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Keywords

contractdamagesarbitrationattorneyliabilityappealtrialcorporationcontractual obligationseizure
contractarbitrationattorneyliabilityappealcorporationseizure

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Hilton Oil Transport v. Oil Transport Co., S.A., 659 So.2d 1141, 1996 A.M.C. 113, 20 Fla. L. Weekly D1795

Facts

Hilton Oil, a Cayman Islands corporation, chartered a tug from O.T.C. to tow its barge, which was involved in transporting asphalt. After a series of commercial disputes and a severe storm that destroyed the barge, O.T.C. sought damages for breach of the charter agreement. The trial court ruled in favor of O.T.C., awarding damages but denying prejudgment interest and assessing attorney fees against O.T.C. Hilton Oil and Overman appealed the judgment.

Hilton Oil, a Cayman Islands corporation based in Miami and Overman is its managing director and primary owner. Hilton Oil operated out of an office occupied by various other corporate entities owned and/or controlled by Overman. Aside from Overman, Hilton Oil's only other employees were two pumpmen.

Issue

The main legal issues included whether the charter was commercially frustrated, whether O.T.C. was bound by arbitration proceedings involving Hilton Oil, and whether the corporate veil could be pierced to impose personal liability on Overman.

The District Court of Appeal, Green, J., held that: (1) charter was not commercially frustrated by seizure of the tug and charterer's barge as a result of commercial dispute with local port authorities, but was frustrated by subsequent loss of barge during storm, so that tug owner was entitled to charter hire up to date of destruction of the barge; (2) tug owner was not bound by the arbitration proceedings involving barge owner and foreign government which detained the barge and tug, so as to be entitled to recover only pro rata share of arbitration award, on theory that barge owner had represented tug owner's interests or that tug owner must be deemed to have been “vouched into” the arbitration proceeding; (3) it was error to pierce the corporate veil and impose personal liability on primary owner of charterer; (4) common fund rule did not apply to support assessing against tug owner a share of barge owner's attorney fees in the arbitration proceeding; and (5) it was abuse of discretion to deny prejudgment interest.

Rule

The court applied the doctrine of commercial frustration, which relieves parties from contractual obligations when an unexpected event completely deprives them of an essential precondition to performance. Additionally, the court ruled that piercing the corporate veil requires evidence of improper conduct.

Generally speaking, the doctrine of commercial frustration is predicated upon the premise of giving relief in a situation where the parties could not provide themselves by the terms of the contract against the happening of subsequent events, but it does not apply where the intervening event was reasonably foreseeable and could and should have been controlled by provisions of such contract.

Analysis

The court found that the charter was not frustrated by the initial seizure of the tug and barge but was frustrated by the subsequent destruction of the barge during a storm. The court also determined that O.T.C. was not bound by the arbitration proceedings involving Hilton Oil and that the corporate veil should not be pierced to hold Overman personally liable, as there was no evidence of fraudulent or improper conduct.

Although we have concluded that the charter party was not frustrated by the seizure of the barge and tug, we must, nevertheless, find that the charter was frustrated and thereby terminated by the subsequent destruction of the barge by the storm.

Conclusion

The court affirmed in part and reversed in part, ruling that O.T.C. was entitled to charter hire up to the date of the barge's destruction and that it was an error to pierce the corporate veil to impose personal liability on Overman. The court also found it was an abuse of discretion to deny prejudgment interest.

Affirmed in part and reversed in part with instructions on appeal, and reversed and remanded with instructions on cross-appeal.

Who won?

Oil Transport Co., S.A. prevailed in the case as the court ruled in its favor regarding the charter hire and the denial of personal liability against Overman.

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