National Bulk Carriers v. United States

• Decision Date: 11 September 1944
• Docket Number: No. 1567,1568.,1567
• Citation: 56 F. Supp. 765
• Parties: NATIONAL BULK CARRIERS, Inc., v. UNITED STATES (two cases).
• Court: U.S. District Court — District of Delaware

56 F. Supp. 765

NATIONAL BULK CARRIERS, Inc., v. UNITED STATES (two cases).

Nos. 1567, 1568.

District Court, D. Delaware.

September 11, 1944.

Abel Klaw, of Wilmington, Del., Leonard J. Matteson (of Bigham, Englar, Jones & Houston), and Samuel D. Antopol, both of New York City, for libellant.

Francis M. Shea, Asst. Atty. Gen., J. Frank Staley, Arnold W. Knauth, and Lester P. Schoene, Sp. Assts. to Atty. Gen., and John J. Morris, Jr., U. S. Atty., of Wilmington, Del., for respondent.

LEAHY, District Judge.

These suits are for recovery of loss of the ships the "Mulligan" and "Bloom."¹ The libels and exceptions are identical in form. The case of the "Mulligan" (No. 1567) only will be discussed, but the discussion will apply mutatis mutandis to the "Bloom" (No. 1568).

The United States of America, acting through the War Shipping Administration, requisitioned the "Mulligan" and gave libellant the standard form of receipt.² As stated in the receipt, the Administrator requisitioned the vessel pursuant to the authority granted in Sec. 902 of the Merchant Marine Act, 1936, as amended, 46 U.S.C.A. 1242.³

On May 12, 1942, the "Mulligan" became a known total loss at sea. Sec. 902 of the Merchant Marine Act, 1936, as amended, provides that the Administrator "at the time of the taking or as soon thereafter as the exigencies of the situation may permit, shall transmit to the person entitled to the possession of such property a charter setting forth the terms which, in the Commission's judgment, should govern the relations * * *." It was evidently not practicable to tender a charter on April 20, 1942, at the time the "Mulligan" was requisitioned. In any event, the agreement of requisition time charter Form 102, Warshipoiltime Contract No. WSA-2147-R, was not executed until some time after the known loss of the "Mulligan." But, it nevertheless recites that it was executed as of April 20, 1942 between libellant and the United States of America. From the charter it appears that the libellant elected War Risk Insurance Valuation Option II,⁴ with "just compensation to be determined in accordance with Section 902 of the Merchant Marine Act, 1936, as amended." By the terms of the charterparty it was further agreed between the parties herein as follows:

"20. Unless otherwise mutually arranged, at all times during the currency of this Charter the Charterer shall provide and pay for or assume: (i) insurance on the Vessel, under the terms and conditions of the full form of standard hull war risk policy of the War Shipping Administration, which shall include malicious damage, sabotage, strikes, riots and civil commotion, insured for and valued at the amount set forth in Part I which insurance shall be made payable to the persons entitled thereto; (ii) all war risk insurance, as required, on the lives of or for injuries to officers and crew and loss or damage to their personal effects, including sextants of deck officers, on leased equipment aboard for which the Owner is responsible to the extent not otherwise covered hereunder, on slop chests, on the actual value of the Vessel's unused consumable stores and on cash carried on board but not in excess of $5,000. unless otherwise agreed; and (iii) war risk protection and indemnity insurance, for the benefit of the Owner and the Charterer as their interests may appear, including Owner's liabilities to officers and crew until repatriated."

Pursuant to the provisions of the charter, the Administrator, on August 1, 1942, issued "War Risks Binder RC No. 539. covering vessels requisitioned by the War Shipping Administration." It is provided in the binder that the premium is to be paid by the War Shipping Administration.⁵ By endorsement No. 2 of the charter⁶ it is again agreed that in the event of loss, just compensation is to be determined in accordance with Sec. 902 of the Merchant Marine Act, 1936, as amended.

These suits are filed pursuant to Secs. 1128 to 1128h of 46 U.S.C.A. Section 1128a authorizes the Administrator (formerly the Commission) to "insure against loss or damage by the risk of war, persons, property, or interest," as follows: "(a) (1) American vessels (including vessels under construction) * * *." Sec. 1128d⁷ purports to give the district courts jurisdiction of actions on claims for losses.

The government has filed three exceptions to the libel. The first exception is that (a) the binder was of no effect as an insurance contract because it was issued after the loss was known to have occurred, and (b) in any event, the binder was merely a restatement in a different form of a pre-existing obligation to make payment of just compensation.

The second exception is that libellant elected War Risk Insurance Valuation Option II, providing for "just compensation to be determined in accordance with Section 902 of the Merchant Marine Act, 1936, as amended"; and that Sec. 902(d) of the Act, as amended, 46 U.S.C.A. § 1242(d), expressly provides that suits thereunder must be brought either in the manner provided for by Sec. 41(20) or Sec. 250 of 28 U.S.C.A.; and that under Sec. 41(20) suits may only be brought in the district if the amount sued for does not exceed $10,000. Thus, defendant argues that as the libel in the instant case asserts a claim far in excess of $10,000, under Sec. 250 suit may only be maintained in the United States Court of Claims.

The third exception is that the proceeding can not be maintained for recovery of items of claims other than the claim for just compensation (for loss of vessel) since it appears on the face of the libel that amounts in excess of such other items of claims have been paid to the libellant on account.⁸

1. (a) That the binder was issued after the loss occurred is immaterial. Clearly at the time the insurance binder was issued all parties knew the vessel was a total loss as a result of disaster at sea. The Administrator, nevertheless, insured the vessel nunc pro tunc as of April 20, 1942, to the termination of the charter. This act of the Administrator shows an election on his part to deal with such losses as insurance losses rather than as claims based on requisition or on charter. In the usual case, an insurance company would not, of course, insure against a loss which had already occurred, but in the present case there would be liability in some form on the government. And in the present case it elected to assume insurance liability by the issuance of the binder. The government issued the binder with full knowledge of all the facts and in such a situation the court will not ordinarily re-make the bargain for the party in the absence of fraud or mistake. Cf. Insurance Company v. Lyman, 82 U.S. 664, 15 Wall. 664, 21 L.Ed. 246. I am, accordingly, of the opinion that the binder is a valid contract of insurance against the loss specified in it.

(b) The war risks binder is a contract of insurance. The government contends that the binder is not a contract of insurance because it is a restatement in different form of the obligation under the requisition to pay just compensation for the vessel in case it is lost. This position is unsound because the rights of the libellant are not the same in all particulars under the binder as they would be under the requisition. In other words, the charter and the binder issued pursuant to it are substituted for the libellant's right to receive full compensation under the Constitution. This substituted agreement conferred new and different rights upon the libellant and subjected it to new and different obligations. See Matson Navigation Co. v. United States, 284 U.S. 352, 52 S.Ct. 162, 76 L.Ed. 336. It is accordingly apparent that the binder and the charter created a valid contract of insurance and was not merely a restatement of a preexisting obligation.

2. This court has jurisdiction. The government contends that this court has no jurisdiction of the claims because the insurance (assuming the binder created a valid contract of insurance) was not for a fixed amount but was for just compensation to be determined in accordance with Sec. 902 of the Merchant Marine Act, 1936, as amended. The government, accordingly, construes this as a just compensation claim with jurisdiction exclusively in the Court of Claims. If the cases at bar had been instituted under Sec. 902 proper, the Court of Claims would have exclusive jurisdiction. But the procedural provisions of Sec. 902, contained in Sec. 902(d), giving jurisdiction to the Court of Claims when claims are made under that section, constitute only a small part of the provisions of Sec. 902. That section also contains provisions establishing principles under which valuations are to be arrived at in determining just compensation when claims are made under that section. Subsection (a), for example, provides that "in no case shall the value of property taken or used be deemed enhanced by the causes necessitating the taking or use." The section also contains provisions for the elimination of any claim for consequential damages. In short, Sec. 902 provides a formula for determining valuation. I am, therefore, of the opinion that when the agreements provide that in the event of loss and suit is instituted under Sec. 1128d just compensation is to be determined in accordance with Sec. 902 of the Merchant Marine Act, 1936, as amended; it was not intended to make the claim one for just compensation under Sec. 902, with a resultant exclusive jurisdiction in the Court of Claims to determine all such claims, but it was merely intended by the parties that they were to utilize the valuation formula set forth in that section.

Under Sec. 902 the Commission, as soon as practicable, shall determine just compensation. The government contends that since a person is given the right under Sec. 902 to sue in the Court of Claims after a determination of just compensation has been made by the Commission, the parties to the War Risks Binder and Charter agreement intended that...