Lucky-Goldstar, Intern.(America) Inc. v. Phibro Energy Intern., Ltd. ( 1992 )

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
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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).
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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
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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,
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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.
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