20221117_C356073_56_356073P.Opn.Pdf ( 2022 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
LAKE SERVICE SHIPPING COMPANY, UNPUBLISHED
November 17, 2022
Plaintiff-Appellee,
v No. 356073
Muskegon Circuit Court
GRAND RIVER NAVIGATION COMPANY, INC., LC No. 18-005250-CK
Defendant-Appellant.
Before: GLEICHER, C.J., and RONAYNE KRAUSE and BOONSTRA, JJ.
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’
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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
1
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.
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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 F3d 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 F3d 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 F2d 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).3 See United
Roasters, Inc v Colgate-Palmolive Co, 649 F2d 985, 990 (CA 4, 1981) (recognizing that
2
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).
3
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.
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“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 F2d 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.
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.
/s/ Mark T. Boonstra
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