FORCE V.
WASHIN6TON INS. CO.
767 Co.
FORCE
et al,
'11. PROVIDENCE
W ASHINGT01'l
INS.
Court, S. D. New York. June 4, 1888.)
1.
MARINE INS'ORANCE-lNTERESTOF' BOTTOMRY LENDER-BALVAGE-COLLECTION OF AT INTERMEDIATB PORT - DISCHARGE OF INSURANCEFOREIGN LAW.
2. BAME-.!BANDONMENT-BUBROGATION-NoTICE-WAIVER.
Where full payment of insurance on advances upon a bottomry obligation is refused on the ground that the insurance contract was pro tanto discharged by the collection of freight, notice of abandonment to the insurers of any claim (}f the iDsured against master or owner by reason of such collection of freight is waived. Insurance on bottomry draft.
In Admiralty.
Sidn&g Chubb, for libelants. George A. Black and J. Adriance Bush, for respondents. BROWN, J. The libelants are indorsees of a bottomry obligation of which the following is a copy: "£912 6 11 Stg.' NEW: YORK, July 12,1888. "Ten days after arrival at final port of destination of the German bark caUed · Betty Wendt,' of I am the master, now lying at New York, loaded with ReM. petrm. in 800 cases turpentine. and ready to sail for 110 Iloand M!l:nilla, I promise to pay to the order of C. &. Co., nine hundred and twelve pounds, six shillings, and eleven pence, British Sterling, in approved bankers' demandbilIs on London, value received, for necessary disbursements of my vessel at this port, for the payment of which I hereby pledge my vessel and freight; and my consignees at the port of final destination are herebYJlirected to pay the amount of this obligation from the first amount of freight received, fQr account of my said vessel. Any other draft or. obligation by me drawn at this port on said freight to be secondary to this. [Signed) '''Ii. SPffiGELBERG, Master of Ger. Bk. Betty Wendt."
It is conceded that the above draft is a valid instrument of bottomry .
FoPce v.. The Pride ofthe Ocean, 3 Fed. Rep. 162. The libelants having advanced money upon this draft, on the 12th of July insured their in-
FEDERAL REPORTER.
terest with the respondents, and received from the latter a certificate that they were insured under an open policy" in the sum of $4,560, on advances against the aboye obligation, valued at sum insured at and from New York to TId Ilo and Manilla." On the margin of the certificatewas stamped the following provision: "Advances against captain's draft, 'for vessel's disbursements, hypothecating vessel and freight, the 9wpershipof draft to be proof of interest; the policy is to cover all perils of the seas of every kind which reduce the things hypothecated to a less value than the sums insured, or which prevent the collection of said draft, in whole or in part, whether said perils are those covered by insurance policies on vessels, freights, or cargoes, or not," subject to abandonmentand s\lbrogation, as usual. The bark upon her voyage stopped at the intermediate port of 110 no, discharged there a part of her cargo, and collected $1,900 freight. On the way from no IIo to Manilla she foundered, and was an actual total loss. The libelants under the insurance certificate demanded of the respondents payment in full. The latter claimed, and their answer contends, that the $1,900 received br the master for freight at 110 110 became at that moment applicable to the draft, being held by the master for the libelant's benefit; and that his receipt of that sum operated at once as a satisfaction and discharge of the insurance contract pro tanto. This claim being contested by the libelants, the balance of the amount covered by the insurance was afterwards paid by the respondents, and accepted by the libelants, without prejudice. Upon subsequent correspondence, and a demand on the ownerE' of the bark for the sum of $1,900, payment was refused, on the ground that none of the money had ever come to their hands, or to their use or benefit; the same being "only enough to pay expenses for discharging at port of distress." The parties have left the case without further evidence on this point; but from the language quoted the fair inference is that the money was used by the master for the needs of the ship in a port of distress, to enable her to complete her voyage from lIo lIo to Manilla. The above libel was thereafter filed to recover the residue of $1,900. The contract of insurance in this case expressly provided that the poliey was" to cover aU perils of the seas of every kind which should reduce the things hypothecated to a less value than the sum insured, or pre-vent the collection of said draft in whole or in parL" The utterloss of the vessel and cargo by foundering, shortly before. reaching Manilla, was aloss by a peril' of the sea; and it was a loss much in excess of the sum insured. Had not that loss occurred, the whole draft would have been collected at Manilla, without reference to the no lIo freight, or the use made of it.' The foundering, therefore, in literal strictness prevented the collection of the draft; and within the letter of the policy, therefore, the respondents are prim.a facie liable for the whole amount insured. . Potter v. Insurance Co., 4 Mason, 298, 301. The case of BroOmfield v. Insurance (J()., L. R. 5 Exch. 192, is not applicable; for that decision was on the ground that there had not been an actual total loss of the ship. The terms ofthe policy in that case are not statedj they could not have
FORCE V. PROVIDENCE WASHINGTON INS. CO.
769
heen' like the present; or, if so, I could not follow the decision, as it would seem plainly to nullify the contract. It is competent for the respondents, however, to show, if they can, by way of defense, that before theloss occurred the insurance contract was in part already discharged; or, if not discharged, that some claim accrued to the libelant, to which the respondents, un payment in full, would have been entitled by abandonment orsubrogation; and that they have lost the benefit thereof through the libelants' acts or laches. The burden ofthe proof is, however, upon the respondents to show all such facts as would be necessary to establish this defense. In their behalf it is claimed that this defense pro tanto: is established: (1) By'proof that the master collected $1,900 freight at no no; and (2) by the neglect of the libelants, until about a year after the stranding, to give to the insurers any express notice of the abandonment of their claim against the master or. ers by reason of the collection and use of that money. For the libelants it is urged that as no money was payable by the terms of the draft until 10 days after arrival at thefinal port of destination, the debt became extinguished by the utter loss of the vessel before arrival; that the lien was merely incidental to the personal obligation,and subject to the same ultimate condition; so that no lien or claim in respect to the freights collected at lIo no, or upon' the wreck, if any had been recovered,survived the disaster. I have not been referred to any English or American authority directly determining either of these contentions. Upon the last point it may be observed that the bottomry draft, as respects payment and the enforcement of the lien, contemplated performance at Manilla, a Spanish port. If, as regards the things to be performed there, it be held operative according to the Spanish law, as the lex loci 8olutionis, (Pritchard v. Norton, 106 U. S. 124, 136-:-141, 1 Sup. Ct. Rep. 102, and cases there cited,) the lien on the wreck.would remain, though, the personal obligation of the borrower was extinguished. By the Code of Spain> (section 734) and in the Codes of most other. continental nations, payment, in case of shipwreck, is reduced to the value of the things saved, less the salvage expenses. 1 Phil. Ins. § 1170; French Code of Com. § 327; Italian Code, § 599; Netherlands Code, § 588. Or, if the question were determined by the law of the ship, which is German, the right of the bottomry lender would be the same. German Code, §§ 691,692. Aside. from foreign law, I think the same rule, as respects any salvage from,the wreck, or any claim in the nature of salvage that might survive, should be upheld, as most in accord with the reasonable intention of the bottomry contract. Bottomry, though a contract BWi generiB, (The Ann C. Pratt, 1 340, 350,) is often treated as a peculiar species of insurance; the amount insured being paid in advance upon an express pledge, in prleBenti, of the ship or freight, or both, for repayment of the advances with a maritime premium, unless the things pledged are lost before arrival at the specified port by some of the perils which the lender assumes. 1 Phil. Ins. § 1168; 2 Arn. Ins. (6th Ed.) 40; 3 Kent, ,Comm. *357. The risks that the lender is to beall were formerlyenuv.35F.no.10-49
770:
merated fully in the contract; as iri;aninsurance policy proper. For convenience, brief forms, like the ,present, have recently come into use, in which all ,save the prime ,condition of arrival at the port of destination is left to implication. 1 Phil. Ins. § 427. There are many conditions and qualifications universally deemed incident to bottomry contracts in addition tothil.t,expressed in the brief form of this draft. 3 Kent Comm. *355. And, as the parties here plainly intended bottomry, the fair implication is that they intendeditwith all the ordinary incidents, rights, and qualifications. that usually attach to bottomry contracts, as commonly expressed in the full and formal instruments most in use; and these, saysPh[llips, include. both average and salvage. 1 Phil. Ins. § 1175. The oldest and most used form expressly reserves to the lender "any average: that may be secured upon any salvage recoverable from the wreck. "Where that form is used, no doubt now exists. ,Insurance Co. Gossler, 96 U. S. 645, and casesthete cited. Other full forms containno clause upon t,his subject; while, in other forms still, the, whole contract is declared void in caseofthe loss of the vessel. See Appleton v. Orowni1lshield, 3 Mass. 443, '8 Mass. 340, where there was no express of the vessel. In the case of The Great Pacific, L. R..2 P. C. 516, L. R. 2 Adm, & Ecc. 381, 385; Sir ROBERT PHILI,IMORE suggested the question, but without :deciding it,whether iil the absence of the clause concerning salvage in a full and formal instrument of bottomry, the lender wOuld by the general maritiine law have a right to the benefit of the proceeds of the wreck. In the case of The Empusa, 5 Prob. Div. 6, 12; upon the u.tter loss of the vessel from collision, the lender upon a bottomry draft just like the present was held entitled to the benefit of the damages recovered by the owner by reason of the loss. The same result was reached in the case of Appleton v. Orowninshield, 8 Mass. 340, 359,360, in an action for money had and received in respect to an award made for the illegal capture of the bottomried vessel, though the decision;was there rested in part on the intention of the award. If the bottomry lender may follow into the hands of the owner the moneys recovered for the sinking of a vessel by collision, I see no reason whyihe could not equally follow the proceeds of the wreck, or the wreck itself... ThiS'draft, as I have said, created an express lien in prl&enti; aud althoughitcould not be enforoed by any steps to collect it, EO long as the voyageW'as pending, there is no express language that eitner discharges the lien, or is incompatible with its existence upon what may remain, in case the voyage is broken up by disaster before arrival at the final port. ,In the absence of such in a brief instrument of this kind,it js not reasonable to suppose that the parties intended any lesS rights to be conferred on the lender than those most coni.monly given by the ordinary full {onils of bottomry; or that the lender should recover .nothing:upon his lien because he could not recover the whole, aild when,l;ty reaS@ ofthe wreck of the vessel, his loss would be greatest. Stephewn/.. Broomfield, L. R. 2 P. C. 516, 524. Viewing bottomry, also, asa species of insurance, the lender could not be justly. excluded from salvage as 'againat.the insurers Of the ship upon an abandonment
FORCE fl.
PRoviDENOE
WASHINGTOX INS. CO.
77i
by the ship-owner; fbrsuch insurers are entitled :b)!hring a subsequent bottomry loan into account in dimitiution of the amount payable to We ship-owner, as a reduction of his insurable Read v.' insurance 00.,3 Sandf. 54,63; Watson':v. In'lmrance 3 Wash; C. C.'l; Allen!v. Insurance Co., lUray, 154; 2 Pars. Mar. Law;'418; By various conti':' nentaI Codes, insurance of sums botrowed on bottomry is void; though everywhere insurance of lent is valid. German Code, § 873; Italian Code, §§638, 599, 607, French Code de Com. §§379, 380,331, 347; Netherlands Code, §§ 675, 599, 600. On a constructive total loss, therefore, the benefit of the salvage ought to inure to the bottomry hllider, as much, at least, as to the insurers of the ship; ,otherwise, the latter would get the whole benefit of the bottomry as a partial insurance, and of aU of the wreck besides. The French Code, (section 331,) following, in such cases, the views of Valin, requires a pro rata division. By our law the bottomry lender, in such a case, takes the whole salvage; because the insurer stands only in the'shoes ofthe owner; and the latter, contrary to the views of Valin, is not deemed entitled to come into concourse with the lender as respects any excess in the original value of the pledge. This says,Emerigon, is based, not on logical grounds, but on the,arbi.. trary favor accorded to the bottomry lender. 3 Kent, Comm. *359; Insurance 00. V. GOBBler, 98 U. S. 652, 656; Emerig. Traite des Assnr. c.17, § 12; 3 Valroger, Droit Mar. §§ 1149-1156. Upona brief contract like this bottomry draft,' therefore, where much is necessarily left to implication, (1 Phil. Ins. § 427,) I think the express lien survives,so long as any part of the res remains, the same as where the average clause is inserted. Such is the right of the ordinary bottomry lender, according: to the continental authorities, (Appleton v. Orowninshield, 3 Mass. 463, 467,8 Mass. 363;) such are the e!Kpress provisions of various continental Codes, (1 Phil. Ins. § 1170; French Code of Com. § 327; Italian Code, .§599; Netherlands Code, § 588;) and such is the Code of Germany, §§ 691, 692, to which country this vessel belonged. But no lien can survive the 10SEl of the res itself, and of all the proceeds of funds that represent it. If the no no freight money was necessarily expended for the completion of the voyage, in consequence of previous sea perils, and was subsequently lost with the ship, nothing could'remain save a possible right of action against the master or owners for a subtraction of the fund, provided the use made of the freight moneys was unlawful jOr for indemnity, in case any legal right of indemnity accrued from the master's use of the money. This will be referred to below, in connection with the question of abandonment. 2. This insurance contract was not a divisible contract, as respects the different ports of no no and Manillaj nor W/:tB it discharged pro 0nto by the master's collection of the $1.900 freight at the first port. Had the case been one of simple insurance by a ship-owner of1his whole freighi at a valued sum, such would have been the legltl·effect of the contract; (2 Phil. Ins. § 1499,) for the insuntnce follows the risk and the matter insured; and when the freight at an intermediate port is fully earned and collected, without any impa:irmentthl'ough prior sea' perils,
772
it becomes immediately available to the owner as his property; and, be" ing no longer at risk, the intent of 'the insurance contract is pro tanto fulfilled. But the situation of the insured lender on bottomry, and the intent ofthis contract, are evidently wholly different. This insurance was not an insurance of" the ship" or ., freight." Under that language the bottomry lender would not have been covered; his policy would have been of no value. 1 PhiL Ins. §427. By all the Codes and text writers, sums loaned on bottomry are a separate and distinct subject of insurance. This certificate declares the insuranQe to be "on advances against the bottomry draft valued at $4,560," and to cover" all sea perils that might prevent its collection, in whole or in part.", The insurance began w;hen the risk began, ended only wpen the risk ended. The lender's risk was th e risk of beingunable to collect his advances from the ship and freight; and his risk continued in its entirety until the vessel reached Manilla, or was lost. Even had this contract directly insured" the ship and freight" to the extent of $4,560, the insurers could only have been credited, as respects the $1,900 collected, with such proportion of it as the $4,560 bore to the whole value of the ship and freight,i. e., with probably not over one-fifth of it; the owner being deemed his own insurer as to the residue, and as such entitled to his pro rata of the collections. But the fact that the Do Do n:eight had been earned and collected did not diminish in the least the bottomry lender's risk On his advances, because that freight was not then legally available to hiQl, and might never become available; and in that event it could not possibly discharge any part of the obligation of the draft, or of the risk attendant upon it; and hence it did not discharge any part of :the insurance contract, which guarantied its" collection" at Manilla as against selJ.perils. "The insurance contract, I repeat, was neither in sllbstance nqr in effect an insurance of the Do lIo freight, but an insurance of the $4;560 loan, and of its collection at Manilla, so fin as collection· migl:\t be defeated by sea perils. No collection could avail in discharge of the insurers unless or until it was legally available to the lender; and,oy the draft nothing was available until arrival at Manilla, ()r:, the breaking up of the voyage. The conditions of the draft applied to,itas an entirety,;:and the insurance contract, which was commensurate with the risk, continued in its entirety. ,,'rhe libelants, moreover, by their loan and draft, did not become owners Qfany :part oOhe ship or freight. Insurance 00. v. Gossler, 96 U. S. 645, 61)4,. They acquired a lien or privilege upon them, and nothing more. Th,ey could not abandon either ship or freight, i,n case of a constructive total loss; that right belonged to the Ship-owner only. The libelants could abandon only their interest in the draft and in the lien created by it. By,the very te,rms of the draft it could not be enforced except upon arri,val at Manilla; or, by implication of law, upon the previous loss of the vessel, 80 far as,respects any salvage from the wreck. This is shown conclusively, botl) by the condition of thf.'l whole obligation, and by the furthf.'lr express provisiQn of the draft itself, whichd.irects the" payment of the amount of thil> obligation [i. e., the wholeamouIlt] by the consignees at the final port of destination from the first amount offreight received."
FORCE V. PROVIDENClt WASHINGTON INS. CO.
773
It is a part of the definition of bottomry (article 680 of the German Code) that "the creditor can exercise his rights only upon the hypothecated objects after the arrival of the ship at the place where the voyage ends." Such is clearly the ordinary incident of bottomry. When the $1,900 was collected, the libelant, therefore, even if present at no no, could not have claimed it. He could take no steps to " collect" his draft till the end of the voyage. His own risk and that of his insurers, therefore, continued entire until that time. The rights of the assured are to be judged according to the state of things as they actually existed at that time·. The insurance contract speaks as from that time. It admits of no severallce as respects the two ports; be:lause the draft admits of no severance, and no part of either contract was fulfilled or discharged. In view of the above-quoted provision Of the draft itself, I think its true construction and intent are practically not to subject ,the Ilo Ilo part of the freight to the bottomry lien at all. The evidence shows that the Manilla freight would have been three times that of the Ilo no freight, ' and considerably in excess of the whole draft, to say nothing of the value of the ship, which was also pledged, and the express direction to the consignees at Manilla to pay the whole sum out of the Manilla freights, clearly shows that that was the special fund from which the parties tended the loan should be paid. It was known that freights would be collected at the intermediate port of no no. It is not credible, considering the terms of this draft, that the parties intended or expected that the Ilo Ilo freights should be tied up until the vessel reached Manilla. Had those funds been intended to be applied to the draft, there is no reason why that intent should not have been expressed, and those freights directed, like the Manilla freights, to be applied on the loan, so far as they would go. On the contrary, the Ilo no freights are virtually excluded, both by postponing all payment till the final port of Manilla, (the word "final" being written and interlined in the printed form,) and by devoting the Manilla freights to the payment of the whole amount; The specific provision control;,; the former general one. Th}s tion of the draft is apparently sustained by the remarks of Emerigon as respects the owner's rights at intermediate ports, on a pledge of cargo, even without the aid of any such special provision as this in the bottomry contract. "The borrower on bottomry of merchandise," says he, "is. not bound to put at risk more than the amount of the loan. If he glves more, it is voluntary, and the excess is not irrevocable. He may, in the course of the voyage, discharge such excess of merchandise, without the lender's having any right to complain. * * * If the borrower shows that at the time of the disaster he had effects of his own equal to the sum borrowed, he is freed from all obligation; and the contract, as respects the lender's rights, will be reduced to the value of the effects saved from the wreck itself." Cants. a la grosse, c. 12, § 2, p. 569. See Ordinance 1681, tit. 5, § 14; Code de Com. § 329; Italian Code, § 602. Boulay-Paty; in his Confcrancc, expresses no dissent to this doctrine, and it is sustained by the latest French authors. (5 Desjardines, Droit Com.; Mar. § 1192, p. 321; 2 Laurin, Crespo Droit Mar. 371.) Val-
77:4
REPOR'l'l'JR.
roger (2 Droit Mar. p. 139, §§ 1120, 1133) would limit the owner's right to deal independently with, the excess to circumstances contemplated by the contract; such as "upon a loan for a voyage out and back, or one giving a right to deal at intermediate portsj" and such is precisely the present case.' 3. In either point of view, therefore, I must hold the respondents prima facie liable for the whole amount of the insured draft, because there was an actual total loss of the ship and of the Manilla freight by sea perils before reaching Manilla, in excess of the amount insured. If, however, it a.ppeared that there was any other fund available to pay any part of the draft, either from the existence of the no no freight moneys in specie, or of any subsisting legal claim by reason of the use made of that money by the master or owners, (assuming that that part of the freight was subject to the pledge,) the insurers, on payment of the draft in full, would be entitled to the benefit of such fund or claim for their reimbursement. The loss, taking the no Ilo freight into account, would not, in that case, be an actual total loss, but only a constructive total loss; and the assured, on demanding payment in full, would be required to abandon that claim to the insurers, if any express abandonment, or notice of abandonment, in such a case were necessary. From the cor· respondence between the parties, it is evident that the libelants did make a demand of payment in full, which the insurance company rejected on the ground that the $1,900 Ilo no freight was applicable to the draft, and was of itself a pro tanto discharge of the insurance; a defense which, as I have above held, is not tenable. The agents of the company seem to have been the first to receive intelligence that freight had been collected at no Ilo; and soon after (in February, 1884,) they suggested that the libelants, "for their own protection, should have their friends at no Ilo attend to the collection of so much of the draft as wab covered by the freight on that portion of the cargo." In July following, payment of the amount, less the $1,900, was made to the libelants, without prejudice. Afterwards, in August, the libelants, through their adjusters, applied to the indorsers of the draft for payment of the balance, which was refused. Negotiations seem to have been continued with the respondents, who, in a letter of September 27, 1884, promised to aid the libelants, through their counsel, "in arriving at a proper settlement of the 81,900 collected and sent to the owners." Much delay seems to have ensued in ascertaining where the owners were, or in communicating with them. In May, 1886, appHcation was made by letter to one of the owners at Barth, In June, 1886, he replied: "The general average of the vessel in question has been settled some two ago. According to our law, the agents [owners] are not personally responsible for your demands, and I am thus not able to collect anything from the former owners. * * * Fl'Pffi the money collected by Captain berg at lIo 110, I received nothing. The same was only enough to pay expenses for discharging at a port of distress, and the owners got no benefit."
While these various efforts were being made, the libelants, on the 24th of January, 1885, gave to the defendants a formal notice of abanuon-
v.
PROVIDENCE WASHINGTON INS. CO.
775
ment of their interest in the bottomry draft, which the respondents a few days afterwards declined to accept, without any statement of their reasons. I greatly doubt, in a case of this kind, where no specific property remains to be with, but at most only a possible right of action for indemnity, whether there is need of any abandonment by the insured beyond that which is implied in the claim of a total loss. See Insurance 00. v. SO'Uthgate, 5 Pet. 604. 2 Phillips (Ins. §§ 1682, 1683, 1723) concludes that "the claiming of a total loss is a suffiCient expression of an intention to abandon." Lowndes (Ins. §§ 144, 248) says that "the mere act of claiming a total loss is equivalent to abandonment; and, if made in time, no other notice is requisite." As respects a mere claim for indemnity against a third person, the language of the supreme court in the case of Insurance 00. v. Tran8]Jortatian 00., 117 U. S. 312, 6 Sup. Ct. Rep. 750, 1176, seems clear and decisive on this point, although; there was notice of abandonment in that case. The court says, (page 320:) "When goods insured lost. actuaIly or constructively; by perils insured against, the insurer, upon payment of the loss, doubtless becomes SUbrogated to aU the assured's right of action against third persons who have caused or are responsible for the loss. No express stipulation in the policy of insurance, or abandonment by the insured. is necessary to perfect the title of the insurer." .
There can be no doubt that on payment of the draft in full, the insurers in this case would have been entitled to any right of action, if any there was, that the libelants, had on account of the master's use of the 110 Ilo freight to complete the voyage. When the libelants made their demand of full payment, it is not conceivable that they intended to retain, or that the defendants imagined that they intended to retain, for their own benefit, any right of recourse against the master or owners; nor, if such had. been their intention, would it have been of any avail against the defendants' legal rights by way of subrogation. Again, the ground upon which payment in full was refused, viz., that the insurance contract was pro tanto discharged upon the collection by the master of the $1,900 freight at Ilo Ilo, was equivalent to a waiver of notice, if that were otherwise necessary; for the refusal on that ground rendered notice of abandonmenLan idle ceremony, and was equivalent to a rejection of any abandonment; because that ground was incompatible with the acceptance of any abandonment.. See 2 Phil. Ins. § 1684 et seq. Both parties were acting on the supposition that this freight money, or part of it, had been "sent to the <?wners," which, upon the correspondence offered in evidence by the defendants, it now appears was not the fact. The assured, if abandonment was necessary, were also entitled to a reasonable time to ascertain the facts; and the express notice of abandonment in this case,thoul/;h nearly a year after the loss of the vessel, was a year and a half pefore the facts were fully ascertained. In endeavoring to learn these facts they had the assistance of the respondents; and there is 110 indication that the latter sustained the slightest prejudice through the delay before formal notice of abandonment was in fact given. I am furtherof,opinion that upon the facts, as they appear upon the
776
evidence offered by the defendants,there was nothing to abandon; and no legal claim against either the master or the owners in re"pect to the 110 110 freight, sinceit appears to have beAn all properly used in a port of distress for the completion of the voyage. Such a use qf the freight money, as I have already said, must be inferred from the evidence offered on that subject. If this evidence is meager, and in Rome respects unsatisfactory, the burden of proofrests upon the defendant. Inasmuch as the insurance was not an insurance of the specific Ilo Ilo freight, but of the draft, insuring it against any sea. perils that might prevent its collection at Manilla, the existence of any outstanding claim on account of the master's previous use of freight receipts that might have become available, analogous to salvage, would at most be in the nature of a partial offset, the existence of which the insurers are bound to esta blish. The mere fact of previous collection of some freight at an intermediate port is riot enough; since that fund is primarily liable to be used for the necessities of the voyage. To constitute a partial defense to the insurers it must appear that at tbe close of the voyage, when the draft could first be enforced, something still remained that was legally available to the assured. The use of the freight money collected by the master in a port of distress fbrtbe necessities of'the voyage, was a use of it in lieu of further bottomry on the ship and unearned freight. It holds the same relation to the prior lenders on .bottomry and to their insurers that subsequent bottomry would have held to them. The Cynthia, 16 Jur. 749. The maritime law imposes upon the master the duty of using such moneys to complete the voyage, rather than to execute a new bottomry. Thomas v. Osborn, 19 How. 22, 31. So long as that money lasted, he had in fact no authority to execute further bottomry, with its incident ofa maritime premium. The use of that money was, like new bottomry, in the eye of the law, for the benefit of all interested in the voyage. Had new valid bottomry been executed to repair the damages, or defray the expenses caused by sea perils, it must have been paid out of any proceeds of the wreck on arrival at Manilla, in preference to the prior bottomry. The libelants' lien on the freight money collected at Do Do no more superseded the master's authority and duty to use those moneys to complete the voyage, than it snperseded his authority to hypothecate the ship, and the Manilla freights, if necessary, on which the same lien existed. The legal liability of the freights collected to be used, instead of subsequent bottomry, for the purpose of completing the voyage, was in fact one of the legal incidents of the adventure, and one of the legal risks that the lender on bottomry and his insurers incurred when they entered upon their contracts. Such use of it was not a wrongful subtraction of the fund. It is urged that the respondents did not insure against a risk of this character, and that that risk was not a peril of the sea. In the case of Greer v. Poole, 5 Q. B. Div. 272, it was held that a loss of part of the cargo through bottomry made to complete the voyage was not a loss by a sea peril for which the insurer of the cargo was liable; but it was conceded that the)oss in that case was not general a yerage; while in this
7i7
case the correspondence shows a loss usually regarded as general average, viz., unshipping cargo at a port of distress. 2 Phil. Ins. § 1302; German Code, § 708, subd. 4. !tis immaterial, how.ever,whether the expenses to which this money ,vas applied were a general average loss or not; or whether, upon an insurance of bottomry like this, freights earned at intermediate port continue insured to the close of the voyage; since this insurance, as I have said, was not of the ship and freight, but of the adall sea perils that might" prevent their collection" at vances as Manilla. The only question material to the defense is, therefore, whether upon the stranding of the vessel there remained any claim legally avail,able towards the payment of the bottomry draft. The question would have been the,same if after the landing of the Ilo Ilo cargo the goods were destroyed by fire, and, the consignees being insolvent, .no was ever cqllected. Though the insurers on bottomry may not have sured against such a fire or insolvency, the mere earning of some could not have constituted any defense to their full liability for a subse-qtient loss by sea perils in excess of the draft. It would be the same if the $1; 900 freight moneys had been collected in coin, taken on board, and gone down with the ship. Whether that coin continued insured not, this insurer's liabilitybn a subsequent loss like this would not affected..... Although the master's Use of the freight money collected was lawful, so that no specific fund any longer existed to which any lien could attach, and though no legal liability of the master resulted from using .the money. still, if the owners were personally bound to pay for the expenses, or the ,repairs, to which the $1,900 were applied, the casiis of The Virgin, 8 Pet. 538; 55,3, and The Cynthia, 16 Jur. 749, contain dicta to the effect that the bottomry holder would have "a resulting right to compensation over against the owners," on. the equitable ground ihit they had in legal effect made use of the bottomry holder's fund tadt8charge an obligation which they were personally bound to pay. Great difficulties seem to me to be involved in this view, having reference, to the legal rank of liens, the inherent conditions and implications of bottomry, and the fact that by our OWl) law, ilT'ihe absence of some' wrongful or illegal act, the only remedy on the bottomry contract is in refri;. Admiralty rule 18; Duncan v. Ben,son, 1 Exch. 537,556, 3 Exch. 644, 656. The Codes of France, (section 331,) and of 'Italy,(section 599,) are plainlyincdmpatible with any such reniedy over; for the remedy of the bottomry lender is expressly" reduced to the value of theeflects saved, subject to the expenses of salvage, and to the claims of other privilegedcreditors having a preference." But if the dicta above referred to express any sound rule, it has no application to this case; for the reason ,that by the law of Germany the master's engagements and contracts etlteredinto under his ordinary maritime powers constitute no personal 01:>ligation upon the owner. The correspondence put in evidepce statel:l this fact; and the provisions of section 452 of the German Code are very explicit to thiseflect. The question concerns the ultimate responsibilityof theowl1er( for the master's acts and engagements, arising out of se'a
an
or
778
" ,FEDERAL REPORTER.
damage as oue of the incidents of the voyage, in the prosecution of foreign commerce. According to the case of Lloyd v. Guibert, L. R. 1. Q. B. 115, 129, (contra, Na.ylor v. Baltzell, Taney, 55, 62,) it is, therefore, to be determined by the law of tqe ship's home; not from any inherent force of the law of the flag, but b\3Qause, in the absence of other indications, and considering all thee;xigencies, and the conveniences of commerce, it will be presumed to have been the intent of the parties, under such circumstances, to contract with reference to that law. The Gaetano, 7 Prob. Div.137, 148; Bank v. Netherlands, 10 Q. B. Drv. 521, 529, 540; The Brantjord Oity, 29 Fed. Rep. 373, 384-390. Article 452 of the German Code provides as follows: "The owner is not perso.nally responsible for the claims Qf third persons; but only the ship and freight are)iable: (1) If the claim is based upon a contract which the master has made by virtue of his legal authority. and not in virtutl of a specical power of attorney j '" '" '" or (2) upon the non-performance, or incomplete performance, by the captain of his duties; '" ... Ill' unless the owner has expressly guarantied the performance of the contract."
Article 453, however, provides for the personal responsibility of the owner for seamen's wages. Although, this exemption from a general personalliability is contrary to the English law, (Cary v. White, 5 Brown Parl. Cas. 325; Arthur v. Barton, 6 Mees. & W. 138; Benson v. Duncan, 1 Exch. 537,554,3 Exch. 644,)it is in accord with the American law, as laid down in the case of The Virgin, 8 Pet. 538, limiting the liability of the owners to the value of the, vessel and freight, that comes to their hands, and as expressly adjudged by TANEY, C. J., in the case of Naylor v. IJaltzeU, Taney, 55, 64" 66. E,ecent legislation has confirmed this limitation. 23 U. S. St. at Large, p. 57, c. 121,§ 18. The German owners were,therefore, not personally bound to make; or,to pay for, the necessary repairs or expenses to complete the voyage, except out of the property embarked in the adventure; and such, through the right of abandonment, is the general ,continental law., French Code de Com. §§ 298, 216. 0Il this ground the case of Lloyd.Y. Guibert, L. R. 1 Q.B. U5, was decided, as respects a French ship. But the freights the voyage were primarily liable for those uses; and their liability to that USI'l outrll-nked the libelants' prior lien, not only by the German Code, (articles 680, 757,762, 773,) but by the general marine law.. By that Code, also, (articles 774,775) the owner is personally liable only for lIuch freigM "as, is actually ·received by him, or knowingly paid over to lienors of illferior rank." In applying the freight moneys alreaq.y collected tothe purposes of completing the voyage, the master applied them to claims ·to the libelfmts'lien; and he thereby not only performed bis own maritime duty, but fulfilled all the personal obligations of the owners in that behalf. By a recent act.of congress (act June 26, 1884, 23 St. at Large, p. 57, c. 121, § 18) it is provided" that the individual, liability of a ship-owner shall be limited to the proportion of any or all debts and liabilities that his individual share of the vessel bears to the whole; and the aggregate liabilities of all the owners of a vessel on account of the same shall not exceed. the value of such vessel
on
MILLER". O'B"aIEN.
779
and freight pending, * *. * excepting wages due to persons employed by said ship-owners." See, also, act June 19, 1886 (24 St. afLarge p. 80, c. 421, § 4.) This, in connection with the former act of 1851, (Rev. St. § 4283,) apparently brings the law of this country intoharmony with the general continental law in respect to the limitation of the liability of ship-owners arising from the navigation of their vessels, and from the acts of masters, whether growing out of contract or of tort; and the earlierdecisions in the English and American law touching the extent of the owner's liability for the master's acts or contracts, and the collateral obligations which depend upon that liability (see Benson v. Duncan, '.I. Exch. 531, 3 Exch. 644; Pope v. Nickerson, 3 Story, 465) will become no longer applicable. The French law on this point, by the amendments to the Code in 1841, was settled in accordance with the views of Emerigon and Boulay-Paty, and with the decision of TANEY, C. J., in Naylm.v. Baltzell, supra; to the contrary of what is stated by STORY, J., in Pope v. Nickerson, 3 Story, 499, (2 Desjardines, Droit Com. Mar. §§ 279,280.) No defense being, therefore, established, the libelant is entitled to a. decree for $1,900, with interest and costs.
MILLER et al.
'!1.
O'BRIEN.
District Court, S. D. New York. June 6, 1888.) SWPPING-LuBIUTY OF OWNER FOR CONTRACT OF MASTER-BOTTOMRY BOl(D8 BY OWNER OF CARGO-ACT JUNE 26,1884. § 18.
The master of the American ship J. executed a bottomry bond on his vessel and carg-o, part of which had been transhipped into the L., the bond covering "said vessel and her cargo, including that portion transhipped on the L.· * * * upon condition that if the said vessel should within five days set. sail, * * * and upon arrival the master should pay the advances, etc.· or if said vessel should' by perils of the sea * * * be an utter loss," the bond to be void. The L. arrived safely. but the J., with her cargo, was a totl\lloss. Held that, neither under the general maritime law, nor Rev. St. U. S. the supplementary act of June 26, 1884. § 18, limiting a ship-owner 8 liability for the acts and contracts of the master to the value of the ship and freight. was the ship-owner liable to the owner of the cargo for the am()unt of the bottomry bond paid by him to redeem that portion of the goods arriving by the L. in safety from the lien of said bond. no personal fault or privity of the IIhip-owner to the 108s being shown.
In Admiralty. On exceptions to libel. · This was a libel against the respondent in per8onam, to recovermon"'y 'which the libelants paid in Germany to redeem their cargo ftom a bottomry bond executed by the master of the American ship Andrew Johnson, at Callao, Peru; on September 15, 1884. The libel ave:rs that the libelants, in June and July, 1884, shipped on board said vessel at Iquique Bay and at Calena Buena about 20,000 bags of nitrate of soda, to be transported to Hamburg, Germany; that she sailed from the latter port
780
FEDERAl. REPORTER.
for Hamburg on July 15th, in an unseaworthy condition; that thereafter she began to leak badly, and in distress put into Callao, Peru, on August 4th; that she was obliged for safety to tranship 1,200 tons of her cargo on board the British bark Mary J. Leslie, to be carried to Hamburg; and that for repairs and transhipment she necessarily incurred an expense of £2,215 5s. 9d., British sterling', which the master was obliged to obtain on bottomry of the ship, freight, and cargo, including the 1,200 tons shipped on the Leslie; for which SUIll the master legally executed a bottomry bond to Messrs. Grace Brothers & Co., merchants of Lima, with mnritime interest at the rate of 17 i per cent.; making in all £2,5\:l9 8s. 9d.j that the Leslie arrived at Hamburg safely, but that the ship Andrew Johnson became a total loss on the voyage from Callao; and that the libelants, in order to obtain possession of the 1,200 tons of cargo belonging to them, were obliged, on'March 17, 1885, to pay the whole of said bottomry and respondentia bondj and that £1,617 4s. 3d. ($7,870.16) thereof were charges specifically made and incurred by and for the benefit of the said ship Andrew Johnson and her freight, andtha Qwn13I: thereof; and that demand of the last-named sum had been made upon the respondent, and payment refused. The respondent excepted to the libel, (1) in that it does not state the nature of the action; and (2) that it does not show a cause of action against the respondent. Butler, Stillman & Hubbard, (W. Mynderse,) for libelants. Sidney Chubb, for respondent. BROWN, J. The nature of the cause, I think, sufficiently appears in the libel to answer the requirement of the twenty-third rule in admiralty. The second exception-that no cause of action is stated-goes to the merits of the action. It does not cover any mere informality of stateqlentj nor any lack of fullness in detail, or of definiteness and certainty. The objection that there is no averment in the libel that communication was had with the owners of the cargo before executing the bottomry cannot, therefore, be considered. The general averments that the expense incurred was necessarYj that the execution of bottomry was necessary, and that the master "lawfully executed the hottomry," are, I think, sufficient, except on special demurrer or special exception. The general question presented is whether. upon a total loss of the Andrew Johnson and her cargo and freight, the ship-owner is bound to indemnify the owner of the 1,200 tonsofcargo that arrived safely by the Leslie for what he paid on the bottomry bond to obtain his goods, so far as the bottomry loan was originally incurred for the benefit of the lost ship and freight. The amount claimed in the libel being only £1,617 48: 3d., (87,870.16,) it is to be inferred that the residue of nearly £1,000 was· tne of the expense included in the bottomry loan that was appQPioned against the cargo; while the former sum was charged against the particular average of the Andrew Johnson !Ind her freight to be earned. Through the total108s of the Andrew Johnson, and of that plutof t.he cargo 'ilIat remained on hoard of her, the respondent has already lost he embarked in the adyenture.
MILLER' 11.
781
Upon the general question, two points have been discussed by counsel -First, whether, under the peculiar terms of the bottomry bond, the Leslie's part of the cargo was, upon the utter loss of the other ship, chargeable with any lien, and whether consequently the libelants were legally bound to pay anything to obtain possession of the Leslie's cargo; second, whether, if they were thus bound, there was any legall'ight of recourse against the owner of the Andrew Johnson, who had suffered a total loss of hiE: oWn ship and freight. In the recent case of Force v. Insurance Co., ante, 767, some consideration was given to the different provisions of bottomry instruments in regard to the risks assumed by the lender, and his right to salvage in what might remain after a total loss of the ship. In that case the bottomry instrument was a brief and informal draft; the present isa full and formal instrument of some 15 folios. The construction of the instrument itself is not free from· difficulty. !tis executed by James H. Killeran, as master of the ship drew Johnson. It recites in detail the principi!'l facts,. and contimles; "That Giace Brothers & Co. were contented to stalld to and risk, hazard, and adventure of said advances upon the hull, body, or keel ?fthe said vessel, Andrew Johnson, together with c.argo laden on board as said, and the freight to be earned; ,* * * and that the said .master doth hypothecate and charge the said vpssel and her cargo, including that portion of the cargo transhipped to the .Mary J. Leslie, anli the freight tQb.e earned alld become payable in respect of said voyage. upon condition that if the said vessel shall forthwith set sail fromCallaoj . * * *' and if the above bounden James H. Killeran shall within the next five days after the arrival of the ves· sel at her final port of destination. and before commencing to discharge, pay to Grace Brothers &, Co. the said advances, and the maritime premium thereon, * * * or if during the said voyage an utter loss of the said vessel by fire, enemies, pirlttes, the perils of the sea, or navigation,or any casualty shall unavoidably happen, to be sUfficipntly proved by the said James H. Kil· leran, then and in either of the said cases this obligation shall be void, or otherwise to be and remain in full force and virtue." The libelants contend that the words "the said vessel" in thecondition of the bond apply equally to both the Andrew Johnson and the Mary J. Leslie. No doubt it was the expectation of the parties that both vessels alike would sail forthwith fromClillao imddeliver their cargoes, but the context scarcely admits of any litera,! application ofthe conditions to both vessels alike. It could not ha\'e been intended that the above bounden James H. Killeran, "master of the Andrew Johnson," should" within five days after the arrival" of the Leslie pay the amount of the bond, if his own vessel arrived !:iafely, though than five days later, at the same port. On the other ,hand, it is olear that the cargo transhipped to the Leslie was intended to be included in the bottomry. The final clause declares that in case of an utter loss byperH!! of the Bea the obligation is to be void. There is no saving clause reserving to the lendersin. cnse of such loss "any average tbatmight be secured upon all salvage recoverable," as is usual in such full and formal instruments. lniJUrance Co. v. G088ler, 96 U.S. 645, 646.· If. such an instrument w.ere cQnstruedupon the principles oLthecorumon law,strictly,and if I.' the
782
F,EDERALREPORTER.
said vessel" were held to mean Andrew Johnson only the whole instrument would become inoperative. on the utter loss of that vessel, under the conditi.on that the obligation should in tbat event be void. Considering,however, that this is a-maritime instrument, to be construed liberally in favor of the bottomry lender, in support of its apparent Or reasclnableintention,. and having regard to the provisions of nearly all the maritime (lodes, which give the lender a right in the salvage, though the vessel be lost, irrespective of tl:e special phraseology of the instrument, I think that the "obligation" that by the condition is to become void may be fairly construed as intended to mean only the personal obligation or agreement to pay the loan; leaving the pledge operative upon any salvage recoverable, in the same manner as where the saving clause is embodied in the instrument. F01'ce v. insurance Gb., 8upra. If the above construction is correct, it would not be material that the words "said vessel" in the prect1ding paragraph literally meant the Andrew Johnson only; for the cargo which was brought safely by the Leslie WflS a part of the original cargo of the Andrew Johnson, and, being hypothecated by the bottomry instrument, .that part of the cargo would CQ.ntiniJe subject to the bottoJl:lr,y lien, like any salvage from the wreck of tll"" ,Johnson,preciselyas if it had been rescued by the Leslie from the Johnson a few moments before the latter went down in mid-ocean. Assutning, therefore, that, as the libel states,"the libelants were bound in law to pay the bond in order to t1btain theirgoods," though the libel does rtot state that'the payment was'"made under the compulsion of any legal proceedings, the case of Duncan v. Benson, 1 Exch. 537, 3 Excb. 644,.iscited asadirect adjudication that the ship-owner is bound to indemnity the libelants, as for money paid for his account. In that case tlleship 'arrivedwith hercatgo.The owner abandoned the ship and freight and refused to satisfy the bottomry. He was, nevertheless, held liable to indemnify'the cargo-owner. In Lloydv. Ginbert, L. R. 1 Q. B. 115, on .the other hand, 'bnder· precisely similar circumstances, the ship-owner was held· not liable; because by the law of France, to which country the ship belonged, the ship-owner was absolved from all liability by abandonment oUhe ship and freight. By the law of England the has no similar right to free himself fr6m liability for the masengagements byabandonrnent; and in the former case, therefore, the lllwner was held' responsible, as for moneys in effect borrowed by the mastE:rfrorn the cargo-owner for the purpose of repairing his ship; precisely as if. he had Bold a part of the cargo for the same purpose, in which case the owner's liability was not disputed ·. Directly contrary to the case of Duncan v. Benson, was the decision of TANEY,C. J., in the case of Naylor v. BaltzeU, Taney, 55, in which the owner of bqttomried cargo, which had been sold in the enforcement of thebottomry.bond, sued the owner, of an American vessel for non-delivery of his cargo. The.question of the extent of t.he ,ship-owner's liability was then fully oonsidered,and it was held to be limited to the value of the ship and freight that comes to the ship-owner's hands. It wasbeId that the master had no authority to bind the owner beyond that limit; and
KRETZMER 'V. THE .WILLIAM A. LEVERING.
'783
that he could not, by a pledge of the cargo, indirectly shipowner'spel'sonal responsibility. "The justice and sound policy." says TANEY, C. J., "of the rule which restricts the power of the master, over the property and fortune of his owner to the value of the shiP intrusted to his command and the freight she may earn, is proved by its adoption by every commercial nation in Europe, and we· should be very unwilling to establish a contrary pl'inciple:in this country, unless very Clear and decisive authorities compelled us to the decision; for it would place the American ship-owner in a far Worse condition than his European rival, and compel him to hazard his whole fortune, however large, upon every distant voyage made by one of his ships." Since that decision was rendered the act of 1851, (Rev. St. § 4283,) applicable to at least all cases of loss and damage, and the recent act of June 26, 1884,(23 St. at Large,p. 57, c. 121,§ 18,) extending the same exemption to aU debts and liabilities generally. save for seamen's wages, have confirmed that adjl;ldication.Theseacts were designed to bring the law of this country harmony with the maritime law of most other countries in respect to the limitation oithe liabilities ofship-owners arising from the navigation of their vessels, and the acts of masters, whether growing out of contract Or tort. .Norwich OJ. v. Wright, 13 Wall. 104, 119, 121. It is irnulaterial which law be· looked to 8S the law·of the contract in this ease; whether the law of this country, as that of the ship's home;;!the law of Peru, where the contract was made; or that of Hamburg, wheredt was to be the law of all three on this point is now in substantial accord. 2 Desjardins. Droit Com. Mar.§§ 280, 282; Force v. Providence, supra. By neither is the ship-owner answerable after the utter loss of ship and freight,unless he is chargeable with some personal privity or fault, .and that is not here alleged. The exception to the libel on fhe merits is .therefore sustained. i
KRETZMER '11· .THE WII,LIAM
A. JuneH, 1888.)
·
I.
Wh\lre a cook ,on a tug is paid a certain sum per month, and in addition weekly "grub money." under an agreement with the captain to board the crew, and is not directed by the captain as to where to make his purchases, nor to do so on the credit of the tug, one who sells him provisions· has nolien on the tug under the general maritime law. Qr under. Statute N. J. 1884.,(Supp. Rev. 427,) providing that a debt for supplies furnished within the state for use oftlie :ship, and contracted 'by the captain" owner, or consignee, shall be a lien on the.$hip. . 2. SAME-BWlDEI!lIOll' PROOF. . , .: Where th,e "tatute provides for a lien on certain. conditions, .the of proof is 'on the libelaut to sho", that those conditions have beellfulfillel;i. the presumptions being all the other way.1Jhe(Jhel'flUrf<Yl'd, 84 Fed, Rep. 399.
MAluTmE
.FURNISHED COOK-STATE STATUTE.