Emmco Insurance Co. v. Wallenius Caribbean Line, SA, 73-1895.

• Decision Date: 12 April 1974
• Docket Number: No. 73-1895.,73-1895.
• Citation: 492 F.2d 508
• Parties: EMMCO INSURANCE COMPANY, Plaintiff-Appellant, v. WALLENIUS CARIBBEAN LINE, S.A., Defendant-Third Party Plaintiff-Appellee, v. GULFSTREAM SHIPPING CORPORATION, Third Party Defendant.
• Court: U.S. Court of Appeals — Fifth Circuit

492 F.2d 508 (1974)

EMMCO INSURANCE COMPANY, Plaintiff-Appellant, v. WALLENIUS CARIBBEAN LINE, S.A., Defendant-Third Party Plaintiff-Appellee, v. GULFSTREAM SHIPPING CORPORATION, Third Party Defendant.

No. 73-1895.

United States Court of Appeals, Fifth Circuit.

April 12, 1974.

COPYRIGHT MATERIAL OMITTED

F. Lawrence Matthews, William C. Cramer, Miami, Fla., for plaintiff-appellant.

Frank J. Marston, Miami, Fla., for Wallenius Caribbean Line.

Mercer K. Clarke, Miami, Fla., for Gulfstream Shipping.

Before TUTTLE, GEWIN and RONEY, Circuit Judges.

TUTTLE, Circuit Judge:

This is a suit for damages for breach of contract by the insurer, Emmco Insurance Company, who has been subrogated to the rights of the consignee, Quality Sales Corporation (Quality), against the carrier, Wallenius Caribbean Line (WCL).¹

The district court held under the Carriage of Goods by Sea Act, 46 U.S.C.A. § 1300 et seq., that the plaintiff had failed to carry its burden of proof (1) on liability, by failing to demonstrate that the partial thawing of the cargo resulted in spoilage and unmarketability, and (2) if liability was proven, of establishing the amount of damages by showing the difference between the fair market value of the cargo at destination had there been no spoilage and the market value as damaged. In other words, the consignee caused the cargo to be destroyed because of its deteriorated condition. The insurer reimbursed Quality $15,902.95 for the cargo pursuant to its insurance policy. In the subsequent suit by the insurer against the carrier, the district court found that there had been no proven damage. Plaintiff-appellant asserts that the district court's decision was "clearly erroneous."

FACTS

The cargo, 2,475 cartons of frozen french fried potatoes, was stowed in two refrigerated trailers which were placed aboard a freighter operated by WCL in August, 1971 at Port Everglades, Florida. On August 15, 1971, the trailers containing the cargo were unboarded in St. Thomas, Virgin Islands. One trailer was delivered to Quality on August 16, while the other remained in the trailer holding area. Because of the thawed condition of the cargo, discovered by Quality's employees while unloading cartons on August 16, a marine surveyor, Mr. Robert Crytser, was engaged by Quality to ascertain the fitness for consumption of these potatoes. On August 17, Mr. Gonzalez Sibila, a marine surveyor from San Juan, Puerto Rico, was brought in by WCL to inspect the cargo. Also, on that date Mr. Edward Buzzell, an inspector from the Department of Health, Bureau of Environmental Sanitation, inspected and determined that the cargo should be condemned. A telephone offer to purchase the shipment sight unseen by a salvage broker in San Juan, Puerto Rico, for 40% of the invoice value of the cargo was allegedly made but not acted upon by Quality.² The french fried potatoes were subsequently destroyed.

Appellant maintains that if the hearsay statements, improperly admitted, are subtracted from the evidence at trial, the district court's decision is "clearly erroneous." Fed.R.Civ.P. 52(a). An examination of the properly admissible evidence reveals that the court's findings "are without adequate evidentiary support in the record" and leaves us with a "definite and firm conviction" that the district court was mistaken. Chaney v. City of Galveston, 368 F.2d 774, 776 (5th Cir. 1966).

LAW

Appellant excepts to two conversations, both testified to by Sibila, WCL's marine surveyor, as inadmissible hearsay. Fed.R.Civ.P. 43(a). Each statement was accepted by the trial court, over appellant's objections, for the truth of the information in the conversation.

The first conversation was an alleged offer, which Sibila stated a San Juan salvage broker conveyed to him, to salvage the cargo for 40% of its invoice value. The trial court inferred from this statement:

"The court finds that the amount does not establish the fair market value of the cargo since the offer was submitted sight unseen and by an individual who specializes in the purchase and sale of merchandise on a salvage basis. The court, however, does find that said offer constitutes credible evidence that the cargo was marketable and not unfit for human consumption as alleged by the plaintiff."

Hearsay is commonly defined as an out of court statement accepted for the truth of what the statement asserts. McCormick § 226; 5 Wigmore § 1361. This statement was made by an out of court declarant. One of the inferences that arises from its assertion is that the french fried potatoes have value as a food product, i. e. are edible.³ Since the court admitted it for that purpose, it erred. Sharp v. United States, 191 U.S. 341, 349, 24 S.Ct. 114, 48 L.Ed. 211 (1903); United States v. Carter, supra; Farmers Union Federated Co-op. Ship. Association v. McChesney, 251 F. 2d 441, 446-447 (8th Cir. 1958); Carantzas v. Iowa Mutual Insurance Co., 235 F.2d 193, 196-197 (5th Cir. 1956).

The second conversation is contended to constitute hearsay within hearsay. The witness Sibila stated:

"Yes, there was one Mr. — there was a health inspector from the Virgin Islands Department of Health who had seen the merchandise and acting upon request of the consignees made arrangements for destruction of the goods in the Virgin Islands."

The district court accepted this as true: "Credible evidence was introduced, however, that the purported order of condemnation was issued at the request of Quality Sales Corporation." Appellant argues that not only the statement by Sibila of what Buzzell said is hearsay, but that what Buzzell said that the consignee said totals double hearsay.

The district court clearly erred in admitting this twice handed-down statement. General Tire of Miami Beach v. NLRB, 332 F.2d 58, 61 (5th Cir. 1964). Not only was there no opportunity to cross-examine, but the alleged declarant, an employee of Quality, is not even identified. Appellant had no way of attempting to locate the declarant for trial.

The appellee does not offer, and we cannot discover, a rebuttal, in the form of an exception to the hearsay rule or other rationale, to appellant's hearsay objections. Appellee submits, rather, that the court had correctly concluded that appellant had failed in his burden of proof on the issue of liability before the court considered the damaging hearsay statements. Therefore, it is necessary next to re-examine the evidence on liability, excluding the hearsay.

In reviewing a trial court's determination, an appellate court is bound by the standard of Fed.R.Civ.P. 52(a):

"Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses."⁴

However, the presumptions under this rule normally accorded the trial court's findings are lessened where the evidence consists of documentary evidence, depositions, and "situations where credibility is not seriously involved or, if it is, where the reviewing court is in just as good a position as the trial court to judge credibility."⁵ 5A Moore's Federal Practice ¶ 52.04 (2d Ed. 1969).

The evidence at trial consisted almost totally of depositions and documents. The components of the evidence on the issue with which we are concerned, except for the minor testimony of Mr. Pedrito Francois, the Director of the Bureau of Environmental Health for the Virgin Islands, are depositions and documents.⁶ In Sicula Oceanica, S. A. v. Wilmar Marine Engineering and Sales Corp., 413 F.2d 1332 (5th Cir. 1969), an admiralty suit involving similar types of evidence, this Court stated:

"This action in admiralty was tried without a jury and was submitted to the district court entirely on depositions and documents. The appellant\'s burden, under Fed.R.Civ.P. 52(a), of showing that the trial judge\'s findings of fact are `clearly erroneous\' is not as heavy, therefore, as it would be if the case had turned on the credibility of witnesses appearing before the trial judge. Galena Oaks Corp. v. Scofield, 5 Cir. 1954, 218 F.2d 217. Caradelis v. Refineria Panama, S. A., 5 Cir. 1967, 384 F.2d 589." Id. at 1333-1334, n. 2.

From a reading of the Carriage of Goods by Sea Act, 46 U.S.C.A. § 1300 et seq., and the cases dealing with this Act, it is clear that appellant could establish a prima facie case merely by proof of receipt of the cargo by the carrier in good condition and delivery at destination damaged. Compagnie De Navigation v. Mondial United Corp., 316 F.2d 163 (5th Cir. 1963); M. W. Zack Metal Co. v. S.S. Birmingham City, supra, 311 F.2d at 337; Daido Line v. Thomas P. Gonzalez Corp., 299 F.2d 669, 671 (9th Cir. 1962); Interstate Steel Corp. v. S.S. "Crystal Gem," 317 F.Supp. 112, 118 (S.D.N.Y. 1970).⁷ Introduction of the clean on board bill of lading by appellant satisfies the showing of good order of the cargo at the time of shipping. 46 U.S.C.A. § 1303(4); Compagnie De Navigation v. Mondial United Corp., supra, 316 F.2d at 172-173. The pertinent issue concerning liability on appeal, therefore, is whether the partial thawing of the cargo caused total loss or damage to the cargo.⁸

On this issue, the district court held:

"The court concludes that while the condition of this cargo upon receipt of Quality Sales Corp. may have been different from the condition of the cargo at the time it was loaded into the trailers at Port Everglades, Florida, this change or difference did not result in actual damage to the cargo nor monetary damage to Quality Sales Corp."

To summarize more specifically, the evidence of unmarketability consisted of an exhibit of the Health Department's report by their inspector Buzzell declaring the french fries inedible, and the deposition of Quality's marine surveyor, Crytser, supporting this conclusion. On the side of marketability, the evidence was comprised of the testimony of WCL's marine surveyor, Sibila, stating that the potatoes were uncontaminated and if refrozen,...