Cunningham v. Rederiet Vindeggen A/S & M/S Trolleggen

WATERMAN, Circuit Judge,

On January 29, 1959, the vessel M/S--Trolleggen stood moored in New York’s-North River, on the south side of Pier • No. 7, while her cargo was being unloaded. During the unloading operations,. *311«one Roman Cunningham, a fifty year ■old longshoreman working on the vessel, was killed when he was struck by a two ton hatch boom which fell on him without warning. His wife and administra-trix, Ethel Cunningham (hereinafter libelant), his sole survivor, subsequently instituted this admiralty suit in the United States District Court for the Southern District of New York against the M/S 'Trolleggen and her owner Rederiet Vin-•deggen A/S (hereinafter respondent) to Tecover damages for the wrongful death of her husband.

Trial was had before the court, Levet, J., sitting without a jury. Since the accident which caused decedent’s death occurred while the M/S Trolleggen was moored in New York territorial waters, libelant’s rights in this action depended upon New York’s Wrongful Death Act,1 and the doctrine that “where -death * * * results from a maritime ■tort committed on navigable waters with'in a State whose statutes give a right of .action on account of death by wrongful :act, the admiralty courts will entertain .a libel in personam for the damages sustained by those to whom such right is given.” Western Fuel Co. v. Garcia, 257 U.S. 233, 242, 42 S.Ct. 89, 90, 66 L.Ed. 210 (1921), quoted in The Tungus v. Skovgaard, 358 U.S. 588, 591, 79 S.Ct. 503, 506, 3 L.Ed.2d 524 (1959). The court below found that the hatch boom which struck and killed decedent had fallen because of its unseawort'fiy condition 2 and the negligent operation by the M/S Trolleggen’s crew members of certain machinery connected to the boom, and that libelant was entitled to damages of $41,461.32, together with interest. Li-belant has appealed on the ground that the damages awarded were inadequate, and respondent has cross-appealed on the ground that an error by the court below resulted in an award that was excessive. No issue was raised on this appeal concerning the liability of the respondent under the law of New York, and the only problem we are concerned with is the correctness of the amount of damages awarded.

“The executor or administrator duly appointed in this state, or in any other •state, territory or district of the United ■States, or in any foreign country, of a -decedent who has left him or her surviving a husband, wife, or next of kin, -may maintain an action to recover dam.ages for a wrongful act, neglect or de-fault, by which the decedent’s death was -caused, against a natural person who, or a -corporation which, would have been liable to an action in favor of the decedent by reason thereof if death had not ensued. Such an action must be commenced within two years after the decedent’s death. '«When the husband, wife or next of kin, do not participate in the estate of decedent, under a will appointing an executor, other than such husband, wife or next of kin, who refuses to bring such action, then such husband, wife or next of kin shall be entitled to have an administrator appointed for the purpose of prosecuting such action for their benefit.

We shall first discuss the issues raised by libelant’s appeal. Libelant argues that the trial court committed five separate errors in computing damages, each of which served to reduce the award below its proper level. The five claimed errors are as follows: (1) the refusal to evaluate at more than $100 per year certain special services performed by decedent for his wife; (2) the limiting of decedent’s work expectancy to age 65; (3) the failure to find that decedent had contributed to libelant more than half his income; (4) the failure to increase the award of damages to allow for inflation over the course of future years; (5) the computation of decedent’s future lost earnings on the basis of his net income after the deduction of predicted federal *312and state income taxes rather than on the basis of his gross income. We find no merit in the first four points raised by libelant but we hold that the trial court committed an error in its treatment of the fifth point which requires us to reverse and remand for recomputation of damages in accord with this opinion.

The first three claimed errors cited by libelant call into question findings which the trial court made on the basis of evidence introduced on the issue of damages. These are findings of fact, and it is clear that a trial court s findings as to damages are to be accorded just as much weight on review as other findings of fact, e. g., Lukmanis v. United States, 208 F.2d 260 (2 Cir. 1953) (per curiam); Carroll v. United States, 133 F.2d 690 (2 Cir. 1943) ; and, in suits in admiralty as well as in other cases, a reviewing court may not overturn a lower court’s finding of fact unless the reviewing court is convinced that the finding is “clearly erroneous. ’ McAllister v. United States, 348 U.S. 19, 20, 75 S.Ct. 6, 8, 99 L.Ed. 20 (1954); M. W. Zack Metal Co. v. S.S. Birmingham City, 311 F.2d 334 (2 Cir. 1962), cert. denied, 375 U.S. 816, 84 S.Ct. 50, 11 L.Ed.2d 51 (1963). “A finding is ‘clearly erroneous’ when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948).

We have examined carefully the record in this case, we have considered the evidence upon which the lower court based its findings of fact as to these elements of damages, and, while we would perhaps have arrived at figures a bit more generous to libelant had we been sitting as the trier of fact, we cannot say that the lower court committed clear error in making the assessment it did.

As to the value of the various special services which it was claimed decedent had performed for libelant, libelant testified in a general way as to the nature of the services and the approximate frequency with which they had been performed. When one recognizes, however, the difficulty of estimating accurately the money value of those services where the libelant failed to introduce evidence as to their money value, the $100 per year figure arrived at by the trial court, while perhaps near the lower en(j 0f ^he permissible range of estimation, cannot be called clearly erroneous, As finding that decedent shared bis ineome with his wife on a fifty-fifty basis, a great deal of testimony was ad-dueed from libelant on direct and cross-examination dealing with the particular types of expenditures she and decedent usually made, and we cannot characterize ag c|eariy erroneous the trial court’s conclusion that a synthesis of this testimony established a pattern that decedent’s income was shared equally by husband and wife- Pinaiiyf though there was evidence that the average age of retirement for social security applicants js currently 67 years, the trial court could legitimately conclude that, in view 0f thg demanding nature of decedent’s Work as a longshoreman, it was more probable that he would have retired at ae.p 65 had hg ]ivpd '

Libelant characterizes her fourth claim of error, that dealing with the lower court’s refusal to increase the damage award to compensate for future inflation, as one involving an alleged mistake in the application of New York law. But we feel that it only involves, as do libel-an^ s °^er claims of error already discussed> dissatisfaction with one of the lower court s findings of fact. While there is some lower court authority in New York to the effect that the trier of facts, in computing damages, may make allowance for the factor of inflation, Lucivero v. Long Island R.R. Co., 22 Misc.2d 674, 200 N.Y.S.2d 728, 730 (Sup. Ct., Kings County 1960); Neddo v. State, 194 Misc. 379, 85 N.Y.S.2d 54, 63 (Ct. of Claims 1948), aff’d, 275 App. Div. 492, 90 N.Y.S.2d 650 (3d Dep’t, aff’d mem., 300 N.Y. 533, 89 N.E.2d 253 (1949), the only evidence introduced by *313libelant on the issue of an inflationary trend was the rather equivocal testimony •of one expert witness, and the lower court was not clearly in error in refusing to be persuaded by it.

We now come to a consideration •of libelant’s contention that the trial ■court erred in computing decedent’s future lost earnings on the basis of net income after taxes. The court, after ■estimating decedent’s projected income for each of the remaining years of his work expectancy, deducted from the in■come figure for each year a sum for federal and state income taxes computed .at current withholding rates. The resulting figures were then used to compute the lump sum due libelant as compensation for the loss of her share of decedent’s future income, the court also crediting libelant with the anticipated future income tax on the portion of the award that was discounted for present enjoyment. We agree with libelant that the trial court erred in adjusting her award .so as to take into account future income taxes so estimated.

Our decision here would be simple indeed if the courts of New York had as yet ruled on whether to use a decedent's gross or net income when computing the damages resulting from a wrongful death, for, as the court below ■correctly noted, when an admiralty court adopts a state’s right of action for wrongful death, the court is obliged to enforce that right subject to whatever ■conditions and limitations the state has attached to it. The Tungus v. Skovgaard, supra, 358 U.S. at 592, 79 S.Ct. at 506. As we are unable to find any New York decision ruling on whether gross or net income is to be used in damage computations under New York’s Wrongful Death Act, we are constrained to follow our own court’s dictum in McWeeney v. New York, N. H. & H. R. R., 282 F.2d 34, 39 (2 Cir.), cert. denied, 364 U.S. 870, 81 S.Ct. 115, 5 L.Ed.2d 93 (1960), later recognized in this court’s holding in Montellier v. United States, 315 F.2d 180 (2 Cir. 1963), which indicates that a federal court should use the gross income measure where applicable state law is silent as to any standard to use.

Respondent argues, however, that the applicable state law is not really silent on this issue. Our attention is called to that part of Section 132 of the New York Decedent Estate Law which limits the recovery in a wrongful death action to “compensation for the pecuniary injuries” suffered by the person for whose benefit the action has been brought,3 and we are cited to several New York cases recognizing that a distributee’s pecuniary loss is measured by the amounts the survivor would have received from decedent’s earnings if decedent had lived. Webster v. State, 18 A.D.2d 774, 235 N.Y.S.2d 620 (4th Dep’t 1962) (mem.); Holmes v. City of New York, 269 App. Div. 95, 54 N.Y.S.2d 289, 292 (2d Dep’t), aff’d per curiam, 295 N.Y. 615, 64 N.E.2d 449 (1945); Wilkinson v. Boehm, 231 App.Div. 295, 247 N.Y.S. 343 (3d Dep’t 1931) (per curiam). Respondent then uses these statements of New York law as the basis for advancing the following *314three step proposition: Since New York law permits recovery in this suit for only that portion of decedent’s future income which libelant would have received had decedent lived, and since libelant could not possibly have received that portion of decedent’s future earnings which would have been withheld from him for income taxes, a sum representing decedent’s net income after taxes must be used in computing libelant’s award of damages.

The argument has a certain gloss of persuasiveness about it, due no doubt to its neatness and simplicity, but a careful analysis of respondent’s reasoning convinces us that the argument completely misses the point. That New York’s Wrongful Death Act permits recovery for only pecuniary losses suffered by a decedent’s distributees aids respondent not one whit. The courts in the McWee-ney and Montellier cases, supra, and, for that matter, every court which has ever undertaken to estimate damages resulting from the loss of future earnings, were concerned with detérmining the amount of “pecuniary losses” sustained by an aggrieved party. The crucial issue is not, as respondent would have us believe, simply whether libelant would ever have received any of that portion of decedent’s future earnings which would have been withheld for taxes. Rather, the crucial issue is whether a court can predict with sufficient certitude just what portion of decedent’s earnings would have been placed beyond libelant’s reach by future tax laws so as to permit the court justly to reduce the damage award which libelant would otherwise be entitled to. We think that the resolution of this issue in the McWeeney case, supra, based in part on an earlier decision of our court in Stokes v. United States, 144 F.2d 82 (2 Cir. 1944), requires us to rule that because of the-speculative nature of any deduction for future income taxes the court below should have calculated libelant’s damage-award on the basis of her husband’s-future gross income before taxes.4

Nor are we persuaded by respondent’s efforts to distinguish the Mc-Weeney case on the ground that we were-there concerned with the propriety of' refusing to instruct a jury to use a net income figure in computing damages, while in this ease the damages were-computed by a court sitting without a. jury.5 While McWeeney did indeed deal with the difficulty a jury would have in. applying an instruction framed in terms-of net income after taxes, the important-factors cited as causing difficulty there-would appear to apply with almost equal force to a court sitting without a jury. Thus, the court in McWeeney pointed to the impossibility of predicting the-number of future exemptions a taxpayer-might become entitled to as well as the-effective dates of such exemptions. Can it be seriously argued that a trial judge-is for some reason more adept at making-such predictions than a jury ? Moreover,, the McWeeney decision was based in-part on the fact that plaintiff’s judgment, in a case like this is usually less than-compensatory because of inflation and' attorney fees, elements that are certainly unaffected by whether a court or a. jury sits as the trier of fact. Finally,, the way this court in McWeeney related' its decision there to prior case law is-a further indication that McWeeney cannot be legitimately distinguished on the-ground that it dealt with jury instructions. The decision was explained as a. continued adherence to Stokes v. United *315States, supra, where this court, branding deductions for future taxes as “too ■conjectural,” affirmed the use of the .gross income measure by a trial court sitting without a jury. More recently we :had occasion to apply the rule of Mc-Weeney to a suit under the Massachusetts Wrongful Death Act where we affirmed the refusal of a court sitting ■without a jury to deduct future taxes in calculating future lost earnings, Mon-tellier v. United States, supra.6

There is a further reason for xef using to distinguish McWeeney on the ■ground that it dealt with the computation of damages by a jury. To so distinguish McWeeney would amount to sanctioning the use of two different rules of substantive law to be applied to identical sets of facts, with the one or the other rule to be applied depending upon whether a jury or a court were sitting as the trier of fact. While there are situations where the special training of a judge makes it permissible to follow different procedural rules when he is sitting without a jury, as, for example, when certain types of otherwise excludable evidence are allowed to be introduced, this is •quite different from permitting a court to follow a different rule of substantive law because a judge is sitting without a jury. There is no possible way of justifying the application of different ■substantive rules of damages which would logically result in awards of lower recoveries in non-jury cases than in jury ¡cases.

We have considered the case of O’Connor v. United States, 269 F.2d 578 (2 Cir. 1959), but we do not regard it as compelling the use of a net income figure in the ease at bar. As we pointed out in McWeeney, the court in O’Connor was bound to apply the Oklahoma law of damages, and the case law of that state, far from being silent on the issue of the deductibility of taxes, clearly indicated that a net income figure was to be used. Although respondent argues that the Oklahoma law which the O’Connor court looked to was no more definitive on the subject than the New York law currently is, we do not agree with respondent. In Magnolia Petroleum Co. v. Sutton, 208 Okl. 488, 257 P.2d 307 (1953), explicitly relied upon by the court in the O’Connor case, 269 F.2d at 585, the Oklahoma Supreme Court, in computing a proper amount of damages for lost earnings, actually used a figure representing wages after the deduction of withholding taxes. 208 Okl. 488, 257 P.2d at 316. We have already discussed the comparable New York law on the subject, and it is obvious that there is nothing in that law that even approaches the clear directive the O’Connor court discerned in the state law of Oklahoma that it had to apply.

Finally, while McWeeney did not, and indeed could not, overrule O’Con-nor as to the necessity of applying a state’s rule on gross or net income where that state’s rule of damages was being applied, McWeeney did necessarily overrule O’Connor as to any implication in the O’Connor reasoning that tax deductions were not too speculative to be considered in assessing damages. Therefore, we hold that the trial court in the case at bar erred in deducting future income taxes when it computed decedent’s lost earnings,7 and hence libelant’s award must be increased accordingly.8

*316We now reach consideration of respondent’s cross-appeal. Respondent claims that the lower court erred in considering as a proper element of damages libelant’s share of certain prospective pension payments of $85 per month to which decedent would have been entitled upon retirement. The pension in question, payable wholly from contributions of employers through the New York Shipping Association, is provided for in a collective bargaining agreement between the Shipping Association and decedent’s union, the International Longshoremen’s Association. The court below found that, in view of decedent’s life expectancy and his probable age of retirement, he would have realized pension payments totaling $10,200 for the years 1975 through 1984. In view of the fact that libelant was entitled to one half of decedent’s future lost income, the court therefore added to libelant’s damage award an amount designed to compensate her for the loss of this $5,100 over the future ten year period.

At the time of the trial, libelant admittedly had already received a certain $7,000 death benefit which, had her husband been receiving a pension at the time of his death, would have been but $500. Respondent maintains that, because of libelant’s receipt of this extra $6,500, libelant is not entitled to compensation for the $5,100 the lower court allowed as her share of her husband’s expectant future pension payments. We disagree with respondent and uphold the trial court’s ruling on this issue, though for different reasons than those set forth by the trial court.

The death benefits which libelant received are, like the pension payments already discussed, provided for by the collective bargaining agreement between decedent’s union and the New York Shipping Association, and they, too, are financed by employer contributions. Under the terms of the bargaining agreement, the widow of a longshoreman on pension is entitled to death benefits in the amount of $500, while the widow of a longshoreman not on pension is entitled to death benefits amounting to $3,500 with double indemnity in case of accidental death. Thus, libelant, whose husband of course was not on pension when he was killed, received $7,000 in death benefits under the collective bargaining agreement, rather than benefits of only $500.

The lower court refused to take the fact of the increased death benefits into account on the ground that such benefits were irrelevant to the issue of damages under the “collateral source doctrine.” According to this doctrine, which is an established exception to the general rule that damages in a negligence action must be compensatory, a wrongdoer is not permitted to reduce a plaintiff’s recovery because of benefits which the latter may have received from another source.9 Though the doctrine as it exists in New York does not extend to gratuitous benefits received by a plaintiff from a third party, Coyne v. Campbell, 11 N.Y.2d 372, 230 N.Y.S.2d 1, 183 N.E.2d 891 (1962); Drinkwater v. Dinsmore, 80 N.Y. 390 (1880), it is adhered to to the extent that benefits received by a plaintiff as a result of some consideration that has been previously extended do not reduce the size of a damage award under New York law. Coyne v. Campbell, supra, 11 N.Y.2d at 375, 230 N.Y. S.2d at 3-4, 183 N.E.2d at 892; Healy v. Rennert, 9 N.Y.2d 202, 213 N.Y.S.2d 44, 173 N.E.2d 777 (1961) (health insurance and pension benefits) ; Althorf v. Wolfe, 23 N.Y. 355 (1860) (proceeds of life insurance policy). Therefore, under *317New York law, if the present ease is a proper one in which to apply the collateral source doctrine, the benefits received, not having been gratuitous, but having been compensatory employee benefits under a collective bargaining agreement, should not reduce plaintiff’s award.

Our initial impression, however, is that the present case should not be viewed as involving the collateral source doctrine at all, and that respondent should be entitled to a reversal on its cross-appeal. It would seem that under the collective bargaining contract between the ILA and the New York Shipping Association plaintiff’s decedent was entitled, as partial compensation for work performed, to either a pension plus $500 in death benefits for his widow or no pension plus $3,500 ($7,000 under the double indemnity provision) in death benefits. In no event could decedent have received, as an element of compensation under the bargaining contract negotiated for him by his union, both a pension and the larger death benefits for his widow. Thus, to permit libelant, who has already collected $7,000 in death benefits, to receive a sum representing her share of decedent’s lost pension, would seem to ignore what decedent’s income expectancy at the time of his death actually was under the collective bargaining contract.

We are required, nevertheless, to apply the law of New York in computing the damages in this case; and, as we read the decision of the New York Court of Appeals in Healy v. Rennert, supra, recently explained and reaffirmed in Coyne v. Campbell, supra, we must affirm the lower court’s decision to include libel-ant’s share of decedent’s prospective pension in its computation of her damage award.

In the Healy case, plaintiff was a city fireman who, because of injuries sustained as a result of defendant’s negligence, was forced to quit his employment several years before the permissible retirement age. At his trial plaintiff testified that, had he continued at his job, he would have been eligible in several years for a pension at half pay. Defendants then were permitted to introduce, over plaintiff’s objection, evidence that as a result of the accident plaintiff had applied for and received a disability retirement pension at three-quarters pay. A unanimous New York Court of Appeals held this to be error, reasoning that such evidence should have been excluded on the ground that it was irrelevant to the issue of damages. The New York court could have reasoned that, under the terms of plaintiff’s employment, he was entitled to either a regular pension at ordinary retirement age or a disability pension in the event of forced retirement at an earlier age, and that an accurate estimate of plaintiff’s future lost earnings would have to take this fact into account. But the court in Healy did not so reason, and, since we regard the Healy case as indistinguishable from the case at bar, we hold that, under governing New York law, the court below did not err in including in its measure of damages a sum designed to compensate libel-ant for the loss of her share of decedent’s prospective pension.

Reversed and remanded as to libelant’s appeal and affirmed as to the cross-appeal.

. N. Y. Decedent Estate Law, McKinney’s ConsoLLaws, c. 13, § 130. The statute provides as follows:

. As the trial court correctly noted, the New York courts have ruled that Section 130 of the New York Decedent Estate Law authorizes the maintenance of an action based on unseaworthiness. The condition of unseaworthiness is said to be embraced by the term “wrongful act, neglect or default” as used in the statute. Clark v. Iceland S.S. Co., 6 A.D.2d 544, 179 N.Y.S.2d 708 (1st Dep’t 1958).

. Section 132 provides as follows:

“Tlie damages awarded to the plaintiff may be such a sum as the jury upon a writ of inquiry, or upon a trial, or, where issues of fact are tried without a jury, the court or the referee, deems to be a fair and just compensation for the pecuniary injuries, resulting from the decedent’s death, to the person or persons, for whose benefit the action is brought. In every such action now or hereafter pending, in addition to any other lawful element of the damages recoverable, the reasonable expenses of medical aid, nursing and attention incident to the injury causing death and the reasonable funeral expenses of the decedent paid by a husband or wife or next of kin or for the payment of which any such person is responsible, also shall "be deemed proper elements of damage. If the decedent leaves surviving a father and a mother, the death of such father prior to the verdict shall not affect the amount of damages recoverable. Interest upon the principal sum recovered by the plaintiff, from the date of the decedent’s death, shall be added to and ho a part of the total sum awarded.”

. The court iu McWeeney, while noting the speculative nature of a deduction for income taxes, also indicated that in certain cases involving extremely high incomes the injustice which would result to a defendant from ignoring future taxes might outweigh the injustice which would ordinarily be done a plaintiif by reducing the award of damages to allow for the speculative tax element, 282 F.2d at 38-39. Since the average annual income of decedent here was not in an upper income range, we need not concern ourselves with -this possible exception to the rule of Mc-Weeney.

. It was on this basis that the court below distinguished the McWeeney case.

. While the court in Montellier did indicate ••that it would have affirmed the lower ■court had it taken the opposite course of deducting a sum for future taxes, 315 F. ‘2d at 186, this statement was not prompted by any doubt as to the applicability of McWeeney to a non-jury case. Rather, .as the opinion in Montellier makes clear, it •was due to the court’s belief that the annual income there involved was large enough so that the lower court, in its ■discretion, could have utilized the exeeption to the McWeeney rule which we have discussed in footnote 4, supra.

. In banc action was requested on this issue by a member of the court, but the request failed to receive the support of a majority of the active judges.

. As we have stated, the lower court, in addition to deducting future taxes in computing the lost earnings due libelant, also credited libelant with a sum designed to take into account the taxes on the por*316tion of the award that was discounted for present value. Recomputation of the proper damages due libelant must, since future taxes are not a proper consideration in computing future lost earnings, eliminate any sum designed to credit libelant with future taxes on the discounted portion of the award.

. For a general discussion of the doctrine in the United States, see Maxwell, The Collateral Source Rule in the American Law of Damages, 46 Minn.L.Rev. 664 (1962).