Smith Petroleum Service, Inc. v. Monsanto Chemical Co.

• Decision Date: 07 January 1970
• Docket Number: No. 26137.,26137.
• Citation: 420 F.2d 1103
• Parties: SMITH PETROLEUM SERVICE, INC., Appellant, v. MONSANTO CHEMICAL COMPANY et al., Appellees. MONSANTO CHEMICAL COMPANY et al., Appellants, v. SMITH PETROLEUM SERVICE, INC., Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

420 F.2d 1103 (1970)

SMITH PETROLEUM SERVICE, INC., Appellant, v. MONSANTO CHEMICAL COMPANY et al., Appellees.

MONSANTO CHEMICAL COMPANY et al., Appellants, v. SMITH PETROLEUM SERVICE, INC., Appellee.

No. 26137.

United States Court of Appeals Fifth Circuit.

January 7, 1970.

COPYRIGHT MATERIAL OMITTED

Junior O'Mara, Jackson, Miss., for appellant-appellee, Butler, Snow, O'Mara, Stevens & Cannada, Jackson, Miss., of counsel.

Joe H. Daniel, L. F. Sams, Jr., Daniel, Coker, Horton & Bell, Jackson, Miss., for appellees-appellants.

Before COLEMAN and GOLDBERG, Circuit Judges, and SKELTON, Judge of the Court of Claims.^*

GOLDBERG, Circuit Judge:

In this diversity case involving indemnity between Mississippi tortfeasors, we consider the landward thrust of the admiralty doctrine enunciated in Ryan.¹ Even with sextant and compass we are unable to sight any estuary leading to Ryan. Looking to the law of Mississippi, we find Ryan rejected and indemnity denied.

This case originated as a wrongful death action growing out of an oil field fire which occurred on May 24, 1963. On that day Paul Case, an employee of Smith Petroleum Service, Inc. (Smith), was fatally burned while working atop an oil drilling rig in the Brookhaven Field in Lincoln County, Mississippi. Smith was employed by Monsanto Chemical Company (Monsanto) to perform a workover job on Monsanto's Lucien No. 1 well in the Brookhaven Field. The work at the well was done pursuant to an oral agreement entered into by Monsanto's field superintendent, Marvin McGraw, and Smith's manager, J. L. Francis. This agreement, which included no specific provision for indemnity in the event of an injury, contemplated that Smith would provide the necessary crew, tools, and rig for the job.

Work was commenced on May 21, 1963, when the crew changed the pump in an attempt to make the well produce. When this proved unsuccessful, the pump was changed for a second time, but the result was again unsatisfactory. When Charles Barfield, production foreman for Monsanto, was advised of the situation, he ordered a dialog test run to determine whether any tubing in the well leaked or needed to be replaced. On the basis of the dialog test, he decided to have the tubing pulled so that certain lengths of tubing could be replaced.²

McGraw and Francis agreed upon a plan to be used in pulling the tubing: salt water would first be poured into the well, then a standing valve would be dropped, and finally the tubing would be filled with salt water. Barfield, however, decided to drop the standing valve first and add fifty barrels of salt water later. At trial Monsanto experts testified that putting the salt water in ahead of the valve would damage the well; Smith experts testified to the contrary.

When the actual pulling of the tubing began on May 24, the valve and the salt water had already been inserted in the well under Barfield's direction. At one point on May 24 Barfield ordered the operation shut down temporarily while blowout preventers were installed in the casing and stabbing valves were brought to the derrick. He also instructed the Smith employee who was operating the motor that he was not to exceed a specified pulling power while removing the tubing from the well. After requesting these safety measures, Barfield left the well site for a time. Upon returning he parked his car about 150 feet from the well and remained in the car, doing paper work which was apparently unrelated to the work on the well.

The Smith crew proceeded to remove the tubing at the well site, and as the thirty-fourth and thirty-fifth joints were pulled to the surface they noticed a brown fluid spilling from the joints. They immediately ceased the operation, and the motor that operated the draw works was shut down. But when the flow from the tubing ceased after a few minutes, Smith's foreman ordered the operation resumed. Then, as the thirty-sixth joint was raised to about fifteen feet above the derrick floor, oil gushed from the tubing into the derrick. Because of the tremendous pressure from the hole the crew was unable to lower the tubing. Oil came in contact with the draw-works motor exhaust and ignited. Mr. Case, who was working on the derrick, was engulfed by the flames and killed.

Smith paid workmen's compensation benefits to Case's family, and thereafter Case's widow instituted suit against Monsanto³ in the Circuit Court of Hinds County, Mississippi. Monsanto removed the case to the United States District Court for the Southern District of Mississippi on the ground of diversity of citizenship and filed a third party complaint against Smith.⁴ On June 28, 1965, Travelers Insurance Company (Travelers), Smith's workmen's compensation carrier, filed a petition to intervene, seeking to recover the sum Travelers had paid to Case's survivors and beneficiaries under the Mississippi Workmen's Compensation Act.

On July 10, 1965, Mrs. Case and Monsanto entered into a provisional settlement for $25,000.00. They then moved the district court to approve the settlement. The court did approve the settlement on August 27, 1965, dismissing Mrs. Case's claim against Monsanto without prejudice to the right of Travelers to pursue its subrogation claim. The case proceeded to trial with Monsanto's claim against Smith and Travelers' claim for reimbursement still to be decided.⁵

Hearing the case without a jury, the district court found "that Monsanto and Smith were equally guilty of negligence"⁶ and held that Smith should bear one-half the cost of Monsanto's settlement and attorney's fees and expenses. The court further held that Travelers was entitled to recover from Monsanto the amount of compensation benefits it had paid. Smith appeals the judgment against it in favor of Monsanto, and Monsanto cross appeals. Monsanto also appeals the judgment against it in favor of Travelers. We reverse in part and remand.

I.

Monsanto asserts that it is entitled to indemnity from Smith, and in support of this claim Monsanto invokes two theories. The first is that Smith in carrying out its duties at the well breached its implied warranty to perform in a workmanlike manner, giving rise to indemnity under the Ryan doctrine. The second is that on the facts of this case Smith was actively negligent while Monsanto was only passively negligent, and thus Smith must indemnify Monsanto because of Smith's more serious tortious conduct.

A.

We consider first the Ryan issue. In Ryan Stevedoring Company v. Pan-Atlantic Steamship Corporation, 1956, 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133, the stevedoring company (Ryan) by informal agreement had contracted with the steamship company (Pan-Atlantic) to perform all its coastal stevedoring operations. While unloading cargo on one of Pan-Atlantic's ships, a Ryan employee was injured when he was struck by a heavy roll of pulpboard which had been improperly stowed. The employee brought suit against the shipowner and recovered because the ship was found to be unseaworthy. The shipowner in turn sued the stevedore, seeking reimbursement for the damage paid to the injured employee. The Supreme Court held that the shipowner's action for indemnity could be maintained. In reaching this result, the Court held that the action was not barred by the exclusive-liability provision of section 5 of the Longshoremen's and Harbor Workers' Compensation Act:⁷

"While the Compensation Act protects a stevedoring contractor from actions brought against it by its employee on account of the contractor\'s tortious conduct causing injury to the employee, the contractor has no logical ground for relief from the full consequences of its independent contractual obligation, voluntarily assumed to the shipowner, to load the cargo properly." 350 U.S. at 131, 76 S.Ct. at 236, 100 L.Ed. at 140.

Moreover, in the absence of an express indemnification agreement, the Court held that a stevedore's contract with a shipowner includes an implied warranty of workmanlike performance:

"The shipowner here holds petitioner\'s uncontroverted agreement to perform all of the shipowner\'s stevedoring operations at the time and place where the cargo in question was loaded. That agreement necessarily includes petitioner\'s obligation not only to stow the pulp rolls, but to stow them properly and safely. Competency and safety of stowage are inescapable elements of the service undertaken. This obligation is not a quasi-contractual obligation implied in law or arising out of a noncontractual relationship. It is of the essence of petitioner\'s stevedoring contract. It is petitioner\'s warranty of workmanlike service that is comparable to a manufacturer\'s warranty of the soundness of its manufactured product." 350 U.S. at 133-134, 76 S.Ct. at 237, 100 L.Ed. at 141-142.

In construing Ryan, we note at the outset that the shipowner's remedy is grounded conceptually in the contract with the stevedore and not in the negligence of the stevedore.⁸ See Italia Societa v. Oregon Stevedoring Company, 1964, 376 U.S. 315, 84 S.Ct. 748, 11 L. Ed.2d 732; Waterman Steamship Corporation v. Dugan & McNamara, Inc., 1960, 364 U.S. 421, 81 S.Ct. 200, 5 L. Ed.2d 169; Crumady v. Joachim Hendrik Fisser, 1959, 358 U.S. 423, 79 S.Ct. 445, 3 L.Ed.2d 413; Weyerhaeuser Steamship Company v. Nacirema Operating Company, 1958, 355 U.S. 563, 78 S.Ct. 438, 2 L.Ed.2d 491. This court has repeatedly recognized the contract rationale underlying Ryan and its progeny. Grigsby v. Coastal Marine Service of Texas, Inc., 5 Cir. 1969, 412 F.2d 1011, 1040; Loffland Brothers Company v. Roberts, 5 Cir. 1967, 386 F.2d 540, 548-549, cert. denied, 389 U.S. 1040, 88 S.Ct. 778, 19 L.Ed.2d 830; Centraal Stikstof Verkoopkanter, N. V. v. Walsh Stevedoring Company, 5 Cir. 1967, 380 F.2d 523, 529; Ocean Drilling & Exploration Company v. Berry Brothers Oilfield Service, Inc., 5 Cir. 1967, 377 F. 2d 511, 512-513, cert. denied, 389 U.S. 849, 88 S.Ct. 102, 19 L.Ed.2d 118; Lusich v. Bloomfield Steamship Company, 5 Cir. 19...