Petition for Writ of Certiorari — Alvarez ex rel. American Home Insurance v. Merrill Stevens Dry Dock Co.

8.7 . 5 Supreme Court, U.S.

16 3 FILED

CASE NO. APR 2 1986

IN THE JOSEPH ee JR,

SUPREME COURT

OF THE

UNITED STATES

VIVIAN ALVAREZ, f/u/b/o AMERICAN

HOME INSURANCE COMPANY

Petitioner

V.

MERRILL STEVENS DRY DOCK COMPANY

Respondent

PETITION FOR WRIT OF CERTIORARI

WILLIAM B. MILLIKEN, ESQ.

HAYDEN AND MILLIKEN, P.A.

5915 Ponce de Leon Bouelvard

Suite 63

Miami, Florida 33146

(305) 662- 1523

Attorneys for Petitioner

QUESTION PRESENTED FOR REVIEW

ARE FLORIDA STATE COURTS FREE TO

IGNORE PRECEDENTS OF THE SUPREME

COURT OF THE UNITED STATES RE-

GARDING EXCULPATORY CLAUSES IN

SHIP REPAIR CONTRACTS WHERE THIS

COURT HAS HELD UNEQUIVOCALLY IN

BISSO V. INLAND WATERWAYS CORP.,

346 U.S. 83, 73 5.0%. 629, 99 L.Ed.

911 (1955) THAT SUCH CLAUSES ARE

VOID IN A CASE IN ADMIRALTY IN-

VOLVING CONSTRUCTION OF A MARI-

TIME CONTRACT ?

BEEREREEREEREESREES=:

TABLE OF CONTENTS

PAGE

QUESTION PRESENTED FOR REVIEW i

TABLE OF CONTENTS ....... ii

INDEX OF AUTHORITIES. ..... iil

Orersmume Geewm. «2 se we ee ow 1

og gs a

MUP UUEe UEVULVED ws eee sce ewe 2

STATEMENT OF THE CASE ...... 2

2) a

ee RD) 6) a re |

Gere ereaemee Ur SERVICE . . «s+ 2 « i

INDEX OF AUTHORITIES

CASE PAGE

Alcoa Steamship Company v. Charles

Farren,

383 F.2d 46 (Sth Cir. 1967), cert.

denied, 393 U.S. 836, 89 S.Ct. Ill,

a hee. 26 CGT GIRGe «+ « «ees O83

Bisso v. Inland Waterways Corp.,

349 U.S. 85, 75, 5.Ct. 629,

99 L.Ed. Sf (3195S) . 2 2 2 so « « §,5,6,7

Edward Leasing Corp. v. Uhlig and

Associates,

785 F.2d 877 (llth Cir. 1986). ... 6,7,8

Eller and Company, Inc. v.

Galapogas Line, S.A.,

493 So.2d 106] (Fla. 3rd DCA 1986). . 6, 7

Kermarec v. Compagnie Generale

Transatlantique,

358 U.S. 625, 79 S.Ct. 406,

3 L.Ed. 20 SOS (1959). « se ao es | BF

Moragne v. State Marine Lines, Inc.,

398 U.S. 275, 90 S.Ct. 1772. 26

L.6e. 28 339 (ISTO) «6 6 2 ts te ee eet

oe eeeeeeeeeeee a

OPINIONS BELOW

The Findings of Fact and Conclusions of Law

of the Eleventh Judicial Circuit for Dade County,

Florida are printed in the Appendix at Page App.

1-20. The Opinion of the District Court of Appeal

of Florida, Third District, is printed in the Appen-

dix at Page App. 2!-30. The District Court of

Appeal of Florida's Denial of Petitioner's Motion for

Rehearing is printed in the Appendix at Page App.

31. The Order of the Supreme Court of Florida is

printed in the Appendix at Page App. 32-33. =

JURISDICTION

The Opinion of the District Court of Appeal

of Florida, Third District, was entered on June

23, 1987. Petitioner's motions for rehearing

and rehearing en banc were denied on August

31, 1987. The Order of the Supreme Court of

Florida denying review was entered on January

5, 1988. The jurisdiction of the Supreme Court

of the United States is invoked under 28 USC,

Section 2101 (c) and because this case presents

a state appellate court's decision on an important

question of federal maritime law which is in con-

1

PES RS RS RE RRR RR Raa =

flict with applicable decisions of this Court.

Rule 17.1(c) Supreme Court Rules.

STATUTES INVOLVED

United States Constitution, Article I11,Sec-

tion 2, Clause |. Subjects of jurisdiction.

The judicial Power shall extend to all

Cases . . .of Admiralty and Mari-

time Jurisdiction .

STATEMENT OF THE CASE

During July, 1982, the yacht ALISON V

sank at her dock. Petitioner ALVAREZ con-

tracted with Respondent MERRILL STEVENS

DRY DOCK COMPANY for repairs of the vessel

and her engines. MERRILL STEVENS repaired

the engines without a vital insulating blanket

covering the turbo chargers. The absence of

turbo charger blankets subsequently caused

a fire which destroyed the vessel.

Petitioner AL.VVAREZ sued Respondent,

MERRILL STEVENS in Dade Count (Miami)

Circuit Court under the theories of negligence

and breach of contract. The trial court found

MERRILL STEVENS negligent and in breach of

contract , but held an exculpatory clause in

2

BERR EER RR EREEEEES

the repair contract absolved MERRILL STEVENS

of all liability. The controlling federal law,

Bisso v. Inland Waterways Corp., 349 U.S.

85, 79 S.Ct. 629, 99 L.Ed. 9Il (1955) was

first raised during trial by Petitioner ALVAREZ

in opposition to MERRILL STEVENS! Motion for

Directed Verdict, and subsequently became the

basis of the trial court's holding MERRILL

STEVENS liable for damages. Upon rehearing,

the trial court reversed its earlier ruling and

held the exculpatory clause void. Respondent

MERRILL STEVENS then appealed to the Dis-

trict Court of Appeal of Florida, Third Dis-

trict, which by majority reversed the trial

court. The dissenting opinion of the Third

District Court of Appeal correctly notes that

the trial court in imposing liability on

MERRILL STEVENS was "following firmly

established principles of law." (Citing

Alcoa Steamship Company v. Charles Farren

and Company, 383 F.2d 46 (5th Cir. 1967),

3

EERE REE EEEEEEE:

cert. denied, 393 U.S. 836, 89 S.Ct. IIl,

21 L.Ed. 2nd 107 (1968)). Petitioner then filed

her Motion for Rehearing and Rehearing en Banc

before the Third District, which was denied.

Petitioner then sought review by the Supreme

Court of Florida, which was also denied.

PSR EREREREEEEEEE:

ARGUMENT

A contract to repair a vessel is a maritime

contract, and mandates application of federal

maritime law. Alcoa Steamship Company v.Charles

Farren and Company, 383 F.2d 46, 50 (Sth Cir.

1967). When a state court hears a case in

admiralty, as did the state court below, it is

bound to follow and apply the federal mari-

time law. Kermarec v. Compagnie Generale

Transatlantique, 358 U.S. 625, 79 S.Ct. 406,

3 L.Ed. 2d 505 (1959); Moragne v. State Marine

Lines, Inc., 398 U.S. 275, 90 S.Ct. 1772, 26

L.Ed. 2d 339 (1970).

Under applicable precedents of this Court,

exculpatory clauses in maritime contracts are

void. In Bisso v. Inland Waterways Corp., 349

U.5.06, 75 S.Ct. 625, 99 -..80. Bi (1955),

this Court held an exculpatory clause that

absolved a tugboat from all liability for negli-

gence in performing its towing contract void.

Following Bisso, the Eleventh Circuit Court

5

EBEEREREEEEREELZEE

of Appeals in Edward Leasing Corp. v. Uhlig

and Associates, 785 F.2d 877, 888-89 (llth Cir.

1986) applied the ruling and rationale of bisso

to a ship repair contract. The Eleventh Circuit

Court of Appeals there held invalid an exculpa-

tory clause with contradictory and ambiguous

language and an absolute disclaimer of liability.

The reasons given in both Bisso and Edward

Leasing for this rule were: (I) to discourage

negligence by making wrongdoers pay for

damages, and (2) to prevent those in need of

goods or services from being over-reached by

others who have the power to drive hard bargains.

In direct conflict with the rule of Bisso and

Edward Leasing, the majority opinion in the

Third District Court of Appeal held the excul-

patory clause contained in the contract drafted

by Respondent valid. Florida law, in contra-

diction to the general maritime law, while

frowning upon exculpatory clauses, upholds

their validity in certain circumstances. Eller

BEEREREEEEEESEEE

and Company, Inc. v. Galapagos Line, S.A.,

493 So.2d 1061, (Fia. 3rd DCA 1986). The legal

principles relied upon by the state court here are

those applied under Florida state law to uphold

the validity of exculpatory clauses. But, when

a state court hears a case in admiralty, it is

bound to follow and apply the federal maritime

law. Kermarac, supra; Moragne, supra, The rule

of law as set forth by this Court in Bisso, supra,

and followed by the Eleventh Circuit in Edward

Leasing, supra, is that exculpatory clauses are

Thus, the state court, by relying on Fiorida

state law announces the rule of law that directly

conflicts with the precedents of this Court, all

of which repeat the rule that a state court hearing

a case in admiralty must apply federal maritime

law.

This Court should grant certiorari in this

case and entertain this case on the merits

because:

|. If allowed to stand, the Third District

Court of Appeal's decision will enable shipyards

in Florida to avoid liability for their negligence

and shoddy workmanship simply by including

exculpatory language or ambiguous, convoluted or

hidden exculpatory clauses in their contracts, the

terms of which consumers will have no opportunity

to negotiate. This will not deter negligence on the

part of the repairer, but will afford a false sense of

protection to the shipowner contrary to the public

policy of admiralty as set forth by this Court in

Bisso, supra. See Edward Leasing Corp. v.

Uhlig and Associates, Inc., 785 F.2d 877, 885

(ith Cir. 1986); and

(2) If allowed to stand, the state court

decision will create confusion among Florida state

and federal courts. Heretofore, all state courts

have followed the United States Supreme Court's

mandate and applied federa! maritime law in ad

miralty cases while in state court. By virtue of

the state court's decision below, Florida courts

8

BEEREREEREEREEZEEE

are now faced with conflicting precedents to the

effect that state law may be applied in admiralty

proceedings in state court. This will destroy

the uniformity of admiralty, and encourage the

vice of forum shopping.

BEEERE ERE RE ERE ECESE

CONCLUSION

For the foregoing reasons and citation

of authority, Petitioner respectfully requests

this Court grant its Petition for Ceriotrari,

entertain this case on the merits, and remand

with instructions quashing the appellate de-

cision below and reinstating the judgment of the

trial court.

Respectfully submitted,

HAYDEN AND MILLIKEN, P.A.

Attorneys for Petitioner

Suite 63

5915 Ponce de Leon Boulevard

Miami, Florida 33146

(305) 662-1523

. Wie fe (a

“WICLIAMB- MILLIKEN, ESQ.

10

BERBER RERREREESEES

|

CERTIFICATE OF SERVICE

| HEREBY CERTIFY that | have, on this

3ist day of March, 1988, mailed three copies of

this Petition for Writ of Certiorari to G.

Morton, Good, Esq., Keliey, Drye & Warren

including Smathers and Thompson, Attorneys

for Respondent, 2400 Miami Center, 100

Chopin Plaza, Miami, Florida 3313l.

[fe ee #

‘ ph Pla i

WFLLIAM Bt MILLIKEN, ESQ.

11

APPENDIX

PEEEREEREEREESSEEEE

IN THE CIRCUIT COURT OF

THE IITH JUDICIAL CIRCUIT

IN AND FOR DADE COUNTY,

FLORIDA

GENERAL JURISDICTION DIV.

CASE NO. 85-6964 (CA 25)

VIVIAN ALVAREZ,

f/u/b/o AMERICAN HOME

INSURANCE COMPANY,

Plaintiff

AMENDED FINDINGS

OF FACT AND CON-

CLUSION OF LAW

V «

MERRILL STEVENS DRY

DOCK COMPANY,

Defendant

/

THIS CAUSE, having been tried before

the Court on March 10 and Il, 1986, and the Court

having taken testimony, evidence and argument of

counsel and having considered memoranda of law of

both parties, the Court hereby makes the following

Findinas of Facts and Conclusions of Law.

FINDINGS OF FACTS

l. Plaintiff, AMERICAN HOME INSURANCE,

insured the yacht "ALISAN V", a 1980 model 40

a= ss EEE eae eee Be

sport fishing boat manufactured by Ocean Yacht

Company. The "ALISAN V" was purchased in

1981 by SANTIAGO and VIVIAN ALVAREZ and they

owned it continuously until it burned on May lI,

1983.

2. In late July, 1982, the "ALISAN V"

sank at its dock. The owners of the "ALISAN V"

and its insurer, American Home arranged to have

Defendant, Merrill Stevens raise the yacht and

tow it to their marina at Dinner Key, Florida.

3. Based on the recommendations of sur-

veyor, Alex Milligan, competitive bids were

solicited for the repairs of the yacht due to its

sinking.

~4, Ultimately, the contract for repair of

the "ALISAN V" was awarded to Merrill Stevens.

5. Pursuant to this contract, Merril

Stevens agreed to refurbish the vessel in accord-

ance with its Invoice No. 8lll dated October 22,

1983. Item No. 3 of Merrill Stevens Invoice No.

8Ill dated October 22, 1983. Item No. 3 of

—2?-

Merrill Stevens Invoice No. 8lll states as follows:

"The main engines to be removed from

the vessel and disassemble complete

of reduction gear - transmission units.

That all parts be cleaned and water

damaged parts such as rings, bearings,

seals, gaskets, belts, gauge senders,

filters, lubricants, regulators, relays,

alternators, etc. be replaced by new

ones. That electric starters as complete

of solenoid units, cylinder heads and

turbo units be overhauled with parts

renewed as necessary. That units

be reassembled, paint furnished, re-

installed with alignments and securing

as original and all the tested and

proven in good running condition as

before."

6. Item Il of Merrill Stevens Invoice No.

Sill states as follows:

“Replace water damaged insulations

inclusive of masonite coverings

and/or sheathings be removed. New

supplied, installed, covered, sheathed

and finished as original. Clean,

prepare and pain engine space area."

The repairs itemized in No. Il were performed

by Merrill Stevens carpentry shop.

7. Merrill Stevens sub-contracted the work

in item No. 3 of its Work Order &8ill to Pitts

Transmission. Neither the owners nor the insur-

ers participated in selecting the sub-contractor.

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BERERERERER EEE

The owners were billed by Merrill Stevens for the

services performed by Pitts Transmission which

was paid.

8. The "ALISAN V" was equipped with

Detroit Diesel 67ITI| engines. These engines

are equipped with exhaust driven turbo-chargers

whose purpose is to increase the performance

and efficiency of the engine by forcing air into

the intake manifold. Each Turbo consists basic-

ally of a turbine fan that is driven by the

escaping exhaust gases of the engine. This

turbine is connected by a shaft to the intake

side of the turbo-charger. In essence, the exhaust

turbine driven by the escaping gases drives

the fan which forces air into the engine. This has

the beneficial effect of increasing the efficiency

and performance of the engine. The "ALISAN V"

had turb-chargers manufactured by Air Research,

Inc. The normal operating temperature of

these turbo-chargers is 900° to 1200° Fahrenheit.

Before the "ALISAN V" sank in July of 1982,

each turbo-charger was covered with a protective

-4-

insulating blanket made of asbestos or similar

material.

9. The "ALISAN V" was purchased in Puerto

Rico and brought from Puerto Rico to Miami on

her own bottom. The "ALISAN V “ made several

trips to the Bahamas with no operational problems

before she sank at the dock in 1982.

10. Merrill Stevens removed the engines and

turbo-chargers from the "ALISAN V" which were

then trucked to Pitts Transmission. In order to

disassemble the turbo-chargers the blankets had

to be removed. During August of 1982,

Merrill Stevens' employee, Mike Vores, at the

request of Pitts Transmission, prepared a Purchase

Order to a supplier of General Motors parts and

engines, Johnson & Towers, Iinc., requesting

two sets of turbo-charger blankets for the GM

67IT!| engines of the "ALISAN V". Johnson and

Towers never sent the turbo-charger blankets

to Merrill Stevens because they were "back-

ordered". This is evident on Johnson & Towers'

-5-

BSEHREHREERE EERE EEEB® #2

Invoice No. 270646.

11. The Court finds that the Plaintiff,

Santiago Alvarez read and signed the Work

Order and Ship Repair Contract #6427, Invoices

no. 8ill and 8Il2. The Work and Ship Repair

Contract contains the following:

I. "Contractor agrees to repair said

vessel in a good and workman like manner,

pursuant to the terms as outlined

and the owner and/or vessel agrees

to pay contractor for said work,

labor and materials as hereinafter stated.

In the event that specific prices

are not quoted, it is understood

and agreed that all work is to be

performed at the contractor's usual

and customary time and material

charges. Other than as specifically

set forth herein, contractor makes no

warranties concerning its workman-

ship or material, either expressly

or implied, including any implied

warranty of merchantability or

fitness for a particular purpose."

kkk

iP "Contractor undertakes to perform

the work outlined and haul and launch

vessels, provide berth, warfage,

towage and other services and

facilities only upon condition that

it shall not be liable, directly or

indirectly, in contract, tort, or

otherwise, to the vessel, its

owners, charterers, underwriters,

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BEEBE EEE REEREESEEE

or any of their agents, servants

or employees, or persons to whom

they might be responsible for any

personal injury or death or damage

to the vessel, its cargo, equipment

or movable stores or for any consequence

thereof, unless such personal injury,

death or peroperty damage is caused

by Contractor's gross negligence or

the gross negligence shall not be

presumed but must be affirmatively

established. !n no event, including

the negligence and/or the gross

negligence and/or the breach of contract

or CONTRACTOR, shall the CONTRACTOR'S

aggregate laibility to all such parties

in interest for personal injury,death

or damages sustained by them,

including damages, exceed the sum

of $300,000 and in no event shall

the CONTRACTOR be liable to any

extent to the vessel, her owners,

charterers and/or underwriters,

for the cost of defending any claims

asserted by third parties, including

attorneys' fees whether such actions

shall be commenced by its

employees or others."

12. On approximately April 29, 1982,

Santiago Alvarez took possession of his yacht

from Merrill Stevens. Prior to that time

representatives of Merrill Stevens and Pitts

Transmission present. During at least one of

these sea trials, the engine hatches were open

and the vessel was stopped several times for

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BEBE REREREERERERBESESEE

adjustments or repairs. None of the sea trials

included a continuous engine running time in

excess of one hour. With the engines running

at 3/4 throttle it would have taken approximately

10 minutes for the turbo-chargers to reach their

maximum operating temperature.

13. On Saturday, April 30, 1983, Santiago

Alvarez took the "ALISAN V" for a short cruise

in northern Biscayne Bay which did not include

a continuous engine running time of more than a

half an hour. During this voyage Santiago

Alvarez did not notice any smell, heat or other signs

of burning in the salon or engine compartment.

14. On Sunday, May I, 1983, Santiago

Alvarez and his family, along with some friends,

took the "ALISAN V_" to the Elliott Key anchorage

in southern Biscayne Bay. The vessel was

running at approxiamtely two-thirds throttle or

approximately 1800 rpm. The trip from the

| dock to Elliot Key was approximately one to

| two hours. When the "ALISAN V" arrived at

the anchorage, the pilot throttled down to idle

| speed.

- 8-

I5. Shortly theareafter Santiago Alvarez

Jr. noted a smokey smell in the salon, which

he reproted to his father. Santiago Alvarez

opened the engine compartment access hatch to

investigate the smell and was greated by a

gray smoke spewing from the engine compartment.

He immediately ordered the engines stopped and

began efforts to fight the fire. He then opened

one of the mainengizie hatches. Nearby boats

brought a number of fire extinguishers which

were discharged into the engine compartment

to no avail.

16. John "Moby" Griffin, a marine salvor,

was also at the anchorage and proceeded to

assist when he noted the vessel afire. He was

oveivaniiy successful in extinguishing the fire

using pumps aboard his vessel. Santiago

Alvarez had abandoned the "ALISAN V"before

this time. Santiago Alverex spoke with "Moby"

Griffin and arrange for Moby Marine to tow the

"ALISAN V" to Moby Marine's dock on the

Miami River were the subsequent -urveys took

-9-

place.

17. After this loss, Santiago Alvarez notifed

his insurance carrier who appointed marine sur-

veyor, Dave Pascoe, to conduct a survey of the

vessel. This took place over three days commen-

cing on May 5, 1983. Subsequently, a joint

survey was conducted on May 20, 1983, with

marine surveyors Dave Pasco, Charlie Stephens,

(appointed by the owners) and electrician Joe

LaFauci of Cable Marine, also appointed by the

owners.

I8. As a result of the joint survey, the above

surveyors concluded that the fire started because

of the absence of the turbo-charger blankets on

the turbo-chargers of the "ALISAN V" engines

in conjunction with the proximity of flammable

material in the engine room. The Court accepts

their opinion as a cause of the fire.

19. The vessel's engine room was equipped

with a fixed Halon fire fighting system manu-

facutred by Fireboy and installed by Ocean

Yachts at manufacture. This system was

10

eee REE REE EE E22 es

recommended by Fireboy as sufficient to pro-

tect a space of 200 cubic feet at 4-3/4 percent

concentration, whereas the engine room in the

"ALISAN V" was calculated by Plaintiff's expert,

Mr. Stephens, to be in excess of 370 cubic

feet. The system did not include a means of

automatic shut down of the engines or of auto-

matically warning the vessel's owner in the event

of discharge of the unit. Coast Guard require-

ments for Halongenated systems require a

minimum of 6% concentration to be effective. The

fireboy unit installed was less than |/3 of the size

needed to protect the "ALISAN V", as experts

for both Plaintiff and Defendant agreed. A

properly designed system would include adequate

size, automatic shutdown and discharge warnings,

all of which were available at the time of constru-

ction of the yacht. A properly designed and

installed system would have extinguished the fire,

although it would not have prevented it from

starting. The Court has no opinion as to what

11

extent the existence of a proper system would

have affected the damages to the "ALISAN V",

finding this to be speculative at this point.

20. The Court finds that Merrill Stevens'

failure to install or to see that their sub-contractor,

Pitts Transmission, installed turbo-charger

blankets on the "ALISAN V" prior to delivery to

the owners constituted negligence and further

finds that such failure was a breach of the express

agreement undertaken by Merrill Stevens in

Paragraph | of their repair contract ". . .to

repair the vessel in a.good and workmanlike

manner. . .". The failure to install these turbo-

charger blankets was a proximate cause of the fire

and hence Plaintiff's losses. There was no showing,

however, nor was it pled, that Merrill Stevens

was guilty of gross fault or gross negligence

nor is there any showing that Plaintiff's neg-

ligence or fault in any manner contributed to

the caues of the fire.

21. The yacht was determined to be a con-

12

structive total loss. American Home paid $150,000.

to the owner which the Court finds to be the Fair

Market Value of the vessel on the date of its

destruction. Moby Marine made a salvage claim

under the Sue and Labor Clause of the policy in

the amount of $20, 000. This was settled for $7,000

and the remains of the "ALISAN V". The Court

finds that this seems to be fair and reasonable.

American Home made these payments on November 14,

1983 to John Griffin and October 4, 1983 to Vivan

Alvarez, which determine the date from which

Plaintiff's damages began to run.

CONCLUSION OF LAW

1. This Court has jurisdiction over the parties

and subject matter of this maritime claim. Venue

is proper in Dade County, Florida.

2. American Home Insurance Company is

subrogated to the rights of the owners of the

“ALISON V" pursuant to payments made by

American Home to the owners of the "ALISAN V"

on the agreed value hull insurance policy held

by American Home on the "ALISAN V" which was

13

SEeBRER REE ER RE E 2 22S

introduced into evidence as Plaintiff's Exhibit

No. | in the sum of $150,000. Pursuant to the

Sue and Labor Clause of said policy, American

Home also paid to their insured $20,000 for the

salvage expenses referred to in paragraph 2l

of the Findings of Fact herein for a total payment

of $170,000.

3. American Home seeks to recover the

$170,000 in damages, either in contract on the

theory that Merrill Stevens breached a warranty

of workmanlike performance or in tort on the

theory that Merrill Stevens was negligent in repairing

the "ALISAN V". It is well settled that a con-

tract to repair a vessel is maritime in nature.

Alcoa Steamship Co., Inc., et al v. Charles

Ferren & Co., ("Alcoa Corsair") 383 F.2d 46,

1957 AMC 2578 (Sth Cir. 1967). Cert. denied.

393 U.S. 836, 89 S.Ct. Ill (1962). Consequently,

a shipowner has a maritime cause of action

whether he sues in contract for a breach of

warranty of workmanlike performance or in tort

14

ee NC

for the negligent performance of a maritime

contract. Alcoa Corsair, supra; Sealift v.

Refinadora Costarricenfe de Petroleo, 60!1 F.Supp.

457 (S.D. 1984). Since Kermarec v. Compagnia

Generale Transatlintic, 358 U.S. 625, 79 S.Ct.

406 (1959), it has been clear that where a case

involves legal rights and liabilities which are

cognizable in Admiralty, the general Admiralty

law governs the case no matter what forum is

chosen, including actions brought in State Court.

Sealift, supra, at 463. Specifically, federal

Admiralty law governs the construction of the

terms of the repair contract together with the

standard of performance due under the contract.

Alcoa Corsair, supra, at 2583. Empacadora del

Norte v. Steiner Shipyard, Inc., 954, 966 (S.D.

Ala. 1979).

4. Merrill Stevens expressly agreed in their

repair contract to repair the vessel in a good and

workmanlike manner and specifically had the duty

to reinstall turbo-chnarcer blankets on the

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"ALISAN V" before delivering it to the owners.

Merrill Stevens breached their undertaking by

failing to insall the turbo-charger blankets which

had been back-ordered. Alcoa Corsair, supra.

5. The Court accepts Plaintiff's expert's

opinion that the absence of the turbo-charger

blankets was a proximate cause of the fire and

hence Plaintiff's damages. There was no com-

parative negligence or fault in any manner on the

part of the owner which contributed to the cause

of the fire.

6. Merrill Stevens was also negligent in

failing to install the tubo-charger blanekts which

negligence was a legal cause of the burning of

the "ALISAN V" under the curcumstances

existing on the "ALISAN V". There was no com-

parative negligence by the owners which was a

legal cause of the fire. There was no gross

negligence or gross fault on the part of

Merrill Stevens nor was any pled in Plaintiff's

Complaint.

PERE SE RE RE RE RRR ERE EE 2S

7. The inadequate fire extinguishing system

designed by Fireboy and installed by the manufacturer

of the "ALISAN V", Ocean Yachts, rendered the

vessel unseaworthy, which was a proximate cause

of the loss, although it was not a cause of the

fire. Accordingly, as between Plaintiff and

Merrill Stevens, the unseaworthy condition of the

ship created by the fire extinguishing system

has no effect on the damages recoverable by

Plaintiff from Merrill Stevens. Alcoa Corsair, supra,

at 2589.

8. The Court finds that paragraph 1 printed

on the reverse side of Merrill Stevens repair

contract is an express warranty to "repair the

vessel in good and workmanlike manner". There-

fore, Merrill Stevens is liable to Plaintiff on the

breach of express warranty count. Insofar as

the negligence count is concerned, the Court finds

that the “Red Letter" clause contained in para-

i

graph 7 of the subject repair contract is valid

under maritime law and effectively exculpates

17

Merrill Stevens from liability on a simple negli-

gence theory. However, the "Red Letter" clause

does not absolve Merrill Stevens from liability, as

here, resulting from breach of their express

warranty to "repair the vessel in a good and

workmanlike manner". All other affirmative de-

fences of Merrill Stevens are rejected.

9. As a result of Merrill Stevens breach of

express warranty, the yacht "ALISAN V" was

declared a constructive total loss and Plaintiff

has incurred damages in the following amounts.

The Court further finds that American Home is

entitled to pre-judgment interest at a rate of 12%

per annum from the date of payment of claims

as set forth in paragraph 2! of the Findings of

Fact. (See Gator Marine Services Towing Company,

Inc. v. V.J. Ray McDermott & Co., 651 F.2d

1096 (5th Cir. 1981):

18

A. Hull Claim $150, 000. 00

Prejudgment interest

Since November 14, 1983 45,000.00

Total on Hull Claim $195, 864. 00

B. Sue and Labor (Salvage $ 20,000.00

Prejudgment interest

since November 4, 1983 6, 385.00

Total Sue & Labor $26, 385.00

Total Damages $222,249.00

10. Plaintiff also claims that he is entitled

to attorneys fees and costs. Attorneys fees are

not recoverable by the prevailing party in

admiralty actions absent statutory authority, with

two exceptions, neither of which is involved here.

Aleyska Pipeline Service Co. V. Wilderness

Society, 421 U.S. 240, 95 S.Ct. 1612 (1975).

Noritake Co. Inc. v. M/V Hellenic Champion et

al, 627 F.2d 724 (5th Cir. 1980); Ocean Barge

Transport Co. v. Hess Oil Virgin Island Corp.

598 F.Supp. 45 (D.St. Croix 1984); Aijple

(La. 1982) Plaintiff is not entitled to an award

of attorneys fees on its breach of contract claim,

whether termed breach of warranty of workman-

19

like performance or otherwise, since no liabi-

lity has been imposed upon Plaintiff for which

he is seeking indemnity. The Court is aware

of the apparent holdings in the 5th Circuit cases

of Todd v. Turbine Service, Inc., supra,

and Todd Shipyards Corp. v. Auto Transportation,

S.A. 763 F.2d 745 (5th Cir. 1985) but expressly

declines from applying them to a situation as here,

where indemnity is not being sought. Smith

& Kelly Co. v. S/S Concordia Tadj, 718 F.2d 1022

(ith Cir. 1983). The Court reserves jurisdiction

to award taxable costs upor appropriate motion.

i. Plaintiff shall submit a Final Judgment

in accordance with these Findings of Fact and

Conclusions of Law within 5 days.

DONE AND ORDERED in Chambers this [8th

day of June, 1986 at Miami, Dade County, Florida.

/s/ PHILLIP W. KNIGHT

Circuit Court Judge

Copies to: Domingo Rodriguez, Esq.

Debra L. Brady, Esq.

Debra Altizer, Esq.

20

I OO EE

IN THE DISTRICT COURT OF APPEAL

OF FLORIDA - THIRD DISTRICT

January Term, 1987

. CASE NO. 86-1732

MERRILL STEVENS DRY DOCK

COMPANY,

Appellant

Vv.

VIVIAN ALVAREZ, f/u/b/o

AMERICAN HOME INSURANCE

COMAPNY,

Appellee

Opinion filed June 23, 1987

An Appeal from the Circuit Court for Dade

County, Phillip W. Knight, Judge.

Smathers & Thompson and Debra L. Brady

and G. Morton Good, for appeallant

Hayden and Milliken and Domingo C. Rodriguez,

for appeiive

Before BASKIN and DANIEL S. PEARSON and

FERGUSON, JJ.

PER CURIAM

This is an appeal from a final judgment

2|

BEREBEEREEEBEEEBEREEEBEEBE SBS ef

— oe ——— — ——— oe — — eanidiineeel a ee Raia all ee ta csiieiell le le =

in favor of the appellee,American Home In-

surance Company, for $222,249 the amount

determined by the trial court, sitting without

a jury, to be the damages suffered by the

appellee when a yacht owned by Alverez,

American Home's subrogor | was totally des-

troyed by fire. Merrill Stevens Dry Dock Company

urges that an exculpatory clause in the repair

contract relieved it from responsibility for

damages to other parts of the vessel or the

vessel as whole, caused by its negligent failure

to properly repair a certain part of the vessel.

We agree and reverse with directions to enter

judgment for Merrill Stevens.”

There is no dispute that the negligent failure

of the defendant, Merrill Stevens Dry Dock

Company, to install or to see to it that its sub-

contractor installed turbo-charger blankets on the

plaintiff's yacht was a breach of its express

undertaking "to repair the vessel in a good and

22

workmanlike manner" and was the proximate cause

of a fire resulting in the total loss of the vessel.

There is also no dispute that it was neither pleaded

nor proved that Merrill Stevens' omission amounted

to gross megligence.

Initially, the trial court, in entering judgment

for Merrill Stevens as to the loss of the vessel

claim, concluded that Clause contract

clearly and unequivocally expresses the

intent that Merrill Stevens shall have no

liability for any damages or losses sustained,

whether in tort or contract unless and until

it has been establisehd that their conduct

amounted to gross engligence. Such clasues

under the maritime law, Known as "Red

Letter" clauses have been held to be valid

and binding. Todd Shipyard Corp. v.

Turbine Service, Inc. , 674 F.2d 401 (5th

Cir. 1982); Morton v. Zidell Explorations,

Inc., 695 F.2d 347 (9th Cir. 1982); Ortiz

v. ETPM U.S.A., Inc., 553 F.Supp. 549

(S.D. Tex. 1982); Noruna IV, AMC 967

(D.Mass. 1969). Clause 7 was under all

the circumstances surrounding these

repairs binding on the parties, valid and

enforceable."

On rehearing, the trial court reversed itself,

concluding that the "Red Letter" clause did not

"absolve Merrill Stevens from liability.

23

BPS@EEREREEBEEEEEEBEEE#® = =

resulting from breach of their express warranty

to 'repair the vessel in a good and workmanlike

manner.'"

We are of the view that the trial court was

right in the first place: Merrill Stevens' under-

taking to “repair the vessel in a good and

workmanlike manner" made it responsible to

correct defective repairs; the exculpatory clause

relieved Merrill Stevens--unless grossly negli-

gent--from responsibility for damages to other

parts of the vessel caused by the defective

repairs. This is simply an unambiguous arm's

length transaction between parties of like

bargaining power who were well able to allocate

who was to bear the responsibility for insuring

against what loss. Accordingly, the judgment

under review is reversed, and the cause is remanded

to the trial court with directions to enter judgment

for Merrill Stevens. The order denying American

Home's motion for attorneys fees is affirmed.

24

Affirmed in part; reversed in part, and

remanded with directions.

DANIEL S. PEARSON and FERGUSON JJ., concur.

25

—

MERRILL~STEVENS DRY DOCK COMPANY

vs.

VIVIAN ALVAREZ f/u/b/o AMERICAN

HOME INSURANCE COMPANY

BASKIN, Judge (dissenting).

Initially, the trial court construed the

parties’ contract as absolving Merrill Stevens

Dry Dock, Inc. [Merrill Stevens] of

liability unless Merrill Stevens was proved grossly

negligent in performing yacht repairs. Upon

reconsideration, however, the court declared

Merrill Stevens liable for the loss of the

yacht, ruling that it had breached its express

warranty. The majority reverses the trial

court's determination upon a holding that Merrill

Stevens incurred no liability unless it was grossly

negligent in the performance of its contract. To

reach that conclusion the majority relies on a

portion of the challenged clause, but is silent as

to the significance of the remainder of the clause.

The majority's failure to give effect to the entire

clause forms the basis of my dissent.

The operative clause states:

26 ~

CONTRACTOR undertakes to perform the

work outlined and haul and launch vessels,

provide berth, wharfage, towage, and other

services and facilities only upon the condition

that it shall not be liable, direct!y or in-

directly, in contract, tort, or otherwise,

to the vesel, its owners, charterers, under-

writers, or any of their agents, servants,

or employees, or persons to whom they might

be responsible for any personal injury or

death, or damge to the vessel, its cargo,

equipment or movable stores or for any

consequence thereof, unless such personal

injury, death, or property damage, is caused

by CONTRACTOR'S gross negligence or

the gross negligence of any of its employees,

which aross negligence shaii not be presumed

but mustbe affirmatively established. In

no event, including the negligence and/or

the gross negligence and/or the breach of

contract of CONTRACTOR, shall the CONT-

TRACTOR'S aggregate liability to all such

parties in interest for personal injury,

death or damage sustained by them, in-

cluding damages for delay of the vessel, or

any other type of damage, exceed the sum

of $300,000.00, and in no event shall the

CONTRACTOR be liable to any extent to the

vessel, her owners, charterers and/or under-

writers, for the cost of defencing any claims

asserted by third parties, including attorney's

fees, whether such actions shall be commenced

by its employees or others.

Reading the clause in its entirety, ! conclude

that Merrill Stevens is laible for its conduct

under the terms of the contract. Although the

first portion of the clause purports to impose

liability on Merrill Stevens only if it is found

27

grossly negligent, The second section renders Merrill

Stevens liabile up to the sum of $300,000 for

"negligence and/or . . .gross negligence and/or

...breach of contract... ." The parties

obviously envisioned circumstances where Merrill

Stevens could be liable under any of three theories;

negligence, gross negligence, or breach of contract.

The trial court, having determined that Merrill

Stevens breached its express warranty to repair

the yacht in a "good and workmanlike manner,"

correctly imposed liability on Merrill Stevens and,

following firmly establshed principles of law,

see Alcoa Steamship Co. V. Charles Ferran &

Co.,383 F.2d 46 (5th Cir. 1967), cert. denied,

393 U.S. 836, 89 S.Ct. Ill, 21 L.Ed. 2d 107 (1968)

awarded damages under the $300,000 limitation.

The majority approves the trial court's finding,

but refuses to impose liability, apparently because

the breach stems from a contractual violation

rather than from gross negligence.

| find no basis for the majority's reweighing

of the trial court's findings of fact, its failure to

28

ence ss Oc ee lO eS LUD

consider the second portion of the contested

clause, or its holding that Merrill Stevens' breach

of its express warranty does not constitute grounds

for assessing liability. | would enforce the

contract and hold Merrill Stevens liable up to the

$300,000 limit intended by the parties. | agree,

however, that American Home Insurance Company

is not entitled to attorney's fees.

|. American Home, as the vessel's insurer,

paid Alvarez $180,000 for the loss.

2. American Home cross-appeals from the

trial court's order denying it attorney's fees.

We affirm that order without further discussion.

3. Clause 7 of the contract provides:

"CONTACTOR undertakes to perform the

work outlined and haul and launch vessels,

provide berth, wharfage, towage, and other

services and facilities only upon the condition

that it shail not be liable, directly or in-

directly, in contract, tort, or otehrwise,

to the vesel, its owners, charterers, under-

writers, or any of their agents, servants,

or employees, or persons to whom they might

be responsible for any personal injury or

death, or damge to the vessel, its cargo,

equipment or movable stores or for any

consequence thereof, unless such personal

injury, death, or property damage, is caused

by CONTRACTOR'S gross negligence or

the gross negligence of any of its employees,

which gross negligence shall not be presumed

but must be affirmatively established. In

no event, including the negligence and/or

the gross negligence and/or the breach of

contract of CONTRACTOR, shall the CONT-

TRACTOR'S aggregate liability to all such

parties in interest for personal injury,

death or damage sustained by them, in-

cluding damages for delay of the vessel, or

any other type of damage, exceed the sum

of $300,000.00, and in no event shall the

CONTRACTOR be liable to any extent to the

vessel, her owners, charterers %nd/or under-

writers, for the cost of defending any claims

asserted by third parties, including attorney's

fees, whether such actions shall be commenced

by its employees or others."

30

a

IN THE DISTRICT COURT OF

APPEAL OF FLORIDA

THIRD DISTRICT

July Term, A.D. 1987

Monday, August 3l, 1987

MERRILL STEVENS DRY

DOCK COMPANY,

Appellant

v. CASE NO. 86-1732

VIVIAN ALVAREZ, f/u/b/o

AMERICAN HOME INSURANCE

COMPANY,

Appellee

j

Upon consideration, appellee's motion for

rehearing and rehearing en banc is hereby denied.

(Baskin, J. dissents.)

A true copy

Attest:

LOUIS J. SPALLONE

Clerk District Court of

Appeal, Third District

cc: Debra L. Brady

Domingo C. Rodriguez

31

i

- ay

SUPREME COURT OF FLORIDA

Tuesday, January 5, 1988

CASE NO. 71245

District Court of Appeal, Third

District No. 86-1732

VIVIAN ALVAREZ, f/u/b/o

AMERICAN HOME INSURANCE

COMPANY,

Petitioner,

Vv.

MERRILL STEVENS DRY DOCK

COMPANY,

Respondent

This cause having heretofore been submitted to

Court on jurisdictional briefs and portions of

the record deemed necessary to reflect juris-

diction under Article V., Section 3(b),

Florida Constitution (1980), and the Court

having determined that it should decline to

accept jurisdiction, it is ordered that the

Petition for Review is denied.

No Motion for Rehearing will be enter-

32

meeBRRE RE RE REEEEE

tained by the Court. See Fla. R. App.

P. 9 330 (d).

OVERTON, Acting C.J. EHRLICH, SHAW

BERKETT and GRIMES, JJ., concur.

A true Copy

Teer:

Sid J. White,

Clerk Supreme Court

cc: Hon. Louis J. Spallone, Clerk

Hon: Richard P. Brinker, Clerk

Hon. Phillip W. Knight, Judge

Domingo C. Rodriguez, Esq.

Debra L. Brady, Esq.

G. Morton Good, Esq.

33