TANKREDERIET GEFION A/S v. Hyman-Michaels Company

• Citation: 406 F.2d 1039
• Decision Date: 10 February 1969
• Docket Number: No. 19167.,19167.
• Parties: TANKREDERIET GEFION A/S, as Owner of the MOTORSHIP GYDA, Plaintiff, v. HYMAN-MICHAELS COMPANY and Lakes Shipping & Trading Corp., Defendants and Third-Party Plaintiffs-Appellants, v. MICHIGAN FOUNDRY SUPPLY CO., Inc., Erickson Trucking Service, Inc., Third-Party Defendants, and National Cargo Bureau, Inc., Third-Party Defendant-Appellee. TANKREDERIET GEFION A/S, as Owner of the MOTORSHIP GYDA, Plaintiff, v. MICHIGAN FOUNDRY SUPPLY CO., Inc., Defendant and Third Party Plaintiff-Appellant, v. ERICKSON TRUCKING SERVICE, INC., Third-Party Defendant, and National Cargo Bureau, Inc., Third-Party Defendant-Appellee. TANKREDERIET GEFION A/S, as Owner of the MOTORSHIP GYDA, Plaintiff, v. NATIONAL CARGO BUREAU, INC., Defendant-Appellee, W. P. Lewis and G. P. Sullivan, Defendants. NATIONAL CARGO BUREAU, INC., Third-Party Plaintiff-Appellee, W. P. Lewis and G. P. Sullivan, Third-Party Plaintiffs, v. LAKES SHIPPING AND TRADING CORPORATION, an Illinois Corporation, Hyman-Michaels Company, an Illinois Corporation, Michigan Foundry Supply Co., Inc., a Michigan Corporation, Third-Party Defendants-Appellants, and Erickson Trucking Service, Inc., a Michigan Corporation, Third-Party Defendant. The TOKIO MARINE & FIRE INSURANCE COMPANY, Ltd., a foreign corporation, et al., Plaintiffs, v. HYMAN-MICHAELS COMPANY, an Illinois Corporation, and Michigan Foundry Supply Company, Inc., a Michigan Corporation, Defendants and Third-Party Plaintiffs-Appellants, v. NATIONAL CARGO BUREAU, Inc., a New York Corporation, Third-Party Defendant-Appellee, and Erickson Trucking Service, Inc., a Michigan Corporation, Third-Party Defendant.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

406 F.2d 1039 (1969)

TANKREDERIET GEFION A/S, as Owner of the MOTORSHIP GYDA, Plaintiff, v. HYMAN-MICHAELS COMPANY and Lakes Shipping & Trading Corp., Defendants and Third-Party Plaintiffs-Appellants, v. MICHIGAN FOUNDRY SUPPLY CO., Inc., Erickson Trucking Service, Inc., Third-Party Defendants, and National Cargo Bureau, Inc., Third-Party Defendant-Appellee.

TANKREDERIET GEFION A/S, as Owner of the MOTORSHIP GYDA, Plaintiff, v. MICHIGAN FOUNDRY SUPPLY CO., Inc., Defendant and Third Party Plaintiff-Appellant, v. ERICKSON TRUCKING SERVICE, INC., Third-Party Defendant, and National Cargo Bureau, Inc., Third-Party Defendant-Appellee.

TANKREDERIET GEFION A/S, as Owner of the MOTORSHIP GYDA, Plaintiff, v. NATIONAL CARGO BUREAU, INC., Defendant-Appellee, W. P. Lewis and G. P. Sullivan, Defendants.

NATIONAL CARGO BUREAU, INC., Third-Party Plaintiff-Appellee, W. P. Lewis and G. P. Sullivan, Third-Party Plaintiffs, v. LAKES SHIPPING AND TRADING CORPORATION, an Illinois Corporation, Hyman-Michaels Company, an Illinois Corporation, Michigan Foundry Supply Co., Inc., a Michigan Corporation, Third-Party Defendants-Appellants, and Erickson Trucking Service, Inc., a Michigan Corporation, Third-Party Defendant.

The TOKIO MARINE & FIRE INSURANCE COMPANY, Ltd., a foreign corporation, et al., Plaintiffs, v. HYMAN-MICHAELS COMPANY, an Illinois Corporation, and Michigan Foundry Supply Company, Inc., a Michigan Corporation, Defendants and Third-Party Plaintiffs-Appellants, v. NATIONAL CARGO BUREAU, Inc., a New York Corporation, Third-Party Defendant-Appellee, and Erickson Trucking Service, Inc., a Michigan Corporation, Third-Party Defendant.

No. 19167.

United States Court of Appeals Sixth Circuit.

February 10, 1969.

Thomas E. Byrne, Jr., Philadelphia, Pa., Krusen, Evans & Byrne, Philadelphia, Pa., Lucking & Miller, Donald J. Miller, Detroit, Mich., on brief for Hyman-Michaels Co. and Lakes Shipping et al.

Leroy G. Vandeveer, Detroit, Mich., Achtenberg, Sandler & Balkin, Irving Achtenberg, Kansas City, Mo., Alexander, Buchanan & Conklin, Richard A. Harvey, Detroit, Mich., Vandeveer, Doelle, Garzia, Tonkin & Kerr, Detroit, Mich., on brief, for Michigan Foundry Supply Co.

David V. Martin, Detroit, Mich., Martin Bohall, Joselyn, Halsey & Rowe, Detroit, Mich., on brief for appellee, National Cargo Bureau.

Before O'SULLIVAN, EDWARDS and McCREE, Circuit Judges,

EDWARDS, Circuit Judge.

Appellants Hyman-Michaels Co. and Michigan Foundry Supply Co. appeal on leave granted from an interlocutory order entered by a District Judge in the United States District Court for the Eastern District of Michigan. The order was entered during trial of eleven cases arising out of a spontaneous combustion fire in a load of steel scrap which damaged both the cargo and the ship in which it was being transported to Japan.

After close of plaintiffs' proofs and the taking of considerable testimony from defendants, appellants principal defendants in the trial entered into a settlement with plaintiffs Tankrederiet Gefion A/S, as owner of the Motorship GYDA, and Mitsubishi, a Japanese trading company, owner of the cargo. Subsequently, as the trial continued, on appellants' complaints against third-party defendant National Cargo Bureau, which had been filed under Rule 14(a) of the Federal Rules of Civil Procedure, National Cargo Bureau objected to plaintiffs' tender of proofs concerning the prudence and reasonableness of their settlement. Thereupon after extensive argument the District Judge entered the following order:

"IT IS HEREBY ORDERED that in all further proceedings in these cases it shall be the burden of the Third-Party Plaintiffs HYMAN-MICHAELS COMPANY and MICHIGAN FOUNDRY SUPPLY COMPANY, INC., to establish their actual liability to the plaintiffs before they shall be entitled to recover indemnity or contribution.

"IT IS FURTHER ORDERED that no evidence as to the reasonableness of settlements or the reasonableness of the amount of the settlements may be received in evidence."

It is this order from which the interlocutory appeal is taken.

This appeal is heard upon the following stipulation of facts:

"(1) This litigation involves a consolidation of a number of suits arising out of the shipment of a cargo of 6,000 tons of steel turnings on board the Norwegian Motorship GYDA in the summer of 1961. The turnings were loaded at Muskegon, Michigan, consigned to Japan. Spontaneous heating of the cargo followed. The ship anchored in Detroit for approximately nine days in the hope that the cargo would cool. Thereafter it sailed, and upon arrival at Philadelphia the cargo was unloaded because of fire which damaged the ship and cargo. The total of all of the alleged damages is approximately $750,000.

"(2) Eleven suits, many with cross-claims and third-party claims, were filed and later consolidated for trial by order of the Trial Court. The Trial Court also ordered a severance of the trial of the damage issues, with the trial of the liability issues to proceed first, in order of time. Four of the suits have been dismissed for various reasons.

"(3) Trial of the liability issues commenced before the Honorable Chief Judge Ralph M. Freeman of the Court below on June 18, 1968. Six of these actions are non-jury cases. These are the actions brought by the ship owner plaintiffs. The other action brought by the cargo owner plaintiffs, is a jury action. All seven actions were being tried simultaneously. One of these actions was dismissed at the close of the plaintiffs\' proofs. Six are still in progress, including the case being tried to the jury. This appeal directly involves only the jury case, Civil No. 24638, and three of the non-jury cases, Admiralty Nos. 23990, 23991 and 25386.

"(4) Civil Action No. 24638 involves suit by the cargo plaintiffs against Hyman-Michaels Company and Michigan Foundry Supply Company. The defendants have filed third party complaints against National Cargo Bureau seeking indemnity and contribution.

"Admiralty No. 23990 involves suit by the ship owner plaintiffs who have brought suit against Hyman-Michaels Company and Lakes Shipping & Trading Corporation, who have third party complaints against National Cargo Bureau, seeking indemnity and contribution.

"Admiralty No. 23991 involves a suit by the ship owner plaintiffs against Michigan Foundry Supply Company, who has a third party complaint against National Cargo Bureau seeking indemnity and contribution.

"Admiralty No. 25386 involves suit by the ship owner plaintiffs against National Cargo Bureau, who has a third party complaint against Hyman-Michaels Company, Lakes Shipping & Trading Corporation, Michigan Foundry Supply Company and Erickson Trucking Service, seeking indemnity and contribution.

"(5) From time to time during the course of the trial, possibility of settlement was discussed both in and out of the Court\'s presence. From the first instance, National Cargo Bureau indicated that it did not wish to participate in any settlement. In view of National Cargo Bureau\'s position, some of the other defendants conducted settlement negotiations with the plaintiffs both in and out of the presence of the Court. National Cargo Bureau did not participate in these negotiations. In connection with preliminary settlement discussions and before final settlement negotiations, counsel for National Cargo Bureau was asked if it would dismiss its third party complaint against Hyman-Michaels Company, Michigan Foundry Supply Company and Erickson Trucking Service, who eventually settled with the plaintiffs, and National Cargo Bureau replied that it would not.

"The defendants Hyman-Michaels Company, Lakes Shipping & Trading Corporation, Michigan Foundry Supply Company and Erickson Trucking Service made settlement agreements with the plaintiffs, and after these agreements had been arrived at National Cargo Bureau was advised of the settlement agreements and was advised of the total amounts that would be paid to the plaintiffs, and was further advised that the settling defendants intended to continue their third party actions against National Cargo Bureau.

"After the settlement agreements had been reached and after National Cargo Bureau had been advised of the settlements, the settling defendants proceeded with their proofs on their third party actions for indemnity and contribution. In the course of presenting proofs, there came a time when the settling defendants proposed to offer evidence that the settlements were prudent and reasonable. National Cargo Bureau objected to the introduction of this proposed evidence, and asserted that the settling defendants must prove actual liability and not merely potential liability to the plaintiffs.

"After hearing arguments of Counsel, the Court rendered an opinion and entered an order to the effect that the settling defendants, as a condition precedent to their claims for indemnity and contribution, had the burden of proving actual liability to the plaintiffs rather than potential liability to the plaintiffs."

Although not included in the stipulation above, an additional fact crucial to our decision is cited in appellee's brief in this appeal, is not denied in appellants' briefs, and was conceded by appellants at oral hearing. This is the fact that, although appellee had full notice of the litigation and was interpleaded as a party thereto, and further, was notified of the settlement negotiation and invited to participate therein, appellants did not prior to settlement seek appellee's approval or tender the defense of this action to appellee in exchange for a hold-harmless agreement.

In this case the appellants (the original defendants, henceforth B) settled the claim of the original plaintiffs, A, without first tendering the defense to the appellee (the third-party defendant, C) in...