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Delphi Petroleum, Inc. v. Magellan Terminal Holdings, L.P.

Supreme Court of Delaware

December 12, 2017

DELPHI PETROLEUM, INC, Plaintiff Below, Appellant and Cross-Appellee,
MAGELLAN TERMINAL HOLDINGS, L.P., Defendant Below, Appellee and Cross-Appellant.

          Submitted: October 11, 2017

         Court Below: Superior Court of the State of Delaware C.A. No. N12C-02-302

          Before VALIHURA, VAUGHN, and TRAYNOR Justices.


          James T. Vaughn, Jr. Justice.

         This 12th day of December 2017, upon consideration of the parties' briefs, oral argument and the record of the case, it appears that:

         1. This case involves contractual disputes between Delphi Petroleum, Inc. ("Delphi"), which buys and sells petroleum products, and Magellan Terminal Holdings, LP ("Magellan"), which operates petroleum storage facilities at the Port of Wilmington. The Superior Court ruled on the various disputes after hearing pre-trial motions and conducting a bench trial. Delphi, the plaintiff/appellant, states twelve claims on appeal. Magellan states two claims on cross-appeal. For the reasons which follow, we find that one of Delphi's claims has merit. In that claim Delphi contends that the trial judge erred in its choice of the date from which pre-judgment interest should begin to run on certain money which Magellan owed Delphi. We also find that one of Magellan's claims has merit. In that claim, Magellan contends that the trial court erred in finding that Magellan committed fraud. On those two issues, we reverse the Superior Court. On all other issues, we affirm the Superior Court for the reasons assigned by it in its Opinion and Order dated June 23, 2015 and its Decision After Trial dated June 27, 2016. Accordingly, we need discuss only the two issues we find to have merit.

         2. As mentioned, Delphi buys and sells petroleum products. Magellan operates a marine terminal in Wilmington, Delaware where petroleum products can be stored. Delphi and Magellan entered into two "Terminalling Agreements, " one on September 1, 2005 and one in May 2011. The Terminalling Agreements set forth the terms and conditions under which Delphi would store its petroleum products at Magellan's terminal.

         3. One of the terms of the agreements was that Magellan would heat tanks containing heavy oil and Delphi would reimburse Magellan for the cost of the fuel consumed in heating those tanks plus 18%. The 2005 agreement provided that gauges would be used to measure the quantity of fuel used to heat tanks. Between 2005 and 2010, however, Magellan used meters to measure the amount of fuel used. One of Delphi's claims was that the use of meters, rather than gauges, resulted in Magellan overcharging for fuel. On the eve of trial, Magellan voluntarily refunded $421, 603 for tank heating charges for the years 2007-2010. The explanation for the refund given by Magellan was that it could not satisfy itself as to whether the meters were recording more oil usage than actually occurred.

         4. At trial Delphi continued to press its claim for tank heating overcharges, claiming that Magellan also overcharged it in 2005 and 2006. In its Decision After Trial, the trial judge ruled that Delphi had been overcharged for tank heating in the amount of $114, 547 in 2005 and 2006 ($27, 396 for 2005 and $87, 151 for 2006). He also ruled that Magellan overcharged for tank heating in the amount of $421, 603 from 2007 to 2010 (the amount refunded by Magellan just prior to trial). In addition to awarding Delphi the $114, 547 in overcharges for 2005 and 2006, the trial judge awarded Delphi interest at the statutory rate on the entire overcharge of $536, 150 ($114, 547 $421, 603) from September 25, 2013.

         5. The date of September 25, 2013 was selected as the date from which interest should run because on that date Delphi made a substantial payment of $1, 085, 466.42. Delphi contends that the date of September 25, 2013 bears no relevance to the heating overcharges. It contends that the relevant dates from which interest should be calculated are the dates upon which Delphi paid the invoices containing overcharges from 2005 to 2010. Magellan contends that prior to September 25, 2013 Delphi's account was in a net negative condition and awarding Delphi interest for a period of time when it owed Magellan roughly twice the amount of the heating overcharges would give Delphi an unwarranted windfall.

         6. We review the determination of when pre-judgment interest begins to run de novo.[1] Pre-judgment interest is awarded as a matter of right in a Delaware action based on breach of contract or debt. [2] The purpose is two-fold: "first, it compensates the plaintiff for the loss of the use of his or her money; and, second, it forces the defendant to relinquish any benefit that it has received by retaining the plaintiff's money in the interim."[3] Generally, pre-judgment interest accumulates from the date payment was due to a party[4], or alternatively "when the plaintiff first suffered a loss at the hands of the defendant."[5]

         7. The record of the manner in which Magellan applied the $1, 085, 466.42 payment made on September 25, 2013 appears to show that it was applied to invoices having due dates from September 5, 2010 to November 27, 2013.[6] It does not appear to have been applied to an invoice with a due date prior to September 5, 2010. We agree with Delphi that interest on the overcharges for fuel for heating tanks runs from the date Delphi paid such overcharges, not from September 25, 2013. We remand the case to the Superior Court for any further proceedings necessary to determine the dates from which interest runs or the amount of such interest.[7]

         8. The other claim we find to have merit is Magellan's claim that the trial court erred in finding that it committed fraud. The facts relevant to this claim occurred during the negotiation of the 2011 Terminalling Agreement.

         9. During those negotiations Delphi's counsel, Ron Gumbaz, wrote an email to Magellan's Tony Bogle, Aaron Milford, ...

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