438 F.

2d 803

SKIBS A/S GYLFE, as Successor in interest to Tankrederiet

Gefion A/S as Owner of the Motorship Fyda, et al., Plaintiffs,
v.
HYMAN-MICHAELS COMPANY and Lakes Shipping and
Trading Company, Defendants and Third-Party PlaintiffsAppellants,
v.
NATIONAL CARGO BUREAU, INC., Third-Party DefendantAppellee.
SKIBS A/S GYLFE, and Forsikrings-Askjelskapet Vega,
Plaintiffs-Appellants,
v.
NATIONAL CARGO BUREAU, INC., and G. P. Sullivan,
Defendants-Appellees.
SKIBS A/S GYLFE et al., Plaintiffs-Appellants,
v.
UNITED STATES of America, Defendant-Appellee.
The TOKYO MARINE & FIRE INSURANCE COMPANY et
al., Plaintiffs,
v.
HYMAN-MICHAELS COMPANY, Defendant and ThirdParty Plaintiff-Appellant,
v.
NATIONAL CARGO BUREAU, INC., Third-Party DefendantAppellee.
Nos. 20126-20129.

United States Court of Appeals, Sixth Circuit.

February 5, 1971.

MacDonald Deming, New York City, for Skibs A/S Gylfe, and others;
Haight, Gardner, Poor & Havens, New York City, Foster, Meadows &

Ballard, Raymond A. Ballard, Detroit, Mich., on brief.

Thomas E. Byrne, Jr., Philadelphia, Pa., for Hyman-Michaels Co., and
others; Lucking & Miller, Donald J. Miller, Detroit, Mich., Krusen, Evans
& Byrne, Philadelphia, Pa., on brief.
David V. Martin, Detroit, Mich., for National Cargo Bureau, Inc., and
others; Martin, Bohall, Joselyn, Halsey & Rowe, David V. Martin,
Detroit, Mich., on brief.
William E. Gwatkin, III, Atty., Dept. of Justice, Washington, D. C., for
the United States; William D. Ruckelshaus, Asst. Atty. Gen., Alan S.
Rosenthal, Atty., Dept. of Justice, Washington, D. C., Ralph B. Guy, Jr.,
U. S. Atty., Detroit, Mich., on brief.
Before PHILLIPS, Chief Judge, and PECK and BROOKS, Circuit Judges.
BROOKS, Circuit Judge.

In July, 1961, the Norwegian vessel Gyda and its cargo of steel turnings (finely
shredded scraps of steel) were damaged as a result of the spontaneous
combustion of the cargo. Eleven lawsuits, several with crossclaims and thirdparty defendant claims, were instituted to recover for the damage. Ten of these
lawsuits were filed by the owners of the ship and its underwriters, and one
action was brought by the owner of the cargo and its underwriters. Four of the
lawsuits were dismissed prior to trial, and the remaining seven actions were
consolidated for trial. Of the remaining seven actions, six were non-jury
admiralty cases brought by the shipowners; one was a civil jury action brought
by the owners and underwriters of the cargo. During trial, several additional
actions were dismissed and certain claims settled.

In this consolidated appeal, four of the actions' final judgments are presented
for review. For purposes of clarity, the facts and nature of each action and the
issues raised by the respective appeals will be treated separately. An overall
picture of the circumstances surrounding this protracted litigation and the
District Court's disposition of the non-jury cases can be found in Skibs A/S
Gylfe, et al. v. Hyman-Michaels Company v. National Cargo Bureau, Inc.
(third-party defendant), D.C., 304 F. Supp. 1204 (1969).

No. 20,127
Skibs A/S Gylfe and Forsikrings-Askjelskapet
Vega
v.

National Cargo Bureau, Inc. and G. P.

Sullivan

This breach of contract action is one of the non-jury admiralty cases brought by
the shipowners, Skibs A/S Gylfe, as successor in interest to the original owners
of the A/S Gyda, and the hull underwriters of the Gyda, ForsikringsAskjelskapet Vega, against National Cargo Company. National Cargo was
engaged by the shipper of the steel turnings, Hyman-Michaels Company, to
perform services relating to the shipping of the steel turnings. National Cargo
impleaded Hyman-Michaels as a third-party defendant to this action. However,
as National Cargo has been exonerated from liability by the District Court's
judgment, the third-party claim was dismissed below and has not been pressed
on this appeal. The shipowners' contract action against National Cargo is a
third-party beneficiary claim based upon National Cargo's contract with the
shippers of the steel turnings to oversee the loading of the cargo, make periodic
tests of the temperature of the stowage and advise as to its safe character. It is
alleged that National Cargo breached its contractual warranty of workmanlike
service by not properly supervising the loading of the cargo, by not continuing
to make tests of the temperature of the stowage and by not informing the
shipowners of the overheating of the stowage. Damages for the injury to the
ship and its cargo are sought from National Cargo for its breach of contract.

The District Court made certain findings of fact and conclusions of law and
concluded:

1. National Cargo warranted to perform its contractual obligations to the

shippers of the steel turnings in a workmanlike fashion, and that the shipowners
received the benefit of this warranty as a third-party beneficiary, see Ryan
Stevedoring Company v. Pan-Atlantic S. S. Corporation, 350 U.S. 124, 76 S.Ct.
232, 100 L.Ed. 133 (1956).

2. National Cargo breached this warranty in a number of material respects, but

that

3. National Cargo's breach of warranty did not make them liable for the
damages to the ship and its cargo because the shipmaster's applying water to
the spontaneously overheating cargo "constituted an intervening cause and
broke the previously existing chain of causation."1

The shipowners contend that the District Court erred in holding that National
Cargo's contractual obligations with respect to the steel turnings was only to

supervise and offer expert opinion as to the safe character of the cargo at the
point of loading in Muskegon, Michigan. It is argued that National Cargo was
under a continuing obligation to advise as to the safe character of the cargo and
it breached this responsibility by not advising the shipowner of the dangerous
overheating of the cargo in hold No. 3 when the ship docked in Detroit. The
District Judge reviewed all the documents which comprised the contract
between National Cargo and the shippers of the cargo. In addition, he examined
the pertinent testimony to determine the parties' intent in entering into the
contract. The Court's conclusion that National Cargo's contractual obligations
were restricted to supervising loading at Muskegon and giving advice as to the
safe character of the cargo only at the point of loading is supported by the
record and is not clearly erroneous. Federal Rules of Civil Procedure, Sec.
52(a).
10

11

12

The shipowners also challenge the District Court's conclusion that while
National Cargo breached its warranty of workmanlike service, the "causal link"
between this breach and the ultimate damage to the ship and its cargo was cut
by the shipmaster's negligence.2 Specifically, the Court held that the shipmaster
acted negligently in applying water to the overheating turnings in hold No. 3; in
sailing from Montreal knowing of the extremely dangerous overheating of the
cargo in hold No. 3; and by applying additional water to the cargo after sailing
from Montreal. It was in part this conduct of the shipmaster and the lapse of
time and space between the loading of the ship and the fire which damaged it
that the Court found broke the "causal chain" between National Cargo's breach
of warranty and the damage to the ship and cargo. These findings of fact are
binding unless it can be said that they are clearly erroneous, Processteel, Inc. v.
Mosley Machinery Company, Inc., 421 F.2d 1074 (6th Cir. 1970) (Decided
February 5, 1970), and while the legal conclusion that a "causal chain" was
broken is theoretically incorrect, the findings of fact can only support a
conclusion that the damages to ship and cargo were unforeseen as viewed from
the point when National Cargo breached its contract.
No. 20,128
Skibs A/S Gylfe, et al.
v.
United States of America

This non-jury admiralty negligence action was brought by the shipowners

against the United States, claiming that the Coast Guard had voluntarily
assumed a duty of due care by detaining the ship at Detroit because of the
overheating of the cargo and then negligently breached this duty by permitting
the ship to leave port while the temperatures of cargo were in excess of safe
limits prescribed by the Dangerous Cargo Act (46 U.S.C. 170), and the

regulations promulgated pursuant to that statute. The District Court found that
the regulations relied upon (33 C.F.R. 6.04-8, 6.12-1 and 6.14-1) did not
require the Coast Guard to detain a ship with overheated steel turnings, but that
46 U.S.C. 170(12) [46 C.F.R. 146.02-6] did place the primary duty of
enforcement of the Dangerous Cargo Act upon the Coast Guard and gave it
authority to detain ships to ascertain if an infraction of the Dangerous Cargo
Act had occurred. However, it was concluded that the Coast Guard did not act
negligently in permitting the ship to leave Detroit.
13

The District Court's decision that the Coast Guard did not act negligently in
releasing the ship at Detroit is challenged by the shipowners. Here again we are
asked to overturn a conclusion of law of the District Court based upon its
findings of fact because they are clearly erroneous. The District Court carefully
examined technical evidence respecting the safe range of temperatures of steel
turnings while in stowage aboard a ship. Testimony of the Coast Guard officer
in charge at the Port of Detroit was heard as was testimony given by the master
of the ship which was damaged. Having received and considered all the
evidence bearing on the issue of whether the Coast Guard was negligent in
permitting the ship in question to leave port, the Court concluded that there was
no negligence in not further detaining it. The findings of fact and conclusions of
law based thereupon are amply supported by evidence in the record and cannot
be labeled as "clearly erroneous".

No. 20,126
Skibs A/S Gylfe
v.
Hyman-Michaels Company and Lakes
Shipping and Trading Company
v.
National Cargo Bureau, Inc.

14

15

This was a non-jury civil action brought by the shipowners against HymanMichaels, the shipper of the steel turnings. Hyman-Michaels implead National
Cargo claiming that National Cargo's breaching of its contract would make it
liable to them if they, as the shipper of the steel turnings, were found liable to
the shipowners. During the trial, Hyman-Michaels settled with the shipowners
(several other actions were then dismissed) and the only dispute remaining was
that between the shipper of the cargo, Hyman-Michaels, and National Cargo,
for breach of its loading contract. This action retained the characteristics of the
third-party defendant claim of attempting to transfer liability. The District
Court held for National Cargo and Hyman-Michaels appeals. Three issues are
raised by the appeal from this decision.

16

First, it is argued that for Hyman-Michaels to recover from National Cargo on

16

First, it is argued that for Hyman-Michaels to recover from National Cargo on

its third-party claim, it is not necessary that it prove that it was actually liable to
the shipowners for the damage to the ship. This question has already been
presented to this Court by an interlocutory appeal and was resolved adversely to
Hyman-Michaels' contentions. See, Tankrederiet Gefion A/S v. HymanMichaels Company, 406 F.2d 1039 (6th Cir. 1969). That issue was properly
resolved by the interlocutory appeal, and it requires no further discussion. (This
same question is raised in appeal No. 20,129, The Tokyo Marine & Fire
Insurance Company, et al. v. Hyman-Michaels v. National Cargo Bureau, Inc.
[Third-Party Defendant] infra, but will not be given further consideration.)

17

The second issue raised is that the District Court erred in its determination that
National Cargo's contract with Hyman-Michaels pertained only to supervising
loading and giving expert opinion as to the character of the cargo at Muskegon,
Michigan. Hyman-Michaels contends, as did the shipowners in appeal No.
20,127, that National Cargo had a duty to give an opinion as to the safe
character of cargo when the ship docked in Detroit. The argument HymanMichaels now advances is somewhat different than that advanced by the
shipowners. However, we hold that the District Court's ruling on the scope of
National Cargo's undertaking finds support in the record and is not clearly
erroneous.

18

Last, Hyman-Michaels argues that the District Court erred in applying tort
principles of "superseding cause" to this contract action. The issue is phrased in
their appellate brief as:

19

"Under the circumstances and evidence in this case, was the action of the
Captain in applying water to the turnings following the sailing of the ship from
Montreal on or about July 3 an independent intervening cause?"

20

The inappropriate use of tort-negligence language in the various contract

actions has already been briefly discussed. See note 1, supra. It is worthy to
note that while the complaint is lodged against the District Court's use of the
negligence language "superseding cause" Hyman-Michaels has formulated its
objection by using a negligence phrase, i. e., "independent intervening cause".
Both parties have cited contract cases in which expressions of causation
traditionally appearing in negligance actions have been used. Yet, it is
elementary that in contract theory a party who breaches a contract has its
ultimate damage liability for that breach gauged by the test of foreseeability of
the injury resulting therefrom. Restatement of Contracts 330. In determining
foreseeability questions of "remoteness in time and space and the number of
intervening events" are considered to decide whether a breaching party to a

contract had reason to foresee the injury. The fact that someone or something
else in fact "caused" the injury may or may not in varying situations affect the
liability of the breaching party if the party had or should have had reason to
foresee that the injury would result, but in the present case clearly the supplying
of water by the captain to his cargo was not a reasonably foreseeable
circumstance.
21

The point is well taken that certain inappropriate language was used by the
District Court in its opinion. However, all parties actively, although perhaps
unconsciously, contributed to the error and the findings of fact made by the
District Court are not clearly erroneous and support the conclusion (phrased in
contract terms) that National Cargo is not liable in money damages for its
breach of contract because the injury to the ship and its cargo was
unforeseeable.

No. 20,129
The Tokyo Marine & Fire Insurance
Company, et al.
v.
Hyman-Michaels Company
v.
National Cargo Bureau, Inc.

22

23

This civil jury breach of contract action was brought by the purchaser of the
cargo, Mitsubishi Shoji Kaisha, Ltd., and the Japanese insurer of the cargo
against the shipper of the cargo, Hyman-Michael and Michigan Foundry Supply
Company which originally sold the steel turnings to Hyman-Michaels. HymanMichaels and Michigan Foundry Supply Company implead National Cargo.
During the trial Hyman-Michaels and Michigan Foundry Supply settled with
the Japanese purchaser of the cargo and the question of National Cargo's
liability to the third-party plaintiffs (original defendants) was resolved by the
jury in National Cargo's favor. Only Hyman-Michaels appeals from the jury
verdict. One issue is assigned as error.

24

Hyman-Michaels maintains that it was error for the District Court to have
instructed the jury that the purchase contract entered into between Mitsubishi
and Hyman-Michaels contained an implied warranty that the steel turnings at
the time of shipment were reasonably fit for transportation. When this purchase
contract was entered into the Uniform Sales Act was in effect in Michigan, and
Hyman-Michaels argues that Section 15 of that Act M.C.L.A. 440.2315
prohibits implying warranties when a buyer orders definite, clearly described or
specific goods. A reading of Section 15 of the Uniform Sales Act and the
Michigan cases cited by Hyman-Michaels, see, e. g., F. M. Sibley Lumber

Company v. Schultz, 297 Mich. 206, 297 N.W. 243 (1941); Beaman v. Testori,
323 Mich. 194, 35 N.W.2d 155 (1948), indicates that the rule relied upon
prohibits implying a warranty of fitness for a purpose when a buyer orders
definite or specific goods. However, in this case, we are dealing with an
implied warranty that the goods at the time of shipment were reasonably fit for
transportation. Michigan cases tend to indicate that a warranty of fitness for a
purpose is not as broad in scope to encompass a warranty that goods are fit for
shipment. See, Richardson v. Messina, 361 Mich. 364, 105 N.W.2d 153 (1960);
Wade v. Chariot Trailer Company, 331 Mich. 576, 50 N.W.2d 162 (1951). In
addition, while no Michigan cases can be found that deal with the question, it
appears that a warranty of fitness for shipment is a separate and distinct
warranty from that of fitness for a purpose and is properly implied in contracts
such as the one in question in the present case. See, Harp, Hardee & Co. v.
Hass-Phillips Produce Company, 205 Ala. 573, 88 So. 740 (1921); Metal
Furniture Company v. Goss, 158 Ark. 145, 249 S.W. 550 (1923). Therefore, it
is concluded that the District Court's instruction that the contract between
Mitsubishi and Hyman-Michaels gave rise to a warranty that at the time of
shipment the goods were reasonably fit for transportation was proper.
25

Affirmed.

Notes:
1

The District Court here and at other points in its opinion erroneously
interchanged language used in contract law with terms used in tort-negligence
law. (See e. g. Skibs A/S Gylfe v. Hyman-Michaels Company, 304 F.Supp.
1204, 1221 (1969). "[T]his court has found that NCB's breach of its contractual
undertakings was not a proximate cause of the damage suffered by the ship * *
*.") The irony of the situation is that the District Court clearly recognized and
correctly ruled that the shipowners had no cause of action against National
Cargo based on a negligence theory, 304 F.Supp. 1204, 1222. However, even
after recognizing this fact, the Court continued to use negligence terminology
such as "proximate cause," "intervening cause" and "superseding cause" in
reaching its decision that National Cargo was not liable under its loading
contract for the damage to the ship. Part of this confusion understandably
resulted from the complexity of this protracted litigation which involved
actions based on contract and tort theories. In addition, some states for public
policy reasons permit injured third parties to recover for "breach of implied
warranties" on negligence theory to circumvent the requirements of contractual
privity. However, in these types of stevedoring cases the courts treat the breach
of implied warranty of workmanlike service between the actual parties as

strictly contractual and permit injured shipowners to proceed under contract

theory as third-party beneficiaries. See Ryan Stevedoring Company v. PanAtlantic S.S. Corporation,supra. It must be added that the parties themselves
contributed to the error by incorrectly interchanging terminology in their
pleadings and at trial. Under ordinary circumstances this mistake might rise to
the level of reversible error since contract principles correctly applied impose
different standards of proof than negligence principles. However, in this case,
the District Court's findings of fact also support the conclusion that National
Cargo's breach of contract did not make them liable because remoteness in
space and time and the number of intervening events made the damage to the
ship unforeseeable.
2

For the purpose of deciding in this contract action that National Cargo was not
liable for the unforeseen damage to the ship, it was unnecessary for the Court
to have concluded that the shipmaster's applying water to the overheating cargo
was a negligent act