Westinghouse Credit Corp. v. M/V New Orleans

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 91-4697

WESTINGHOUSE CREDIT CORP.,
Plaintiff, Third Party
Plaintiff,

versus

M/V NEW ORLEANS, her engines, tackle,
apparel, etc., in rem, ET AL.,
Defendants,

KENNER MARINE & MACHINERY, INC., ET AL.,
Defendants-Appellees,

POWER SYSTEMS DIESEL, INC., and
VENER MARINE, LTD.,

Defendants, Third Party
Plaintiffs-Appellees

versus

DOUGLAS MARINE SERVICE, INC.,

Third Party Defendant,

versus

ATLAS ASSURANCE CO.,
JNT FLEET, INC.,

Third Party Defendants-
Appellants.

Appeals from the United States District Court
for the Western District of Louisiana

(November 23, 1994)

Before REYNALDO G. GARZA, HIGGINBOTHAM, and DeMOSS, Circuit Judges.

DeMoss, Circuit Judge:
 I.

Kenner Marine & Machinery, Inc. agreed to sell the dredge NEW

ORLEANS to Willie C. Starling, Sr. and Starling Enterprises, Inc.

Westinghouse Credit Corp. financed $600,000 of the purchase price

and secured its loan with a preferred ship mortgage. Westinghouse

agreed with Kenner Marine that, if Starling defaulted, Westinghouse

would foreclose on the NEW ORLEANS and purchase the dredge at a

federal marshal's sale. Kenner Marine agreed to repurchase the

dredge from Westinghouse for the balance owed by Starling to

Westinghouse plus costs expended by Westinghouse in connection with

the sale.

Starling defaulted. Westinghouse sued to enforce its lien on

the NEW ORLEANS. The court ordered the dredge seized and placed in

custody. Douglas Marine Service, Inc. became consent custodian of

the NEW ORLEANS, and in September 1985, J.N.T. Fleet, Inc. towed

the dredge from Intracoastal City, Louisiana to the Douglas Marine

facility near Baldwin, Louisiana. The NEW ORLEANS sustained water

damage both while being towed and later during the lengthy storage

at the Douglas Marine facility.

Westinghouse purchased the NEW ORLEANS at the marshal's sale.

When Westinghouse demanded that Kenner Marine repurchase the dredge

pursuant to the prior agreement, Kenner Marine refused.

Westinghouse sued Kenner Marine for specific performance of the

agreement to repurchase the NEW ORLEANS, or, in the alternative,

for payment of damages.

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 After settlement of the consolidated lien and repurchase

cases, only J.N.T. and its insurer, Atlas Assurance Co., remained

as defendants in the litigation. Kenner Marine, Power Systems

Diesel, Inc., and Vener Marine, Ltd., the latter two companies

having furnished labor and materials for repair of the dredge,

received an assignment of rights and sued J.N.T. and Atlas for

negligence in towing.

The district court found J.N.T. and Atlas liable for $206,320

in damages and refused to credit J.N.T. and Atlas for the amount

already paid by the settling parties. J.N.T. and Atlas appeal. We

affirm.

II.

Prior to trial, Atlas moved to dismiss, claiming that the

ocean marine insurance policy issued to J.N.T. was not a proper

subject for direct action in Louisiana. See LA. REV. STAT. ANN.

§§ 22:611 (marine insurance exemption) & 22:655 (direct action

statute) (West 1978 & Supp. 1992). By recent decision of the

Louisiana Supreme Court and this Court, the Louisiana statute

exempting marine insurance from application of some provisions of

the Louisiana Insurance Code does not limit an injured party's

ability to maintain a direct action against an insurer under the

Louisiana Direct Action statute. Grubbs v. Gulf Int'l Marine,

Inc., 13 F.3d 168 (5th Cir. 1993); Grubbs v. Gulf Int'l Marine,

Inc., 625 So.2d 495, 502-04 (La. 1993). Therefore, Atlas was not

entitled to dismissal on this ground, and we affirm the district

court's denial of that motion.

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 III.

J.N.T. and Atlas argue that the $206,320 judgment rendered

against them should have been reduced to reflect a pro tanto

(dollar-for-dollar) credit for settlement funds paid by Douglas

Marine and the hull insurers for damages during storage. It is

true that this Court had developed a settlement credit rule which

requires full credit for amounts received in settlement from joint

tortfeasors. E.g., Rollins v. Cenac Towing Co., 938 F.2d 599 (5th

Cir. 1990), cert. denied, 112 S.Ct. 1242 (1992); Hernandez v. M/V

Rajaan, 841 F.2d 582 (5th Cir.), cert. denied, 488 U.S. 981 (1988).

The U.S. Supreme Court, however, recently repudiated the pro tanto

settlement approach in admiralty cases, adopting in its place a

proportionate share rule. McDermott, Inc. v. AmClyde, 114 S. Ct.

1461 (1994). Under the proportionate share approach, the finder of

fact must determine the total damages from all joint causes and the

proportion of each tortfeasor's share of joint liability. Although

principles of joint and several liability survive, a nonsettling

defendant cannot initially be assessed any amount of damages larger

than his proportionate share of all damages as determined by his

proportionate share of all liability. Thus, under AmClyde, the

nonsettling defendant is no longer entitled to a "credit" based on

prior settlements. Rather, under AmClyde, it is the plaintiff who

takes the risk of either a poor settlement or a favorable

settlement with other defendants. However, the proportionate share

rule, like its predecessor the pro tanto rule, applies only to

cases in which there has been a settlement by a joint tortfeasor.

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See generally, Id. (when plaintiff settles with joint tortfeasors,

nonsettling defendant is entitled to credit for damages

attributable to conduct of settling defendant); RESTATEMENT (SECOND)

OF TORTS §§ 433A & 879. Thus, J.N.T. and Atlas are not entitled to

call for the proportionate share rule in this case unless (1) they

are joint tortfeasors with the settling defendants, and (2) the

court determined damages based on the conduct of both J.N.T. and

the settling defendants.

J.N.T. and Atlas claim that the required joint tortfeasor

relationship does exist, because the damage at the dock masked any

damage from the trip, erasing any basis for apportioning liability

and making the two injuries indivisible. Kenner Marine and Power

Systems, on the other hand, argue that this case involves two

separate torts, one by J.N.T. during towage and one by Douglas

Marine at the dock during storage. We agree with Kenner Marine and

Power Systems. This is not a case in which there were two

casualties closely related in time such that damage from one is

indivisible from the other. J.N.T.'s tug, the MISS NORMA, picked

up the dredge NEW ORLEANS at Intracoastal City in the late evening

hours of September 18, 1985 and dropped her off in the early

morning hours of September 20 at the Douglas Marine facility in

Baldwin. During the voyage, the bow of the NEW ORLEANS apparently

took on water as a result of being incorrectly pushed bow first

rather than stern first by the MISS NORMA. The master on board

the tug testified regarding how much water he saw in the hull of

the dredge NEW ORLEANS during the tow. Several witnesses testified

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concerning the condition of the dredge prior to the tow and the

extent of damages immediately after the tow. Bradley, an

experienced Kenner Marine dredge field technician, based his

testimony on an inspection conducted September 20th, before the NEW

ORLEANS had even been fully docked at Douglas Marine. If that were

not enough, Webster, an experienced marine surveyor, visited the

dredge NEW ORLEANS on November 16, shortly after the towing, and

documented with pictures and reports the extensive damage caused by

the near sinking while the vessel was under tow. The list of items

damaged, which he prepared contemporaneously, became the basis for

the damages awarded by the trial court. There was no allegation

and no testimony in the record indicating that any of the damage

alleged to have occurred at Douglas Marine occurred between

September 20, when the dredge arrived, and November 16, when

Webster conducted his survey.

Approximately one year after arrival of the dredge on Douglas

Marine, when Kenner Marine sent a technician to retrieve an

equipment manual from the NEW ORLEANS, it discovered that the

dredge had taken on water several times while stored at Douglas

Marine. As a result, Webster surveyed the vessel again in

September 1986, taking pictures and producing a detailed report.

The photos taken by Webster in November 1985 and September

1986, along with his reports and the corroborating testimony,

confirm that what we have here is two separate torts resulting in

two different harms -- one occurring over a period of two days as

a result of negligent towage of the vessel and one occurring over

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a subsequent period of one year as a result of negligence in the

care and custody of the vessel during storage. Because the

essential relationship of joint tortfeasors does not exist between

J.N.T. and Atlas on the one hand and the settling defendants on the

other hand, J.N.T. is not entitled to any settlement credit.

Additionally, a nonsettling defendant is not entitled to a

settlement credit unless it has been held liable for damages

attributable to the conduct of the settling tortfeasor. The

district court did not hold J.N.T. and Atlas liable for damages

sustained while the NEW ORLEANS was stored at Douglas Marine. At

trial, the court repeatedly limited the evidence to damage

sustained during towing, asking each witness to confirm that the

damages discussed related only to that incident. The court

subtracted certain amounts from the alleged damages, including

$30,000 for damage to tools and equipment based on evidence that

these items were dry and not water damaged immediately after the

tow. Significantly, at a post-trial hearing the court recollected

that it had found "only the damages occasioned by J.N.T. and

Atlas."

It is true that Webster's original 1985 estimate of the

monetary damages to the NEW ORLEANS was significantly lower than

both his revised estimate and the damages actually awarded.

However, it is also true that his 1986 estimate, conducted after

subsequent water damage at Douglas Marine, is much higher than the

damages actually awarded. Webster testified that the list of items

damaged and costs for repair tendered as evidence in this action

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included only items damaged as a result of the negligent towage

which he discovered in his November 1985 survey. The items he

included on his list were independently substantiated as being

items damaged during the tow by both the master of the tug and the

Kenner field service technician who inspected the vessel on the day

it arrived at Douglas marine.

We find that the trial court made an implicit, if not

explicit, finding that this case involved two separate torts which

caused two distinct harms and tried the case accordingly. Based on

our review of the briefs and the record, we agree that J.N.T. was

not a joint tortfeasor with the settling defendants with respect to

the casualty tried, and that no joint damages were awarded by the

trial court. Because we believe that the trial court correctly

refused to credit J.N.T. and Atlas for the amount paid in

settlement of the damages incurred while the vessel was stored at

Douglas Marine, we affirm.

IV.

Although the court did not modify its judgment by assigning

settlement credit, the court did reduce the award based on the

$10,000 deductible contained in J.N.T.'s insurance policy. Kenner

Marine and Power Systems do not contest the validity of this

provision or its legal effect; they maintain that J.N.T. waived

this claim by presenting it only after trial. Kenner Marine and

Power Systems, however, cannot appeal this issue because they have

not filed a notice of appeal. In addition, J.N.T. could not have

waived the deductible argument because the deductible had been

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stipulated into evidence. Because the insurance policy had already

been brought into evidence, and Kenner Marine and Power Systems had

not alleged that the deductible clause was inapplicable, the court

did not err in granting a remittitur in the amount of the

deductible.

The decision of the district court is AFFIRMED.

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