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Mon 14 May 2018, 15:41 GMT

ING loses appeal in OW Bunker case involving US supplier


US Court of Appeals upholds judgment that funds should be distributed precisely as the parties intended.


Illustration of a gavel and sound block.
Image credit: Pixabay
The United States Court of Appeals for the Eleventh Circuit has upheld a judgment by a court in the Northern District of Florida, which ruled that Martin Energy Services LLC should receive $286,200 plus interest for the supply of 300 metric tonnes of marine fuel to the vessel Bravante VIII in a deal involving the now-defunct business O.W. Bunker.

ING Bank had appealed the district court's final judgment, asserting that the district court erred by awarding Martin the aforementioned payout for providing the fuel.

Case background

Brazilian firm Boldini Ltd contacted O.W. Bunker & Trading do Brasil (O.W. Brasil), who, together with two other affiliated entities - O.W. Bunker Middle East DMCC (O.W. Middle East) and O.W. Bunker USA Inc. (OW USA) - arranged for physical supplier Martin Energy to provide fuel to the Bravante VIII in Panama City, Florida.

The transaction was structured not as a direct sale of fuel by Martin to Boldini but as a sale by Martin to O.W. USA, a sale by O.W. USA to O.W. Middle East, and a sale by O.W. Middle East to Boldini. O.W. Brasil functioned only as a broker or agent.

The intended result of the transaction was that Boldini would pay $290,100 and receive 300 metric tonnes of fuel on board the Bravante VIII; Martin would provide the fuel, deliver it, and receive $286,200; the O.W. entities would pocket the difference: $3,900.

Martin delivered the fuel on credit, and was not paid at the time of delivery. O.W. Bunker entities worldwide then filed for bankruptcy in their respective countries of origin shortly after the fuel was delivered, and Martin remained unpaid for the fuel provided to the Bravante VIII.

Lawsuit

Following the collapse of O.W. Bunker, Martin and ING Bank asserted conflicting claims for payment for the fuel.

ING acted as the lead participant in a syndicate that provided working capital for the O.W. entities prior to their collapse. It had authority to act for the syndicate and asserted that it was entitled to collect outside of the bankruptcy proceedings the receivables of O.W. Middle East and O.W. USA. This includes receivables arising from the sale of fuel for the Bravante VIII.

ING claimed during the case - and in the appeal - that Martin had no claim against Boldini or the Bravante VIII, arguing that the bunkering certificate did not give rise to a contract between Boldini and Martin.

District court judgment

But the district court ruled that Martin was entitled to payment for the fuel on the basis of quantum meruit. Under Florida law, to prevail on a quantum-meruit claim, a plaintiff must show that (1) it conferred a benefit on the defendant; (2) the defendant had knowledge of the benefit; (3) the defendant accepted or retained the benefit; and (4) the circumstances are such that it would be inequitable for the defendant to retain the benefit without paying its fair value.

The district court found Martin had conferred a benefit on Boldini by providing 300 metric tons of fuel to Boldini's vessel, which Boldini knew of, accepted, retained, and memorialized in a bunkering certificate acknowledging the fuel's delivery. The district court determined it would be inequitable for Boldini to retain the benefit of the fuel without paying for it and awarded Martin the fair value of the fuel.

In the district court's judgment, Robert L. Hinkle ruled that, despite the O.W. bankruptcies, the funds could be distributed precisely as the parties intended.

The court declared that Martin had a valid contract claim against Boldini that was satisfied by Boldini's previous payment into the court's registry of the full amount ($290,100) due on the claims. It also ruled that Martin had a valid maritime lien against the Bravante VIII that was discharged by Boldini's court payment.

The Florida court concluded that the funds in the court's registry should be distributed as follows: $286,200 to Martin, $3,900 to ING, and a proportional share of the remainder (interest paid into the court's registry by Boldini and interest earned on the funds after deposit in the registry) to Martin and ING.

Appeal judgment

And in the appeal, the United States Court of Appeals for the Eleventh Circuit stated: "Under Florida law, a subcontractor can recover in quantum meruit from the owner, even though the subcontractor had a contract with the general contractor, if the owner had received a benefit from the subcontractor's work and the owner had not paid for that work under the owner's own contract with the general.

"Applying Florida law, in the absence of a valid contract claim against Boldini, and with the relevant O.W. Bunker entity in bankruptcy and unpaid, Martin can recover in quantum meruit from Boldini for the benefit of the fuel Martin delivered and provided to Boldini. Accordingly, the district court did not err by entering judgment which awarded Martin the value of the fuel provided from the fund in the registry of the court, and awarding ING Bank the remaining portion earned by the 'resellers'."


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