Chicago SS Lines v. United States Lloyds, 34728.

• Decision Date: 28 November 1924
• Docket Number: No. 34728.,34728.
• Parties: CHICAGO S. S. LINES, Inc., et al. v. UNITED STATES LLOYDS, Inc., et al.
• Court: U.S. District Court — Northern District of Illinois

2 F.2d 767 (1924)

CHICAGO S. S. LINES, Inc., et al. v. UNITED STATES LLOYDS, Inc., et al.

No. 34728.

District Court, N. D. Illinois, E. D.

November 28, 1924.

Kremer, Branand & Hamer, of Chicago, Ill., for libelants.

Ickes, Lord, Wire & Cobb, of Chicago, Ill., Bigham, Englar & Jones, of New York City, and Burry, Johnstone & Peters, of Chicago, Ill. (F. Bruce Johnstone, of Chicago, Ill., and D. Roger Englar and Henry N. Longley, both of New York City, of counsel), for respondents.

CARPENTER, District Judge.

This action is to recover from underwriters on the theory of constructive total loss of the steamer George W. Clyde (built in 1872) as a result of her sinking alongside her dock at Little Current, Canada. It is also claimed that if not liable on this theory, underwriters are nevertheless liable for damages caused by the sinking. There are also partial loss claims for damage to rudder and boilers prior to the sinking.

The libel was filed by the owner, Chicago Steamship Lines, Inc., and Northern Trust Company of Chicago, a mortgagee. J. C. Hoskins was president of the owner corporation. The master of the vessel was Capt. Goodrow.

All the policies sued upon named R. Parry-Jones of Cleveland as underwriters' surveyor, and directed that he be notified in event of any loss. Parry-Jones has been for many years in charge of the Great Lakes district on behalf of the Salvage Association, a concern organized for the benefit of English underwriters and having its headquarters in London.

On Saturday, August 25, 1923, the Clyde loaded a cargo of print paper at Little Current, Canada. Half an hour after loading was completed, she commenced to list to port and continued listing slowly for about an hour until she leaned against the dock. Then for 10 to 20 hours she gradually settled until she rested on the bottom. The water was clear and about 25 feet deep. She lay practically on an even keel in a sheltered position. Her upper deck was entirely out of water. There was neither wind nor current and the weather was fair. Except for some boulders under the bow, the bottom was firm and smooth. The Clyde was 256 feet in length, and 22 feet from the stem the ship rested on a 4-foot rock. Forty-six feet from the stem, and from there on aft, she lay practically on an even keel. The only sign of damage to the hull was one hole in the bottom caused by settling down on the 4-foot rock.

On Sunday, August 26th, the master notified Hoskins in Chicago of the sinking. Hoskins thereupon telegraphed that fact to Parry-Jones in Cleveland, saying nothing about abandonment. On Monday Hoskins wired the master asking the cause of the sinking. Goodrow replied that the cause was unknown. On the same day Hoskins wrote Parry-Jones confirming his telegram and adding that the Clyde had been abandoned to underwriters.

On receipt of the telegram announcing the sinking, and before abandonment had been suggested, Parry-Jones solicited bids for raising the vessel. On Wednesday evening, August 29th, Capt. Reid, a salvor, arrived at Little Current. He learned from the master how long the Clyde had taken to settle, and that same night made Parry-Jones a "no cure no pay" bid by telegraph. He raised her in three days. To use his expression, "The whole affair was a mere pumping job."

Abandonment.

It is contended by respondents that no abandonment was made to underwriters: First, because Parry-Jones was not the proper person to receive the notice, he being underwriters' surveyor, and not being agent of the insurers, within the meaning of the policy; second, because the letter of August 27, 1923, was merely a report made to Parry-Jones that the Clyde had already been abandoned; and, third, because the alleged abandonment was not joined in or ratified by the Northern Trust Company, the mortgagee. The Northern Trust Company not only did not join in the abandonment, but several weeks thereafter it commenced proceedings in this court to foreclose its mortgage on the vessel, and it is at least doubtful whether under these circumstances the abandonment was effectual. In the view I have taken of the case, however, it is not necessary to decide any of the foregoing questions.

Acceptance of Abandonment.

Libelants insist that the underwriters raised the vessel and that this action constituted an acceptance of abandonment. While the contrary might be urged with some force, I am assuming for the purpose of this opinion that Capt. Reid of the wrecking company was the agent of the underwriters. Did their conduct constitute an acceptance of abandonment?

The sue and labor clause of the policies, which covers also the matter of abandonment, provides as follows:

"And it is especially declared and agreed that no acts of the insurer or insured shall be considered as a waiver or acceptance of the abandonment."

This provision is in the public interest. It leaves both insurer and insured free to act for the safety of the vessel without prejudice to their respective rights under the policy. Neither party, however, is permitted to take refuge under this clause from the consequences of inconsistent conduct. The acts which are protected are those reasonably tending toward the recovery of or the safety of the vessel. In my opinion the mere raising of the Clyde did not constitute an acceptance of abandonment.

Libelants insist, however, that having raised the vessel, the underwriters were bound to repair, and could not tender her back in damaged condition.

I have examined the cases cited by libelants in support of this position, commencing with the leading case of Peele v. Merchants' Insurance Co., 19 Fed. Cas. 98, decided by Mr. Justice Story in 1822. As I read them, they do not sustain libelants' contention. In the Peele Case the question was whether underwriters had a right, without consent of the owners, to take possession and management of the ship and afterward to repair the ship for owner's account. Justice Story held that the underwriters had no such right and must be deemed to have accepted the abandonment which had been duly tendered. In the instant case, however, the policies give the underwriters no right to make repairs. They at no time took possession and control of the ship, but, on the contrary, the ship remained constantly under the control and direction of the owner and its master.

In Richelieu Navigation Co. v. Boston Ins. Co., 136 U. S. 408, 10 S. Ct. 934, 34 L. Ed. 398, where a judgment in favor of underwriters was sustained, the Supreme Court held that the acts of the underwriters in sending a wrecking party, taking possession of, and repairing the vessel, did not amount to an acceptance of abandonment. The court said (page 433 10 S. Ct. 941):

"Whether the insurer accepts or not is a matter of construction of his words and conduct. Any act done for the purpose of making the most of the property, to whomsoever it may prove to belong, ought not to be construed against the party who thus seeks the common interest."

In the absence of a provision to the contrary in the policy of insurance, the underwriters cannot be punished for trying to minimize the damage.

In Peele v. Merchants' Insurance Co., supra, Justice Story said, 19 Fed. Cas. at page 119:

"If after abandonment, the owners were to proceed to repair the ship without consultation with the underwriters, it would be a waiver of the abandonment, because it would be doing an act inconsistent with the asserted transfer of ownership. It would deprive the underwriters of the right of electing whether to repair the ship or not, and thus compel them to spend their money in a way which they might deem useless."

The alleged abandonment took place on August 27th. Hoskins, president of chief libelant, however, at no time relinquished control of the vessel. His master and his crew remained continuously on board. From the moment of sinking, Hoskins directed every movement. He was in constant telegraphic communication with the master; he ignored Parry-Jones' suggestion that the Clyde be dry-docked at Ecorse and ordered her to Manitowoc, 50 miles further away from the scene of disaster; he solicited and obtained a cargo late in September; he hired his own surveyors at South Chicago to check up damages with the underwriters' surveyors; he caused her to be repaired for the purpose of going after his promised cargo; he exercised an owner's privilege in making temporary instead of permanent repairs; he solicited insurance, both on the...