Gray v. Freights of The Kate

• Decision Date: 16 October 1894
• Citation: 63 F. 707
• Parties: FREIGHTS OF THE KATE et al. v. FREIGHTS OF THE KATE et al. (five cases). BROWN et al. GRAY et al. v. SAME (five cases). HUNTINGTON et al. v. SAME (five cases). ATLANTIC TRUST CO. v. SAME (five cases). GRAY, Receiver, v. SAME (five cases).
• Court: U.S. District Court — Southern District of New York

63 F. 707

FREIGHTS OF THE KATE et al.

GRAY et al. v. FREIGHTS OF THE KATE et al. (five cases). BROWN et al. v. SAME (five cases). HUNTINGTON et al. v. SAME (five cases). ATLANTIC TRUST CO. v. SAME (five cases). GRAY, Receiver, v. SAME (five cases).

United States District Court, S.D. New York.

October 16, 1894

Convers & Kirlin, for James Gray and others.

Cary &amp Whitridge and W. P. Butler, for John Crosby Brown and others.

Benedict & Benedict and Maxwell Evarts, for petitioners C. P Huntington and others.

Carter & Ledyard, Mr. Baylies, and Mr. Goodrich, for petitioner Atlantic Trust Co.

Stetson Tracy, Jennings & Russell and Mr. Van Sinderen, for petitioner Henry W. Gray, receiver, etc., of United States & Brazil Mail S. S. Co.

BROWN District Judge.

The above 25 libels and petitions were filed by five different claimants of the freights earned by the various steamships above named, upon the last voyage of each from Brazil to New York. The Kate arrived here on March 27, 1893; the Joshua Nicholson on March 17th; the Etherly on April 2d; the Elsie and the Enchantress about April 29th. The vessels were all running in the service of the Untied States & Brazil Mail Steamship Company, under written charters from their owners, made (except that of the Enchantress) in the latter part of 1892, or January, 1893. The net freights remaining after deducting port charges and the expenses of delivering the cargoes here, amount to the following sums, viz:

Those of the Kate to $9,856.08; of the Elsie, $12,946.99; of the Etherly, $8,745.17; of the Enchantress, $11,280.26; of the Joshua Nicholson, $6,975.38.

The first five libels are by the different owners of the five steamships, to recover the unpaid charter hire, and certain other demands, for which liens upon the freights are claimed under the express provisions of the several charters.

The second five libels are by Brown Bros. & Co. for moneys paid on account of the steamship company, the charterers, upon drafts drawn by that company on letters of credit issued to it by Brown Bros. & Co., on the faith of an express hypothecation of 'all the freights earned and to be earned,' as 'collateral security' for the payment of the drafts.

The five petitions of Huntington and Pratt are for moneys paid by them as guarantors upon three letters of credit issued by Heidelbach, Ickelheimer & Co. to the steamship company, on the alleged credit and pledge of the freights to the guarantors as security for their guaranty.

The five petitions of the Atlantic Trust Company present its claim to the freights as mortgagee of all the 'ships, property, leases, tolls, income, rents, issues, and profits' of the steamship company; and the five petitions of the receiver of the steamship company claim whatever is not legally vested in the other claimants.

The steamship company failed in February, 1893. On March 18, 1893, the petitioner Henry Winthrop Gray was duly appointed by the state court temporary receiver of the company; and on March 6, 1894, this appointment was made permanent.

The charters of all the steamers were in substantially the same terms, except that of the Joshua Nicholson, which varied a little in the express lien secured to the owners.

The charter of the Kate, which is a representative of the rest, was dated December 15, 1892, and was what is commercially known as a time charter. The steamer was let to the company for two round trips from New York to Brazil and back, at the rate of 6/6 per ton per month, payable monthly in advance. She was to be manned, officered and provisioned by the owners; while the charterer was to load her, and supply coal, etc. Clause 21 of the charter provided that 'the owners shall have a lien upon all cargoes and all subfreights for any amount due under this charter. ' The charter of the Joshua Nicholson gave this lien for 'charter hire' only, instead of for any amount due.

Shortly before the arrival of the Kate at New York at the close of her first voyage, the steamship company having failed, and in answer to inquiries having stated that it did not propose to load the steamer again, the owners, on March 20, 1893, notified the company in writing that they 'hereby withdraw the steamer from your (the company's) service under the charter party, without prejudice to any claim they or their agents may have on you in pursuance of this charter party or otherwise. ' This notice was in accordance with a right to withdraw reserved by the fifth clause of the charter party, in case of any default in payment of the hire monthly in advance. At the time of this notice, upwards of one monthly payment was due and unpaid. On March 27th the Kate arrived at New York, whereupon the owners, without dissent by the company, took possession of her through their agents, Messrs.. Winchester & Co., who delivered the cargo and collected her freights now in suit. The same notices were given as regards the four other chartered steamers; and on their arrival afterwards, similar proceedings were taken for the delivery of the cargoes and the collection of their freights; and soon afterwards the above libels were filed by the shipowners, and the freights were deposited subject to the order of the court.

The libelants, James Gray and others, shipowners, claim to recover against the freights of the vessels respectively, (a) the unpaid charter hire of each vessel up to the end of unloading, viz.: For the Kate, $4,070.85; for the Elsie, $7,909.14; for the Etherly, $7,811; for the Enchantress, $14,482.48; for the Joshua Nicholson, $2,938.86. To the liens for charter hire there are no valid objections; though there are some counter charges presented to diminish the amounts due upon each; and in the case of the Enchantress a considerable deduction of time is claimed, on account of a breakdown in her machinery.

The shipowners further claim liens for (b) certain advances and supplies furnished by them to the charterers before and after sailing from Brazil upon the last voyages; for coal obtained at Rio, and for port charges, and meals at St. Thomas, where the Kate was obliged to put in for supplies, which, under the charter, the Brazil Company was required to provide; also for some mats bought of the master of the Enchantress; the expenses of replacing a bulkhead, and the master's services as purser; all of which the company agreed to pay; (c) indemnity against certain liens claimed against these steamers, some of which are in suit, for supplies furnished by material men in New York on the previous voyages out; and also against certain claims of cargo owners made against the ship for cargo damage, and for short delivery on the last voyage; which claims the charterers, it is said, are bound to pay; also (d) damages for the nonemployment of the steamers during the residue of the charter period after the vessels were withdrawn, i.e., for the period required for another voyage to Brazil and back, or about three months; except in the case of the Enchantress, whose charter expired with the current voyage.

The libelants John Crosby Brown and others constitute the firm of Brown Bros. & Co., bankers, of this city and London, who, since 1887, have been in the habit of issuing to the steamship company letters of credit for the disbursement of its steamers at Brazilian ports upon a hypothecation of the freights. Several such letters were issued in 1892. The last of these was issued and dated on November 29, 1892, to the president of the steamship company, and forwarded to him at Rio, where he then temporarily was, for 8,000 pounds, all of which was availed of there by drafts on Brown, Shipley & Co., London, at 90 days' sight. On the back of this letter of credit, as upon previous ones, was an agreement signed by the secretary and treasurer of the company at the time the letter was issued, by which, among other things, the company agreed to put Brown Bros. & Co. of New York in funds sufficient to pay any drafts drawn upon the letter of credit, 15 days before the maturity of such drafts in London; and also agreed that 'all freight moneys earned and to be earned, and the policies of insurance thereon, are hereby pledged and hypothecated to them (Brown Bros. & Co.) as collateral security for the payments as above promised; and to give them any additional security that they may require whenever they may see proper to demand it.'

When this last letter of credit was issued and the hypothecation signed on November 29, 1892, only one of the above-named five chartered steamers, viz., the Enchantress, was running in the service of the company; the Kate, and the other three steamers were chartered, and entered the company's service, within the two months following. The company also owned five other steamers, which ran regularly in its service. The Kate, chartered on December 15, 1892, sailed on her first trip on December 15th. It is contended, however, in behalf of Brown Bros. & Co., that the hypothecation to them was general, and was intended to cover not only the freights of the specific voyages assisted by the drafts, but 'all freights' earned by any steamers of the line, until all the drafts were paid; and that they have, therefore, by the express contract, a general lien upon all the freights of the line for the payment of any of the drafts unpaid.

Six drafts were drawn and negotiated by the company's agents at Rio under Brown Bros. & Co.'s last letter of credit. They were dated December 6, 1892, 2,000 pounds; December 16 1,000 pounds; December 27, 1,000 pounds; January 2, 1893, 2,000 pounds; January 9, 1,000 pounds; January 21, 1,000 pounds. They were drawn on London at 90 days sight, and became due at various dates from March 30 to May 15, 1893; and the steamship company having failed in...