Opinion
356073
11-17-2022
LAKE SERVICE SHIPPING COMPANY, Plaintiff-Appellee, v. GRAND RIVER NAVIGATION COMPANY, INC., Defendant-Appellant.
UNPUBLISHED
Muskegon Circuit Court LC No. 18-005250-CK
Before: GLEICHER, C.J., and RONAYNE KRAUSE and BOONSTRA, JJ.
PER CURIAM.
This contract dispute involves a barge-the McKee Sons-owned by plaintiff Lake Service Shipping Company (LSSC) that was chartered by defendant Grand River Navigation Company (GRNC). The charter party agreement required GRNC to "maintain and repair the Vessel, together with her machinery, appurtenances and spare parts, in a good state of repair and in seaworthy, good and efficient operating condition[.]" LSSC brought this lawsuit, alleging that GRNC breached the agreement by prematurely returning the vessel in a deplorable, non-seaworthy condition. After a four-day trial, the jury agreed and awarded LSSC over $11 million in damages.
Among other smaller challenges, GRNC complains that the trial court improperly deemed the phrase "then value" in the escape clause of the agreement ambiguous and allowed the jury to determine its meaning. We discern no error and affirm.
I. PERTINENT FACTS AND PROCEDURAL HISTORY
LSSC is the subsidiary of a mining company headquartered in Muskegon. It owns the McKee Sons, a "self-unloading barge" that requires a tugboat for movement. However, LSSC does not have the means to operate its own shipping services. Accordingly, in 2000, LSSC entered a charter party agreement with GRNC, a large shipping company, to maintain and operate the vessel. Under the agreement, GRNC was required to make charter (lease) payments to LSSC. It was also fully responsible for the maintenance, repair, and operation of the vessel. The parties renewed the agreement several times, with its final term set to expire in 2018.
As required by ¶¶ 1 and 4 of the 2000 agreement, LSSC delivered the McKee Sons to GRNC "in class and in suitable condition to obtain its U.S. Coast Guard inspection certificate" and "in good operating and seaworthy condition." GRNC sailed the McKee Sons on the Great Lakes for 12 years, until December 2012. By that time, the McKee Sons needed structural steel repairs to remain in a seaworthy and good operating condition. GRNC placed the McKee Sons in "laid up" status and did not perform any necessary repairs, either structural or more run-of-the-mill. GRNC claimed that it intended to eventually put the McKee Sons back in service and continued to make its charter payments throughout 2013 and 2014. However, in December 2014, GRNC returned the McKee Sons to LSSC's dock in Muskegon. When GRNC returned the barge, rotting perishable goods remained unremoved. Barrels and cans of paint, gasoline, and other hazardous waste had to be hauled away by specialists. Pipes had burst and electrical systems had rotted. Below deck was a toxic wasteland. Even worse, it appears that GRNC may have looted the ship for parts. The exhaust system was missing as were several critical machinery parts. After it returned the vessel, GRNC notified LSSC that it was terminating the charter agreement under ¶ 15(a) because it opined that the cost of necessary repairs exceeded the then value of the vessel.
LSSC filed suit, alleging that GRNC breached the charter agreement. Relevant to this appeal, ¶ 3(a) of the 2006 charter agreement provided:
[GRNC] agrees that at all times during the Term of this Agreement [GRNC] shall maintain and repair the Vessel, together with her machinery, appurtenances and spare parts, in a good state of repair and in a seaworthy, good and efficient operating condition, always in accordance with the standards of the American Bureau of Shipping [ABS], the United States Coast Guard and good commercial maintenance practices. Repairs and maintenance include the costs of special surveys due in 2003, 2008, 2013, and 2018, should [GRNC] elect to exercise its option to extend this Agreement beyond 2018.
Paragraph 3(c) further provided that the parties "shall endeavor to mutually agree on repairs or maintenance to be performed" and if they cannot, then qualified experts would evaluate the vessel and deem what repairs and maintenance are necessary. Paragraph 6 also governed GRNC's duty to maintain the vessel, providing, "From the time of delivery to the expiration of the Agreement, [GRNC] shall, at its own expense or by its own procurement, . . . repair and maintain the Vessel" and requiring GRNC to bear the cost of "repairs and maintenance."
Paragraph 11 governed the return of the vessel at the end of the contract:
[GRNC] agrees . . . that upon termination of this Charter, whether by limitation or otherwise, to return said Vessel to [LSSC] at Muskegon, Michigan, or other agreed Great Lakes location, in like good condition, ordinary wear and tear excepted....
LSSC alleged that GRNC breached these provisions.
GRNC invoked ¶ 15(a) of the charter agreement in support of its early termination of the agreement:
The parties hereto further mutually agree that in the event of a total loss and/or constructive total loss of said Vessel, or if it has been irreparably damaged,
Charter hire payment shall terminate upon the date of said loss, and any prepaid Charter hire shall be returned by [LSSC] to [GRNC]. In the event, however, of a loss other than total loss or constructive total loss, irrespective of the cause of the same, force majeure always excepted, or the duration of the delay occasioned thereby, the Charter hire payment shall be paid in full as hereinbefore specified.
If at any time during the Term of the Charter under the Agreement the cost of all required structural repairs necessary for [GRNC] to remain in compliance under this Agreement at the time of each five year classification society inspection due to normal wear and tear exceeds the then value of the Vessel, the Charter under this Agreement may be terminated by [GRNC] upon 20 days' written notice to [LSSC]. In that event, the hire is to be prorated from the last yearly term payment. [Emphasis added.]
The second paragraph of ¶ 15(a) was changed from the original 2000 agreement. In the original agreement, the second paragraph of ¶ 15(a) provided:
If at any time during the Term of this Charter the cost of any required operational repairs to equipment and machinery exceeds the then value of the Vessel, this Charter may be terminated by [GRNC] upon 20 days' written notice to [LSSC]. In that event, the hire to be prorated from the last yearly term payment.
The majority's interpretation would expose GRNC to potentially unlimited liability for the cost of repairs-even if "due to normal wear and tear"-that, when performed, would cause the vessel to be valued at even one dollar more than the cost of the repairs. By way of extreme example, if the vessel were so badly damaged, through normal wear and tear, that only a small piece of it remained intact, but if that piece could be "repaired" by essentially building a new ship around it, the resulting ship would be valued slightly higher than the cost of the repairs. Although it might be debatable whether the resulting ship was the same vessel as the original-not unlike in Plutarch's "Ship of Theseus" paradox (see Plutarch, Life of Theseus, 23.1)-the majority's interpretation of ¶ 15(a) would obligate GRNC to perform those repairs and to deliver a brand new vessel to plaintiff at the end of the charter period. More simply put, under the majority's interpretation, GRNC would nearly always be liable for required structural repairs caused by normal wear and tear, regardless of the cost or the amount of time the vessel would be out of commission while those repairs were performed.
The first paragraph of this provision relieves GRNC of its duty to maintain or repair the barge if an event occurs resulting in a total or constructive loss of the vessel. The second paragraph addresses "required structural repairs" "due to normal wear and tear." If the cost of making the structural repairs "exceeds the then value of the vessel," GRNC did not have to undertake the cost.
GRNC sought summary disposition of LSSC's suit based on ¶ 15(a) before trial, but the trial court denied that motion. During the ensuing four-day jury trial, the parties presented significant evidence related to their business dealings and contract negotiations, their interpretations of the agreement language, the condition of the McKee Sons upon its return in December 2014, the repairs needed and their costs, and GRNC's lack of maintenance of the McKee Sons between December 2012 and December 2014.
The parties also presented evidence regarding the ABS surveys conducted on the vessel. The parties agreed that in order to maintain ABS class certification, vessels are subject to various surveys. During a five-year survey, a vessel is taken out of the water and put on blocks for a thorough inspection (also known as being "dry-docked"), including evaluation of the thickness of the vessel's steel hull using steel gauging. At a certain level of deterioration, steel must be replaced. The McKee Sons was scheduled for a special survey in 2012. However, unlike saltwater vessels, vessels in the Great Lakes can obtain a one-year extension of this survey by undergoing a "year-of-grace survey." During this year-of-grace survey, problems will still be identified and the vessel will have to undergo necessary repairs to address any readily apparent issues.
The McKee Sons underwent a year-of-grace survey in 2012, effectively postponing the special survey until 2013. In anticipation of the 2013 special survey, GRNC evaluated the McKee Sons for needed repairs, including undertaking visual inspections and ultrasonic readings related to steel thickness. GRNC determined what repairs would likely be required, including structural steel work, and secured quotes for the work. It then created a 10-year plan for completing that work. GRNC never followed through with the 2013 special survey and the ABS neither confirmed what work was required nor approved the repair plan.
At trial, the parties presented highly varying testimony regarding the costs of necessary repairs to the McKee Sons, from a low of approximately $3.2 million to a high of $9 million. They also presented evidence regarding the value of the McKee Sons. An expert appraiser hired by GRNC opined that in its present condition, the McKee Sons had a fair market value of $3 million. Its liquidation value if it were sold for scrap was $2.5 million. Alternatively, if sold as a "permanently moored facility," the McKee Sons would have a value of $5 million. However, if the McKee Sons were repaired, such that it was operational and in class with all its certificates, its fair market value would have been $14 million with a liquidation value of $11 million.
Given the wide gap in valuation and repair estimates, the parties heatedly debated the meaning of the phrase "then value" in ¶ 15(a) of the charter agreement. GRNC contended that ¶ 15(a) was unambiguous and that it applied to the facts of this case because the McKee Sons' value at the time of the special survey-without repairs-was exceeded by the costs of the repairs needed, including the year-one repairs as well as repairs that could be performed in later years. LSSC took the position that ¶ 15(a) was ambiguous and could be read to refer to the McKee Sons's value after repairs are made. LSSC also argued that the repairs at issue were the year-one repairs required at the time of the 2013 survey, not additional repairs mapped out in the 10-year plan. GRNC sought a directed verdict on this issue, just as it had sought summary disposition. The trial court denied GRNC's motion. The trial court concluded that ¶ 15(a) was ambiguous and instructed the jury on the interpretation of ambiguous contracts consistent with the Michigan civil jury instructions.
The jury found that GRNC had breached the charter agreement "in one or more ways" and awarded LSSC $11,825,685 in damages. The trial court subsequently denied GRNC's motions for judgment notwithstanding the verdict (JNOV), a new trial, or remitter. GRNC now appeals.
II. ANALYSIS
As noted, GRNC filed motions for summary disposition, directed verdict, and JNOV, all of which were denied by the trial court. We review these decisions de novo. Foreman v Foreman, 266 Mich.App. 132, 135; 701 N.W.2d 167 (2005). We review for an abuse of discretion the trial court's denial of GRNC's request for a new trial. Moore v Detroit Entertainment, LLC, 279 Mich.App. 195, 223; 755 N.W.2d 686 (2008). In considering these motions, we must review the evidence in the light most favorable to the nonmoving party to determine whether there existed a material factual question for the jury's consideration, and we may not substitute our judgment for the jury's when reasonable jurors could disagree on the evidence. See Anaya v Betten Chevrolet, Inc, 330 Mich.App. 210, 215-216; 946 N.W.2d 560 (2019) (directed verdict); Landin v Healthsource Saginaw, Inc, 305 Mich.App. 519, 545-546; 854 N.W.2d 152 (2014) (JNOV); Zaher v Miotke, 300 Mich.App. 132, 139-140; 832 N.W.2d 266 (2013) (summary disposition under MCR 2.116(C)(10)); Taylor v Kent Radiology, PC, 286 Mich.App. 490, 525; 780 N.W.2d 900 (2009) (a motion for new trial is based on the great weight of the evidence, and we give deference to the finder of fact).
GRNC's challenges are based on the interpretation of the charter agreement. We review de novo legal questions regarding the proper interpretation of a contract, "including whether the language of a contract is ambiguous and requires resolution by the trier of fact." DaimlerChrysler Corp v G Tech Prof Staffing, Inc, 260 Mich.App. 183, 184-15; 678 N.W.2d 647 (2003). GRNC's challenges also involve the instructions provided to the jury. We review de novo legal questions regarding jury instructions, but review for an abuse of discretion a trial court's determination whether an instruction applies to the facts of a case. Moore v Detroit Entertainment, LLC, 279 Mich.App. 195, 223; 755 N.W.2d 686 (2008).
A. "THEN VALUE" IN ¶ 15(a) IS AMBIGUOUS
We begin with GRNC's challenges based on ¶ 15(a) of the charter agreement.
A charter party contract is "maritime in nature." Simon v Intercontinental Transp (ICT) BV, 882 F.2d 1435, 1441 (CA 9, 1989). Federal common law regarding maritime contracts governs the interpretation of the charter agreement. Norfolk S R Co v Kirby, 543 U.S. 14, 22-23; 125 S.Ct. 385; 160 L.Ed.2d 283 (2004). Indeed, the charter agreement expressly indicated that it would be governed by federal admiralty law.
When it comes to the identification of contractual ambiguity, federal law differs markedly from Michigan law. In Michigan, we find contractual ambiguities only rarely;" 'ambiguity is a finding of last resort ....'" Kendzierski v Macomb Co, 503 Mich. 296, 311931 N.W.2d 604 (2019), quoting Lansing Mayor v Pub Serv Comm, 470 Mich. 154, 165 n 6; 680 N.W.2d 840 (2004). An ambiguity may be found only when two provisions of the same contract "irreconcilably conflict" with each other. Klapp v United Ins Group Agency, Inc, 468 Mich. 459, 467; 663 N.W.2d 447 (2003).
Under federal law, "[a] contract that is reasonably and fairly susceptible of more than one meaning is said to be ambiguous." Ingersoll Milling Machine Co v M/V Bodena, 829 F.2d 293, 306 (CA 2, 1987). This standard focuses on whether the competing interpretations of the language in question are equally reasonable, not whether they irreconcilably conflict. Extrinsic evidence cannot be used to find ambiguity; that decision must be made from the four corners of the document. In re Fitzgerald Marine &Repair, Inc, 619 F.3d 851, 858 (CA 8, 2010). However, once a contract is deemed ambiguous, extrinsic evidence can be relied upon to determine its meaning. Royal Ins Co of America v Orient Overseas Container Line Ltd, 525 F.3d 409, 422 (CA 6, 2008)
The phrase at issue in this case is short and simple: "then value." The parties agree on the meaning of the word "value": the amount of money that the barge could be sold for in the barge market. The word "then," however, is trickier. There are two equally reasonable interpretations of the phrase when it is construed in the context of the entire agreement.
The phrase "then value" appears in a paragraph of the charter agreement addressing GRNC's obligation to perform "structural repairs" on the barge during the period of the charter, for the purpose of keeping the vessel in seaworthy condition. As noted, other paragraphs-3, 6, and 11-describe more generally GRNC's duty to actively maintain the barge in seaworthy condition. Read as a whole, the contract communicates that GRNC was contractually bound to keep the barge in good repair and to maintain its seaworthiness. Abundant trial evidence supported that GRNC did not do so. LSSC contended, and the jury found, that by returning the vessel in its condition, GRNC breached the charter agreement. The larger issue, however, is whether GRNC's maintenance obligation included making the structural repairs that were necessary to maintain the vessel's seaworthiness. LSSC sought the cost of these structural repairs and the jury likely included these costs in its large verdict.
Neither side contested that the barge needed structural repair work to pass the five-year survey. GRNC's defense centered on ¶ 15(a) of the charter agreement, which it claimed absolved it from performing the structural repairs required in other provisions of the agreement. As noted, ¶ 15(a) read:
If at any time during the Term of the Charter under the Agreement the cost of all required structural repairs necessary for [GRNC] to remain in compliance under this Agreement at the time of each five year classification society inspection due to normal wear and tear exceeds the then value of the Vessel, the Charter under this Agreement may be terminated by [GRNC] upon 20 days' written notice to [LSSC]. In that event, the hire is to be prorated from the last yearly term payment. [Emphasis added.]
The trial court determined that the meaning of "then value" was ambiguous, as it could relate to the value of the vessel at the time of the five-year survey before any needed structural steel repairs were undertaken, or it could also refer to the value of the vessel after the structural repairs were accomplished. We discern no error in this assessment. "Then" can refer to a time in the past or the future. For example, "I was living in Southfield then" relates to a past event, while "give me the book next week, I won't have time to read it until then" refers to the future. The question presented here is whether the meaning of "then value" in its context in the charter agreement is reasonably susceptible of more than one plausible interpretation. GRNC urges that "then value" relates to the value of the barge at a singular moment in time: before the undertaking of a five-year survey of the vessel's seaworthiness. At the time of the five-year inspection at issue here, the barge needed millions of dollars of structural steel work. Because GRNC had not properly maintained and repaired the vessel during the years before the survey, the vessel was not seaworthy at that point in time, and its market value had plummeted.
GRNC offers a reasonable interpretation of the contractual language. But a different interpretation-that "then value" relates to the market value of the barge after the monetary investment necessary to pass the five-year survey-is also reasonable. Therefore, the "then value" paragraph of the charter agreement is ambiguous.
The trial evidence substantiates that at the time the five-year survey should have occurred, the vessel had fallen into disrepair and was unseaworthy. Viewed in the light most favorable to the jury's verdict, due to GRNC's breach of its maintenance responsibilities, the barge was an inoperable mess. And indisputably, it needed structural repairs.
GRNC claimed that at that point, the value of the ship was $3 million, while the cost of the needed repairs exceeded $4.8 million. The jury was permitted to consider the evidence GRNC marshalled in support of this claim, and GRNC's argument that ¶ 15(a) allowed it to return the vessel without replacing the worn-out steel. LSSC contended that the cost of the structural repairs was between $3.2 and $3.9 million, and that the barge was worth more than that. The jury considered this evidence and LSSC's extrinsic evidence supporting that ¶ 15(a) could not be construed as meaning that the vessel's "then value" was equal to its value before the necessary repairs.
During oral argument on GRNC's motion for a directed verdict, the trial court summarized GRNC's position regarding ¶ 15(a) as follows: "If the jurors find that Paragraph 15(A) applies then that essentially gives you a trump card over other perceived violations, correct?" Counsel for GRNC answered affirmatively.
To conclude, as LSSC seems to suggest, that GRNC may be held liable for failing to perform all repairs, even if ¶ 15(a) applies, would render ¶ 15(a) meaningless. Paragraph 15(a) operates to allow GRNC to terminate the agreement in lieu of performing certain repairs, provided that the cost for those repairs exceeds the "then value" of the vessel. Therefore, if ¶ 15(a) applies and were properly invoked by GRNC, GRNC would be absolved from its obligation to pay for those specific repairs addressed in ¶ 15(a).
The "then value" sentence of ¶ 15(a) contains two references to time. The first encompasses the entire term of the charter: "If at any time during the Term of the Charter under this Agreement the cost of all required structural repairs necessary for [GRNC] to remain in compliance under this Agreement ...." (Emphasis added.) The second, which immediately follows, refers to the time of the five-year survey: "[T]he cost of all required structural repairs necessary for [GRNC] to remain in compliance under this Agreement at the time of each five year classification [ABS] inspection due to normal wear and tear exceeds the then value of the Vessel ...." (Emphasis added.)
Both references to time require consideration, because the individual, discrete words of a contract should be read holistically and within the context of the entire agreement. "[C]ontractual terms must be construed in context and read in light of the contract as a whole[.]" Auto Owners Ins Co v Seils, 310 Mich.App. 132, 148; 871 N.W.2d 530 (2015) (citations omitted). See also LLOG Exploration Co, LLC v Signet Mar Corp, 673 Fed App'x 422, 425 (CA 5, 2016). Interpreted in that spirit, ¶ 15(a) could reflect the parties' intent that the "then value" of the vessel relates to the value "during the time of the charter," or at the time of each five-year survey. The ambiguity is patent, and is reinforced when all the words of this sentence are subjected to a practical analysis consistent with the rest of the charter agreement.
The parties intended that GRNC would maintain and repair the barge as needed to maintain its seaworthiness. This proposition was expressed in ¶¶ 3(a), 3(c), 6, and 11. Another way of looking at this mandate is that GRNC was charged with, and accepted, the obligation to maintain the value of the vessel. LSSC expected-and the parties contracted for-the return of a seaworthy barge. In that context, it makes little sense to interpret ¶ 15(a) as a "get out of jail free" card for GRNC, absolving it of its ongoing responsibility to repair and maintain the vessel by allowing it to fall into such disrepair that the cost of fixing it would exceed its damaged and trashed value. Instead, one reasonable interpretation of this paragraph is that the parties intended that "then value" refers to the value of a properly maintained, repaired, and seaworthy vessel, since that is what GRNC agreed to return to LSSC. Given these differing, reasonable interpretations, the trial court did not err in finding an ambiguity.
B. "ALL REQUIRED STRUCTURAL REPAIRS"
GRNC also challenges the trial court's interpretation of the phrase "all required structural repairs" in ¶ 15(a). GRNC asserts that the phrase refers to all repairs mandated by the five-year survey, but that might not be required until a year or more after the survey. However, GRNC improperly isolates the phrase from its context in ¶ 15(a). The relevant language refers to "the cost of all required structural repairs necessary for [GRNC] to remain in compliance under this Agreement at the time of each five year classification society inspection due to normal wear and tear." This language is clear and contains an unambiguous temporal limitation. That is, the relevant costs are those for repairs required to remain in compliance "at the time" of the five-year survey. Any repairs that will not be required by the ABS until later years are, by definition, not required to remain in compliance "at the time" of the survey. Accordingly, GRNC could not rely on the higher cost of repairs that it deemed would be required at later years in its 10-year plan to inflate the cost of repairs over the then-value of the vessel.
C. BREACH OF OTHER PROVISIONS
As GRNC could not rely on ¶ 15(a) to prematurely terminate the charter agreement, we need not address its claim that ¶ 15(a) negated all of its contractual duties and thereby defeated all of LSSC's breach of contract claims. Ultimately, the charter agreement remained in place and GRNC was required under several contractual provisions to maintain and repair the vessel. Given the deplorable condition in which the McKee Sons was returned to LSSC, the jury easily could determine that GRNC failed to perform as the contract required. Indeed, by its own admissions, GRNC stopped all maintenance in December 2012, long before it gave notice of its intent to terminate the contract.
D. SUBSTANTIAL BREACH DOCTRINE
GRNC further complains that the trial court improperly instructed the jury on the first-substantial-breach doctrine, which LSSC allegedly invoked to preclude GRNC's reliance on ¶ 15(a) to terminate the agreement. GRNC mischaracterizes the record.
At trial, LSSC specifically requested an instruction to the effect that "a party who breaches a contract cannot in turn . . . rely upon terms of the contract to justify its breach." GRNC objected, asserting that LSSC was attempting to invoke the first-substantial-breach doctrine, which did not apply. The trial court agreed with GRNC, concluding that the doctrine did not apply to the facts of this case and declined to give LSSC's proposed instruction.
The trial court did, however, instruct the jury on the parties' respective theories of the case. LSSC's theory of the case stated, in part:
[LSSC] contends that [GRNC's] reliance on [¶ 15(a)] is misplaced for the reason that, one, [GRNC] was in breach of the [charter party agreement] for nearly two years prior to the alleged terminations and, two, the cost of the necessary structural repairs for the vessel did not exceed here-quote: then value, as the phrase is commonly used.
GRNC objected to this statement of LSSC's theory, asserting that this argument implicated the substantial-breach doctrine, which the trial court had already ruled inapplicable. The trial court overruled GRNC's objection and read LSSC's theory of the case, including the language set forth above. However, the court asked LSSC's counsel to refrain from using language to suggest that GRNC's breach before termination was a "disqualifier" that precluded invocation of ¶ 15(a). Counsel complied with that request. When reading the parties' theories, the trial court specifically instructed the jury that they were the parties' theories of the case and that the court had no preference for either theory. The jury was also told that the court would instruct it on the law and that the jury must "take the law" as instructed by the court.
Considering the trial court's rulings and instructions, GRNC is not entitled to relief. GRNC received the relief it requested-the trial court did not instruct the jury on the first substantial breach doctrine. There is no further relief this Court could provide. See People v Miller (After Remand), 211 Mich.App. 30, 42-43; 535 N.W.2d 518 (1995) ("[D]efendant objected below, and the court struck the testimony. Defendant has already received his relief.").
Moreover, to the extent LSSC's theory of the case discussed the interplay between ¶ 3(a) and ¶ 15, there was no error. Contrary to GRNC's arguments, ¶ 15(a) is not a trump card that retroactively cures prior breaches unrelated to the structural repairs at issue in ¶ 15(a). LSSC's theory that GRNC was in breach of ¶ 3(a) for two years before attempting to invoke ¶ 15(a) was entirely consistent with the evidence and the charter agreement. Also contrary to GRNC's arguments, LSSC's theory of the case did not implicate the substantial-breach doctrine; that is, after the trial court made its ruling, LSSC did not argue that GRNC's prior breach precluded or disqualified it from invoking ¶ 15(a). And, in any event, the trial court's jury instructions were clear. The parties' theories of the case were simply the parties' theories. The jury was instructed to apply the law as given to it by the judge. Jurors are presumed to follow their instructions. Ykimoff v Foote Mem Hosp, 285 Mich.App. 80, 109; 776 N.W.2d 114 (2009).
We affirm.
BOONSTRA, J. (concurring in part and dissenting in part).
I concur with the majority in its interpretation of the phrase "all required structural repairs" as used in ¶ 15(a) of the parties' Charter Party Agreement, and in concluding that the trial court properly instructed the jury regarding the substantial-breach doctrine. I dissent, however, from the majority's interpretation of the phrase "then value" as used in ¶ 15(a). Because I find the phrase to be unambiguous, I would hold that the trial court erred by instructing the jury that it could interpret the phrase using extrinsic evidence, and would vacate the trial court's judgment and remand for a new trial.
The majority correctly notes that contracts are to be read as a whole, and even criticizes defendant Grand River Navigation Company, Inc. (GRNC) for "improperly isolating" another contractual phrase (in ¶ 15(a)) from its context. Yet the majority commits the same error in analyzing the phrase "then value" as found in ¶ 15(a). The mere fact that, in general, the word "then" has multiple definitions does not mean that the phrase "then value," when considered in situ in ¶ 15(a), is ambiguous.
Paragraph 15(a) states, in pertinent part:
15. (a) . . . If at any time during the Term of the Charter under the Agreement the cost of all required structural repairs necessary for Charterer to remain in compliance under this Agreement at the time of each five year classification society inspection due to normal wear and tear exceeds the then value of the Vessel, the Charter under this Agreement may be terminated by Charterer upon 20 days'
written notice to Owner. In that event, the hire is to be prorated from the last yearly term payment.
When read in context, see Davis v Valsamis, Inc, 752 Fed App'x 688, 692 (CA 11, 2018), the phrase "then value of the vessel" in ¶ 15(a) is unambiguous and refers to the vessel's value at the time of the five-year survey, calculated prior to the necessary repairs being performed; it cannot reasonably be construed to mean the value after repairs on the vessel are performed. When used as an adjective to modify a noun, such as "value," the word "then" is commonly understood to mean "existing or acting at or belonging to the time mentioned." Merriam-Webster's Collegiate Dictionary (11th ed). "Then" can also mean "at that time." Id. Looking at ¶ 15(a), the relevant time-that is, the time mentioned-is the time of the five-year survey. The five-year survey is the time that costs of repairs are to be determined, and the corresponding reference to "then value of the vessel" in the same sentence indisputably supports that the vessel's value should be assessed as of that time. Nothing in the language of ¶ 15(a) supports plaintiff Lake Service Shipping Company's (LSSC) position that the vessel should instead be valued after repairs are performed. And contrary to the majority's suggestion, the opening clause of ¶ 15(a) ("If at any time during the Term of the Charter") does not in any way impact the meaning of "then value" or create any ambiguity; it merely indicates that if the prerequisites of ¶ 15(a) are satisfied (i.e., that the described cost of structural repairs exceeds the then value of the vessel) at any time during the contract term, the termination provision may be invoked.1
The majority falls victim to LSSC's claim that "then value" could be read to mean "then resultant value." LSSC offers several definitions for the word "then" from various dictionaries to the effect that "then" can refer to a time in the future. Improperly isolating the word "then" from its context, the majority makes the same mistake. Certainly, "then" has various definitions. For example, as an adverb, it can also mean "soon after that: next in order of time," "following after in order of position, narration, or enumeration: being next in the series," "in addition," or "in that case." Merriam-Webster's Collegiate Dictionary (11th ed). Given the various meanings of "then," if considered in isolation, without regard to the remainder of ¶ 15(a), "then" might seem ambiguous because it would be unclear what time was at issue; indeed, this is how the majority arrives at its conclusion that the phrase is ambiguous. But, again, words and phrases cannot be read in isolation; contracts must be read as a whole and words interpreted in context. See Davis, 752 Fed App'x at 692. When ¶ 15(a) is read as a whole, the time in question is clear, and the term "then value" unambiguously refers to the value at the time of the five-year survey. See In re Fitzgerald Marine &Repair, Inc, 619 F.3d at 859. Absent susceptibility to two reasonable interpretations that are fairly made, the term "then value" in ¶ 15(a) is not ambiguous. See Davis, 752 Fed App'x at 692.
I acknowledge that one of LSSC's witnesses, Greg Canestraight (Canestraight), who negotiated the 2006 amendment on behalf of LSSC, testified at trial that he believed that the vessel should be valued for purposes of ¶ 15(a) on the basis of the "then resultant" value, i.e., the value after repairs had been performed. However, this type of extrinsic evidence cannot be used to create an ambiguity when none exists. See In re Fitzgerald Marine &Repair, Inc, 619 F.3d at 858. Accordingly, Canestraight's testimony about how he thought ¶ 15(a) should apply does not establish an ambiguity. See id.
Contrary to the majority's assertion, my interpretation of ¶ 15(a) would not offer GRNC a "get out of jail free" card or allow it to "trash" the vessel without consequence. Certainly, reading the contract as a whole and harmonizing the various provisions, the invocation of ¶ 15(a) could excuse GRNC from performing the "required structural repairs" at issue in ¶ 15(a). However, the application of ¶ 15(a) (if properly invoked)2 would not defeat LSSC's other claims for breach of contract. Termination of a contract generally applies prospectively to eliminate future obligations, not retroactively to cure past breaches. See Armour &Co v Nard, 463 F.2d 8, 11 (CA 8, 1972). That is, "generally, the exercise of a power of termination will have prospective operation only; discharging both parties from their contractual duty to perform promises that are still wholly executory, but not discharging liability for breaches that have already occurred." Id., citing 6 Corbin on Contracts, § 1266, p 66. Accordingly, if properly invoked, ¶ 15(a) would only excuse GRNC from making future payments under ¶ 2 and performing future maintenance under, for example, ¶ 3(a). However, GRNC did not attempt to invoke ¶ 15(a) until after returning the McKee Sons in December 2014, and given the 20-day termination notice required, even if GRNC were entitled to invoke ¶ 15(a), that termination could not have taken effect until January 11, 2015.
Accordingly, even if ¶ 15(a) applies, GRNC remained obligated to perform its obligations under the agreement until January 11, 2015, including those set forth in ¶ 3(a). See United Roasters, Inc v Colgate-Palmolive Co, 649 F.2d 985, 990 (CA 4, 1981) (recognizing that "obligation of good faith performance" continued until the party's "right of termination was actually effective"). The evidence at trial showed that GRNC laid up the McKee Sons in December 2012 and stopped performing all maintenance. Paragraph 15(a) would not retroactively excuse GRNC's failure to perform any maintenance for two years. See Armour &Co, 463 F.2d at 11. Additionally, ¶ 11 required GRNC to return the vessel in "in like good condition, ordinary wear and tear excepted." GRNC returned the vessel before the agreement terminated and before GRNC attempted to terminate under ¶ 15(a), making it questionable whether ¶ 11-which applies "upon termination" of the charter agreement-even governs the vessel's condition at the time of its return in December 2014. In any event, at most, ¶ 11 allowed GRNC to return the vessel with ordinary wear and tear only. Yet, there was ample evidence of conditions that exceeded normal wear and tear, including, for example, the alleged trash and hazardous waste left on the vessel, leaking pipes and hydraulic pump lines, broken sewer lines resulting in raw sewage on the vessel, leaking antifreeze, missing mechanical parts, and a broken power cord. Even if ¶ 15(a) applies, the agreement was not terminated until January 2015, and GRNC's invocation of ¶ 15(a) would not retroactively excuse any of these alleged breaches under ¶ 3(a), nor would it excuse GRNC's failure to return the vessel in the condition specified in ¶ 11. Thus, the majority's apparent concern that GRNC would be permitted to trash the McKee Sons without consequence is unfounded.
On appeal, GRNC confusingly argues that the reference in ¶ 3(a) to the 2018 survey, and GRNC's obligation to pay for this survey only if GRNC elects to exercise its option to extend the agreement beyond 2018, somehow relieves GRNC of its obligations under ¶ 3(a) when ¶ 15(a) is invoked. This argument is baseless. The 2018 survey is not at issue in this case.
For these reasons, I respectfully dissent from Section II(A) of the majority opinion. I would also address-as discussed in this opinion-GRNC's argument that, if ¶ 15(a) applies, ¶ 15(a) also defeats LSSC's claims of breach of contract premised on other sections of the Charter Party Agreement, and would hold that those claims should properly proceed to trial; I therefore dissent from Section II(C) as well. I otherwise concur with the majority opinion.