Lenfest v. Coldwell
| Decision Date | 06 November 1975 |
| Docket Number | D,FERRO--BET,Nos. 54,74,s. 54 |
| Citation | 525 F.2d 717 |
| Parties | Inez H. LENFEST and Marine Midland Grace Trust Company of New York, as Executors of the Estate of Harold C. Lenfest, and Kenneth F. Yarrington, Plaintiffs-Appellants, v. Harold W. COLDWELL, Defendant-Appellee.CORPORATION OF AMERICA, Plaintiff-Appellant, v. Harold W. COLDWELL, Defendant-Appellee. ockets 74--2659, 74--2660. |
| Court | U.S. Court of Appeals — Second Circuit |
W. Shelby Coates, Jr., New York City (Wilbur E. Dow, Jr., New York City, of counsel), for plaintiffs-appellants in 74--2659.
Joseph D. Tarlowe, New York City, for plaintiff-appellant in 74--2660.
William Warner, New York City (Symmers, Fish & Warner, New York City, of counsel), for defendant-appellee.
Before FRIENDLY, TIMBERS and GURFEIN, Circuit Judges.
This is an appeal from a decision by Judge Carter in the United States District Court for the Southern District of New York, denying plaintiffs any recovery on their 'Anticipated Profits' marine insurance policy. Plaintiff Ferro-Bet Corporation was the time charterer of the vessel S.S. PANOCEAN from October, 1963 until sometime in the summer of 1964. 1 Plaintiffs Lenfest 2 and Yarrington were financiers of Ferro-Bet. All plaintiffs were insured under an 'Anticipated Profits' policy issued by a group of London marine insurers who have designated Harold Coldwell as their nominee in this action. The question presented on appeal is whether the district court erred in finding that plaintiffs failed to prove the vessel either an actual total loss, a constructive total loss, or a compromised total loss, as the policy required, and were hence not entitled to recover.
When the charter was arranged, the owners of PANOCEAN (not parties to this suit) had insurance policies on the hull and machinery of the vessel for $240,000. Under such policies, not directly in issue, the owners were insured against the partial or total destruction or loss of the vessel's structure and machinery (e.g., engines, auxiliaries and boilers). 3
The 'Anticipated Profits' 'honor' 4 insurance policy issued to the plaintiffs was to run for a twelve-month period beginning on October 29, 1963. The policy provides for payment to the plaintiffs 'On--Anticipated Profits--Amount $150,000.' 5 The insurers were
'to pay the above sum in the event the vessel becomes a total and/or constructive and/or arranged and/or compromised total loss as a result of Marine or War perils' (emphasis added).
The 'Institute T.L.O.' or 'Inchmaree' clause, to which these insurance contracts were also subject, further provides that
'1. This insurance covers only:--Total Loss (Actual or Constructive) of the Vessel (including total loss directly caused by:--
'. . . Bursting of boilers, breakage of shafts, or latent defect in the machinery or hull
'. . . Negligence of Master, Officers, Crew or Pilots)
'provided such loss or damage has not resulted from want of due diligence by the Assured, Owners or Managers.'
The policy provides further that
6
By the terms of the policy, plaintiffs could recover on 'anticipated profits' in the event that the vessel became a) an actual total loss; b) an arranged or compromised total loss; or c) a constructive total loss, as a result of marine or war perils, or crew negligence (unless due to lack of due diligence by owners or insureds). For the ship to become a constructive total loss, the costs of recovery and/or repairs to the ship would have had to exceed $240,000 (the insured value on hull and machinery).
The PANOCEAN's charter began comfortably enough. In late November 1963 the vessel proceeded in ballast from Curacao to New Orleans where a cargo under a Cook Grains, Inc., subcharterparty was loaded and carried to Marseilles. 7 She went on to Seville where baryte ore destined for New Orleans was loaded. At Leixos, Portugal, she took on other cargo. She then proceeded to London to discharge cargo and incurred some minor damage while in her berth. After loading at Immingham steel coils destined for Baltimore, PANOCEAN proceeded to Flushing, Netherlands, for bunkers.
In the subsequent passage between Flushing and Baltimore it was stipulated that the vessel encountered heavy weather, and that the voyage lasted from February 24 to April 3, 1964. The stipulation continued:
'Damages and/or equipment losses occurred on the forecastle deck, the main deck, the upper bridge deck, the boat deck, the '02' deck, and the poop deck; and in the engineering spaces of the vessel. The vessel's Scotch Boiler was subjected to heavy accumulation of salt, scale and soot from use of raw sea water; and both the starboard and the port Lamont boilers were subjected to use of raw sea water, and heavy accumulation of salt, scale and soot. It was necessary for the vessel to put into Azores and Bermuda as 'ports of refuge' before Baltimore could be reached.'
Stipulation 1/28.
Under the charterparty, the PANOCEAN was 'off hire' while the owner had her repaired in Baltimore, for about two months, until June 5, 1964, when she was tendered back to the time charterer as ready. She sailed out of Baltimore on June 12, 1964, but within two hours suffered a steering engine telemotor control system failure (apparently due to negligently made repairs), and was forced to anchor for repairs. 8
After further repairs were made, the voyage resumed on June 16, but the ship again ran into trouble, and was forced to drop anchor off Port Everglades, Florida, to make repairs on account of boiler carryover problems unconnected with earlier damage. On June 22, the vessel stranded while at anchor off Port Everglades, suffering numerous bottom 'setups and indentations from the sand and coral bottom. She was refloated with the assistance of a tug on June 26 and docked the next day at Port Everglades for repairs.
She did not arrive in New Orleans until July 18, 1964, almost a month later. There she was drydocked for engine repairs which were effected by July 31. Various permanent hull repairs costing some $40,000 should have been made at this time, but were deferred by the owner. After she arrived at New Orleans and before she departed, a dispute arose between the charterer and the owner, and the status of the charterparty went to arbitration. The vessel left New Orleans again, off charter, and sustained additional serious injuries in the Gulf of Mexico in September 1964. The owners sold the vessel as scrap in late 1964.
On June 26, 1964, while the vessel was in drydock for repairs at Port Everglades, Tradax Export cancelled a subcharter with plaintiff Ferro-Bet, pursuant to its option to cancel if the PANOCEAN was not ready to load soybeans in New Orleans by June 20. Plaintiffs claim that they also lost the Cook Grains subcharter when Ferro-Bet's chief financiers, Marine Midland Bank, refused to permit substitution of a vessel, forcing an abandonment of the enterprise.
On May 20, 1964, while the vessel was under repair in Baltimore and after serious expressions of anxiety by its subcharterers and lenders, Ferro-Bet made its first demand for payment under the Anticipated Profits policy. 9 On February 25, 1965, the owners of PANOCEAN authorized their average adjuster, 10 Great Eastern Associates, Inc., to settle all PANOCEAN claims (exclusive of salvage costs) arising during 1964 for $235,000. Two days later, however, the owners reduced the figure to $225,000. On March 4, 1965, Great Eastern Associates cabled the insurance brokers in London with a breakdown of disbursements and unrepaired damages making up the owner's gross claim against the insurers of $444,246. The insurers had already advanced some $126,794 for repairs in Baltimore. After deducting $15,000 for estimated general average contributions 11 from cargo interests, Great Eastern's cable indicated a 'balance due' from the insurers of $302,452 (on an aggregate claim of $429,246). An exchange of telegrams resulted in Great Eastern and the owners accepting an immediate settlement of $225,000; an additional $45,220.07 was later paid over for general average costs at Port Everglades. 12
The District Court correctly held that the Baltimore repairs and damages had resulted from insured-against marine perils. Relying on the report of the underwriter's survey, done on behalf of the London Salvage Association, the court found that $155,006 in necessary repairs had been accomplished at Baltimore, and that estimated repairs of $49,340 on the Port Lamont boiler had been deferred. Appellees concede that these two sums may properly be added in determining the existence of a constructive total loss.
The district court also found that the Azores and Bermuda were ports of refuge, as was stipulated, and that the claimed costs at those ports were properly to be included in determining the costs of repair and recovery. The court relied on Compania Maritima Astra, S.A. v. Archdale (The ARMAR), 134 N.Y.S.2d 20 (S.Ct.1954), which held the costs of 'salvage, pilotage, towage and superintendence' includible in computing constructive total loss costs. The costs accepted were, at the Azores, $538.15 for 'disbursements' and $2,380.29 for 'vessel allowances,' and, at Bermuda, $1,028.60 for 'disbursements' and $3,166.67 for 'vessel allowances.' Since all these expenses in the aggregate did not total over $240,000 (but amounted to only $211,459.71), the court found that there was no constructive total loss at...
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