Folger Coffe Co. v. Olivebank

• Decision Date: 03 February 2000
• Docket Number: No. 98-20630,VOET-GENICOT,98-20630
• Citation: 201 F.3d 632
• Parties: (5th Cir. 2000) THE FOLGER COFFEE COMPANY; GULF INSURANCE CO., Plaintiffs-Appellants, v. OLIVEBANK; CHARMAIN SHIPPING, INC.; SAFBANK LINE LIMITED; ANDREW WEIR SHIPPING LIMITED; LYKES BROTHERS STEAMSHIP COMPANY, INC., Defendants-Appellees. GULF INSURANCE COMPANY,Plaintiff-Appellant, V. M/V OLIVEBANK; CHARMAIN SHIPPING, INC.; SAFBANK LINE LIMITED, Defendants-Appellees. ASSOCIATED MARINE UNDERWRITING AGENCY; SOUTH AFRICAN EAGLE INSURANCE COMPANY; CARGO UNDERWRITING AGENCY; AEGIS INSURANCE COMPANY LIMITED; MUTUAL & FEDERAL INSURANCE COMPANY LIMITED; CESAM; UNDERWRITERS OF LLOYD'S; HENRYBVBA; CHUBB & SON, INC.; MARINE OFFICE OF AMERICA CORPORATION; SUN ALLIANCE GENERAL INSURANCES; SUN ALLIANCE INTERNATIONAL LIMITED; ALEXANDER & ALEXANDER (ACTING ON BEHALF OF LLOYD THOMPSON); COMMERCIAL UNION ASSURANCE COMPANY PLC; UNDERWRITERS OF AMSTERDAM BOURSE AND OTHER UNDERWRITERS; CIGNA INSURANCE CO. OF EUROPE SA NV/CIGNA PROPERTY & CASUALTY INSURANCE COMPANY OF NORTH AMERICA; CEEMIS (ACTING ON BEHALF OF UNDERWRITING MANAGEMENT SERVICES); PACIFIC EMPLOYERS INSURANCE COMPANY, Plaintiffs-Appellants, v. M/V OLIVEBANK, her engines, boilers, tackle, etc., in rem; CHARMAIN SHIPPING, INC.; ANDREW WEIR SHIPPING LIMITED; SAFEBANK LINE LTD.; LYKES BROTHERS SHIPPING CO., INC.; BLUE ANCHOR LINES, INC.; BLUSHIP LTD., Defendants-Appellees. INTERCARGO INSURANCE COMPANY; FIREMAN'S FUND INSURANCE COMPANIES (NEW YORK); FIREMAN'S FUND INSURANCE COMPANIES (CHICAGO), Plaintiffs-Appellants, v. M/V OLIVEBANK, her Engines, Boilers, Tackle, etc., in rem; CHARMAIN SHIPPING, INC.; ANDREW WEIR SHIPPING LIMITED; LYKES BROTHERS SHIPPING CO., INC; ICON CARRIERS, Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 632

201 F.3d 632 (5th Cir. 2000)

THE FOLGER COFFEE COMPANY; GULF INSURANCE CO., Plaintiffs-Appellants, v. OLIVEBANK; CHARMAIN SHIPPING, INC.; SAFBANK LINE LIMITED; ANDREW WEIR SHIPPING LIMITED; LYKES BROTHERS STEAMSHIP COMPANY, INC., Defendants-Appellees.

GULF INSURANCE COMPANY,Plaintiff-Appellant,

V.

M/V OLIVEBANK; CHARMAIN SHIPPING, INC.; SAFBANK LINE LIMITED, Defendants-Appellees.

ASSOCIATED MARINE UNDERWRITING AGENCY; SOUTH AFRICAN EAGLE INSURANCE COMPANY; CARGO UNDERWRITING AGENCY; AEGIS INSURANCE COMPANY LIMITED;

MUTUAL & FEDERAL INSURANCE COMPANY LIMITED; CESAM; UNDERWRITERS OF LLOYD'S; HENRY VOET-GENICOT BVBA; CHUBB & SON, INC.; MARINE OFFICE OF AMERICA CORPORATION; SUN ALLIANCE GENERAL INSURANCES; SUN ALLIANCE INTERNATIONAL LIMITED; ALEXANDER & ALEXANDER (ACTING ON BEHALF OF LLOYD THOMPSON); COMMERCIAL UNION ASSURANCE COMPANY PLC; UNDERWRITERS OF AMSTERDAM BOURSE AND OTHER UNDERWRITERS; CIGNA INSURANCE CO. OF EUROPE SA NV/CIGNA PROPERTY & CASUALTY INSURANCE COMPANY OF NORTH AMERICA; CEEMIS (ACTING ON BEHALF OF UNDERWRITING MANAGEMENT SERVICES); PACIFIC EMPLOYERS INSURANCE COMPANY, Plaintiffs-Appellants, v. M/V OLIVEBANK, her engines, boilers, tackle, etc., in rem; CHARMAIN SHIPPING, INC.; ANDREW WEIR SHIPPING LIMITED; SAFEBANK LINE LTD.; LYKES BROTHERS SHIPPING CO., INC.; BLUE ANCHOR LINES, INC.; BLUSHIP LTD., Defendants-Appellees.

INTERCARGO INSURANCE COMPANY; FIREMAN'S FUND INSURANCE COMPANIES (NEW YORK); FIREMAN'S FUND INSURANCE COMPANIES (CHICAGO), Plaintiffs-Appellants, v. M/V OLIVEBANK, her Engines, Boilers, Tackle, etc., in rem; CHARMAIN SHIPPING, INC.; ANDREW WEIR SHIPPING LIMITED; LYKES BROTHERS SHIPPING CO., INC; ICON CARRIERS, Defendants-Appellees.

No. 98-20630

IN THE UNITED STATES COURT OF APPEALS, FOR THE FIFTH CIRCUIT

February 3, 2000

Appeals from the United States District Court Southern District of Texas

Before FARRIS¹, WIENER, and STEWART, Circuit Judges.

FARRIS, Circuit Judge.

In this admiralty and maritime appeal, Folger Coffee Co. and its insurer, Gulf Insurance Company, seek to reverse the district court's judgment that (1) the vessel M.V. Olivebank is entitled to use general average on a salvage lien and (2) that Folger Coffee and Gulf Insurance owe their proportional share to the general average fund. We affirm.

BACKGROUND

The M.V. Olivebank left the Port of Durban, South Africa on June 12, 1996, with cargo that included granite blocks, steel wire and earth moving equipment. On the morning of June 15, 1996, the vessel encountered severe weather and extremely rough seas which caused seawater to come over the aft deck. At approximately 8:00 a.m., seawater in the vessel's alternator room, two levels below the deck, shorted the two active alternators and caused a complete loss of electrical power to the ship. Electricity was required to run the main engine and steer the ship. The third alternator, which was on standby, should have engaged but either did not or was immediately turned off so that it could be evaluated for water damage. The vessel's emergency electrical system, required by the Safety of Life at Sea Convention of 1974, should have provided emergency lighting from batteries, followed by the automatic start-up of the emergency generator to provide electrical services for steering. The batteries failed and the emergency generator was ultimately started manually. The emergency system was not designed to provide motive power.

The parties dispute the exact means by which the seawater reached the alternator room. It is, however, undisputed that a skylight, or raised hatch, nine feet above deck and two levels above the alternators was open at some point during the relevant period. The floor of the room below the skylight was the ceiling of the alternator room. Several small holes had been cut in this floor/ceiling to enable equipment to operate properly while resting on the floor. Water coming through the skylight could have gone through these holes into the alternator room. It is also undisputed that outside deck-level vent covers to the exhaust vents were open and that these vents lead to the alternator room.

Without steering, the vessel was tossed at extreme angles as it could not position itself to best withstand the high waves. The captain of the vessel put out a Mayday. He entered into a salvage agreement with Pentow Marine, Ltd., a salvage tug, pursuant to a Lloyd's Open Form. The salvors arrived in the late afternoon.

In the process of trying to manually start the emergency generator, two engineers on board broke the handle off the emergency generator circuit-breaker. The electrician then "hot wired" the broken circuit breaker to engage the emergency system. The restored lighting enabled the engineers to examine and start the stand-by alternator. The main engines were ultimately started prior to the arrival of the salvors, and, after waiting out the storm, the M.V. Olivebank sailed to a port of refuge on its own power.

The salvors exercised their salvage lien by threatening arrest of the cargo and/or the ship. Prior to salvage arbitration, the vessel and the cargo interests settled with and paid the salvors. The owners of the M.V. Olivebank declared general average, forcing the cargo interests to provide general average bonds and guarantees, which remain outstanding.

Folger Coffee and Gulf Insurance filed actions in district court seeking a declaration that the vessel was not entitled to general average and recovery for damage to cargo. The actions were consolidated,² and, following a two-day bench trial, the district court found for the vessel. The district court found that the loss of power was caused by a fortuitous combination of events and that the vessel was seaworthy when it left port. The district court entered a final amended judgment on October 8, 1998, and Folger Coffee and Gulf Insurance timely appealed.

DISCUSSION

A. Rule 52(a) & Standard of Review

Rule 52(a) requires a district court sitting as trier of fact to "find the facts specially and state separately its conclusions of law thereon[.]" The rule specifically permits oral delivery following the close of evidence and states that "[f]indings of fact . . . shall not be set aside unless clearly erroneous." Folger Coffee and Gulf Insurance urge us to exercise de novo review because the district court failed to "express its findings of fact with sufficient particularity and provided no recognizable conclusions of law."

We rejected an identical argument in Burma Navigation Corp. v. Reliant Seahorse MV, 99 F.3d 652, 656 (5th Cir. 1996):

[Appellants'] challenge to the specificity of the district court's fact findings under Rule 52(a) appears to be a thinly veiled attempt to turn a sufficiency-of-the-evidence argument into a legal challenge. . . . Rule 52 requires the district court to simply issue findings with sufficient detail to enable the appellate court to consider the findings under the applicable reviewing standard. Rule 52 is satisfied if the district court's findings give the reviewing court a clear understanding of the factual basis for the decision.

Id. (note and citations omitted); see also Chandler v. City of Dallas, 958 F.2d 85, 88-89 (5th Cir. 1992) (per curiam) (discussing rationale behind the rule). More recently, we have stressed that as long as the district court's account of the evidence is plausible, it must be accepted. See Luhr Bros., Inc. v. Shepp (In re Luhr Bros., Inc.), 157 F.3d 333, 338 (5th Cir. 1998), cert. denied sub nom. Jones v. Luhr Bros., Inc.,___ U.S. ___, 119 S. Ct. 1357 (1999). The district court's findings of fact and conclusions of law meet the requirements of Rule 52.

Folger Coffee and Gulf Insurance further contend that the issue of seaworthiness is a mixed question of law and fact reviewed de novo. We have previously held that seaworthiness is an issue of fact reviewed for clear error. See Stevens v. East-West Towing Co., Inc., 649 F.2d 1104, 1106 (5th Cir. 1981); see also Deutsche Shell Tanker Gesellschaft v. Placid Refining Co., 993 F.2d 466, 469 (5th Cir. 1993) (determinations regarding each element of general average claim are findings of fact). The contentions of Folger Coffee and Gulf Insurance do not persuade us otherwise.

B. General Average & Carriage of Goods at Sea Act (COGSA)

Folger Coffee and Gulf Insurance maintain that the M.V. Olivebank was not entitled to general average because the vessel was unseaworthy under the Carriage of Goods at Sea Act, 46 U.S.C. 1300-1315.

The parties do not dispute that the bill of lading covering the cargo aboard the M.V. Olivebank required general average contribution. Under COGSA, once the vessel establishes that a general average act occurred,³ the cargo owner may only avoid liability by establishing that the vessel was unseaworthy at the start of the voyage and that the unseaworthiness was the proximate cause of the general average event. If the cargo owner proves unseaworthiness, the vessel may still prevail by proving that it exercised due diligence to make the vessel seaworthy prior to the voyage. See Deutsche Shell, 993 F.2d at 468.

1. Seaworthiness

The district court held that the evidence did not support the proposed finding that the vessel was unseaworthy due to a defective emergency electrical system. The district court found that the failure of the batteries and emergency system was due to the same intervening event that caused the primary alternators to fail (entry of seawater and corresponding power surge) and that the collapse of both systems at the same time was fortuitous. The district court further found that the emergency system was sufficient because it started, whether mechanically or manually, and that the broken switch was caused by human error not a defect. The district court found the contemporaneous evidence established that the engineer made a decision not to engage the stand-by alternator (number 2) and that the automatic starting mechanism was not defective....