General Intermodal Logistics Corp. v. Mainstream Shipyards & Supply, Inc.

• Decision Date: 21 December 1984
• Docket Number: No. 83-4395,83-4395
• Citation: 748 F.2d 1071
• Parties: GENERAL INTERMODAL LOGISTICS CORPORATION, a corporation, d/b/a Gilco Marine Transport Services, Plaintiff-Appellant, v. MAINSTREAM SHIPYARDS & SUPPLY, INC., a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1071

748 F.2d 1071

GENERAL INTERMODAL LOGISTICS CORPORATION, a corporation d/b/a Gilco Marine Transport Services, Plaintiff-Appellant, v. MAINSTREAM SHIPYARDS & SUPPLY, INC., a corporation Defendant-Appellee.

No. 83-4395.

United States Court of Appeals Fifth Circuit.

Dec. 21, 1984.

Lake, Tindall, Hunger & Thackston, Greenville, Miss., Goldstein & Price, Hubert I. Binowitz, St. Louis, Mo., for plaintiff-appellant.

W. Scott Welch, III, Rhesa H. Barksdale, Jackson, Miss., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Mississippi.

Before WISDOM, RANDALL and JOLLY, Circuit Judges.

PER CURIAM:

Several years ago General Intermodal Logistics Corp. (Gilco), now the appellant, brought suit against Mainstream Shipyards & Supply, Inc. (Mainstream), alleging that Mainstream negligently repaired a towboat owned by Gilco. In the first trial the district court, sitting without jury, found Mainstream liable for negligent repair and entered judgment for Gilco for $79,444.38. 502 F.Supp. 38. Mainstream appealed and this court affirmed the district court's findings of fact, but vacated and remanded the portion of the judgment concerning damages. 666 F.2d 129. The district court was directed to consider whether a release entered into between Mainstream and General Marine Towing Company (GMT), Gilco's predecessor in interest, barred the action. On remand, the district court found that the release was supported by sufficient consideration and held that it barred recovery. Gilco appeals. We hold that there was no consideration to support the release. We remand and direct the district court to enter judgment for Gilco and make a determination of damages consistent with our prior opinion.

I.

As noted, this case is before us for the second time. The underlying facts have been fully developed in the district court's initial opinion, 502 F.Supp. 38, and in our earlier opinion, 666 F.2d 129. To promote a clear understanding of the case, however, we need to restate the facts leading up to the district court's judgment on remand, which is the subject of this appeal.

The defendant, Mainstream, which operated a shipyard for the repair of commercial towboats, entered a contract on June 13, 1974, with GMT to repair and refurbish the M/V JANE T, a vessel wholly owned by GMT. GMT was a Mississippi corporation, with offices in Greenville, Mississippi, formed for the purpose of operating a marine transportation business. The plaintiff, Gilco, owned fifty percent of the shares of stock of GMT and James Nowell and Emery Skelton, both Greenville residents, each owned twenty-five percent of the stock.

Before entering the GMT contract, Mainstream had offered essentially the same contract to Gilco. Because of arrangements between Gilco and GMT, however, the written contract was entered into by and between Mainstream and GMT. Charles R. Glenn, Vice President of Gilco, signed the contract on behalf of GMT. The contract provided that Mainstream would install two engines in the towboat and modify the bases to suit the new engines and reduction gears. In addition, Mainstream agreed to furnish and install two main engine lubricating-oil priming pumps, two new intermediate shafts with bearings, and reduction gear oil coolers, filters and relief valves.

Upon completion of the work in November 1974, Mainstream invited Skelton, then Vice President of GMT, to accompany its personnel on a sea trial of the M/V JANE T. Skelton complained about a vibration which Mainstream adjusted to the satisfaction of all parties. Ten days before completion of the work, however, Mainstream's president, Joe Williams, learned that title to the towboat had been transferred to Gilco and would be operated by Gilco instead of GMT. Williams stated that because of this development, he prepared a document entitled Acceptance and Release, which he wanted signed by Gilco before the vessel would be delivered. The document provided "[t]hat for and in consideration of the delivery of the M/V JANE T pursuant to the terms of the contract ... the Buyer does hereby ... release ... Seller ... from any and all rights, claims, liens, remedies or causes of action of whatever nature for all damages arising from the failure, if any, of Seller to comply with the terms of said contract." The document was presented to Skelton on December 9, 1974, and he signed it on the same day. The release recited that he executed it "after having first obtained the authority from General Marine Towing Company, Inc., and Gilco Marine Transport." Gilco does not contest that Skelton properly read the document before signing it or that he had authority to sign on behalf of Gilco. Upon executing the release, Mainstream delivered the M/V JANE T to Gilco.

After delivery by Mainstream, the JANE T, which was renamed the JANE ELIZABETH, was, for lack of business, moored in Lake Ferguson near Greenville until mid-May 1975. After being moved to Memphis, Tennessee, for more economical fleeting, the JANE ELIZABETH proceeded up the Mississippi River to Cattlesburg, Kentucky, to fulfill a towing contract. During this run the vessel encountered problems, including excessive vibration and instances of the governor prematurely shutting off the engine. As a result of these difficulties, Gilco contacted National Marine Service, the company that provided and installed the engines at Mainstream's shipyard. Repairmen from National Marine attended the vessel and found that oil filter elements were not installed in the cannisters and that welding slag, which normally would have been absorbed by the oil filter elements, had been allowed to remain in the engines' systems.

Following repair by National Marine, the vessel proceeded up the Ohio River where it continued to experience engine problems. The towboat was then drydocked near Portsmouth, Ohio, and checked by B & Q Marine and Repair, Inc. of Point Pleasant, West Virginia. The B & Q repairmen discovered original errors in alignment between the tail and intermediate shafts, and as a result realignment work was performed by that company. Additionally, at Gilco's request National Marine dispatched its service engineer to the drydock site who discovered that all bearings and various other elements of the engines were in need of replacement or repair.

Because of these problems, Gilco filed suit in the Northern District of Mississippi against Mainstream for damages resulting from the negligent repair of the M/V JANE T. The district court, sitting without a jury, found that the absence of oil filter elements and the presence of welding slag in the lubricating oil system contributed to the damage to the vessel's engines. 502 F.Supp. at 41. The court found that Mainstream was obligated to install oil filter elements in the engines and remove welding slag and that it negligently failed to do so. Id. The district court further found that Mainstream negligently failed to align intermediate and tail shafts with the engines, which caused excessive vibration during normal operations. Id. The district court determined that the repair costs paid to National Marine and B & Q to repair the vessel were a direct and proximate result of Mainstream's negligence and that a disclaimer of warranty in the contract did not serve to bar Gilco's action. Id. at 41-42.

Mainstream appealed that judgment to this court. 666 F.2d 129. Although recognizing that the evidence was in sharp dispute, we refused to overturn the district court's finding as clearly erroneous. Id. at 132. We noted, however, that the district court did not consider the effect of the release in its conclusions of law, although it was briefly mentioned in its findings of fact. Id. at 133. We affirmed the district court's findings of fact, but because it was not apparent whether the district court properly considered the effect of the release, we vacated the portion of the judgment that awarded damages and remanded for a determination whether the release barred recovery and "to determine the measure of damages as may be appropriate." Id.

On remand to the district court, another district judge presided because of the death of the former judge. The district court, unable to make adequate findings of fact concerning the validity of the release based upon the record, ordered further proceedings. After an evidentiary hearing, the district court made further findings of fact and concluded that there was sufficient consideration for the release between Mainstream and Gilco. Further, the court held that the release applied to negligence actions. Concluding that the release barred Gilco's negligence action, the court entered judgment for Mainstream. The district court thus found it unnecessary to redetermine the amount of damages as directed by our former panel. This appeal followed.

II.

The dispositive issue in this appeal is whether sufficient consideration supports the Acceptance and Release. We hold that because there was no consideration, the release is of no force or effect. The basis for our holding is that Mainstream had a preexisting contractual duty to deliver the vessel to GMT or its successor in interest, and that it had no right to select who might operate the vessel after it left the shipyard absent a contractual provision to the contrary. Because there was no consideration to support the release, it is not necessary to decide whether the release bars actions for negligence or whether the district court erred in considering parol evidence in determining the existence vel non of consideration.

III.

On remand, the district court reiterated the general rule that a promisor's agreement to fulfill an existing legal obligation is not sufficient consideration to support a contract. The district court, however, relying on Morrison Flying Service v. Deming National Bank, 404 F.2d 856 (10th Cir.1968), cert. denied, 393 U.S. 1020, 89 S.Ct. 628, 21 L.Ed.2d 565 (1969), held that a...