Oliver J. Olson & Co. v. American Steamship Marine Leopard

Decision Date23 March 1966
Docket NumberNo. 19753-19755.,19753-19755.
Citation356 F.2d 728
PartiesOLIVER J. OLSON & CO., a corporation, Libelant, v. The AMERICAN STEAMSHIP MARINE LEOPARD, etc., and Luckenbach Steamship Company, Inc., a corporation, Respondents. LUCKENBACH STEAMSHIP COMPANY, Inc., a corporation, Libelant, v. OLIVER J. OLSON & CO., a corporation, et al., Respondents. Petition of OLIVER J. OLSON & CO., a corporation, for exoneration from, or limitation of, liability, as owner and operator of the STEAMSHIP HOWARD OLSON.
CourtU.S. Court of Appeals — Ninth Circuit

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Allan E. Charles, Willard G. Gilson, Peter N. Swan, Lillick, Geary, Wheat, Adams & Charles, San Francisco, Cal., for Luckenbach Steamship Co.

Brobeck, Phleger & Harrison, J. Stewart Harrison, San Francisco, Cal., for Oliver J. Olson & Co.

McCutchen, Doyle, Brown, Trautman & Enersen, Norman B. Richards, Hauerken, St. Clair, Zappettini & Hinds, George H. Hauerken, San Francisco, Cal., for Marine Leopard Cargo.

Derby, Cook, Quinby & Tweedt, Robert H. Thede, San Francisco, Cal., for Underwriters at Lloyds.

Cecil F. Poole, U. S. Atty., John F. Meadows, Atty. in charge, Alexander Karst, Atty., Admiralty and Shipping Section, San Francisco, Cal., for United States.

Before HAMLEY, MERRILL and DUNIWAY, Circuit Judges.

HAMLEY, Circuit Judge.

This is an admiralty cause arising out of the collision between the SS HOWARD OLSON and the SS MARINE LEOPARD, on May 14, 1956. As a result of that collision the HOWARD OLSON, which was in ballast, was sunk and the MARINE LEOPARD and its cargo were damaged. The HOWARD OLSON was owned by Oliver J. Olson & Co. (Olson), and the MARINE LEOPARD is owned by Luckenbach Steamship Company, Inc. (Luckenbach). The owners of cargo aboard the MARINE LEOPARD are referred to herein as Cargo.

The issues of fault were tried early in 1957, and an interlocutory decree was entered on September 13, 1957, finding both vessels at fault. In that decree it was also found that the owners of the HOWARD OLSON were not in privity to its faults. This latter finding entitled the owners of the HOWARD OLSON to limit their liability in accordance with the provisions of the Limitation of Shipowners' Liability Act, Rev.Stat. § 4283 (1875), as amended, 46 U.S.C. § 183 (1964). The interlocutory decree was affirmed by this court, Oliver J. Olson & Co. v. Luckenbach S.S. Co., 9 Cir., 279 F.2d 662.

Pursuant to a provision of the interlocutory decree which was not challenged on the prior appeal, the causes were referred to a commissioner to take testimony and ascertain the value of the HOWARD OLSON immediately before the collision, and at the end of her voyage, together with the freight pending for the voyage, and the freight lost as a result of the collision. The commissioner was also directed to ascertain the damages sustained by the various claimants. All questions in respect to the division of damages, the application of the statutes for limitation of liability, priorities, and distribution of the limitation fund were reserved for decision by the court.

All items of damage referred to the commissioner were settled by stipulation, or otherwise disposed of, except the valuation of the HOWARD OLSON. Hearings were had on that issue resulting in a report by the commissioner valuing the vessel at $430,000 immediately prior to the collision. The commissioner's report was confirmed by the district court and a final decree was thereafter entered. Luckenbach and Cargo have appealed.

Luckenbach contends that the district court erred in overruling Luckenbach's exceptions to the commissioner's report valuing the HOWARD OLSON at $430,000. In these exceptions, as restated in Luckenbach's opening brief on appeal, it is asserted that the commissioner erred in several different respects in fixing that valuation. Some of these exceptions have to do with the factors upon which the commissioner premised his valuation, and others pertain to the rejection or disregard of certain evidence produced by Luckenbach.

Before discussing these contentions an account of the history and characteristics of the HOWARD OLSON will be helpful. This vessel was of a type known as a "Laker," having been built on the Great Lakes in 1917 for a cost of $983,171.05. The HOWARD OLSON was a steel-riveted, single screw vessel with engines astern. She was 4,100 D.W.T., 2477 gross tons, 261 feet overall length and 43 feet 6 inches overall beam. She had a lumber carrying capacity of approximately 2,100,000 feet board measure.

Olson purchased the vessel in 1946 for $116,000. At that time she was, in the opinion of underwriters, in condition to be classed A-1 with the American Bureau of Shipping. In 1950 she was equipped with radar worth $5,644. In 1952 diesel cranes were installed on the vessel at a cost of $69,000. Olson maintained the vessel in excellent condition. In February, 1956, three months before she was lost, plate renewals were effected costing $33,000. An expert expressed the opinion that the condition of the vessel in 1956 was such that she could have operated nine more years without incurring major repair.

The HOWARD OLSON had certain characteristics which well suited her for the coastwise lumber trade conducted by Olson. Among these features were the placement of her engines astern, the radar and diesel crane equipment, large hatches and square, boxlike holds. The vessel was comparatively inexpensive to operate, requiring a crew of only twenty-nine men. All of these features, taken together, contributed to her high record of average daily earnings as compared to the KAREN and BARBARA OLSON, operated by the same owner. The HOWARD OLSON, as a domestic-built and documented vessel, had coastwise privileges pursuant to Rev.Stat. § 4132 (1875), as amended, and 41 Stat. 999 (1920), as amended, 46 U.S.C. §§ 11, 883 (1964).

The HOWARD OLSON was engaged in carrying packaged lumber from deepwater ports in Washington and Oregon to Southern California and returning in ballast. There was evidence to the effect that while other vessels in the Olson fleet were to be replaced by barges, the HOWARD OLSON, because of her special features, was not to be replaced. On the other hand, there was also evidence to the effect that for several months prior to the collision the owner had been trying to sell the HOWARD OLSON. Moreover, after that vessel was lost, Olson made no effort to replace her with another freighter but, in accordance with the trend in the coastwise trade, turned exclusively to barges.

Holding that the market value of the HOWARD OLSON in May, 1956, could not be determined because there was no relevant market, the commissioner primarily used reproduction cost depreciated in reaching a valuation of $430,000. The commissioner thus accepted the opinion testimony of Andrew E. Allen, chief engineer for Todd Shipyards Corporation, and Leroy T. Kanapaux, an employee of Frank S. Martin & Sons, ship surveyors and appraisers. Kanapaux, whose testimony was principally relied upon, fixed the reproduction cost of the HOWARD OLSON at $2,949,540. Depreciation was predicated upon the so-called Martin Scale which is a declining balance depreciation of five percent reduced over the years. This produced a figure of $399,013.77, to which Kanapaux added the depreciated cost of the cranes ($33,720.71), for a total reproduction cost depreciated of $432,734.48. This method of determining the reproduction cost depreciated of the HOWARD OLSON was not challenged.

The commissioner also took into account evidence that the HOWARD OLSON was insured for $495,000, plus twenty-five percent or a total of $618,000 in the event of total loss. The commissioner also noted that the vessel's earning record was "impressive," and that, over her expectable life, she would have returned far more to her owner than her reproduction depreciated valuation. The commissioner indicated, however, that he did not consider these matters of insured value or earnings to be conclusive on valuation, but only as indicating that these factors could in no way cause him to reduce the experts' reproduction depreciated valuation.

Luckenbach questions the propriety of basing valuation of the HOWARD OLSON on reproduction cost depreciated, in view of the other evidence of valuation in the record.

The principles governing the allowance of damages for the total loss of a vessel in a collision at sea are comprehensively set forth in Standard Oil Co. of New Jersey v. Southern Pacific Co., 268 U.S. 146, 155-156, 45 S.Ct. 465, 467, 69 L.Ed. 890.1 As there stated, the measure of damages to be applied is the market value of the lost ship, if it has a market value at the time of destruction. Market value, as the Court indicated, is value "* * * such as is established by contemporaneous sales of like property in the way of ordinary business, as in the case of merchandise bought and sold in the market, * * *." See, also, Barton v. Borit, 3 Cir., 316 F.2d 550, 552. Other evidence of value, such as reproduction cost depreciated, may be resorted to only where no market value can be established.

Luckenbach asserts that evidence was presented of contemporaneous sales of comparable vessels and that the commissioner's determination of the value of the HOWARD OLSON should therefore have been based upon that evidence, rather than evidence of reproduction cost depreciated.

According to the undisputed evidence, two sister ships owned by Olson, the BARBARA OLSON and the KAREN OLSON, were sold in November, 1956, for $205,000 each. These vessels were sold to foreign buyers for foreign operations. While these sales were made six months after the loss of the HOWARD OLSON, there was undisputed testimony that, by November, 1956, the market for ships had risen approximately twenty percent above the market in May, 1956.

There was also testimony that each of these vessels was generally equivalent to the HOWARD...

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