American Commercial Lines, Inc. v. Valley Line Co., 75--1209

• Decision Date: 26 February 1976
• Docket Number: No. 75--1209,75--1209
• Citation: 529 F.2d 921
• Parties: AMERICAN COMMERCIAL LINES, INC., Appellant, v. The VALLEY LINE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 921

529 F.2d 921

AMERICAN COMMERCIAL LINES, INC., Appellant, v. The VALLEY LINE COMPANY, Appellee.

No. 75--1209.

United States Court of Appeals Eighth Circuit.

Submitted Oct. 17, 1975.

Decided Jan. 28, 1976.

Rehearing Denied Feb. 26, 1976.

Fritz G. Faerber, Lucas & Murphy, St. Louis, Mo., for appellant.

Gary T. Sacks, Goldstein & Price, St. Louis, Mo., for appellee.

Before CLARK, Associate Justice, ^* LAY and ROSS, Circuit Judges.

ROSS, Circuit Judge.

This is an action in admiralty brought by American Commercial Lines (American) against the Valley Line (Valley). In the court below, summary judgment was granted to Valley, and American appeals that judgment. We reverse and remand for further proceedings.

American is the owner of the M/V R.W. Naye, a diesel towboat which was being operated by Inland Tugs Co. (charterer) on March 19, 1975, pursuant to an oral bareboat charter party. The crew were employees of the charterer, except for the captain and pilot, who were American employees on loan to the charterer. At about 6:30 a.m. the Naye was proceeding upriver near Mile 197, Upper Mississippi River with a tow and M/V Frank C. Rand, owned by Valley, was coming downriver with a tow. The two vessels agreed upon a port to port passing, but during the passing the R.W. Naye and its tow collided with some shore structures, causing them considerable damage. American alleges that the collision was caused by the Frank C. Rand crowding the R.W. Naye out of the channel, either because of negligence or unseaworthiness of the Frank C. Rand. Valley denies this, and alleges that the sole proximate cause of the collision was unseaworthiness or negligence of the R.W. Naye.

Owners of the shore structures threatened to bring proceedings in personam against American and in rem against the R.W. Naye. In response to this threatened action American paid over $33,000 in claims and obtained purported agreements of release and assignment of the claims of the owners of the damaged shore facilities. In this suit American seeks to collect from Valley on the assigned claims.

Valley moved for dismissal of American's complaint or for summary judgment on the ground that American was a volunteer which could not have been liable to the owners of the shore structures, and therefore its payments of the claim was 'champertous.' Alternatively, Valley contended that the payment in full of the claim and release of American released any other joint tortfeasors, and left the payees nothing to assign; therefore the assignments were void. The district court, treating the motion as one for summary judgment under Fed.R.Civ.P. 12(b) and 56, held that American was acting as a volunteer in making the payment, because under a demise or bareboat charter the owner of a vessel cannot be held personally liable for errors in navigation. Relying on Crain Brothers, Inc. v. Duquesne Slag Products Co., 273 F.2d 948, 953 (3d Cir. 1959), the trial court held that the threat of seizure of the R.W. Naye was not sufficient to compel American to pay the claims. Since the payments were determined to be officious the court granted Valley's motion for summary judgment on the basis of Crain Brothers.

We first note that the lower court's conclusion that American could not be personally liable for the damage to the shore facilities is not free from doubt. In its amended answer Valley itself alleges inter alia that the casualty was due to the unseaworthiness of the R.W. Naye. Unseaworthiness of a vessel may be grounds for imposing in personam liability on the shipowner, even in the presence of a bareboat charter agreement. Kerr-McGee Corp. v. Law,479 F.2d 61, 63 (4th Cir. 1973). Crain Brothers was not decided on summary judgment; in that case it was determined that no possibility of in personam liability of the owner existed after a full trial of the issues. In this case if American breached its duty to provide the charterer with a seaworthy vessel and if such unseaworthiness was a proximate cause of the damage, as appellee alleges, it could be personally liable. Thus a material question of fact exists which precludes summary judgment even under the theory advanced in Crain Brothers. Blum v. Schuyler Packing Co., 508 F.2d 881, 883 (8th Cir. 1974).

If there were no genuine issue of material fact, however, American may still be entitled to subrogation rights against Valley. Subrogation is an equitable rather than a contractual doctrine applied in the interests of justice when one who is not a volunteer pays an obligation which should be imposed on another. See, e.g., Pearlman v. Reliance Insurance Co., 371 U.S. 132, 136--137, 83 S.Ct. 232, 9 L.Ed.2d 190 (1962); Restatement of Restitution § 162 (1937). Subrogation is available in admiralty. Compania Anonima Venezolana de Navegacion v. A. J. Perez Export Co., 303 F.2d 692, 696--697 (5th Cir.), cert. denied, 371 U.S. 942, 83 S.Ct. 321, 9 L.Ed.2d 276 (1962); The Etna, 138 F.2d 37, 39 (3d Cir. 1943); Petition of New York Trap Rock Corp., 172 F.Supp. 638, 647 (S.D.N.Y.1959).

In paying the claims for damage to the shore structures American was not acting as a volunteer. It is undisputed that the payments were made under compulsion to protect the owner's own interests. American Oil Co. v. McMullin, 508 F.2d 1345, 1349 (10th Cir. 1975); Restatement of Restitution, Supra, § 162, comment b at 655. Although it may later appear that neither American nor its vessel was liable, that was certainly not established when the claims were settled; the undisputed facts and the applicable law gave rise to a substantial likelihood that American or the R.W. Naye would be liable for the damage. A moving vessel which collides with a stationary shore structure is presumed to be at fault and has the burden of proving otherwise. Brown & Root Marine Operators, Inc. v. Zapata Off-Shore Co., 377 F.2d 724, 726 (5th Cir. 1967). We have already mentioned the possibility of in personam liability of the owner for unseaworthiness of his demised vessel. Furthermore, the owner who seeks to show he was relieved of his legal responsibilities because of an oral demise of his vessel bears a heavy burden to show that the charter party amounted to a demise. Guzman v. Pichirilo, 369 U.S. 698, 700, 82 S.Ct. 1095, 8 L.Ed.2d 205 (1962); Fitzgerald v. A. L. Burbank & Co., 451 F.2d 670, 676 (2d Cir. 1971). This is especially true when the captain and the pilot were employees of American. If it could not prove there was an oral demise the owner could be liable in personam for unseaworthiness or any error in navigation of the R.W. Naye which was a proximate cause of damage. Even if American could not be subject to in personam liability, there is the possibility of in rem liability of the R.W. Naye for any negligence of the charterer. The Barnstable, 181 U.S. 464, 467, 21 S.Ct. 684, 45 L.Ed. 954 (1901); Burns Brothers v. Central Railroad, 202 F.2d 910, 914 (2d Cir. 1953). A threat to seize the R.W. Naye was made by the claimants in this case. Valley asserts that the seizure could have been avoided by posting a bond or convincing the claimants to accept a letter of undertaking, promising that American would pay any judgment rendered. Valley contends that American should have waited until it was sued by the owners of the damaged structures, and then brought in the charterer and Valley, and any others, as third party defendants. See Fed.R.Civ.P. 14(c). American could have done so, but by pursuing the alternative it did (which was considerable simpler) we cannot agree that American was acting officiously. The payments were made under legal compulsion to avoid potential in personam and in rem liability, or at least a complex lawsuit. Dampskibsaktieselskabet v. Bellingham Stevedoring Co., 457 F.2d 889, 892 (9th Cir.), cert. denied, 409 U.S. 1024, 93 S.Ct. 466, 34 L.Ed.2d 316 (1972); Gulf Atlantic Transportation Co. v. Becker County Sand & Gravel Co., 122 F.Supp. 13, 19 (E.D.N.C.1954).

A third reason that the judgment of the court below must be reversed is that American can sue as assignee of the claims of the shore structures' owners. The rights of an assignee differ from those of a person entitled to subrogation. '(A) peson who discharges the obligation of another officiously is not entitled to subrogation, whereas a person who has obtained an assignment from the obligee can enforce the obligation without regard to any question of his officiousness.' Restatement of Restitution, supra, § 162, comment h, at 660. Assignments are clearly cognizable in admiralty. E.g., Ozanic v. United States, 188 F.2d 228, 231 (2d Cir. 1951); The Mandu, 102 F.2d 459, 461--462 (2d Cir. 1939); Republic of Turkey v. Zadeh, 112 F.Supp. 933, 934 (S.D.N.Y.1953). In this case American obtained valid assignments of the rights of the three claimants against Valley. Valley challenges the validity of those assignments, however, on the basis that by releasing American the damaged parties also released Valley, and, therefore, argues Valley, there was nothing to assign.

Each claimant executed one document in favor of American which purported to be both a release of the party's claim against American and assignment of its claim against Valley. ¹ Valley would have us read each document as two, with the first, the release, executed before the second, the assignment. This argument would also require us to hold that execution of the assignment portion of each document was a meaningless act. Obviously each claimant had to intend to retain its cause of action against Valley or they would have had nothing to assign. Basic to contract interpretation are the principles that the writing is read as a whole and interpreted in a way that will give effect to its general purpose, and an interpretation which makes the contract valid and reasonable will be preferred to that which would make it void or meaningless. 4 Williston on Contracts, 710--711, 747--749 (3d ed. 1961). And in releases as in other contracts, the intent...