Bisso v. Inland Waterways Corporation

• Decision Date: 23 March 1956
• Docket Number: No. 910.,910.
• Parties: William A. BISSO, Jr., Receiver, New Orleans Coal & Bisso Towboat Company, Libellant, v. INLAND WATERWAYS CORPORATION, Respondent.
• Court: U.S. District Court — Eastern District of Louisiana

139 F. Supp. 387

William A. BISSO, Jr., Receiver, New Orleans Coal & Bisso Towboat Company, Libellant, v. INLAND WATERWAYS CORPORATION, Respondent.

No. 910.

United States District Court E. D. Louisiana, New Orleans Division.

March 23, 1956.

Deutsch, Kerrigan & Stiles, Francis Emmett, New Orleans, La., for libellant.

George R. Blue, M. Hepburn Many, New Orleans, La., for respondent.

J. SKELLY WRIGHT, District Judge.

In prior proceedings in this case,¹ respondent has been held liable for the value of the Steel Tank Barge Bisso No. 9 on the date of her loss, May 12, 1944. The Commissioner's report on valuation of this vessel at the time of the loss has been filed.² He finds that the vessel had a reproduction cost of $31,000, to which he added $7,350 charter hire, contracted for but not earned by the vessel at the time of the loss, making a total valuation of $38,350, from which he subtracted the barge's salvage value following the casualty of $1,800, thus arriving at a net valuation of $36,550.

The Commissioner's valuation is clearly erroneous and must be disregarded.³ Instead of finding market value, as he was required to do under the law,⁴ he found only reproduction cost, to which he added $7,350 of unearned charter hire, which, of course, is not an assessable item of damage.⁵ The Commissioner also rejected depreciation as a consideration in determining valuation where reproduction cost is used.⁶ This court, therefore, will proceed de novo in fixing the value of the Bisso No. 9 on May 12, 1944.

Where a vessel is a total loss, the measure of damages is its market value at the time of the loss.⁷ Market value is defined as that sum which would be paid for the vessel by a willing buyer after fair negotiations with a willing seller. Standard Oil Co. of New Jersey v. Southern Pacific Co., supra. Usually market value is established by contemporaneous sales of similar property in the ordinary course of business. Where market value cannot be established by contemporaneous sales, other evidence is resorted to. Standard Oil Co. of New Jersey v. Southern Pacific Co., supra. Such other evidence may consist of any circumstance which would reasonably influence the valuation of the vessel at the time in question. Carl Sawyer, Inc., v. Poor, supra. "The ascertainment of value is not controlled by artificial rules. It is not a matter of formulas, but there must be a reasonable judgment having its basis in a proper consideration of all relevant facts." Standard Oil Co. of New Jersey v. Southern Pacific Co., supra, 268 U.S. at page 156, 45 S.Ct. at page 467.

While "reconstruction cost less depreciation is an accepted guide to lead the way to the determination of the value of a vessel when market value cannot be shown",⁸ it is not an absolute measure of a vessel's value. It is merely "one of the relevant facts, all of which must be considered in arriving at a fair judgment of value."⁹ For example, in addition to reproduction cost less depreciation, capitalization of earning capacity, book value to the owner, opinions of marine surveyors and engineers, the amount of insurance on the vessel are additional criteria¹⁰ which may be helpful in arriving at the sometimes elusive concept of what a willing buyer would pay to a willing seller for the property in question.

In suit here for judgment of valuation is a steel tank vessel 175' in length, 40' in beam, 9.5' in depth, with a rated carrying capacity of 9,000 barrels. It was completed in 1942 at a cost of $25,000, and at the time of loss on May 12, 1944, her insurance coverage was $20,000.¹¹ At the time of her loss, the barge was operating under a charter expiring November 21, 1944, for $1,100 per month. After her loss, the vessel was recovered and sold as scrap for $1,800.

The record shows, and the parties agree, that there were no contemporaneous sales of similar vessels in 1944 for the reason that this country was at the time at war, and the Government, in coordinating war efforts, had virtual control of all tank barges and shipyards. In the absence of contemporaneous sales, the parties have largely limited their efforts to prove valuation to proof of reproduction costs. Libellant claims that the proper valuation of the barge after subtracting $1,800 for salvage is $45,350, while respondent argues that the Commissioner's finding as to the reproduction cost of $31,000 should be accepted, but that depreciation at 5% per annum plus salvage of $1,800 should be deducted therefrom, leaving a total of $26,100 as the measure of damages in this case.

In its efforts to prove reproduction cost, libellant used five witnesses, three independent experts and two of its employees, who arrived at reproduction costs of the vessel, at the time of the loss, of $38,824.44, $38,500, $43,000, $39,000 and $40,000 respectively.¹² Respondent used three expert witnesses who testified that reproduction cost of the Bisso No. 9 at the time of loss was $32,000, $35,354 and $30,690.¹³

After a study of the testimony of all the witnesses and a consideration of the methods by which they arrived at the reproduction cost, it is this court's opinion that the reproduction cost of the Bisso No. 9 on May 12, 1944 was $35,000. This figure is approximately the same as the one obtained by the Government's expert, Landwehr, based on the actual cost of similar barges constructed for the Government in 1944. It also approximates a reproduction cost of $36,000 obtained on May 22, 1944 from the Nashville Bridge Company, builder of the Bisso No. 9. The quotation from the Nashville Bridge Company and the calculation of Landwehr are deemed to be more reliable guides to actual reproduction cost than the estimates of the other expert witnesses.

This reproduction cost of $35,000, however, is not the valuation of the vessel. At the time in question, it is highly doubtful that any private person, such as the libellant herein, would have been able to obtain the necessary steel and shipyard facilities to build a vessel similar to the Bisso No. 9. This circumstance, of course, increases the amount that a willing buyer would pay to a willing seller for the barge. It must, therefore, be considered in determining market value. An indication of this increase is shown by the fact that libellant was able to charter the vessel for $1,100 per month. Since this enhancement in value is not reflected in the reproduction cost, it must be added to the reproduction cost of the vessel on the day of the loss. This enhancement, while difficult to estimate with any degree of accuracy, would be at least $3,000, which must be added to reproduction cost after depreciation. Allowing depreciation at the usual 5% per annum for two years and subtracting the $1,800 in salvage, the net recovery in this case for the libellant is $32,700 plus interest.

Libellant maintains that depreciation should not be charged against reproduction cost for the Bisso No. 9 because the scarcity of vessels at the time was such that a barge two years old would bring the same price as a new barge, and that the value of such vessels during the war was actually increasing rather than decreasing. This suggestion will not bear analysis. The increase in value of the barge has already been taken into account in estimating not only the cost of reproduction, but also the enhancement in value resulting from the difficulty in procuring steel and shipyard facilities to build a barge during the war. Libellant's suggestion that no depreciation be charged is indeed novel. In no case, and there have been many involving total loss during wartime, has a court failed to allow depreciation where valuation is predicated upon reproduction cost.¹⁴

Decree accordingly.

1 Bisso v. Inland Waterways Corp., D.C., 114 F.Supp. 713, 1953 A.M.C. 1664, affirmed, 5 Cir., 211 F.2d 401, reversed 349 U.S. 85, 75 S.Ct. 629, 99 L.Ed. 911.

2 The complete Commissioner's Report reads as follows:

"On Monday, July 25, 1955, pursuant to Notice dated July 14, 1955, the testimony of the following witnesses was taken before me: Arthur A. Grant; William A. Bisso, Sr.; William A. Bisso, Jr.; Frank A. Geffs; Frank Riess.

"On September 16th and 23rd, 1955, pursuant to an appointment of this Honorable Court to act as Commissioner to determine the valuation of Bisso Oil Barge No. 9, the testimony of the following witnesses was heard: Captain Harry Koch; Alvah C. Landwehr; Sam P. Stone.

"At the conclusion of all the testimony and argument of Counsel, Proctors were given an opportunity to submit memoranda, which they did in October 1955.

"Price of construction in 1944 of a similar oil Barge as the Bisso No. 9, after taking all the evidence of Libelant's and Respondent's witnesses into consideration, would, in my opinion, be approximately $31,000.00 and, amount of the Charter...