Opinion
Civil Action No. 01-CV-2136 Section "J" (2)
August 30, 2001
FINDINGS OF FACTS AND CONCLUSIONS OF LAW
This matter came on for trial before the Court, sitting without a jury, on August 23, 24 and 27, 2001. The Court has now considered all of the evidence presented at trial, stipulations of the parties, pre-trial memoranda filed by the parties, as well as post-trial oral arguments. Pursuant to Federal Rules of Civil Procedure 52(a), the Court now makes the following findings of fact and conclusions of law.
To the extent any findings of fact should be classified as conclusions of law, they should be so considered; and to the extent any conclusions of law should be classified as findings of fact, they should be so considered.
FINDINGS OF FACT 1.
This case involves claims by Kim Susan, Inc. ("KSI") for an alleged defective rebuilt EMD diesel engine sold by Design Power International ("DPI") to Service Marine, Inc. ("SMI"), and eventually installed as the starboard engine aboard the M/V GRADY FAGAN. The plaintiff, KSI, is a Louisiana corporation with its principal place of business in Larose, Louisiana. KSI owns and operates offshore supply vessels servicing deep water drilling operations in the Gulf of Mexico. The defendant, DPI, is a Texas corporation with its principal place of business in Houston, Texas.
2.
KSI contracted with SMI in June, 1997, for the construction of the MN GRADY FAGAN, an offshore supply vessel.
3.
SMI contracted with DPI in July, 1997, for the purchase of two rebuilt EMD diesel engines for installation in the vessel. DPI warranted the rebuilt EMD engines against defects in materials and workmanship pursuant to a written warranty.
4.
DPI delivered the engines to SMI in December, 1997. SMI installed the engines aboard the vessel in early 1998, but failed to complete the construction of the MN GRADY FAGAN prior to filing for bankruptcy that same year.
5.
KSI then contracted with Halter Marine, Inc. ("Halter") to complete the construction of the MN GRADY FAGAN. The vessel was finally delivered to KSI on December 24, 1998, and placed into service almost immediately.
6.
KSI alleges it became aware of excessive vibrations in the starboard main engine of the MN GRADY FAGAN almost immediately after delivery and acceptance of the vessel on December 24, 1998. KSI further claims that a warped or defective crankshaft gear caused the substantial and unusual engine vibrations, which rendered the use of the vessel so inconvement that it would have not purchased the vessel had it known of the vibration defect. Accordingly, in the instant suit, KSI claims that it suffered actual and consequential damages as a result of a redhibitory defect in the starboard engine under Louisiana Civil Code articles 2520-2548, and that DPI breached its contract by not honoring its warranty against defects in material and workmanship and repair, failure to replace the engine and failure to reimburse KSI for the necessary repairs to the rebuilt engine. Thus, KSI concludes that under Louisiana Civil Code article 2520, it is entitled to recover from DPI, the manufacturer, for a redhibitory defect.
Prior to trial, KSI alleged that both the flywheel and the crankshaft gear were warped or defective at the time the starboard engine was delivered by DPI to SMI for installation aboard the vessel. At trial, however, KSI's evidence was directed to an alleged defect in the crankshaft gear only. It should also be noted that throughout the pre-trial proceedings and to a lesser degree at trial, the crankshaft gear was alternately referred to as the "bull gear," "bell gear," and "ring gear".
7.
DPI, on the other hand, argues there is no redhibitory defect because, inter alia, the rebuilt engine was in all respects fit, suitable and in good working order, and free from any defect in material and workmanship when delivered to SMI on December 10, 1997. In the alternative, DPI argues that KSI waived its right to claim a redhibitory defect; and that the written warranty supplied with the engines is a limited warranty which excludes all other warranties, including the implied warranty against redhibitory defects.
8.
DPI also argues that any defect subsequently found in the starboard main engine of the GRADY FAGAN resulted from some intervening subsequent misuse, abuse or failure to maintain, or other act caused subsequent to DPI's delivery to SMI and while the engine was in the care, custody and control of others for whom DPI cannot be held responsible.
9.
With respect to the plaintiff's claim for breach of warranty, DPI contends that KSI has failed to prove any breach by DPI since there is no evidence of any defect in the crankshaft gear which existed at the time of the sale or delivery of the engine. Moreover, DPI argues that the engine warranty had lapsed because sea trials were not performed within the specified six months from delivery. Alternatively, DPI contends the damages recoverable by KSI are specifically limited or excluded by the express language of the warranty.
10.
DPI also asserts a counter-claim against KSI to collect a total of $10,646.72 due under an open account for the value of the replacement crankshaft gear supplied in September, 1999 at a cost of $1,419.89, and for labor and travel expenses, in the amount of $9,226.83, incurred by DPI for services provided to the GRADY FAGAN, and for attorney fees under Louisiana's Open Account Statute, La. Rev. Stat. 9:2781.
11.
The threshold factual issue in this case is whether the crankshaft gear in the starboard EMD diesel engine of the MN GRADY FAGAN was defective at the time DPI delivered the engine to SMI shipyard in December, 1997.
12.
KSI argues that although it was not until August, 1999 that the exact source of the vibrations was diagnosed, the fact that the excessive vibration problem manifested itself during the vessel's maiden voyage offshore and within days of delivery of the vessel in December, 1998, is strong circumstantial evidence that the defect in the crankshaft gear was present at the time DPI delivered the rebuilt engine to SMI shipyard in December, 1997. The rest of KSI's argument is essentially that it has met its burden of proving a prima facie case of redhibition, that the burden then shifts to DPI to prove that the defect in the crankshaft gear arose from some other cause following delivery of the engines, and having failed to carry that burden, DPI is liable in redhibition for the damages sustained by KSI.
Despite the best efforts of counsel for both parties and a great deal of speculation by the various witnesses, including both experts, it was evident to the Court that neither side was able to prove by a preponderance of the evidence the exact cause or source of any defect subsequently found in the crankshaft gear in September, 1999 while the vessel was at Halter Marine's shipyard.
13.
The KSI witnesses who testified on the threshold factual issue were Greg Woods, engineer aboard the MN GRADY FAGAN; Kirk Lirette, chief mechanic for KSI; and Kent Fagan, part owner and operations manager of KSI. The gist of their testimony was that the Captain and crew noticed excessive vibrations in the starboard main engine almost immediately during the vessel's maiden voyage offshore. After delivery of the vessel to KSI on December 24, 1998, the vessel spent several days taking on fuel, supplies and cargo for her initial voyage. At the time, the vessel was on a charter hire to service a deep water drilling operation located over 100 miles offshore in the Gulf of Mexico. The vessel departed on its maiden voyage on December 29, 1998.14.
According to Mr. Woods, the vibrations were so bad that ceiling tiles were shaken loose in the wheel house, various lines and engine appurtenances were loosened causing oil leaks, engine bolts were loosened, a starter wire was disconnected, handrails aboard the vessel were shaking dangerously, valve covers were warped, and the vibrations disturbed crew members who were almost literally shaken from their bunks. Mr. Lirette, the chief mechanic for KSI, testified that he was sent out to the vessel when it returned to shore following its initial voyage. Lirette confirmed the physical damage allegedly caused by the severe vibrations, but was unable to determine the cause or source of the vibrations. Mr. Fagan, part owner of KSI and in charge of vessel operations, testified that he received numerous complaints from the vessel's Captain and crew concerning the vibrations. KSI considered the vibrations to be so severe that they created potentially dangerous working conditions for the vessel and her crew. The KSI witnesses testified that these severe vibrations continued unabated until the time the vessel finally went into the Halter Marine shipyard in August, 1999. During at least seven months of that period, the MIS GRADY FAGAN was operating on a regular charter hire servicing deep water drilling operations more than 100 miles offshore in the Gulf of Mexico.
15.
Yet despite the alleged severity of the vibration problem, the first written notation of any such problem was not made until August 16, 1999, almost eight months after the vessel was delivered to KSI and began its offshore operations. On that date, Kirk Lirette made a single entry in his personal tally or log book about the vibration problems on the MN GRADY FAGAN. This was shortly before the vessel entered the Halter Marine shipyard for repairs to her propellers and shafts. Prior to that date, there was no mention whatsoever of any type of vibration problem noted in either the Captain's logs or the engine room logs for the vessel. Nor was there mention of collateral damage attributed to the vibration, such as the falling ceiling tiles emphasized by plaintiff's witnesses.
16.
Further, until August 16, 1999, there were no complaints made by KSI to DPI (or to anyone else for that matter) about excessive vibrations aboard the vessel. KSI made no attempt to obtain outside help to either diagnose or repair the vibration problem, failed to consult with or call out any experts to determine the nature or cause of the excessive vibrations, and did not take the vessel out of service for even a single day — despite its alleged fear for the safety of the vessel and her crew.
When asked to describe exactly what efforts KSI made to diagnose and solve the excessive vibration problem on the MN GRADY FAGAN, Mr. Fagan testified they did a lot of"brainwork" (in other words, they thought about the problem a great deal, but did little to actually solve it).
17.
Although KSI claimed it did not call DPI earlier because it did not know that the source of the vibrations was the starboard main engine, as opposed to something else such as the propeller or shaft, this explanation does not ring true to the Court. Mr. Woods, the engineer, and Mr. Lirette, the mechanic, both testified that the vibrations were focused in the area of the starboard main engine of the MN GRADY FAGAN. While it was certainly possible that a propeller or shaft problem could have been the source of the problem, there was no plausible reason why such a serious problem would not have been immediately reported to the company that rebuilt and sold the engine itself. Certainly, it would have been mentioned — or noticed — at least during the several field service calls which DPI's mechanics made to the vessel between December 24, 1998 and August 16, 1999. Yet, while DPI's mechanics were aboard the vessel, working on other engine problems such as oil leaks, no one from KSI bothered to say anything about a vibration problem which was allegedly so severe it endangered the vessel and her crew.18.
The Court does not find credible the testimony of the KSI witnesses that excessive or unusual vibrations were experienced aboard the MN GRADY FAGAN from the time of her initial voyage offshore, and continued unabated thereafter until the vessel entered the Halter Marine shipyard almost eight months later. The action — and inaction — of KSI during that time, plus the total lack of any written documentation in any of the vessel's log books or the mechanic's log book, as well as the lack of complaints to DPI or any other third party, all serve to belie the testimony of KSI's witnesses on this threshold factual issue.
All three of KSI's fact witnesses' testimony was further undermined by the fact that each of them had given differing testimony on key points in their pre-trial depositions.
19.
KSI's own expert witness, Richard Silloway, testified on direct examination that in his opinion there was a defect in the crankshaft gear of the starboard main engine, and that this defect was present at the time the engine was sold and delivered by DPI. Implicitly, Mr. Subway based his opinion on the fact that the KSI crew claimed to have observed a severe vibration problem from the time of the vessel's first voyage offshore. Because the Court has determined that the vibration problem did not arise until nearly eight months later, on or about August 16, 1999, Mr. Silloway's opinions lack sufficient factual support. Moreover, on cross-examination, Mr. Silloway conceded that if there was evidence that during dyno-testing of the engine at Hatch and Kirk in Houston there were no unusual vibrations, that would indicate the crankshaft gear likely was not defective or bent at that time.20.
There was other, credible evidence which supports a finding that the crankshaft gear of the starboard engine was not bent or defective at the time the engine was delivered by DPI to the SMI shipyard in December, 1997. In November, 1997, the engine was dyno-tested by a third-party, Hatch and Kirk, Inc., in Houston, Texas. During the dyno-testing, the engine was connected to a special machine, including a generator, which simulates the load on the engine which is produced by the drive shaft and propeller while the vessel is operating. In this test, the engine was operated for eight hours through a full range of RPM's, up to its maximum range of 900 RPM's. The test was performed by technicians for Hatch and Kirk, and witnessed by representatives of DPI (engine re-builder), SMI (shipyard), KSI (customer of SMI), the American Bureau of Shipping ("ABS") (classification society). No unusual vibrations were observed at any RPM speed, and the engine was certified by the ABS.
21.
On or about December 4, 1998, while the vessel was still at Halter Marine shipyard, the vessel underwent "dock trials." During these trials, the vessel is untied from its moorings, and its bow is placed directly against the dock, and then its engines are operated throughout the full range of RPM's for four hours. On board were representatives of Halter, DPI, KSI, and the ABS. Once again, there were no unusual vibrations observed.
22.
Finally, on December 14 and 15, 1998, the vessel underwent final "sea trials" in the Gulf of Mexico. Before heading offshore, the vessel was loaded with water ballast to simulate a load under normal operating conditions. Representatives of all concerned parties were aboard, including representatives of Halter, DPI, KSI, the ABS, and the Coast Guard. Once the vessel was in open waters, beyond the sea buoys, the vessel was operated one hour at full speed ahead. The only significant problem noted was that the vessel could not attain its rated maximum 900 RPM's, which was attributed to the fact that the wrong size and pitch propellers had been installed at the shipyard. Otherwise, there were no unusual vibrations observed. The vessel was accepted by all parties and delivered to her owner, KSI, on December 24, 1998.
In late August, 1999, while the M/S KJM SUSAN was at Halter shipyard, the propellers were removed, and new propellers of the proper size and pitch were installed. There was conflicting testimony at trial as to whether or not the port propeller shaft was bent or not. According to entries in Kirk Lirette's tally or log book for September 1, 1999, the port propeller shaft was sent to E.J. Fields machine shop. Lirette's log entry for September 2 was "E.J. Fields shaft report. Polishing and straightening right now." Lirette testified that despite this log entry, in fact E. J. Fields had reported the shaft was "within tolerance" and not bent, but that they went ahead and "straightened" the shaft nonetheless. It is difficult to understand why KSI would pay Fields to straighten a propeller shaft which was not bent and which was within specified tolerances. Unfortunately, neither party submitted evidence directly from E.J. Fields, either by documents or testimony, as to precisely what the machine shop found when it examined the propeller shaft or why the shaft was straightened if indeed it was not bent.
23.
The Court finds the testimony of DPI's witnesses on the threshold issue, particularly Charles Hankins, to be credible and supported by the other credible evidence, and by common sense and logic. Although KSI raised some doubt about the accuracy of a part of Mr. Hankins' testimony, even if the Court accepts that Mr. Hankins was mistaken in parts of his testimony, the Court nonetheless gives substantial weight to the bulk of his testimony. Moreover, even if the Court were to completely discount Hankins' testimony, the Court still would be left with the firm conviction that KSI's fact witnesses were not credible on the threshold factual issue — that a defect in the crankshaft gear existed at the time the engine was sold and delivered by DPI — an issue on which KSI bears the burden of proof.
In its rebuttal case, KSI's expert Silloway condemned Mr. Hankins as "incompetent" because of an alleged miscalculation in reading dial gauge measurements on the original flywheel when it was attached to the crankshaft gear on the starboard main engine at Halter during September, 1999.
24.
The Court also found persuasive the testimony of DPI's expert, Jules Schubert, whose opinion was that there was no defect in the original crankshaft gear. Mr. Schubert based his opinions largely on the testimony and evidence which has been accepted by the Court as credible.
25.
Accordingly, without proof that a defect in the crankshaft gear existed at the time on delivery of the engines by DPI, plaintiff KSI has failed to prove an essential, threshold element of its cause of action.
26.
On its counter-claim, DPI carried its burden to prove it is owed $10,646.72 for service work, including labor and parts, performed for KSI in connection with the MN GRADY FAGAN.
CONCLUSIONS OF LAW 1.
This court has jurisdiction over this matter based upon the existence of diversity of citizenship and jurisdictional amount, pursuant to 28 U.S.C. § 1332 (a).
2.
Under Louisiana law, every sale of goods carries with it an implied warranty that the thing sold is free of hidden defects or redhibitory vices and that it is reasonably fit for its intended use. La. Civ. Code arts. 2520, 2475 and 2524.
3.
When the product sold contains a redhibitory defect, the buyer is entitled to bring a redhibitory action against the manufacturer of the product purchased through an intermediate seller, even absent privity of contract between the ultimate buyer and the manufacturer. Media Production Consultants, Inc. v. Mercedes-Benz of N. Am., Inc., 262 So.2d 377, 381 (La. 1971). Accordingly, if a redhibitory defect is present under Civil Code article 2520, the buyer of the defective product may assert a cause of action directly against the manufacturer for breach of the implied warranty against redhibitory defects.
4.
To prevail in a redhibitory action, the plaintiff must prove by a preponderance of the evidence that the item sold contained a defect at the time of the sale which was not apparent through an ordinary inspection and which rendered the thing unfit for its intended use, or so imperfect that he would have not bought it had he known of the defect. La. Civ. Code arts. 2520, 2521, 2530. See, Carter v. Chrysler Motors Corp., 384 So.2d 838, 840 (La.App. 4th Cir. 1980); Prat v. Heymann, 410 So.2d 343, 346 (La.App. 4th Cir. 1982); Associates Financial Services Co., Inc. v. Ryan, 382 So.2d 215, 219 (La.App. 3rd Cir. 1980); Ross v. Premier Imports, 704 So.2d 17, 21 (La.App. 1st Cir. 1997).
5.
Because the burden is on the plaintiff initially to establish a prima facie case, the failure to establish such case defeats his cause of action, and the burden does not shift to the defendant until a prima facie case has been established by the plaintiff by a preponderance of the evidence. Commaco, Inc. v. Southern Ocean Corp., 581 So.2d 365, 370 (La.App. 4th Cir. 1991), Writ denied, 586 So.2d 533-34 (La. 1991).
6.
Under the Louisiana Civil Code a redhibitory defect shall be presumed to have existed at the time of delivery if it appears within three days from that time. La. Civ. Code art. 2530. Once the three-day presumptive period has expired, the plaintiff has the burden of proving both the existence of the defect and that it existed at the time of sale. See, Harris v. Drexler Motor Co., 339 So.2d 1304, 1305 (La.App. 1st Cir. 1976).
7.
There is no credible evidence that the alleged defect was present at the time of the sale and delivery of the engine to SMI.
8.
The alleged defect also did not manifest within three days of delivery, therefore no presumption arises that the defect was present at the time of delivery. KSI had the burden of proof to show both the existence of a defect and that such defect existed at the time DPI delivered the engine to SMI's shipyard.
9.
For the above stated reasons, KSI failed to sustain its burden of proving by a preponderance of the evidence that there was a redhibitory defect in the engine supplied by DPI.
10.
KSI also alleges a claim against DPI based on an alleged breach of the written warranty provided by DPI in connection with the sale of the rebuilt engine. A second purchaser is subrogated to his vendor's or first purchaser's right of action in warranty against others. McKneely v. Don Coleman Const. Co., Inc., 441 So.2d 497, 500 (La.App. 2nd Cir. 1993). SMI's rights against DPI are governed by the express warranty; thus plaintiff, who is subrogated onto SMI's rights is also subject to that warranty.
11.
Under the express written warranty, DPI warranted the engine to be "free from defects in materials and workmanship." As was true for the redhibition claim, however, KSI had the burden of proving the existence of a defect in either the materials supplied by or workmanship performed by DPI. Accordingly, KSI cannot recover on its warranty claim because there was no proof of a defect upon delivery of the engine to SMI.
12.
On its counter-claim, DPI is entitled to recover the sum of $10,646.72 for services provided to the MN GRADY FAGAN. However, because DPI did not properly comply with the Louisiana's Open Account statute, it is not entitled to recover attorneys' fees.
13.
In this diversity case, governed by Louisiana law, DPI is entitled to legal interest on its counter-claim from the date of judicial demand.
14.
Accordingly, judgment will be entered in accordance with the foregoing in favor of defendant, Design Power International, and against plaintiff, Kim Susan, Inc., at plaintiffs cost.