contracts. Its non-maritime aspect is the land-based sale

of the toluene. The agreement to sell is not "incidental" to the

agreement to deliver. These cases can but this case does not

present a chicken and egg puzzle. Delivery was not necessary to a

sale and the buyer took title as the product crossed the ship

flange at the load port. As we explained, it is not the case that

every contract for sale of goods requiring the seller to arrange

seaward shipment is a maritime contract.

We are not persuaded that the maritime aspects of this

contract are sufficiently separable for trial in admiralty without

prejudice to Phibro's right to try the non-maritime aspects to a

jury. The contract itself draws no such distinction. The buyer is

to pay $640.00 per metric ton without allocation of the cost of

shipping. LGI filed a single claim for breach of contract, with no

contention that it sued to recover only for the breach of the

maritime aspects of the contract. Indeed, the contract also

provided that it would be governed by the law of the state of New

York. Nor did the damages and breach urged relate only to the

shipping terms. Phibro urged that LGI breached the contract by not

abiding modifications of the contract regarding shipping dates.

Curiously, LGI argues to us that "the sale itself was

inseparable from the maritime obligations." The contention is

that, where the maritime and non-maritime aspects of a contract are

inseparable, the admiralty court may try the entire claim for

4 breach of contract. LGI relies on this court's decision in Rex

Oil, Ltd. v. M/V Jacinth, 873 F.2d 82, 86 (5th Cir. 1989).

Rex Oil recited that "where nonmaritime elements are

inseparable from maritime elements," a district court could

exercise maritime jurisdiction, taking the language of Puerto Rico

Maritime Shipping v. Luallipam, Inc., 631 F. Supp. 1472, 1474 (D.

Puerto Rico 1986). Yet, Puerto Rico Maritime Shipping states that

"maritime jurisdiction will attach if the non-maritime elements of

the agreement are incidental to the maritime elements, or if the

non-maritime elements are separable from the maritime elements."

Id. (emphasis added).

Rex Oil replaced the word "separable" with "inseparable" and

thus inadvertently misstated the precedent it was attempting to

apply. It is contrary to the long-held and established

jurisprudence in this and other circuits, and common sense, as yet

not a complete stranger to our jurisprudence. See Jack Neilson,

Inc. v. The Tug Peggy, 428 F.2d 54, 60 (5th Cir. 1970); D.M. Picton

& Co. v. Eastes, 160 F.2d 189, 192 (5th Cir. 1947); Berwind-White

Mining Co. v. Cit of New York, 135 F.2d 443, 447 (2d Cir. 1943);

Compagnie Francaise De Navigation A Vapeur v. Bonnasse, 19 F.2d

777, 779 (2d Cir. 1927), cert. denied, 275 U.S. 551 (1927) (Learned

Hand, J.).

Because it is contrary to earlier Fifth Circuit precedent of

Jack Neilson, Inc. v. the Tug Peggy, 428 F.2d 54, 60 (5th Cir.

1970), we are not bound by Rex Oil. Under the law of this circuit,

5 the earlier panel opinion controls. Alcorn County, Mississippi v.

U.S. Interstate Supplies, 731 F.2d 1160, 1166 (5th Cir. 1984).

The district court erred in asserting maritime jurisdiction

over this non-maritime contract. We reverse the judgment entered

against the defendant and remand for proceedings consistent with

this opinion.

REVERSED and REMANDED for further proceedings.