Opinion
Civil Action No. 4:98CV139-P-B
August 2, 2000
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case came on to be heard by the Court during a three day non-jury trial. The Court, having heard and considered the evidence presented by the parties during the trial of this matter, along with the post-trial briefs submitted subsequent thereto, hereby enters the following findings of fact and conclusions of law:
FINDINGS OF FACT
1. Re: "Booster Illinois"
Plaintiff/counterdefendant Mid-South Dredging Company [hereinafter "Mid-South"] is a corporation organized and existing under law. For the purposes of the claim against defendant Reliance Insurance Company, Mid-South is entitled and authorized to proceed on the payment bond in the name of the United States of America for the use of plaintiff/counterdefendant pursuant to 40 U.S.C. § 270b.
Defendant/counterplaintiff Firth Construction Company [hereinafter "Firth"] is a corporation organized and existing under law. Defendant Reliance Insurance Company [hereinafter "Reliance"] is a corporation duly organized under the law.
In the late summer and fall of 1997, Firth Construction Company put together a bid to perform work for the United States Army Corps of Engineers [hereafter Corps of Engineers] pursuant to Corps of Engineer Contract number DACW38-97-C-0051. The Corps of Engineers contract, and Firth's bid to perform such contract, included, but was not limited, to dredging sections of the Yazoo River between approximately mile 142 and 148.5. Firth Construction Company possessed prior experience, at the time it submitted a bid to the Corp of Engineers, in performing the "land side" aspects of this project. However, Firth owned no dredging equipment, was not familiar with operating dredging equipment, and had no prior experience with any dredging project at the time it submitted its bid to the Corps of Engineers on this job.
Before submitting its bid to perform this contract, Firth made an arrangement with a third party (BB Construction), to perform the dredging aspects of this contract. Firth planned to use its own equipment and its employees to perform the balance of this contract, i.e., the land side aspects of the project. Firth believed, at the time it submitted its bid to the Corps of Engineers to perform this contract, that BB owned most, but not all, dredging equipment that would be needed to perform the dredging aspects of the government contract. Firth also believed that BB possessed the expertise to operate said dredging equipment.
The Corps of Engineers bid specifications stipulated that silt/dirt and like materials, which were to be removed from the bottom of the Yazoo River by dredging, be transferred to certain locations (deposit sites) situated specified distances from the dredging sites themselves. The dredge that BB Construction planned to use to perform the dredging aspects of the job, the dredge Baton Rouge, was a 20" dredge. The dredge Baton Rouge did not have the capability (the power) to move dredged materials (silt/dirt, etc.) the distances specified by said Corps of Engineers contract. Thus, it was necessary for Firth to acquire two "Boosters" (i.e., items of machinery that had the capacity to "boost" the flow of dredged material, through a pipeline, from the location where the involved dredge dislodged said materials from the river bottom, to specified disposal sites). Firth, in particular, needed two boosters with 20" pumps to perform this contract. It was also necessary for Firth to acquire sections of piping, through which such dredged materials would pass as said materials moved from the dredge itself to the disposal areas designated in the Corps of Engineers contract.
In November of 1997, George McCauley, an employee of Firth Construction Company, contacted Eric Lind (an officer and employee of Mid-South Dredging Company) to determine whether Mid-South was potentially interested in leasing a booster that it (Mid-South) owned to Firth. Mid-South, at the time of McCauley's call to Lind, owned various items of dredging equipment, including a booster called the "Booster Illinois." This booster, along with various other items of dredging equipment which Mid-South owned, was sitting idle, tied off to the shore of the Yazoo River a mere 11 miles downstream from Firth's dredging site.
Mid-South Dredging Company submitted a bid to the Corps of Engineers to perform this particular contract, but its bid was not accepted. However, in reviewing Corps of Engineers specifications (for the purpose of preparing its bid) Mid-South acquired actual knowledge of the stipulations set forth by the Corps of Engineers relating to the contract.
This booster had been sitting idle for more than a year prior to McCauley's call to Lind. Mid-South, at the time of McCauley's call, was in bankruptcy having earlier sought Chapter 11 bankruptcy protection. Mid-South, therefore, for some period of time before McCauley's call, was basically insolvent and was unable to pay the salaries of its officers, including Lind.
George McCauley, though an engineer who was experienced in land-based dirt moving projects, had no prior experience in a dredging project such as the one specified in the Corps of Engineers contract at issue in this lawsuit. Eric Lind possessed extensive experience in and knowledge about dredging equipment. Mr. Lind was familiar with dredging projects of the type that Firth planned to perform for the Corps of Engineers. Eric Lind's knowledge as to the characteristics/suitability of dredging equipment generally and "boosters" in particular, therefore, vastly exceeded that of George McCauley. Lind was aware of Firth's lack of expertise at all relevant times to be hereafter mentioned.
Between December 1997 and January 26, 1998, Eric Lind had several telephone conversations and meetings with McCauley and his project manager, John Thompson. Lind represented in those conversations that Mid-South's "Booster Illinois" was a 20" booster. He further represented that it had performed reliably for Mid-South on previous jobs, including its last project another government dredging job. Beyond those general representations, Lind also communicated to McCauley and Thompson that the "Booster Illinois" had been completely overhauled in 1996 and that it contained all new rings, pistons and liners. Lind assured Thompson that the "Booster Illinois" was in "good shape" mechanically. The only thing that needed to be done to the booster's engine, Lind said, before it could be placed in Firth's active service, was an adjustment of the timing on its blower.
Thompson, like McCauley, possessed no prior experience in any dredging project and was not knowledgeable about dredging equipment.
Lind bolstered these assurances to Firth by providing seven pages of technical data. This data included "pump curves," i.e., data reflecting the capacity of the "Booster Illinois" pump which were predicated on the assumption that said pump was equipped with a "53 ~ warp valve impeller." Lind also provided a writing which stated the "Booster Illinois" could operate at "max continuous 850 RPM." On December 29, 1997, Lind faxed an additional writing to Firth with a schedule of proposed rental rates for the "Booster Illinois" and for pipeline. This writing again described the "Booster Illinois" as being equipped with a 22" x 20" pump.
Mid-South proposed to charge Firth a monthly rental of $22,500 on the booster itself. Lind told McCauley it was necessary to have a "qualified" Chief Engineer on board the booster at all times when it was being operated. Lind agreed to serve in that capacity at a charge of $6,000 per month. The total monthly rental for the booster, including said Chief Engineer, was to be $28,500.
On January 7, 1998, Lind sent McCauley a proposed "Bareboat Charter" which set forth the terms of Firth's lease of the "Booster Illinois." This proposed charter stated, in part, that the "Booster Illinois" will be subject to an "on charter" survey by a surveyor of Mid-South's choice. Lind selected Cairo Marine to perform the "on charter" survey on the "Booster Illinois."
On January 8, 1998, a qualified marine surveyor named Carl Vorenkamp performed an on charter survey on the "Booster Illinois." Lind accompanied Vorenkamp as he performed the survey. Following the survey, Vorenkamp prepared a written report which described the booster as having a 22" x 20" cast steel dredge pump. Vorenkamp sent a copy of the report to Lind, who read it upon receipt. Lind was aware, after he read the report, that Vorenkamp's survey changed the pump's description to a 20" pump from an 18" pump as had been set forth in an earlier survey which Mid-South furnished Vorenkamp in preparation for the on charter survey.
No Firth representative was present when Vorenkamp performed the survey.
This description was markedly different from the 1993 Cairo Marine survey report provided Vorenkamp by Lind in preparation for the on charter survey. The 1993 report described the "Booster Illinois" as being an "18/20"booster unit powered by an eight cylinder Fairbanks Morse O.P. diesel engine. . . ." Neither McCauley nor any other Firth employee was provided a copy of the 1993 survey report during the period of negotiation.
On January 19, 1998, Lind sent McCauley another "final" draft of the charter agreement relating to the "Booster Illinois," together with a copy of Vorenkamp's January 8, 1998 "on charter" survey report and an invoice for charter hire and mobilization expenses. Lind never disclosed to Firth the fact that this report contained an erroneous description of the pump — though Lind knew that to be true. Article 3 of the charter, headed CONDITION OF VESSEL included the following language:
CHARTERER hereby expressly agrees that it has inspected and surveyed said vessel, or CHARTERER hereby expressly agrees that it has inspected and surveyed said vessel, or CHARTERER agrees it will make such inspection prior to time of delivery, and is fully satisfied with the seaworthiness thereof; with the condition thereof; and with the vessel's suitability for the service and/or use intended. The failure of the CHARTERER to make such inspection and survey shall be entirely at its own risk. Further, CHARTERER agrees to accept said vessel "as is" and OWNER makes no warranties or representations of any kind or nature, expressed or implied, including without limitations, warranty of condition, seaworthiness, and/or fitness for any purpose whatsoever. . . . The acceptance of said vessel by CHARTERER shall be CHARTERER'S acknowledgment that said vessel is seaworthy, of satisfactory condition and suitable and fit for service and/or use intended.
Firth had conducted no such inspection and Lind knew as much. In fact, the engine on the booster had not even been started for more than a year. Lind further knew that an inspection of the pump's engine to determine whether it contained new liners, pistons and like internal components was practically impossible.
On January 22, 1998, Firth paid Mid-South's $5,000 dewinterization charge for the "Booster Illinois." In making such payment Firth relied on Lind's assurances, both oral and written, made prior to that date — though no contract had been executed between the parties relating to Firth's rental of the booster. Lind contracted with a certified mechanic named Steve Hinkle to perform the mobilization work on the "Booster Illinois." Hinkle worked to put the booster in an operable condition from January 21-25, 1998.
In fact, as set forth later in this opinion, McCauley had serious problems with several Articles in the proposed contract, including the language in Article 3. On February 13, 1998 he sent a revised charter agreement to Lind for his review and signature. It significantly modified Article 3, as well as various other terms of the charter forwarded by Lind on January 19, 1998.
On January 26, 1998, the "Booster Illinois" was moved upriver to Firth's job site. And on January 30, 1998, BB moved sections of pontoon line from Mid-South's moorage area to Firth's job site. On February 4, 1998, the dredge Baton Rouge began dredging operations, assisted by the "Booster Illinois" and another booster purchased by Firth. The Baton Rouge's production during the first twenty-two (22) days of operation was significantly below Firth's projections. It was felt that modifications to the dredge's gearbox would improve its production. Thus, on February 26, 1998, Firth shut down dredging operations in order to make the modifications.
This date was utilized by Mid-South as the starting date for Firth's rental of the "Booster Illinois."
No contract had been executed between the parties as of this date.
On February 6, 1998, Firth paid the balance of Mid-South's initial invoice by check number 25306. The payment covered Firth's rent of the "Booster Illinois" plus Mid-South's $6,000 charge for Lind's service as Chief Engineer, for the period January 26, 1998 through February 26, 1998. Firth relied upon Lind's assurances, oral and written, in making this payment. At this juncture, Firth had paid Mid-South $33,500 for a booster that had operated in its service for a total of three (3) days. Thereafter, on February 25, 1998 Firth paid Mid-South's second ($28,500) invoice (invoice number 9801-2) covering charter hire and Lind's service as engineer, for the period February 26, 1998 through March 26, 1998.
The quantity of material moved by the "Booster Illinois" was dictated by the production of the dredge Baton Rouge — i.e. production was synchronized. During the first 22 days of the project, the "Booster Illinois" operated at reduced R.P.M. levels and at operating temperatures that were below normal, all due to the Baton Rouge's limited ability to produce. The Booster Illinois experienced no mechanical problems during the 22 day period when it operated at reduced capacity and, as far as Firth knew and was Firth was able to determine, the Booster was capable of performing as Lind promised.
On February 23, 1998, Eric Lind sent McCauley a letter and again enclosed final charter agreements for McCauley's signature. The charter agreements incorporated only one of Firth's proposed changes and the language in Article 3 was identical to that of the charters sent by Lind on January 19, 1998. Despite his dissatisfaction with the language, McCauley signed the charter agreement. His decision to do so was founded on two factors: Lind's assertions, oral and written, as outlined previously and the fact that the "Booster Illinois" had performed well up to that point.
This demand was coupled with an implied threat to withdraw the booster from Firth's service if the charter was not executed in the form demanded by Lind. See Lind's February 23, 1998 letter to McCauley in which Lind asserted that "the terms and conditions of the Chater Agreement sent to your office on January 19, 1998 are the terms and conditions under which Mid-South Dreding Company chartered and continues to charter the Booster Barge "Illinois."
The dredge Baton Rouge returned to service on March 6, 1998 and, as the result of said gearbox modifications, the dredge's production dramatically increased. As the result of such increase, the "Booster Illinois" was called upon to operate at higher R.P.M. levels, at higher operating temperatures, and at levels of production that approached those contemplated by Firth when it agreed to rent the booster. The "Booster Illinois" managed to operate for a total of only four days at such increased levels of production and before experiencing a major failure of its main engine on March 10, 1998. Upon learning of the booster's failure, Eric Lind dispatched Steve Hinkle to Firth's construction site to repair the booster. Hinkle arrived at the construction site, inspected the booster's engine, and found that it contained one cracked and one used liner.
Mid-South paid Steve Hinkle for his work on the booster in March and April 1998. Eric Lind testified at trial that he did so because he considered Steve as a stand-in to fulfill his responsibilities as chief engineer when Lind couldn't be present due to other obligations.
The failure of the booster's main engine prompted Firth's George McCauley to write to Mid-South on March 19, 1998 advising of Firth's decision to cancel its charter of the booster immediately. Lind responded to McCauley's letter of cancellation by pointing out that under Article 4 of the charter, the lease would not terminated until April 26, 1998. Lind followed up on the conversation with McCauley with a letter in which Mid-South agreed to an April 26, 1998 charter termination date for the booster. After reviewing the written terms of the charter, Firth acquiesced to Lind's assertion that the charter extended through April 26 and, accordingly, Firth paid Mid-South an additional $33,000 on April 6, 1998.
It is not evident from the testimony whether McCauley was aware of the reason for the booster's failure at the time of his March 19, 1998 letter advising of Firth's decision to cancel the contract.
This payment covered charter hire on the booster from March 26 through April 26, for Lind's service as Chief Engineer for that period and Mid-South's charges for rental of a 1300' section of pipeline.
Since the terms of the charter required that Firth pay charter hire through April 26 and because Firth needed an additional booster to assist the dredge Baton Rouge, Firth decided to repair the booster's engine. McCauley's decision was also based on his reading of the charter provision concerning repairs, which made Firth responsible for such repairs. McCauley intended to use the booster for the balance of the charter term — i.e., through April 26, in order to determine whether it could satisfactorily perform; if it performed, Firth planned to continue to charter it. If it failed to perform, Firth planned to return it to Mid-South on or before April 26, 1998.
Repairs to the pump's engine were completed on April 4, 1998 and Firth returned the "Booster Illinois" to active service on April 14, 1998. The Booster operated for six additional days. On April 20, 1998, it experienced a second major mechanical failure. Following the booster's second failure, Firth hired Geoff Webster, a marine surveyor with expertise in dredging and dredging operations, to inspect the booster and to determine the cause of the booster's recent failure.
Firth's employees assisted Hinkle in making the repairs. Firth expended $14,345.33 to pay its employees, who assisted Hinkle, and to purchase parts used to repair the booster's engine, etc.
Webster's April 28, 1998 survey revealed several important facts. First and foremost, his inspection of the booster's pump revealed that the Illinois had only an 18" pump — not a 20" pump as represented by Eric Lind. Second, he determined from his interviews with project employees that the April 20, 1998 failure was the result of three cracked liners numbers 6, 7, and 8. He also learned that the earlier engine failure was the result of a cracked number 2 liner. The latter information was corroborated by his observation of scrap liners on the deck of the booster's barge. He further observed that the other scrap liner (number 6) showed serious signs of wear that is, it was heavily pitted. Webster also reviewed log entries for the "Booster Illinois" while conducting his survey. He noted high unit temperatures while the booster was running at a reduced load of only 500-600 RPMS Based on his experience, Webster concluded that the booster was incapable of providing sustained performance at 850 RPMS without overheating. Accordingly, the "Booster Illinois" was ill-suited to meet Firth's needs for the dredging project due to its inadequate size and its inability to continuously run at a speed of 850 R.P.M.'s. He concluded that the overall mechanical condition of the booster was not indicative of a recent complete overhaul in fact, all his findings pointed to the opposite conclusion. In a nutshell, his trial testimony was as follows: "Also if the liners and the pistons and the piston rings are worn, you're going to have the same problem [high exhaust temperatures]. This tells me this engine is sick, is in need of overhaul." Through extensive direct and cross examination by counsel and further questions from the Court, Mr. Webster testified that the difference between a 20" pump as represented by Lind and an 18" unit as actually situated on the Illinois would result in a 15-20% loss in production and that the 18" pump when coupled with an otherwise 20" system created a "nuisance" and a "hindrance" to production and efficient operation. In addition, the failure of the Illinois' engine to operate at an acceptable speed without generating self-destructive temperatures caused an even greater reduction in efficiency and thus, overall production. Mr. Webster testified, and the Court so finds, that these conditions coupled with Lind's earlier representations to McCauley that the engine had been completely overhauled with new parts constitute material misrepresentations that affect the validity of the charter agreement.
Mr. Webster's testimony at trial reflected that the proper measure of pump size is determined by the inside diameter of the discharge side of the pump and/or the discharge pipe whichever is narrowest. He conclusively testified that the pump on the Illinois was an 18" pump. Notwithstanding the efforts to explain away this discrepancy, both Eric Lind and Don Lind conceded that the "Booster Illinois" was not a 20" booster under Vicksburg Corps of Engineers standards. Given that the Yazoo River project was being run by the Vicksburg Corps, the Court finds that this is the material governing principle against which the booster' pump size should be measured especially inasmuch as Mid-South itself bid on the instant government project and was familiar with the Corps' requirements.
His initial report narrowed the problem down to one of two things: problems with the cooling system or the need for replacement of pistons and liners. He eliminated the first possibility based on a review of the log books which showed no problems with either the lube oil temperature or the jacket water cooler temperatures.
As a result of Webster's survey, McCauley learned Lind made multiple misrepresentations in connection with the "Booster Illinois," aside from, and in addition to, Lind's assurances relating to the mechanical fitness of the booster, including the fact that the booster was not a 20" dredge and that the booster had not been completely overhauled at the conclusion of Mid-South's work on an earlier government project.
McCauley also learned that Lind was rarely in attendance on the booster during the time it operated — in derogation of the charter provision regarding his duties as Chief Engineer.
Following the April 20, 1998 failure, Firth had every intention of returning the booster to Mid-South's moorage area on or before April 26, 1998. However, low river conditions and an engine problem with one of the boats used on the project combined to delay Firth's return of the booster to its original site. Firth returned the Booster Illinois to Mid-South's mooring point between May 2 and May 5, 1998.
Mid-South continued to bill Firth for charter hire on the Booster Illinois after April 26, 1998. Firth refused to pay these bills on the basis that its charter with Mid-South, relating to the booster, was void as the result of Lind's misrepresentations.
It is the finding of this Court that Lind knew that the dredge Firth intended to use to perform this contract was a 20" dredge, and that Firth was only interested in renting a booster with a 20" pump. The Court finds that Lind intentionally represented the "Booster Illinois" as a 20" booster despite his knowledge that the booster was in fact only an 18" booster. He supported his representations with documents which also falsely characterized the booster as a 20" booster including a schedule of prices for the rental of the booster and the January 8, 1998 survey report prepared by a marine surveyor expressly chosen by Mid-South. He did this despite the fact that he had in his possession a 1993 survey report which accurately described the pump as an 18" pump. The Court further finds that the difference in pump size was material and Lind knew as much. Each of these actions was undertaken by Lind with the intent to induce Firth to rely on the above-referenced oral and written representations in agreeing to charter the "Booster Illinois." The Court also finds that Lind, acting for Mid-South, represented to McCauley and Thompson that the "Booster Illinois" had been completely overhauled with new, rather than used, parts following its use on another government dredging project in 1996; these representations, too, were false, as were the written data he transmitted to Firth e.g., the pump curves and the information relating the booster's ability to operate continuously at 850 RPMS and its ability to provide some 1700 horsepower in furtherance of Firth's dredging needs. Again, Lind made these assurances and sent this data to Firth for the purpose of persuading Firth to rent the "Booster Illinois, thereby providing a stream of revenue to Mid-South.
It is also the finding of the Court that McCauley, acting on behalf of Firth, did rely on Lind's characterizations of the booster, especially with regard to the fact of overhaul and the size of the booster. It is clearly evident from the evidence before the Court that McCauley would never have agreed to rent the booster at all, let alone executed the contract, had he been aware of the truth regarding these matters. Notwithstanding his own concession that he was indeed "under the gun," McCauley's actions respecting the charter and his signature on the contract were predicated in very large part on information provided by Eric Lind both orally and in writing.
However, despite Firth's showing of materially false representations concerning the booster, it is also evident to the Court that Firth derived some benefit from the use of the booster during its initial period of service, although its capacity for doing so was a direct result of the dredge Baton Rouge's low level of production. In addition, Mid-South is entitled to recover for the additional ten (10) days use of the booster in March and April preceding the booster's second, and final, failure. The Court determines that a reasonable value for the use of the booster during that time is $11,250/month a sum representing half that agreed upon by the parties for a completely overhauled booster united equipped with a 20" pump. The Court's reasoning is based on the booster's ability to run only at half capacity without overheating and experiencing premature engine failure.
As to Lind's services as Chief Engineer, however, the Court finds that Firth derived only marginal benefits, if any from Lind. Lind was seldom on site and certainly did not oversee the booster's operations in the fashion ordinarily contemplated of a chief engineer. His availability by telephone and his absence during the critical period immediately following the booster's first failure in March 1998 evince his lack of value to Firth. Accordingly, Mid-South is entitled to no credit for the value of Lind's services as chief engineer. Nor was the documentary and testimonial proof offered at trial sufficient to sustain Mid-South's claim for damage to the equipment while under the control and use of Firth. Accordingly, Mid-South's claimed damages with respect to the condition of the booster following its return must likewise be disallowed.
2. Re: Pipeline Rental
McCauley and Lind also negotiated a charter agreement for pipeline equipment. McCauley admitted in his trial testimony that he found no fault with either the charter agreement for the pipeline rental or the performance of the equipment itself. Firth utilized the pipeline equipment from the inception of the dredging project up through June 25, 1998, when McCauley wrote Lind to inform him that Firth was terminating the charter on the pipeline contract "immediately." Once again, river conditions did not enable Firth to immediately return Mid-South's pipeline to Mid-South's mooring area. As soon as river conditions permitted, Firth returned the pipeline to Mid-South's mooring area. Although Firth did not return all of the pipe to Mid-South until the end of July 1998, Firth did not make the required monthly payments of $4,550 for May, June and July. It was stipulated at trial that Firth owes Mid-South for these three additional months rental, totaling $13,650 plus interest at the contract rate of ten percent. The Court is not satisfied, however, that Firth returned the pipeline equipment in a damaged condition which failed to comport with the terms of the charter agreement. Accordingly, plaintiff Firth failed to prove its claim for any additional damages with regard to the claimed breach of contract under the pipeline charter.
CONCLUSIONS OF LAW
This is an admiralty and maritime claim. This Court has jurisdiction to hear and decide this dispute by and between these parties. See 28 U.S.C. § 1331, 28 U.S.C. § 1333, 40 U.S.C. § 270 (b) and/or Rule 9(h), F.R.C.P. Venue is likewise proper in this action as Contract number DACW38-97-C-0051 was to be performed within the confines of the Northern District of Mississippi pursuant to 28 U.S.C. § 1391 and 40 U.S.C. § 270(b).
Mid-South seeks to recover damages from Firth for claimed breaches of maritime contracts, i.e., each of two bareboat charters covering the lease of the "Booster Illinois" and of pipeline equipment. Firth, by contrast, seeks to have this Court declare the charter agreement respecting the "Booster Illinois" void and to order restitution of all sums paid by Firth in consideration of the said charter.
This Court, in the exercise of its admiralty jurisdiction, has authority to set aside any maritime contract that was procured through either a misrepresentation, or as a result of mutual mistake of material fact. See, e.g., Black Gold Marine, Inc. v. Jackson Marine Co., Inc. and the Motor Vessel Mr. Gene, 759 F.2d 466 (5th Cir. 1985); Williston on Contracts, § 1488 (1973).
To show that these maritime contracts were fraudulently procured, Firth must prove:
1. That the deceiving party made a material misrepresentation(s);
2. That said representation(s) was/were false;
3. That such deceiving party knew that the representation(s) was/were false when made;
4. That the deceiving party intended for the deceived party to rely on the misrepresentations; and
5. That the deceived party detrimentally relied upon the misrepresentation(s).
Black Gold Marine, Inc. v. Jackson Marine Co., Inc. and the Motor Vessel Mr. Gene, 759 F.2d 466 (5th Cir. 1985); Williston on Contracts, § 1487A.
The Court finds, by clear and convincing evidence:
1. That Eric Lind, acting for Mid-South, made representations to Firth that were false when made;
2. That Lind knew that said representations were false when he made them;
3. That Lind made such misrepresentation to induce Firth to enter into the charters upon which Mid-South relied for its claim for damages against Firth; and
4. That Firth relied, to its detriment, upon Lind's false representations in entering into these contracts.
Lind's misrepresentations and Firth's execution of the bareboat charter referencing the "Booster Illinois"in reliance upon these misrepresentations render that contract void. Kennett-Murray Corporation v. John E. Bone, 622 F.2d 887 (5th Cir. 1980); Western Fireproofing Co. v. W.R. Grace Co., 896 F.2d 286 (8th Cir. 1990); Williston on Contracts, § 1487A.
The Court acknowledges the position of counsel for plaintiff/counterdefendant concerning the parol evidence rule and its proscription against the admission of evidence to vary or reform the terms of the contract. However, in the face of Firth's defense and counterclaim predicated on fraudulent procurement and the relief sought, the Court finds that the admission of parol evidence concerning events predating the execution of the bareboat charter is proper. See Nichols v. Shelter Life Insurance Co., 923 F.2d 1158 (5th Cir. 1991); Phillips v. Chevron U.S.A., Inc., 792 F.2d 521 (5th Cir. 1986). The Court further finds that it would fly in the face of all principles of justice and equity to permit a company, namely Mid-South, to make numerous material false statements in an effort to induce another to enter into an agreement and then to allow it to insulate itself from the consequences of those misrepresentations by the mere insertion of language which purports to repudiate the effect of those statements on the other contracting party.
Thus, Mid-South's claim for damages against Firth, which is based upon the premise that the bareboat charter on the booster is valid and enforceable, shall be dismissed. Firth is entitled to restitution as a result of Mid-South's misrepresentations — that is, a money judgment against Mid-South. Western Fireproofing Co. v. W.R. Grace Co., 896 F.2d 286 (8th Cir. 1990); Williston on Contracts, § 1525.
Firth's claim is measured by the economic benefit it conferred upon Mid-South. 17A Am. Jur 2d § 604; Williston on Contracts, § 1525; Corbin on Contracts, § 1032 (1999). Principles of equity, however, do require that Mid-South be afforded an offset for the reasonable value of the booster during its period of use by Firth. Such economic benefit in this case includes:
1. The sum that Firth paid Mid-South to dewinterize and mobilize the "Booster Illinois," i.e., $5,000 with interest at the rate of eight percent up to the time of judgment;
2. Monies Firth paid to Mid-South for Lind's Services as Chief Engineer for the period of time that Firth had the booster in its possession, i.e. $18,000 with interest at the rate of eight percent up to the time of judgment;
3. Monies Firth paid Mid-South as charter hire on the booster, i.e., $77,500 with interest at the rate of eight percent up to the time of judgment; less $11,250 representing the reasonable rental value of the booster for the period that Firth was able to use the booster and benefitted from its use;
4. Monies Firth paid to repair the "Booster Illinois," i.e., $14,345.33 plus interest at the rate of eight percent up to the time of judgment.
Firth conceded at trial that the bareboat charter covering the pipeline rental was not fraudulently procured and that it had breached that agreement. Accordingly, Mid-South is entitled to an additional offset against the above recovery of $13,650 representing pipeline rental for the period from April 30 — July 31, 1998, plus the contract rate of interest at ten percent up to the time of judgment.
The parties are to present an agreed judgment reflecting the foregoing findings of fact and conclusions of law within ten (10) days, or on or before August 15, 2000.