Gulf Refining Co. v. Universal Ins. Co.

• Decision Date: 06 May 1929
• Docket Number: No. 278.,278.
• Citation: 32 F.2d 555
• Parties: GULF REFINING CO. v. UNIVERSAL INS. CO.
• Court: U.S. Court of Appeals — Second Circuit

32 F.2d 555 (1929)

GULF REFINING CO. v. UNIVERSAL INS. CO.

No. 278.

Circuit Court of Appeals, Second Circuit.

Decided May 6, 1929.

Bigham, Englar & Jones, of New York City (D. Roger Englar and M. P. Detels, both of New York City, of counsel), for appellant.

Burlingham, Veeder, Masten & Fearey, of New York City (Van Vechten Veeder, of New York City, of counsel), for appellee.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

MANTON, Circuit Judge.

A cargo shipped on the vessel Gulf of Venezuela, together with the vessel, sustained a fire loss. The fire was extinguished with foamite and water, but only after considerable damage to both cargo and vessel. The vessel, cargo, and freight were separately insured by the appellee, who owned both cargo and vessel. The insurance covered fire and marine perils, including general average. Various underwriters, domestic and foreign, participated in the insurance, but the underwriters on the vessel were not the same as those of the freight or cargo. A general average statement was prepared by the average adjusters employed by the appellee for the purpose of making allowances and contributions, special charges, and particular average, payable by it or for the account of the vessel, cargo, and freight respectively, or the underwriters thereon, as if belonging to separate owners. These amounts were ascertained, and the amounts payable or receivable by the several underwriters on account of the general and particular average and special charges collected were paid in full, except the collecting of the commissions which is in issue in this suit. The adjusters added to the general and specific charges the collecting commission of 2½ per cent., of which the appellant's share is $268.15. The appellant refused to pay the same, denying liability, for the reason that the assured owned both the vessel and cargo.

Because ship and cargo were separately insured, they are as if separately owned, and there was need of a general average adjustment. It treated the interest, ship and cargo as if separately owned, for the underwriters stood in the place of the owner as to each interest, and received and paid the moneys collected and distributed as if there was diversity of ownership. A general average adjustment involves the apportionment of items as between general average and special charges, the collection of the funds from the different underwriting interests, and the distribution of the same according to the adjustment made. A collection fee charged in the case of diverse ownership of interest is regarded as proper, and the question is whether, in the case of common ownership with diverse underwriting, a collection charge is improper. In the case of common ownership, adjustments differ in no respect for an adjustment properly made as between the several interests of cargo, ship, and freight, is binding on the underwriters. They stand in the place of the assured. When there is common ownership of the several interests, the adjustment is in effect in behalf of the underwriters themselves.

It has been the custom, and it is authorized by the law merchant, that a commission of 2½ per cent. be paid for collecting general average. In Barnard v. Adams, 10 How. 270, 13 L. Ed. 417, decided in 1850, the Supreme Court said:

"The 2½ per cent. allowed for collecting the general average rests upon the usage and custom of merchants and average brokers. It is a duty arising out of the unforeseen disaster, and resulting directly from it. Usually there are contributions to be paid out, as well as received, by the shipowner. It is a trouble-some duty, not embraced in their obligation as mere carriers. The usage is therefore not unreasonable. The objection, that it is paying the owners for merely collecting their own debt, is founded on the accidents or peculiar circumstances of this case, and does not affect the general principle on which this usage is based."

Five years later, in Sturgis v. Cary, 2 Curt. 382, Fed. Cas. No. 13,573 (1855), Mr. Justice Curtis, sitting at circuit, considered an exception to a master's report which raised the question of whether the owners of a vessel were entitled to charge among the items to be contributed for in general average a commission of 2½ per cent. on the amount of general average...