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Garza v. Marine Transport Lines Inc.

decided: November 3, 1988.

RICARDO GARZA, PLAINTIFF,
v.
MARINE TRANSPORT LINES, INC., DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT, V. NORFOLK SHIPBUILDING & DRYDOCK CORPORATION, THIRD-PARTY DEFENDANT-APPELLEE



Appeal from a judgment of the United States District Court for the Southern District of New York (Irving Ben Cooper, Judge), granting summary judgment to third-party action. Reversed and Remanded

Winter and Miner, Circuit Judges, Billings,*fn* District Judge.

Author: Billings

BILLINGS, District Judge:

Defendant and third-party plaintiff-appellant Marine Transport Lines, Inc., ("MTL") seeks review of an order of the United States District Court for the Southern District of New York (Cooper, J.) granting summary judgment to third-party defendant-appellee Norfolk Ship-building & Drydock Corporation ("Norshipco") on MTL's third-party claim for indemnification and legal fees. The district court granted summary judgment and dismissed the third-party action on the ground that it was time-barred by the terms of the agreement between MTL and Norshipco. Garza v. Marine Transport Lines, Inc., 680 F. Supp. 624 (S.D.N.Y. 1988).

MTL argues on this appeal that the district court erred in concluding that the contract clauses were unambiguous, and that because of that error, the court improperly excluded parol evidence relevant to the meaning of the clauses. MTL also requests that this Court, upon examination of the parol offered, rule upon the meaning of the contract clauses in dispute. We agree that the clauses are ambiguous and therefore reverse and remand for reconsideration. We do not pass on the proper interpretation of the disputed contract clauses because we believe the district court should have the first opportunity to assess these clauses in light of the parol evidence introduced.

BACKGROUND

Plaintiff Ricardo Garza commenced this suit in September, 1984, to recover damages for personal injuries sustained while a crew member on the MARINE CHEMIST, a vessel owned and operated by MTL. The MARINE CHEMIST was repaired by Norshipco pursuant to contract during the period between October 11 and November 10, 1983. On November 17, the second time the ship was docked after the repairs, the starboard head mooring line parted and struck plaintiff, causing serious injuries to his right leg. Plaintiff settled with MTL for $200,000 in June, 1985, and is no longer an active party.

Sometime after the accident, it was determined that the synthetic mooring line that hit Garza had been damaged at the location of the break by contact with hot molten metal. MTL claims that this damage was caused during the repair period at the Norshipco Yard, presumably as a result of repairs involving burning and welding in the vicinity of the mooring line. MTL notified Norshipco of Garza's claim in May, 1985, and commenced this third-party action against Norshipco in June, 1985, pursuant to leave of the district court. MTL contends that the mooring line parted because it had been damaged by Norshipco employees while the MARINE CHEMIST was at Norshipco's shipyard. Norshipco denies liability on the basis of certain so-called "red letter clauses" contained in the written agreement between the parties.

The contract for repair of the MARINE CHEMIST consists of MTL's invitation to bid with repair specifications dated July 25, 1983, Norshipco's bid dated August 26, 1983, and MTL's letter of September 1, 1983, awarding the job to Norshipco. The repair specifications do not indicate that any work was to be performed on the mooring line involved in the accident, nor was that line purchased from Norshipco.

Norshipco's bid contained several exculpatory "red-letter" clauses which are common in maritime repair contracts. The red-letter clause upon which Norshipco grounded the instant summary judgment motion reads as follows:

We shall be discharged from all liability for defective workmanship or material or for loss or damage, unless the same is discovered prior to and claim in writing made to us within sixty (60) days and litigation is commenced within one year after our work has ceased for whatever reason or has been completed, or the vessel has been redelivered, whichever first occurs.*fn1

The district court agreed with Norshipco that the clause unambiguously imposed a sixty-day limitation period on MTL's indemnification claim, and dismissed the third-party action because written notice had not been provided within the time required by the clause. The district court refused to consider evidence from "without the four corners of the ship repair contract" as to the meaning or application of the clause. 680 F. Supp. at 628. MTL argues on this appeal, as it did in the court below, that the sixty-day limitation clause did not apply to claims for personal injury. Rather, MTL urges, a different red-letter clause was applicable:

We do not agree to the accident, indemnity, and insurance provisions, if any, contained in your invitation or specifications, relating to liability for death or personal injury, and in such cases we accept only such liability as is imposed upon us by law.

MTL argues that under this clause, the proper limitations period for actions grounded in personal injury would be that "imposed upon us by law", not the sixty-day period. At the very least, MTL argues, the meaning and application of the contract clauses are ambiguous and parol should ...


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