Jig The Third Corp. v. Puritan Marine Ins. Underwriters Corp.

• Decision Date: 15 September 1975
• Docket Number: No. 74-2709,74-2709
• Parties: 17 UCC Rep.Serv. 944 JIG THE THIRD CORPORATION, Plaintiff-Appellee, v. PURITAN MARINE INSURANCE UNDERWRITERS CORPORATION et al., Defendants-Third-Party Plaintiffs-Appellees, ATLANTIC MARINE, INC., Third-Party-Defendant-Appellant. James I. GEORGE, Jr., et al., Plaintiffs-Appellees, v. ATLANTIC MARINE, INC., Defendants-Appellants. JIG THE THIRD CORPORATION et al., Plaintiffs-Appellees, v. Y. E. HALL, INC., Defendant-Third-Party Plaintiff-Appellee, ATLANTIC MARINE, INC., Third-Party-Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 171

519 F.2d 171

17 UCC Rep.Serv. 944

JIG THE THIRD CORPORATION, Plaintiff-Appellee, v. PURITAN MARINE INSURANCE UNDERWRITERS CORPORATION et al., Defendants-Third-Party Plaintiffs-Appellees, ATLANTIC MARINE, INC., Third-Party-Defendant-Appellant.

James I. GEORGE, Jr., et al., Plaintiffs-Appellees, v. ATLANTIC MARINE, INC., Defendants-Appellants.

JIG THE THIRD CORPORATION et al., Plaintiffs-Appellees, v. Y. E. HALL, INC., Defendant-Third-Party Plaintiff-Appellee, ATLANTIC MARINE, INC., Third-Party-Defendant-Appellant.

No. 74-2709.

United States Court of Appeals Fifth Circuit.

Sept. 15, 1975.

W. T. Womble, Houston, Tex., Marshal Graham, Harlingen, Tex., George D. Gabel, Jr., Jacksonville, Fla., for Atlantic.

Paul Q. O'Leary, Paul Y. Cunningham, Jr., Brownsville, Tex., for Puritan Marine Insurance Underwriters Corp. & Y. E. Hall, Inc.

Appeal from the United States District Court for the Southern District of Texas.

Before GOLDBERG, CLARK and GEE, Circuit Judges.

GOLDBERG, Circuit Judge:

On August 28, 1971, M/V PRINCESS KE AH SOM PAH, a shrimp boat, sank in 15 fathoms of water in the Gulf of Mexico south of Port Aransas, Texas. There was no loss of life or personal injury, but the vessel itself and its gear, including its engines, navigational equipment and rigging, were claimed by the sea. The owners of the PRINCESS, James I. George, Jr., James I. George, III and JIG III Corporation (referred to collectively hereafter as JIG III), sued the vessel's manufacturer, Atlantic Marine, Inc., advancing three theories of recovery: one in contract breach of warranty and two in tort negligent design and construction and strict liability. ¹ After a trial, the jury found that the sinking of the PRINCESS resulted from a defect in the design or construction of the boat. ² The jury also found in answer to a special interrogatory that Atlantic Marine was negligent in the "design and/or manufacture of the vessel." Atlantic Marine appeals, contending that JIG III's remedy, if any, must be found within the four corners of the contract of sale. We believe, however, that nothing in that contract can be construed to exonerate Atlantic Marine of liability for its own negligent design or construction of the PRINCESS, and we affirm the jury's verdict on that basis.

I

At trial, JIG III endeavored to prove that Atlantic Marine had negligently designed and constructed the PRINCESS' shaft assembly, and that this negligence was the proximate cause of the vessel's untimely demise. Plaintiff's several expert witnesses testified that Atlantic Marine's utilization of a 41/2-inch, cold-rolled steel shaft instead of the standard 4-inch, stainless steel shaft for its boats was very unsound, and that this design was not approved by the American Bureau of Shipbuilders. These witnesses also noted other defects in the shaft assembly. Finally, JIG III showed that three other Atlantic Marine-built shrimpboats of similar design had either sunk or suffered serious damage as a result of the same sort of malfunction as that which led to the loss of the PRINCESS. In sum, especially considering the fact that upon review of the sufficiency of the evidence to support a jury verdict, this Court must view that evidence in the light most favorable to the prevailing party below, Boeing Co. v. Shipman, 5 Cir. (en banc ) 1969, 411 F.2d 365, 374, we believe that there was ample evidence to support the jury's finding of negligent design and construction by Atlantic Marine.

Atlantic Marine contends, however, that whatever the evidence may have been, it ought not to have been submitted to the jury, for in the particular circumstances of this case, JIG III must obtain recompense on a contract theory or not at all, so that there was properly no tort theory for the jury to consider. Atlantic Marine reasons that where, as here, the genesis of the relationship between two parties is contractual in nature, where the parties are of relatively equal bargaining power, and where the only loss complained of is the loss of the chattel which was the subject of the contract, the aggrieved buyer is limited to the remedies afforded by that document. This result is said to be the only proper one because the buyer and seller in such a situation clearly intended that all their future relations with respect to the chattel should be governed by the terms of the bargained for contract of sale, and because another result, that is, the availability of a tort action to the buyer, would upset the finely-tuned economic calculations which underlay the making of the initial agreement.

We preface our discussion of this issue by pointing out that the law governing the existence of any tort-based cause of action here is the general maritime law. When an ocean-going shrimpboat sinks in 15 fathoms of water in the Gulf of Mexico and the sinking is allegedly tortious, there is maritime locality plus a significant relationship to traditional maritime activity, and the tort, if recognized by the law, is maritime in nature. See Executive Jet Aviation, Inc. v. City of Cleveland, 1972, 409 U.S. 249, 268, 93 S.Ct. 493, 505, 34 L.Ed.2d 454, 467; ³ In re Motor Ship Pacific Carrier, 5 Cir. 1974,489 F.2d 152, 154-55, cert. denied sub nom. Union Camp Corp. v. Gypsum Carrier, Inc., 417 U.S. 931, 94 S.Ct. 2643, 41 L.Ed.2d 235; Union Oil Co. v. Oppen, 9 Cir. 1974, 501 F.2d 558, 560-63. This would be true even though the conduct complained of may have been negligent construction or defective design and may have occurred ashore. See Watz v. Zapata Off-Shore Co., 5 Cir. 1970, 431 F.2d 100, 112-14; Oppen v. Aetna Ins. Co., 9 Cir. 1973, 485 F.2d 252, 256. Of course, under certain circumstances and on familiar conflicts principles, a court applying the general maritime law might look to the law of a particular state when that state has strong contacts with the parties or other legitimate interests. This would be especially appropriate when the relationship of the allegedly tortious behavior to traditional maritime behavior is enough to confer admiralty jurisdiction but is, in the main, slight. See Watz v. Zapata Off-Shore Co., supra. When, however, as in this case, the allegedly tortious act or omission causes an oceangoing vessel to sink on the high seas and the act occurred during the shipbuilding process, the interests of admiralty overbalance those which any state might have.

The basic difficulty with Atlantic Marine's contention that JIG III's grievance against it must be resolved solely within the bounds of their contractual relationship is that torts ordinarily are not considered to constitute a part of any contractual relationship. On the contrary, the common assumption is that parties intend their contractual relations to be governed by the law of contract, and their tortious relations, if any, to be governed by the law of torts; this is true even if the tortfeasor is a seller, the victim the buyer, and the only loss is property damage to a chattel purchased by the buyer from the seller. As Dean Prosser remarks There can be no doubt that the seller's liability for negligence covers any kind of physical harm, including not only personal injuries, but also property damage to the defective chattel itself.

W. Prosser, The Law of Torts § 101 at 665-66 (4th ed. 1971). Numerous recent cases have demonstrated that a manufacturer's negligent design or manufacture of a product gives rise to a cause of action in tort, even where the aggrieved buyer is the economic equal of the seller and where the only damage is to the purchased chattel itself. See, e. g., Sterner Aero AB v. Page Airmotive, Inc., 10 Cir. 1974, 499 F.2d 709; Keystone Aeronautics Corp. v. R. J. Enstrom Corp., 3 Cir. 1974, 499 F.2d 146; Continental Grain Co. v. Fegles Const. Co., 8 Cir. 1973, 480 F.2d 793; Neville Chemical Co. v. Union Carbide Corp., 3 Cir. 1970, 422 F.2d 1205, cert. denied, 400 U.S. 826, 91 S.Ct. 51, 27 L.Ed.2d 55.

Atlantic Marine suggests, however, that whatever the law may once have been, the Uniform Commercial Code's implied warranty of merchantability, U.C.C. § 2-314, ⁴ has subsumed the tort of negligent design and manufacture, thus turning a tort claim into a contractual one. We believe that this argument fundamentally misapprehends the distinction between tort and contract, for it assumes that the "former" tort of negligent design and manufacture was really nothing more than a sort of quasi-contractual warranty of non-negligent design and manufacture. While such a legal abstraction might well provide the missing link in products liability law, we have been unable to find any precedential traces of this creature, and we conclude that it has never existed in corporeal form. Dean Wade recently addressed this same problem and reached this result, reasoning that the complete absence of any U.C.C. provisions dealing specifically with negligence is "quite significant," for at the time of the Code's adoption, the law of products liability including a seller's liability for negligent design and manufacture was well-established, so that if the U.C.C. had been intended to supplant the law of negligence, its framers would certainly have said so. Dean Wade believes that the legislative history of the U.C.C. firmly supports his and our conclusions. ⁵ See Wade, Is Section 402A of the Second Restatement of Torts Preempted by the U.C.C. and Therefore Unconstitutional?, 42 Tenn.L.Rev. 123, 131-35 (1974).

The admiralty courts have followed the general rule that a tort cause of action exists in a situation such as that presented by this case. See Houston-New Orleans, Inc. v. Page Engineering Co., E.D.La.1972, 353 F.Supp. 890, 899; Sears, Roebuck & Co. v. American President Lines, Ltd., N.D.Cal.1971, 345 F.Supp. 395, 402; Taisho Fire & Marine v. Vessel Montana, N.D.Cal.1971, 335 F.Supp. 1238, 1239; Dudley v. Bayou Fabricators, Inc., S.D.Ala.1971, 330 F.Supp. 788, 791; cf. Alcoa S. S. Co. v. Charles Ferran & Co., 5 Cir. 1967, 383 F.2d 46,...