Fishing Fleet, Inc. v. Trident Ins. Co., Ltd., 77-1524

Decision Date11 July 1979
Docket NumberNo. 77-1524,77-1524
Citation598 F.2d 925
PartiesFISHING FLEET, INC., Plaintiff-Appellee, v. TRIDENT INSURANCE CO., LTD. and Pike/Anco, Defendants-Appellants.
CourtU.S. Court of Appeals — Fifth Circuit

L. Glen Kratochvil, T. G. Schirmeyer, Houston, Tex., for defendants-appellants.

Paul Q. O'Leary, Brownsville, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before COLEMAN, GODBOLD and INGRAHAM, Circuit Judges.

GODBOLD, Circuit Judge:

This case involves the right of Fishing Fleet, the owner of the shrimp boat, the Estoellen, to recover for her loss under a marine insurance policy issued by Trident. The district court awarded Fishing Fleet the face amount of the insurance coverage, $30,000, on the theory that the total constructive loss of the Estoellen was caused by "barratry of the master." Trident attacks the judgment on the ground that barratry of the master was not proved and that, even if proved, recovery was barred by the contractual exclusion of liability for losses caused by government seizure of the boat (free of capture and seizure clause). Other issues raised by Trident include the insured's alleged concealment of material facts, its failure to diligently protect its interest in the Estoellen and the admissibility of Mexican government documents. 1

Fishing Fleet hired Frank Borsch to captain the Estoellen in late 1973. Borsch was given the necessary ship documents for processing with the Coast Guard, but never delivered them to the Coast Guard. As a result, Borsch never signed on as captain, and the prior captain, James Homan, was the captain of record at the time the Estoellen was lost. 2 Borsch made one successful fishing trip. The events which occurred during the second trip form the basis of this lawsuit.

Around the middle of November, the Estoellen set out on its second fishing trip with Borsch as captain. After an initial shrimp catch she put into Campeche, Mexico, to refuel and take on supplies. One of the crew members left the ship and returned to Brownsville, Texas, where he reported to the owners that he left because he "did not like the way things were going." By January 1974, the Estoellen was overdue and no shrimp had been received for Fishing Fleet's account from the Estoellen. Harold Dyke, a part owner of Fishing Fleet and its general manager, went to Campeche to investigate. Before leaving, Dyke told his insurance agent in Brownsville that he was concerned about the Estoellen. The insurance agent told Pike-Anco, Trident's insurance broker in Texas, that the vessel was or might be missing. Dyke found Borsch in Campeche and was told by him that the Estoellen had loaded 168 boxes of shrimp into a freezer boat known to be in the area. Borsch told Dyke that the Estoellen had been repainted and pointed the vessel out in the harbor. Dyke returned to Brownsville.

Back in Brownsville, Dyke discovered that Borsch had not loaded any shrimp onto a freezer boat. In February 1974 Dyke sent two employees, Cordoba and Garcia, to Campeche. They found the Estoellen sunk but in shallow water so that she was partly visible above water, with a hole in her port side. The boat had been towed into Campeche on February 12 by a Mexican vessel. When Cordoba and Garcia returned and reported to Dyke, he informed his insurance agent of the condition of the Estoellen. Dyke did not return to Campeche because the insurance agent warned him that he might be detained in Mexico until charges accrued against the ship were paid. The district court found that the total charges were $40,783.51. The Estoellen is now owned by a Mexican national and registered under the name Durango.

As of February 13, 1974, the Mexican authorities could find no trace of either Borsch or the crew. Before Borsch disappeared, however, and before the Estoellen sank, Borsch made an unsuccessful attempt to sell her for $10,000.

I. Barratry of the master

In Marcardier v. Chesapeake Insurance Co., 12 U.S. (8 Cranch) 39, 3 L.Ed. 481 (1814), the Supreme Court defined barratry of the master as "an act committed by the master or mariners of a ship for some unlawful or fraudulent purpose, contrary to their duty to the owners, whereby the latter sustain an injury." Id. at 49, 3 L.Ed. at 484; Accord, Patapsco Insurance Co. v. Coulter, 28 U.S. (3 Peters) 222, 7 L.Ed. 659 (1830). This court in Commercial Trading Co. v. Hartford Ins. Co., 466 F.2d 1239 (CA5, 1972), approved the district court's conclusion that " 'in the absence of fraud, nothing but acts of known criminality, gross malversation, or the like can amount to barratry.' " Id. at 1244-45; Accord, National Union Fire Ins. Co. v. Republic of China, 254 F.2d 177, 183 (CA4), Cert. denied, 358 U.S. 823, 79 S.Ct. 38, 3 L.Ed.2d 64 (1958) (" '(Barratry) is a generic term which includes many acts of various kinds and degrees. It comprehends any unlawful, fraudulent or dishonest act of the master or mariners, and every violation of duty by them arising from gross and culpable negligence contrary to their duty to the owner . . . .' " (Quoting Greene v. Pacific Mutual Life Ins. Co., 91 Mass. 217, 220 (1864))); Isbell Enterprises, Inc. v. Citizens Casualty Co., 303 F.Supp. 549, 552 (S.D.Tex.1969), Aff'd on other grounds, 431 F.2d 409 (CA5, 1970). Simple negligence of the captain or crew can never amount to barratry. Commercial Trading Co. v. Hartford Fire Ins. Co., supra at 1245; Intermondale Trading Co. v. North River Ins. Co., 100 F.Supp. 128, 132 (S.D.N.Y.1951).

Appellant claims that Fishing Fleet has failed to prove barratry as defined above. 3 We disagree. The evidence recited above points to gross malversation by Captain Borsch. He lied to Dyke about the loading of shrimp, fraudulently tried to sell the Estoellen, and once she sank, disappeared, failing to protect the owner's interest in her, a duty Borsch owed Fishing Fleet. We believe this is sufficient to constitute barratry of the master.

II. Free of Capture and Seizure Clause

The insurance policy provides that

The following conditions shall be paramount and shall supersede and nullify any contrary provisions of the Policy. This Policy does not cover any loss, damage or expense caused by, resulting from, or incurred as a consequence of:

a. Capture, seizure, arrest, restraint or detainment, or any attempt, thereat; or

b. Any taking of the Vessel, by requisition or otherwise, whether in time of peace or war and whether lawful or otherwise.

Trident argues that the total loss of the Estoellen resulted from her seizure by the Mexican authorities and that it is freed from liability under the F.C.& S. Clause. The district court found, however, and we agree, that the total constructive loss of the Estoellen was caused by the barratry of the master. The district court found that the total charges against the ship totaled over $40,000 at the time the vessel was seized. There was, therefore a total constructive loss before the seizure.

In National Union Fire Insurance Co. v. Republic of China, supra, the court stated that "(n)o case has come to our attention in which the barratrous conduct of either the master or the crew of a vessel has been held to be within the capture and seizure exclusion clause of a marine insurance policy." Id. at 185. Appellant argues that the district court opinion in Intermondale Trading Co. v. North River Ins. Co., supra, held that the F.C.&S. Clause is a complete defense to barratry of the master. In that case, however, the court concluded that there was no evidence of barratrous conduct. Id. at 132. There is no need to decide whether the F.C.&S. Clause can ever be a defense where there have been barratrous acts. Here, the Estoellen was a total constructive loss prior to seizure. The seizure was not the cause of the loss. 4

III. Concealment and Misrepresentation

Appellant contends that Fishing Fleet intentionally concealed the fact that the Estoellen was scuttled in Campeche harbor, and that this alleged concealment is ground for avoiding the policy. Paragraph 2 of the "Certificate Conditions" of the policy provides that "(t)his entire Certificate shall be void if the Assured has concealed or misrepresented any material fact or circumstances concerning this insurance or the subject thereof or in the case of any fraud or false swearing by the Assured touching any matter relating to this insurance or the subject thereof, whether before or after a loss." The district court found that Fishing Fleet's notice to its insurance agent of the events surrounding the loss of the Estoellen was sufficient to avoid a violation of paragraph 2 of the policy. After Cordoba and Garcia returned from Campeche with news that the Estoellen was sunk in shallow water, Fishing Fleet passed this information on to its insurance agent. Fishing Fleet, however, did not tell the insurance agent that it suspected that the Estoellen was intentionally scuttled. 5

Fishing Fleet's failure to pass on its suspicion of an intentional scuttling is not grounds for avoiding the policy. Trident was held liable because of the barratry of the master. The finding of barratry was not premised on intentional scuttling of the Estoellen. Indeed, there was no finding that...

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