George A. Moore & Co. v. Eagle Star & British Dominions Ins. Co.

• Decision Date: 18 March 1925
• Docket Number: No. 18068.,18068.
• Citation: 5 F.2d 358
• Court: U.S. District Court — Northern District of California
• Parties: GEORGE A. MOORE & CO. v. EAGLE STAR & BRITISH DOMINIONS INS. CO., Limited, et al. THE C. S. HOLMES.

5 F.2d 358 (1925)

GEORGE A. MOORE & CO. v. EAGLE STAR & BRITISH DOMINIONS INS. CO., Limited, et al. THE C. S. HOLMES.

No. 18068.

District Court, N. D. California, S. D.

March 18, 1925.

Derby & Single, S. Hasket Derby, and Carroll Single, all of San Francisco, Cal., for libelant.

Pillsbury, Madison & Sutro, of San Francisco, Cal., for respondents.

KERRIGAN, District Judge.

This is a libel in personam by G. A. Moore & Co. against certain insurance companies upon three insurance policies, one issued by each respondent. The policies covered protection and indemnity against certain losses and liabilities incident to shipping on the schooner C. S. Holmes. In 1920 the Holmes was libeled at New Plymouth, New Zealand, for damages done to a cargo of benzine which had been shipped from San Francisco to New Zealand. The cargo owner secured a judgment against the ship in the New Zealand court, which judgment is made the basis for the present libel against the insurance companies.

The facts surrounding this shipment are very fully presented in the opinion of the New Zealand court. It appears that the benzine was stowed in a deck house which had been built upon the upper deck of the Holmes. When the cargo was unloaded at New Zealand, it was found that the case oil had suffered severe loss. An examination disclosed the presence of sea water in the deck house, which, of course, accounted for the rusted and damaged condition of the cases containing the benzine. This water had entered the deck house at some time during the voyage, and the water marks on the cases indicated that it had risen at times to the level of the second or third tier of cases. As the questions presented herein turn more or less on the drainage system which had been provided to carry off whatever sea water might enter the deck house, I will quote from that part of the opinion of the New Zealand court wherein these drains are described. "There are four of these (scupper drains), two on each side of the deck house. The design of each scupper drain is this: A hole is made in the main deck and another is made below the main deck in the inner skin of the ship. A pipe is then placed so as to connect the two. This is necessarily a curved pipe bending a little after leaving the main deck towards the ship's side. Water poured into the deck house would enter the orifice, and if unobstructed would at once flow down between the outer planking and the inner skin into the bilge and there be pumped out in the ordinary way. If everything was in working order, the exit of the water would be rapid and it could not rise high in the deck house." After discussing the evidence of the marine surveyors who examined the cargo on its arrival at New Zealand, as well as the evidence of the marine surveyors who had issued certificates of seaworthiness at San Francisco, the court stated: "The only conclusion that I can draw from the evidence as a whole is that the scuppers as a system proved inadequate. * * * The scuppers were designed to meet a certain amount of accidental obstruction, but they proved inadequate to meet what came."

A proper determination of this case may be had on a consideration of two of the questions presented by counsel. One of these, a question of law, is: "Is there an implied warranty of seaworthiness in a so-called P. & I. policy, such as is here sued on, and the second, a question of fact, is, "Was the Holmes unseaworthy with the actual fault and privity of the libelant." In passing, it may be said in connection with this latter point, that the libelant concedes that it cannot recover herein if the unseaworthiness was its actual fault and privity.

I shall discuss these questions inversely to the order in which they have just been stated. The respondent insurance companies contend the New Zealand court expressly found that the Holmes was unseaworthy, and that the judgment embodies and rests upon an indispensably necessary finding that such unseaworthiness was with the actual fault and privity of libelant. They invoke the well-established principle that a valid judgment is conclusive between the parties and their privies, as to all questions of fact adjudicated. Unquestionably the New Zealand court found that the ship was unseaworthy when she left San Francisco, but I am of the opinion that it did not find that such unseaworthiness was with the actual fault and privity of the libelant, and that, further, such a finding was not necessary to support the judgment.

The shipowner had relieved itself of the absolute obligation to furnish a seaworthy ship by inserting the rather common provision in the bill of lading that — "The shipowner shall be responsible for loss or damage arising from any unfit state of the vessel when she sails on the voyage; but any latent defect in hull, machinery, equipment, or fittings shall not be considered unfitness or unseaworthiness; provided the same do not result from want of due diligence of the shipowner or of the ship's husband or manager." It is thus seen that the libelant would not have been liable to the cargo owner, unless it had failed to exercise due diligence to make the ship seaworthy. On familiar principles of law, it must be assumed, therefore, that the New Zealand court found that the unseaworthiness of the Holmes to carry the cargo of benzine arose either from obvious defects or from defects which libelant could have found and corrected by exercising due diligence. Practically these two propositions amount to the same thing, so we may say that a finding that the libelant had failed to exercise due diligence was absolutely necessary to support the judgment of the New Zealand court. But a shipowner may furnish an unseaworthy ship and not be charged with actual fault and privity of the unseaworthiness, even though he may have failed to exercise that due diligence which would relieve him from the obligation of furnishing a seaworthy ship. That is, there is a distinction between the terms "due diligence" and "actual fault and privity" as used in admiralty law. These terms have received judicial interpretation in connection with the Harter Act (27 Stats. at Large, 445 Comp. St. §§ 8029-8035) and the Limited Liability Acts (sections 4283-4286; R. S. Comp. St. §§ 8021-8024). Section 3 of the Harter Act provides: "That if the owner of any vessel * * * shall exercise due diligence to make the said vessel in all respects seaworthy * * * neither the vessel, her owner * * * shall become or be held responsible for damage or loss resulting from faults or errors in navigation or...