Opinion ID: 4059291
Heading Depth: 2
Heading Rank: 1

Heading: Constructive Total Loss Determination

Text: Marquette asserts that the district court’s pre-casualty valuation of the EKWATA and its finding that the costs of repair would exceed that valuation are not supported by the record, particularly the expert testimony introduced at trial. Thus, Marquette argues, the district court erred in concluding that the EKWATA was a constructive total loss and in awarding Moench damages on that basis. We review the district court’s constructive total loss determination for clear error. See Ryan Walsh Stevedoring Co. v. James Marine Servs., Inc., 792 F.2d 489, 491 (5th Cir. 1986). A vessel is a total (or constructive total) loss when repair is not physically or economically feasible, such as when the cost of repairs exceeds the vessel’s pre-casualty value. See Gaines Towing & Transp., Inc. v. Atlantia Tanker Corp., 191 F.3d 633, 635 (5th Cir. 1999); see also Pillsbury Co. v. Midland Enters., Inc., 715 F. Supp. 738, 763 (E.D. La. 1989). In the case of total (or constructive total) loss, the owner is entitled to recover the pre-casualty value of the vessel (i.e., the price which would result from the hypothetical fair negotiations between an owner willing to sell and a purchaser desiring to buy). See Standard Oil Co. of N.J. v. S. Pac. Co., 268 U.S. 146, 155– 56 (1925); see also Gaines Towing & Transp., 191 F.3d at 635. When a vessel’s 5 Case: 15-31105 Document: 00513697755 Page: 6 Date Filed: 09/29/2016 No. 15-31105 pre-casualty value cannot be established by recent comparable sales, there is no precise rule or formula for valuation. See Standard Oil, 268 U.S. at 155– 56. Instead, the district court “should consider any and all evidence before it” that bears on value. Greer v. United States, 505 F.2d 90, 93 (5th Cir. 1974). This includes evidence of the vessel’s purchase price and the cost of any improvements to the vessel. Id. “[O]ther evidence such as replacement cost, depreciation, expert opinion and the amount of insurance” should also be considered to determine pre-casualty value. King Fisher Marine Servs., Inc. v. NP Sunbonnet, 724 F.2d 1181, 1185 (5th Cir. 1984); see also Carl Sawyer, Inc. v. Poor, 180 F.2d 962, 963 (5th Cir. 1950). The court must then make an “informed judgment.” Bloomfied S.S. Co. v. Brownsville Shrimp Exch., 243 F.2d 869, 873 (5th Cir. 1957). In doing so, the court is not bound by any single piece of evidence, including the opinions or formulas elicited by the parties’ experts. 5 See Bloomfield, 243 F.2d at 873 (rejecting argument that district court was bound by vessel’s purchase price, book value, or similar values reached by expert surveyor); see also Lukens v. Comm’r, 945 F.2d 92, 96 (5th Cir. 1991). If the district court’s valuation “is within the range of figures that may properly be deduced from the evidence,” it is not clearly erroneous, even 5 Marquette seems to argue that, even after it presented evidence, the district court was (and consequently this court is) bound by the evidence presented in Moench’s case-inchief. However, this court made clear in Greer that the district court “should consider any and all evidence before it.” 505 F.2d at 93. This necessarily included the evidence Marquette elected to present. Our conclusion in Greer is consistent with the general rule that, where both parties have offered evidence, “the party supported by the weight of the evidence will prevail regardless of which party bore the burden of persuasion, proof, or preponderance.” Whitehouse Hotel Ltd. P’ship v. Comm’r, 615 F.3d 321, 332 (5th Cir. 2010) (quoting Blodgett v. Comm’r, 394 F.3d 1030, 1039 (8th Cir. 2005)); see also Belk v. Charlotte-Mecklenburg Bd. of Educ., 269 F.3d 305, 328–29 (4th Cir. 2001). It is also consistent with our general practice of testing the sufficiency of the evidence on appeal by viewing the entire record. See Wealden Corp. v. Schwey, 482 F.2d 550, 551 (5th Cir. 1973) (rejecting request “for a review of the evidence as it stood when plaintiff closed the presentation of his evidence”); see also Fed. Ins. Co. v. HPSC, Inc., 480 F.3d 26, 32 (1st Cir. 2007); Gaffney v. Riverboat Servs. of Indiana, 451 F.3d 424, 451 n.29 (7th Cir. 2006). 6 Case: 15-31105 Document: 00513697755 Page: 7 Date Filed: 09/29/2016 No. 15-31105 if the valuation is not “a figure as to which there is specific testimony.” Lukens, 945 F.2d at 96 (quoting Anderson v. Comm’r, 250 F.2d 242, 249 (5th Cir. 1957)). The district court had the benefit of witnessing the testimony at trial and was in the best position to resolve the conflicting testimony concerning value and repair cost. See Ryan, 792 F.2d at 491. With regard to value, the district court found that the EKWATA was an uncommon vessel which could not be valued based on comparable sales and that much of the evidence on valuation was unreliable. It credited the vessel’s purchase price ($200,000) and the cost of materials and equipment spent improving it ($217,000) as the most reliable of the recognized indicia of value. See Greer, 402 F.2d at 93. The district court’s $417,000 valuation was near the middle of the experts’ opinions ($50,000–$1.5 million) and well below replacement cost, less depreciation ($5–7.5 million)— both of which are recognized indicia of value. See King Fisher Marine Servs., 724 F.2d at 1185. The district court’s valuation was “within the range of figures that may properly be deduced from the evidence” and thus not clearly erroneous. Lukens, 945 F.2d at 96 (quoting Anderson, 250 F.2d at 249); see also Greer, 505 F.2d at 93; Bloomfield, 243 F.2d at 874. With regard to repair cost, the district court heard the undisputed testimony at trial that the steel-hulled SALVATION’s allision with the fiberglass-hulled EKWATA caused severe damage to the EKWATA. The damage was severe enough that all of the expert witnesses agreed (in spite of their differing opinions on value and repair cost) that the EKWATA was a total loss, either real or constructive. The district court credited the expert testimony that repair costs would total “hundreds of thousands” of dollars. It also noted Strouse’s testimony “that repairs would be in the range of $285,000 was, admittedly, incomplete and inconclusive” because Strouse could not fully assess the damage below the waterline without having the EKWATA drydocked. Although Strouse’s estimate nominally included damage below the 7 Case: 15-31105 Document: 00513697755 Page: 8 Date Filed: 09/29/2016 No. 15-31105 waterline, we cannot say, given the other testimony and Strouse’s uncertainty about damage below the waterline, that the district court clearly erred in finding that the cost of repairing the severely damaged EKWATA exceeded its pre-casualty value and, therefore, the EKWATA was a constructive total loss.