THE PETAR

• Decision Date: 03 July 1946
• Citation: 68 F. Supp. 296
• Parties: THE PETAR. OZANIC v. UNITED STATES, and consolidated causes.
• Court: U.S. District Court — Southern District of New York

68 F. Supp. 296

THE PETAR.

OZANIC v. UNITED STATES, and consolidated causes.

District Court, S. D. New York.

July 3, 1946.

Bigham, Englar, Jones & Houston, of New York City (Andrew J. McElhinney, of New York City, of counsel), for libellant.

John F. X. McGohey, U.S. Atty., of New York City (Edward L. Smith, of New York City, of counsel), for respondent.

LEIBELL, District Judge.

On March 8, 1942, the Yugoslavian steamer "Petar" was sunk in the Caribbean Sea as a result of a collision with the United States tanker "Kennebec." At the time of the collision the "Petar" was carrying cargo and was operating under a time charter. The possession and use of the vessel had been requisitioned by the Yugoslav government and she was subject to Yugoslav and British restrictions. The crew were under a union contract by which the owner was obliged to pay to the survivors of the crew wages, maintenance and travel expenses for repatriation. After the collision the "Kennebec" stood by to render assistance and in the operation her motor whaleboat became damaged and was lost.

On August 5, 1942, Bozidar Izanic, as Master of the steamship Petar, filed a libel in this court against the United States. Subsequently consolidated therewith were a cross-libel by the United States for the damage sustained by the Kennebec and for the loss of her motor whaleboat, and a libel against the United States by the insurer of the Petar's cargo of bauxite. Pursuant to a stipulation of the parties and on motion of this libellant a decree of this court was entered adjudging that the United States should pay two-thirds of the damages caused by the collision and the remaining one-third should be paid by the owners of the Petar. The value of the cargo including freight ($27,852), the personal effects of the survivors ($11,428.86), and extra equipment and supplies of the Petar ($5,872.27), as well as the damage to the Kennebec ($11,119.62) were fixed by agreement of the parties. The remaining items of damage, which were in dispute, were referred to a Commissioner who found that:

1. The value of the "Petar" on March 8, 1942, the date of the sinking, was $170,000.

2. The libellant was not entitled to any recovery for the loss of profits which would otherwise have been earned under the time charter.

3. The libellant was not entitled to recover the repatriation expenses of the survivors, for wages, maintenance and transportation.

4. The respondent was not entitled to any recovery for the loss of its motor whaleboat.

The libellant excepts to the Commissioner's findings in respect to the value of the Petar (claiming a value of $210,000), and to the denial of recovery for the loss of profits (charter hire of $12,746.22), and to the denial of repatriation expenses ($10,277.61), covering wages, maintenance and costs of transportation of seven survivors (3 to Georgetown, British Guiana and 4 to New York City). The respondent excepts to the findings in respect to the value of the Petar, claiming a value of $93,000, and to the denial of recovery for the loss of the motor whaleboat, valued at $2,500.

As the Commissioner reported:

"The principal issue in this case, * * * was the value of the PETAR. Constructed in Holland in 1910, she was nearly 32 years old when she sank. A small steel cargo steamer, in class and operating condition, and fitted for trans-Atlantic service, she was engaged in the bauxite trade between Georgetown and St. Thomas when she sank. At the time of her loss she was registered under the Yugoslavian flag and her use had been requisitioned by that government."

The Petar was of the three island type, having an overall length of 265 feet, 39 foot beam, and a depth of 18.7 feet; she was of 2787 deadweight tons measured by her peacetime Plimsoll marks, 2850 by wartime Plimsoll marks. She was powered by steam, had two Scotch coal-burning boilers, reciprocating triple expansion engines — about 1200 Horse Power under normal operating steam pressure of 180 pounds. She was a single screw steamer and was chartered as a nine knot ship, and she averaged 8.84 knots in all types of weather. Lloyds gave her the top classification of + 100 A 1.

The maxim restitutio in integrum expresses the principle governing the computation of damages adopted in collision cases in admiralty. If a vessel is totally lost the measure applied to restore the owner to the same position he was in before the collision is the market value of the vessel at the time of her total destruction; "that is to say, the gross sum for which she might have been sold immediately before the collision." The Cushing, 2 Cir., 292 F. 560, at page 566. A vessel may be lost in a period when market value cannot be determined by the established method of referring to contemporaneous sales of like vessels in the ordinary way of business. Extraordinary conditions exist during times of war, when there is a great demand for vessels but practically no open market and no comparable sales, due to government requisition.

The problem of valuation under such conditions was presented in Standard Oil Co. of New Jersey v. Southern Pacific Co., 268 U.S. 146, 45 S.Ct. 465, 467, 69 L.Ed. 890, and the Court held that in the absence of market value, the damages to which an injured party is entitled in admiralty for the loss of a vessel is that amount which probably could have been obtained for her, considering all the circumstances, on the date of the collision; "the sum that in all probability would result from fair negotiations between an owner willing to sell and a purchaser desiring to buy." At page 156 of 268 U.S., at page 467 of 45 S.Ct., 69 L. Ed. 890, the Court stated: "It is to be borne in mind that value is the thing to be found, and that neither cost of reproduction new, nor that less depreciation, is the measure or sole guide. The ascertainment of value is not controlled by artificial rules. It is not a matter of formulas, but there must be a reasonable judgment having its basis in a proper consideration of all relevant facts." The Supreme Court affirmed the decision of the Circuit Court of Appeals, Second Circuit, which had held that if, at the time of loss of a vessel, there "was no market value * * * because such steamships could not be purchased, because none were on the market, or because it was difficult, if not impossible, to obtain a shipbuilder to construct one, then these special circumstances invoke the rule of damages of cost of production less depreciation." The Cushing, 292 F. 560, at page 567.

Another case which dealt with the war-time valuation of a vessel was The Hisko, 2 Cir., 54 F.2d 540, 541. That court followed the rule of the Supreme Court in the Standard Oil-Southern Pacific case and held that "Reconstruction cost less depreciation for age is not an absolute measure of a vessel's value, but only one of the relevant facts, all of which must be considered in arriving at a fair judgment of value; nevertheless, under such conditions as were shown to exist in the Proteus case and in the case at bar (The Almirante), reconstruction cost less proper depreciation may be deemed a reliable indication of the minimum value."

It is obvious from the rule of these cases that when a vessel is lost as a result of collision during a time of war when there is no open market to determine value, then the market value must be determined from all the available circumstances and relevant facts, giving consideration to their proper weight and bearing. The supplementary questions of relevancy and weight are not as clearly defined as the general rule. In Standard Oil Co. of New Jersey v. Southern Pacific Co., supra, the court found that the cost of reproduction in a period of high costs, prices and wages was a relevant factor, and that proper depreciation was a relevant fact, considered in relation to reproduction costs. The court excluded original cost of the vessel as a relevant factor or useful guide in determining value, because of changed prices and enhanced values brought about by the influence of war.

In the same case in the Circuit Court of Appeals (The Cushing, supra) that court excluded from consideration the fact that the vessel was operating under government requisition and that the owner "could not have sold her, or would have to sell her subject to control by the government." The court observed that when she was lost the act of requisition was at an end and the loss was that of the owner and that the monetary loss to the owner was her then market value. Mersey Docks and Harbor Board, 3 K.B.Div. 223, was cited and quoted from to support this view. Original cost, under the special circumstances presented, was considered a very inferior criterion. It clearly would be unfair in the case at bar as the base to be depreciated. The original cost of the Petar was about $171,000 in 1910. She was sold in 1932 for $16,262. She was purchased by her last owner for $33,629 in June 1936.

In The Hisko, supra, the court also held that the American reconstruction cost of a foreign built vessel was competent evidence on the issue of the vessel's value, because "under the abnormal conditions of September, 1918, there was a demand for cargo vessels, regardless of where they were built, which gave them a value, if they could have been sold, greater than their reproduction cost in an American yard." In the report of the Advisory Board on just compensation to the War Shipping Administration (December 7, 1943), the Board in Rule 2 stated: "In the case of requisition of foreign flag vessels under Public Law 101, 50 U.S.C.A.Appendix, § 1271 et seq., just compensation should be determined as in the case of domestic vessels."

Some other factors which must be subjected to the test of relevancy, competency and weight are the value placed on a vessel for insurance, the earning capacity of the ship and the manner in which the ship has been kept up. The cases seem to hold that the insurance value, stated in a...