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AMERICAN EXPORT LINES, INC., a foreign corporation, Appellant, v. ATLANTIC & GULF STEVEDORES, INC., a corporation, Appellee

United States Court of Appeals for the Fourth Circuit1963-01-09No. No. 8738
313 F.2d 414

Summary

Holding. A stevedore cannot rely upon its own negligence as a defense in an indemnity action brought by a shipowner seeking reimbursement for damages paid to an injured party. The judgment of the district court was reversed, and judgment was entered in favor of American Export Lines for indemnification.

A longshoreman injured during cargo loading operations sued the ship's owner, American Export Lines, for negligence and unseaworthiness. A jury found the owner liable and awarded $25,000 in damages, which the owner paid. The owner then sued the stevedoring contractor, Atlantic & Gulf Stevedores, seeking indemnification on the theory that the stevedore's employees caused the accident through improper winch operation. The district court rejected the indemnity claim, reasoning that because the owner was not at fault, the jury's initial liability finding could not serve as a basis for imposing indemnity obligations on the stevedore.

The appellate court reversed, holding that a stevedore cannot use its own negligence as a defense to an indemnity action brought by a shipowner. The court established that a stevedore entering into a service contract with a shipowner is required to indemnify the owner for damages resulting from the stevedore's breach of its warranty to perform services with reasonable care. The court found that the stevedore's own evidence at trial established that its employees' negligent winch operation was the sole cause of the injury, which simultaneously proved the stevedore's liability to reimburse the owner for the judgment and associated costs.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether a stevedore may assert its own negligence as a defense to an indemnity claim by a shipowner
  • Whether the stevedore's breach of its warranty to perform services with reasonable care obligates it to indemnify the shipowner
  • Whether the jury's finding of liability in the initial tort action may be relitigated in a separate indemnity proceeding

Procedural posture

The shipowner appealed from a district court judgment denying its indemnity claim against the stevedoring contractor in a separate admiralty action.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

SOBELOFF, Chief Judge.

Can a stevedore rely upon its own negligence as a defense to the action of a shipowner seeking indemnity for a money judgment paid out to a victim of the stevedore’s carelessness? We hold that it cannot.

On September 26, 1956, during loading operations aboard the S.S. EXCELLER, owned by American Export Lines, a draft of freight struck the coaming of the No. 5 hatch. Its contents spilled into the hold, seriously injuring Arthur Harper, a longshoreman employed by Atlantic & Gulf Stevedores, who was working below. After collecting compensation from his employer under the Longshoremen’s and Harbor Workers’ Compensation Act, Harper brought an action against Export, alleging negligence and unseaworthiness. At the trial two versions were presented as to what caused the draft to strike the coaming. Some witnesses testified that the winches were defective, and that this condition was known to the stevedore personnel at least two and one-half hours before the accident, but the foreman of the gang of longshoremen ordered them to proceed with their work. This testimony indicated that the accident resulted from the stevedore’s negligence which activated a pre-existing defect in the winches. There was other testimony, however, that the accident was caused solely by the failure of the winch operators to raise the draft to a sufficient height, thus permitting it to strike the coaming instead of passing above it. On this conflicting evidence, a jury rendered a general verdict against the vessel’s owner in favor of Harper in the sum of $25,000. Judgment was entered, which Export paid. With the addition of counsel fees and expenses, the total loss to Export amounted to $31,585.37.

Thereupon Export brought the present action for indemnity against the stevedore, Atlantic, which, although not a party to the original action, had advance notice thereof and sent an attorney to observe the proceedings. In the indemnity action, tried on the admiralty side of the District Court, the Judge found on evidence virtually identical to that presented in the original action “that the sole proximate cause of the accident was the negligence of Harper’s co-employees, Shell and Hardy, in the operation of the winches.” Indeed, Atlantic insisted in the District Court and again on this appeal that the substandard performance of its own employees was the sole cause of Harper’s accident. The District Court, instead of awarding judgment in favor of the innocent shipowner, absolved the stevedore whose ad- » mitted breach of warranty to perform services in a workmanlike manner occasioned Harper’s injury and Export’s financial loss. The theory upon which recovery was denied was that, since Export was free from fault, the jury’s finding of initial liability furnished no basis for imposing, in a separate action, a correlative obligation of indemnity upon Atlantic. American Export Lines, Inc. v. Atlantic & Gulf Stevedores, 205 F.Supp. 316 (E.D.Va.1962). The anomalous result of this reasoning is that responsibility confers complete immunity.

Such a result stands in flat contradiction of the firmly-established rule “that a stevedoring contractor who enters into a service agreement with a shipowner is liable to indemnify the owner for damages sustained as a result of the stevedore’s breach of his warranty to perform the obligations of the contract with reasonable safety.”

A jury had determined Export’s liability to Harper, and Export having paid the judgment, it was entitled to raise in a separate action the entirely distinct question whether the existing risk of injury as found by the jury was brought into play by the stevedore’s failure to perform its contracted services with reasonable safety. Crumady v. The Joachim Hendrik Fisser, 358 U.S. 423, 79 S.Ct. 445, 3 L.Ed.2d 413 (1959); Calmar S.S. Corp. v. Nacirema Operating Co., 266 F.2d 79 (4th Cir., 1959). There was no requirement that this question be raised in the original action by impleading the stevedore under Admiralty Rule 56. Impleader is permissible but not compulsory. Gilmore & Black, The Law of Admiralty, 365 (1957); 3 Moore’s Federal Practice, § 14.06, citing Erie R. Co. v. Erie & Western Transportation Co., 204 U.S. 220, 27 S.Ct. 246, 51 L.Ed. 450 (1907), and Fyfe v. Pan-Atlantic S.S. Corp., 37 F.Supp. 497 (S.D.N.Y. 1941). The shipowner was bound only to show that the stevedore’s breach of warranty occasioned its expense, Rederi A/B Dalen v. Maher, supra, 303 F.2d at 567, absent conduct on its own part sufficient to preclude recovery. Weyerhaeuser S.S. Co. v. Nacirema Operating Co., 355 U.S. 563, 567, 78 S.Ct. 438, 2 L.Ed.2d 491 (1958). No such conduct is alleged or proved.

The District Court found upon abundant evidence, including that of the stevedore itself, that negligence of the winch operators was the sole proximate cause of the accident. What the stevedore here advances as a defense in reality supplies the very basis for its liability. The breach of the duty to use proper care is manifest. Reimbursement must follow.

Reversed, with directions to enter judgment for American Export Lines.

Reversed and remanded.

. Atlantic rejected the shipowner’s offer to take over the defense of the litigation.

. Waterman S.S. Co. v. Dugan & McNamara, 364 U.S. 421, 423, 81 S.Ct. 200, 5 L.Ed.2d 169 (1960); Crumady v. The Joachim Hendrik Fisser, 358 U.S. 423, 429, 79 S.Ct. 445, 3 L.Ed.2d 413 (1959); Weyerhaeuser S.S. Co. v. Nacirema Operating Co., 355 U.S. 563, 567, 78 S.Ct. 438, 2 L.Ed.2d 491 (1958); Ryan Stevedoring Co. v. Pan-Atlantic Corp., 350 U.S. 124, 130-134, 76 S.Ct. 232, 100 L.Ed. 133 (1955); Moore-McCormack Lines, Inc. v. Maryland Ship Ceiling Co., Inc., 311 F.2d 663 (4th Cir., 1962); Rederi A/B Dalen v. Maher, 303 F.2d 565, 566 (4th Cir., 1962); Smith v. Jugosalvenska Linijska Plovidea, 278 F.2d 176, 180 (4th Cir., 1960); Calmar S.S. Corp. v. Nacirema Operating Co., 266 F.2d 79, 80 (4th Cir., 1959); American Export Lines, Inc. v. Revel, 266 F.2d 82 (4th Cir., 1959).

. It has been held, even when the parties effect settlement without proceeding to judgment, that the initial liability is not subject to be relitigated in the indemnity action. See Waterman S.S. Co. v. Dugan and McNamara, 364 U.S. 421, 81 S.Ct. 200, 5 L.Ed.2d 169 (1960); Rederi A/B Dalen v. Maher, 303 F.2d 565, 566-567 (4th Cir., 1962); Paliaga v. Luckenbach S.S. Co., 301 F.2d 403, 409-410 (2d Cir., 1962); California Stevedore & Ballast Co. v. Pan-Atlantic S.S. Corp., 291 F.2d 252, 254 (9th Cir., 1961).