Ocean Cruise Lines, Inc. v. Abeta Travel Service, Inc.

• Decision Date: 23 February 1990
• Citation: 562 So.2d 205
• Parties: OCEAN CRUISE LINES, INC. v. ABETA TRAVEL SERVICE, INC. ABETA TRAVEL SERVICE, INC. v. OCEAN CRUISE LINES, INC. 87-1506, 87-1534.
• Court: Alabama Supreme Court

Page 205

562 So.2d 205

OCEAN CRUISE LINES, INC. v. ABETA TRAVEL SERVICE, INC.

ABETA TRAVEL SERVICE, INC. v. OCEAN CRUISE LINES, INC.

87-1506, 87-1534.

Supreme Court of Alabama.

Feb. 23, 1990.

Rehearing Denied April 20, 1990.

C. Robert Gottlieb, Jr. and William W. Watts of Reams, Vollmer, Philips, Killion, Brooks & Schell, Mobile, for appellant/cross-appellee.

George M. Walker and Michael D. Knight of Hand, Arendall, Bedsole, Greaves, & Johnston, Mobile, for appellee/cross-appellant.

ALMON, Justice.

These appeals are from a judgment rendered on a jury verdict in favor of Abeta Travel Service, Inc. ("Abeta"), and against Ocean Cruise Lines, Inc. ("OCL"), for $250,000.

OCL is the general sales agent in the United States for OCL, S.A., a Panamanian corporation. Abeta is a travel agency based in Mobile. Following talks with OCL's group reservations manager, Abeta entered into a contract entitled "group space confirmation" on February 11, 1987. That contract gave Abeta the right to sell up to 50 spaces on an OCL cruise bound for Scandinavia. The contract stated that the reserved cabins would be considered "sold and assigned" upon receipt of a $250 deposit for each passenger and a list of the passengers' names. After entering into this agreement, Abeta entered into negotiations with Helen Thompson, a Mobile resident. Ms. Thompson had dealt with Abeta frequently in the past, arranging tours similar to the cruise to Scandinavia. Abeta and Thompson gathered a group of 19 passengers, and on April 9, 1987, Abeta mailed a check to OCL to cover the required deposit. Ms. Thompson, as tour guide, was to receive free passage. This check was negotiated by OCL on April 13, 1987.

Abeta produced evidence tending to show that OCL was engaged in a fraudulent booking system that discriminated against tour groups. According to Abeta, OCL would accept deposits from tour groups and promise them reservations, while never actually booking the tour groups as passengers. Instead, these tour groups would be placed on an alternate list, or "ghost ship." Because dealing with tour groups was not as lucrative as dealing with individual passengers, OCL would attempt to book as many individual passengers as possible and then attempt to find space for the tour groups. If no space was available, the tour group would be cancelled.

Abeta contends that OCL's dual booking system was never revealed to Abeta. Abeta maintains that OCL never disclosed its failure to book the Thompson group, despite frequent phone conversations between Abeta and OCL's group reservations manager. To the contrary, Abeta was reassured that the passengers' reservations had been confirmed. Abeta contends that OCL was aware that the tour group's chance of securing passage was slim and that its reservations were only tentative, but that OCL actively suppressed this information in order to keep the tour group on standby in order to fill any vacant cabins.

Abeta was not notified of the tour group's cancellation until seven days before the cruise's scheduled departure. After receiving this news, the owner of Abeta was able to secure passage for 13 members of the tour group on a different cruise line. The other members of the group were unable to go on this other cruise, because it had a later departure date. To maintain good relations with its customers and to preserve its business reputation, Abeta paid the additional costs of the second, more expensive cruise. Upon learning that Abeta had secured alternative passage for the tour group, OCL presented proposals for cruises to the Orient, Alaska, Canada, and South America at reduced rates. OCL asked Abeta to relate these proposals to the passengers. Abeta contends that it presented those proposals to Ms. Thompson, the only member of the group with whom it had communicated.

Abeta filed its complaint against OCL on July 30, 1987, alleging that OCL had: (1) breached the group space confirmation contract, (2) been negligent in overbooking the cruise, and (3) misrepresented that the cabin spaces had been reserved for the Thompson group. Abeta later amended its complaint, adding charges of wanton misconduct and fraudulent concealment. ¹ Abeta asked for compensatory damages for expenses incurred in arranging the replacement cruise, lost commissions, and loss of interest on working capital. It also claimed punitive damages.

Following OCL's failure to answer Abeta's complaint, Abeta moved for a default judgment. This motion was granted, but the default judgment was later set aside, for reasons explained below. Following a trial on the merits, the trial judge directed a verdict for Abeta on the breach of contract claim, and the jury returned a verdict for Abeta on the tort claims. The trial judge entered a judgment in the amount of $250,000. It is from this judgment that OCL appeals. Abeta cross-appeals the trial court's order setting aside the default judgment.

Exclusion of Evidence of Alternative Trip Proposals

Following a motion in limine by Abeta, the trial judge entered an order excluding any evidence of alternative trip proposals made by OCL. OCL maintained that these proposals represented a viable way of mitigating any damages suffered by Abeta or the passengers, and sought to introduce evidence that Abeta never communicated these proposals to the passengers. The trial judge ruled that these proposals were either an attempt by OCL to renegotiate the contract it had breached with Abeta or were offers of compromise. Offers of compromise are generally inadmissible. Super Valu Stores, Inc. v. Peterson, 506 So.2d 317, 321 (Ala.1987). This rule is justified on the policy grounds that extrajudicial settlements are to be encouraged. Indemnity Co. of America v. Pugh, 222 Ala. 251, 132 So. 165, 167 (1931).

OCL argues that the exclusion of the evidence was error for a number of reasons. Three of the four reasons presented concerned the trial judge's characterization of the evidence as an offer of compromise.

First, OCL contends that the proposals were not offers of compromise because, it says, they were not contingent on the condition that Abeta waive or compromise any claims it had against OCL. Instead, OCL contends that it merely wanted Abeta to communicate these proposals to the passengers. However, this Court has held that the exclusion also applies to evidence of a compromise or an offer to compromise with a third party whose claim also arose out of the transaction or occurrence under litigation. Chandler v. Owens, 235 Ala. 356, 179 So. 256, 259 (1938). The passengers were such third parties, and the trial court could permissibly have viewed OCL's proposals as an attempt to forestall or prevent suit by the passengers. Those proposals therefore fall within the ambit of this rule.

Second, OCL argues that the excluded evidence was not being offered to show the relative strength or weakness of either party's case, which, it contends, is the sole reason for the inadmissibility of offers of compromise. This argument is without merit. The appellate courts of this state have also held that offers of compromise are not admissible as evidence of a party's good faith attempt to settle a dispute. Glaze v. Glaze, 477 So.2d 435, 436 (Ala.Civ.App.1985).

OCL's third argument is that Abeta, not being the party making the offer, could not enjoy the "privilege" of having the offer excluded. OCL cites Carnival Cruise Lines, Inc. v. Goodin, 535 So.2d 98 (Ala.1988), as support for its position. This Court finds OCL's reliance on Carnival to be misplaced. In Carnival, the plaintiff had made a preliminary demand for payment, which the defendant refused. Carnival, supra, at 102. The plaintiff introduced evidence of the demand and refusal at trial, and the defendant appealed. This Court held that the evidence concerned a demand for payment, not an offer of compromise, and was therefore admissible. Carnival, supra, at 102. In addition, our courts have held that the exclusion of evidence of offers of compromise applies when the evidence is presented on the offeror's behalf, as well as when it is presented against him. Yeager v. Hurt, 433 So.2d 1176, 1181 (Ala.1983); Flournoy v. State, 30 Ala.App. 154, 2 So.2d 329, 330 (1941). Other jurisdictions have also held that the offeree is entitled to invoke the rule excluding offers of compromise. Davidson v. American Fitness Centers, Inc. 171 Ga.App. 691, 320 S.E.2d 824, 826 (1984); Frisella v. Reserve Life Ins. Co. of Dallas, 583 S.W.2d 728, 734 (Mo.App.1979); Vinyard v. Herman, 578 S.W.2d 938, 942 (Mo.App.1979).

The final issue to be resolved concerning the admissibility of the alternative trip proposals involves the trial judge's characterization of these proposals as attempts to renegotiate a breached contract. In its brief, Abeta cites Gradco, Inc. v. St. Clair County Bd. of Ed., 477 So.2d 365 (Ala.1985), in which this Court held that a non-breaching party would not be compelled to mitigate damages if to do so would entail undue risk. Gradco, supra, at 368. It is clear from the record that the trial judge considered the new proposals by OCL as being offered with no greater assurances of performance than were offered with the original booking to Scandinavia. Because of the speculative nature of these proposals, and because none of the proposed alternative cruises was destined for Scandinavia, Abeta was under no duty to accept them. Nor was it under a duty to communicate these proposals to the passengers in an effort to mitigate damages caused by OCL's breach of contract and misfeasance.

Denial of OCL's Motion for Directed Verdict

OCL argues that the trial court erred in refusing to direct a verdict in its favor on all the counts in Abeta's complaint. It contends that Abeta was merely an agent for the passengers, and therefore lacked standing to bring an action based on their loss or injury. OCL also argues that Abeta was not the real party in interest and, therefore, that to allow it to press its...