O'Brien v. Miller

delivered the opinion of the court.

By a charter party executed at Yalparaiso, Chili, on April 5, 1884, Gibbs & Company, of the place named,, chartered the ship' Andrew Johnson to carry a cargo of nitrate of soda from Iquique and Caleta “ to any safe port in the United Kingdom or on the continent between Havre and Hamburg, both included, as ordered.” After loading at the places named, the Andrew Johnson, pursuant to orders, sailed on July 15, 1884, for Hamburg, the cargo on' board being consigned to the order of Antony Gibbs & Sons, a firm doing business in London. On the 4th of August following, the vessel, being in distress, put into Callao. Certain necessary repairs, which were advised by a duly appointed board of survey, were made, and, upon the recommendation of the board, 8449 bags, or about' 1200 tons, of the nitrate of soda were transhipped to the British bark Mary J. Leslie, to be conveyed, by that vessel, to Hamburg.'

To defray the expenses incurred in the port of refuge, the master of the Andrew Johnson executed a bottomry and re-spondentia bond to the firm of Grace Brothers & Company. This bond not only bound the ship Andrew Johnson and her cargo and freight, but also, in express terms, hypothecated the cargo transhipped to the Mary J. Leslie. Although both cargoes were thus bound, the bond, in its defeasance clause, provided that it should be void “ if during the said voyage an utter loss of the said vessel by fire, enemies, pirates, the perils

“¥e formulate the question which you, in the names of Messrs. Antony Gibbs & Sons and Messrs. Baring Brothers & Co., have submitted to our judgment as follows:

“Whetherthe portion of the cargo of nitrate of soda of the

Andrew Johnson, brought home per Mary J. Leslie, is liable for the whole amount of the bottomry bond, which was signed in Callao, and whether, consequently, the receiver of this portion of the cargo has to pay the whole of the bottomry bond, provided the value of this portion of the cargo is not less than the amount of the bottomry debt ?

“ This question we must answer in the affirmative, because, according to the law here, ship, freight and cargo of the Andrew Johnson, as well as the portion of the cargo which was transhipped into the Mary J. Leslie, are jointly liable for the whole amount raised on bottomry at Callao, and, there- ' fore, the Andrew Johnson and her cargo having become a total loss, the holder of the bottomry bond can come upon that portion of the cargo which was shipped by the Mary J. Leslie for the whole amount of his claim.

“ Some doubt might be raised as to whether, according to the wording of the bottomry bond, the money was not lent or appear to be lent contingent upon the safety of the Andrew Johnson, and becoming due only after her arrival at her port of destination, but becoming null and void in the event of her non-arrival. We are of opinion, however, that this interpretation is not consistent with the real intention of the contracting parties, and that the wording referred to has originated in the not sufficiently careful use and employment of a form of bond which happened to be at hand. This seems the less doubtful to us for this reason, that if the bottomry bond were interpreted in this manner, the cargo of the Mary J. Leslie would be entirely liberated, after the loss of the Andrew Johnson occurred, and would not even bear a portion of the bottomry debt, which nevertheless has arisen out of a case of general average. Manifestly this cannot have been the intention of the parties interested.”

Antony Gibbs & Sons paid the amount of the bond for account of Gibbs & Company, the consignors. Subsequently, the owners of the Andrew Johnson commenced legal proceedings against the Thirlmere to hold that vessel responsible for the collision by which the Johnson and her cargo were lost. The Thirlmere availed herself of the statute-' of'Great Britain

The present suit was commenced on July 20, 1887, by a libel in 'personam against the owner of the Andrew Johnson to recover the due proportion of the sum paid on the bond. Those joined as libellants were eleven in number; that is, all ,the members composing the firm of G-ibbs & Company, the consignors of the nitrate, of soda, and the members of the firm of Antony Gibbs & Sons, the consignees. The original libel is not in the record. Exceptions to it were filed on the ground that it did not state the nature of the action and that it did not state a cause of action. On June 6, 1888, the district judge overruled the exception to the want of clearness in the averments of the libel, but maintained the exception of no cause of action. Although the learned judge found that the bottomry bond had not ;been avoided by the loss of the Andrew Johnson and her cargo, and therefore that the payment made at Hamburg was necessary, he yet concluded that as the Andrew Johnson and her cargo had proven a total loss, nothing having Been alleged in the libel asAo a recovery by reason of such loss, the libellants were precluded from

“ This respondent admits that the owners of the ship Thirlmere, having taken appropriate proceedings under the statutes of the United Kingdom of Great Britain and Ireland, obtained a decree limiting their liability for said collision to a certain sum, which they thereupon paid into the court, and which said sum was distributed between the libel-lants and the respondent herein, and other parties and their attorneys, in part satisfaction of the damages by each of them sustained by reason of said collision, but this respondent denies that he received.the said sum of £6557 9s. 6d., and avers that the amount’ received by him was much less than said sum.”

No allusion was made in the pleading's of the respective parties to the fact that the owner of the Andrew Johnson had received the benefit of any insurance upon the vessel.

After tlie taking of proof the 'cause was heard on the exceptions and merits on November 23, 1893. At the outset

“ First, to as much of the libellant’s claim as arises out of the limited liability proceedings in the English court as to the Thirlmere, the defence of laches-on the part of the libellant in not sooner bringing that matter before the court.

“ Also as to the same portion of his claim, the. defence res judicata, because passed on by the English court.”

This request was refused and exceptions to the refusal were noted. The court, on the merits, held that the bottomry bond, at the time of its payment, was a valid obligation; that in view of the fact that the bond embraced not only the cargo on the Johnson; hut also the cargo on' the Mary J. Leslie, that the words “ said vessel” in-the defeasance clause must be considered as referring to the cargo on both vessels, and, therefore, the obligations of the bond were not avoided by the loss of the Johnson and her cargo; that the owners of the Johnson having .recóvered from the Thirlmere, up to the value of the latter vessel, damages for the collision, were not discharged from personal liability under the acts of Congress, inasmuch as the sum recovered from the Thirlmere was greater than the amount sought to be enforced in personara against'the owner. 59 Fed. Rep. 621 . In conformity to the opinion of the court, an interlocutory decree was entered on April 3,1894, referring the matter to a special' commissioner to ascertain and report the amount the libellants were entitled to recover. On April 10, 1894, the respondent again applied to the court for leave to amend his answer by setting up the two additional defences of laches and res-judicata, and the request was again denied. On June 5,. 1894, the report of the commissioner was filed, finding the libellants entitled to the principal sum of $6091.73, and on July 16,1894, a final decree for that sum with interest and costs was duly entered. By the final decree seven of the libellants, that is to say, those who composed the firm of

In the disoussion at bar many minor questions have been pressed upon our attention, but the pivotal controversy rests upon the ascertainment of the true meaning of the bottomry -bond, and the obligations, if any, which .arose from its payment. ¥e forego the present consideration of the more unimportant questions in order to at once approach the fundamental issues in th’e cause. The libellants assert that from the terms of the bond as a whole, it manifestly results that the cargo of the Leslie was liable despite the loss of the Johnson and her cargo; that hence the consignees of the cargo, on the Leslie, were obligated to pay the bond, and that on their doing so there arose a legal duty on the owner of the Johnson to pay‘the proper proportion thereof, which obligation, it is claimed, can be enforced despite the loss of the ship, since the owner had recovered and retained the amount awarded against the Thirlmere, ■ On the other hand, the respondent asserts .that the words of the bond providing for its avoidance in case of the loss of “ said vessel are free from ambiguity and give no room for construction, and that even if this be not the case in consequence of the loss of the Johnson, the consignors who paid the bond are not entitled, under the limited liability acts, to recover any proportion thereof.

There can be no doubt that, considered in themselves and

This general rule of construction should especially guide a court of admiralty in interpreting a contract of bottomry and respondentia.

In the exercise of their jurisdiction with respect to such bonds, courts of. admiralty are not governed by the strict rules of the common law, but act upon enlarged principles ' of equity, per Story, J., in The Virgin, 8 Pet. 538 , 550; and the same.learned justice, in the case of Pope v. Nickerson, 3 Story, 486 , said: “ A court’ of admiralty in cases within its civil jurisdiction acts as a court of equity, and construes in

To quote the language of the judicial committee of the Privy Council in The Prince George, 4 Moore P. C. 28: “Bottomry bonds for the benefit of the shipowners and the general advantage of commerce are greatly favored in courts of admiralty, and where there is no suspicion of fraud every fair presumption is to be made to support them.”

We reach, then, under the light of these principles, the consideration of the contract, for the purpose of ascertaining its meaning and enforcing the intention of the parties to be derived from all the stipulations therein found. There can be no .doubt that the terms of the bond included not only the Andrew Johnson and her cargo, but the cargo transhipped on the Leslie, for the bond says : “ For which payment, to be well and faithfully made, I bind myself, my heirs, executors, or.administrators, and also the hull, boats, tackle, apparel and furniture of the said vessel and' her cargo of nitrate of soda, including about 1200 tons of nitrate of soda, transhipped on board the British bark Mary J. Leslie, of Liverpool, 1ST. S., of 815 tons register, and of which W. S. MacLeod is now master, and the freight to be' earned and become payable in respect thereof.”

In the recitals of the bond, where a statement, is made of the fácts creating the necessity for the loan, the intention of the master to include the cargo transhipped on the Léslie is also unequivocally expressed. Likewise in the recitals which relate to the conditions upon which the lenders have agreed to advance the money required, it- is again stated that they have consented so to do upon the master’s executing “this present bond or obligation and hypothecation of the said vessel, her boats and apparel, and her cargo, including that portion of the cargo transhipped to the Mary J. Leslie, and the freight to be earned and become payable in respect to the said cargo, and the said Grace Brothers are contented to stand to and bear the risk,-hazard and adventure thereof upon the hull, body or keel of the said vessel Andrew Johnson, her boat, tackle, apparel and furniture, together with the cargo

The cargo on the Leslie having been hypothecated along with that op the Johnson, and the bond declaring that it was upon the faith of such hypothecation that the money was advanced, the claim that because of the use of the word “vessel” in the singular, the bond was to be avoided by the loss of the Johnson, despite the arrival of the Leslie, amounts to contending that although both parties declared that the money was lent on the faith of both cargoes, and that without the pledge of both it would not have been advanced, yet that they immediately stipulated that it should be secured upon only one of the objects hypothecated.

Deriving the meaning of the parties from their situation and their intentions as declared in the contract, it becomes impossible in reason to construe the word “ vessel ” in the defea-sance clause as not applying to both the Johnson and the Leslie. It is conceded that the value of the Johnson and her cargo was enormously in excess of the sum of the bond; this having been the case, to hold that the hypothecation of the cargo on the Leslie was only -to be availed of in case of the arrival of the Johnson and her cargo, would be to determine that the cargo on board the Leslie w;as only to be resorted to by the bondholder, in the event recourse against that cargo should be superfluous. "We cannot construe a contract for security so as to render the security available only in case resort to it should become unnecessary. True, it is sought to escape the dilemma resulting from this reasoning by saying that the object which the parties had in view was a resort to the cargo of the Leslie in case the Johnson and her cargo arrived in such a damaged condition as to render it neeessary that the cargo

The contemporaneous construction of the contract given by the masters of the Johnson and Leslie is shown by the bill of lading which was given by the one and taken by the other for the nitrate of soda which was transhipped on the Leslie. On this bill of lading the following endorsement was placed:

“The-8449 bags of nitrate of soda, as per this bill of lading, are included in and jointly responsible with the nitrate of soda'specified in the bottomry and respondentia bond given to Messrs. Grace Brothers & Company as security for the payment of the Amier. ship Andrew Johnson’s disbursements in Callao.”

We conclude that to give the construction to the bond claimed by the shipowner would not only do violence to the expressed intentions of the parties and their contemporaneous interpretations of its meaning, but would also be adopting, to quote the language of Sir James Colville in The Great Pacific, L. R. 2 P.

“ Contracts of this kind are so different in different countries, (although they resemble each other in some prominent features,) that when disputes arise they are to be decided by the words of the particular contract in question rather than by any principles of general commercial law. In tfye present instance, therefore, we must endeavor to ascertain the meaning of thé bond, and be governed by it.”

In the case just referred to, the loan was upon goods ladened upon a vessel, and it was a condition of the contract that the loan was to be paid within a certain period after the return of the vessel to Philadelphia, her home port, or in the event of an utter loss by certain enumerated sea risks, the bond was to be void. On the return voyage, the vessel was condemned and sold at an intermediate port, and the goods on board were sent to Philadelphia in other vessels and delivered to the defendants, and' according .to an agreement annéxed to the respondentia bond were sold by them. In an action brought to recover the difference between the price realized from the sale and the.- amount of the loan, the defendants contended, among other defences, that the terms of the bond did not make the repayment of the loan dependent upon the return of the goods, but upon the return of the vessel, and that as the vessel did not return, the day of payment had not arrived. The court pointed out the extraordinary consequences which would follow the construction contended for, and held that, even if under a literal interpretation the right to recover did not exist, a resort to the spirit of the contract and the intention- of the parties would entitle the lender to judgment, as the goods and not the vessel were the sources from -which the defendants expected to derive the means of payment.

Our conclusion being that the bond was not avoided by the loss of .the Johnson, and was a valid and subsisting obligation,

The shipowner being liable for his average portion of the

.The original act, approved March 3, 1851, c. 43, 9 Stat. 635 , was carried forward into the Revised Statutes as sections 4282 et seq.

Section 4283 declares that the liability of the owner of any vessel for various acts and things mentioned “ shall in no case exceed the amount or value of the interest of such owner in such vessel and, her freight then pfending.”

Section 4284 describes the liability as “the whole value of the vessel, and her freight for the voyage ” ; and section 4285 declares that it shall be a sufficient compliance with the law if the owner transfer his interest in such vessel and freight, for the benefit of the claimants, to a trustee.

Section 4283 was amended by the act approved June 26, 1884, c. 121, 23 Stat. 53 , 57, so as to do away with the restrictions upon the character of debts and liabilities against which the limitation might be asserted. This amendment, however, is not material to the question now considered.

The clear purpose of Congress was’to require the shipowner, in order to be able to claim the benefit of the limited liability act, to surrender to the creditors of the ship all rights of action which were directly representative of the ship and freight. "Where a vessel has been wrongful^ taken from the custody of her owners or destroyed through the fault of another, there exists in the owner a right to require the restoration of his property, either in specie or by a money payment as compensation for a failure to restore the property. Manifestly, if the option was afforded the owner of the ship to receive back his property or its value, he could not, by electing to take its value, refuse to surrender the amount as a condition to obtaining the benefit of the act.

In The City of Norwich, 118 U. S. 468 , where the obliga

“ The owner is bound civilly for all delinquencies committed by the captain within the scope of his authority, but he may discharge himself therefrom by abandoning the ship and freight; • and, if they are lost, it suffices for his discharge to surrender all claims in respect of the ship and its freight.”

So, also, Kaltenborn, in a treatise, published at Berlin in 1851, as translated and quoted in the dissenting opinion in The City of Norwich, supra, says:

“ The Roman law, which held the owner absolutely liable with all his property, is nowhere put in practice, and was not current as early as the Middle Ages. Indeed, the Consulate, of the Sea, ch. 183, 224, -236, the law of Wisby, reasoning from Arts. 13 and 68, that of the Hanse Towns, reasoning from Art. 2, title X, render the owners, as a rule, answerable only to the extent of the ship’s value; and the modern maritime laws free the owners, by the abandon of the ship and their several shares in the vessel, from all further liability for the ship enterprise, particularly for the acts and contracts of the captain. In- the ship are included all gains arising during the voyage, as well as the insurance. Should the ship and the freight .have perished, it is sufficient for exoneration of the owners if all claims and causes of action having reference to the vessel and freight are abandoned, by ■them.”

The same doctrine is clearly recognized in the ■ provisions of

“Art. 778. In cases of general average, the compensation for sacrifice or damage takes, as against the ship’s creditor, the place of that which the compensation is to make good.

“ The same rule applies to the indemnity, which in case of loss or damage to the vessel or of nonpayment of freight when goods have been lost or damaged, is due to the shipowner by the party who has caused the damage by his illegal conduct.

“ When the compensation or indemnity has been received by the shipowner, he is personally responsible to the ship’s creditors to the extent of the amount received in the same manner as to the creditors of a voyage in case of encashment of the freight.”

Indeed, that a right of action for the value of the owner’s interest in a ship and freight is to be considered as a substitute for the' ship itself, was decided in this court in the case of Sheppard v. Taylor, 5 Pet. 675 . That was a case where a vessel had been seized, condemned and sold by the Spanish authorities because of a violation of the trade regulations of the kingdom of Spain. The King of Spain subsequently ordered the proceeds of the vessel and cargo to be repaid to the owners, but this was not done; afterwards the owners, having become insolvent, assigned their claims for the restoration of the proceeds and for indemnity from Spain to their separate creditors, and the commissioners under the Florida treaty awarded to be paid to the assignees a sum of money, part fo.r the cargo, part for the freight, and part for the ship. The officers and seamen having proceeded against the owners of the ship by a libel in personam for their wages, and having afterwards, by an amended libel in personam, claimed payment out' of the money paid to the assignees of the owners under the treaty, it was held that they were entitled, towards the satisfaction of the same, to the sum awarded by the commissioners for the loss of the ship and her freight, with certain deductions for the expenses of prosecuting the claim before the commissioners.

“ If the ship had been specifically restored, there is no doubt that the seamen might have proceeded against it in the admiralty in' a suit in rem for the whole compensation due to them. They have by the maritime law an indisputable lien to this extent. This lien is so sacred and indelible .that it has, on more than one occasion, been expressively said that it adheres to the last plank -of the ship. 1 Peter’s Adm. note 186, 195; 2 Dodson’s, 13 ; The Neptune, 1 Hagg. Adm. 227, 239.

“ And, in our opinion, there is no difference between the case of a restitution in specie of the ship .itself and a restitution in value. The lien reattaches to the thing and to whatever is substituted for it. This is no peculiar principle Of the admiralty. It is found incorporated into the doctrines of courts of common law and equity. The owner and the lienholder, whose claims have been wrongfully displaced, may follow the proceeds wherever they can distinctly trace them. In respect, therefore, to the proceeds of the ship, we have no difficulty in affirming that the lien in this case attaches to them.”

Nor does the ruling in The City of Norwich, supra, that the proceeds of an insurance policy need not be surrendered, by the shipowner, conflict with the decision in Sheppard v. Taylor. The decision as to insurance was placed on the ground that the insurance was a distinct and collateral contract which the shipowner was at liberty to make or not. On such quéstion there was division of opinion among the writers on maritime law and in the various maritime codes. But as shown by the full review of the authorities, found in the opinion of the court, and in the dissent in The Gity .of Norwich, all the maritime writers and codes accord in the conclusion that a surrender, under the right to limit liability, must be made of a sum received by the owner, as the direct result of the loss of the ship, and which is the legal equivalent and substitute for the ship.

¥e conclude that the owner who retains the sum of the damages which have been awarded him. for the loss of his ship and freight has not surrendered “the amount or value” (sec.

The remaining questions are free from difficulty. It was urged below and is pressed at bar that the amended libels disclosed no cause of action, because it was not specifically alleged that the master of the Johnson communicated with the cargo owners before consenting to the bond.

It was said in The Julia Blake, 107 U. S. 418 , 425, “it is now the settled law of the English courts that a master cannot bottomry a ship without communication with owner, if communication be practicable, and, a fortiori, cannot hypothecate the cargo without communicating with the owner of it, if communication with such owner be practicable.” A particular review of the doctrine laid down by the English courts was however rendered unnecessary in the case of the Julia Blake, as the circumstances in that case clearly established that the hypothecation of the cargo was unwarranted, irrespective of the failure to communicate with the owner of the cargo.' In the case of Glasoott v. Lang, 2 Phillips’ Ch. 310, decided in 1847, Lord Chancellor Oottenham declared that no authority existed to support the claim that a bottomry .bond executed upon a vessel might be avoided because the captain, though having opportunity to do so, failed to communicate with the owners before giving the bond. In The Karnak, L. R. 2 Ad. & Ec. 289, Sir Eobert Phillimore thus referred to the subject:.

“ 1 think it will be found upon examination of the foreign maritime law that the bottomry bond, under the various titles of eontrat d la grosse aventure, hyjpotheca, hodmer, or cambio marítimo, was always considered as binding the caigo, and that the necessity of a special communication, if possible, of the master with the owner of the cargo, according to the doc

trine of recent cases, however just in principle, is peculiar to the English law.”

The rule declared to be settled in Great Britain by the cases of The Bonaparte, 8 Moore P. C. 459; The Hamburg, B. & Lush. 253, 273; S. C. 2 Moore P. C. (N. S.) 289, 320; Australasian Steam Navigation Company v. Morse, L. R 4 P. C. 222, was, in 1877, thus stated by the Privy Council in Kleinwort v. Cassa Marittima, 2 App. Cas. 157:

“ That it is an universal rule that the master, if in a state of distress or pressure, before hypothecating the cargo, must communicate or even endeavor to communicate with the owner of the cargo, has not been alleged, and is a position that could not be maintained; but it may safely, both on authority and on principle, be said, that in general it is his duty to do so, or it is his duty in general to attempt to do so. ... If according to the circumstances in which he is placed it be reasonable that he should — if it be rational to expect that he may — obtain an answer within a time not inconvenient with reference to the circumstances of the case, then it must be taken upon authority and principle that it is the duty of the master to do so, or at least to make the attempt.”

As- in the case of the Julia Blake, however, we find it unnecessary to determine in the case now before us whether the rule laid down by the courts of Great Britain is the doctrine of this court. Under that rule, it is only where, under all the. circumstances of the case, communication with the owners of the cargo was feasible, that a failure to attempt to communicate will avoid the bond. Now, in the case at bar, the pleadings do not aver nor does the evidence establish whether communication was had by the master with .the owners of the cargo before the execution of the bond, nor that such communication was feasible or might reasonably have been had. "While it may be inferred from the averment in the libel that the libellants assented to the bond, “believing that the said bond was properly and necessarily issued,” that such assent was given subsequent to the execution of the bond, the language used does not imply that the master had not communicated with the cargo owners before making the hypothecation. As

But one matter remains to be considered, and that is as to the action of the District Judge in refusing, on the hearing and subsequently, to permit the respondent to amend his answer by setting up the plea of laches and of res judicata as respects the allegation for the first time made in the third amended libel of the receipt by the owner of the Andrew Johnson of partial compensation from the owners of the ship Thirlmere for the loss of the Andrew Johnson and her freight. The third amended libel was filed October 28, 1890, and the exceptions and answer thereto wrere filed June 22, 1891. . The trial took place on November 22,1893. It appears from the papers used in support of the motion filed after the trial of the case that the claim made in the admiralty proceedings in England, that the cargo owners should be ci’edited from the ship’s share of the moneys paid into court by the owners of the Thirlmere with the ship’s proportion of the’bottomry bond, was rejected, because of a supposed want of jurisdiction. Indeed, the proctor for the respondent, in an affidavit filed in support of the renewed application for leave to amend the answer, stated as a reason for not setting forth the defences in question in the answer to the amended libel that he “ was then of the opinion that his client was entitled to judgment on the defences then set up ” and that he “ was then advised that the presentation and rejection by the English admiralty court of tbe libellants’

It is also clearly inferable from the statements in the affidavit we have referred to that when the answer to the third amended libel was filed the proctor for the respondent-knew of the transaction with the insurance company. Even, therefore, if the fact was, as claimed, that the respondent would have been entitled to receive from his underwriters one half of whatever decree the libellants might be entitled to recover, had the same been secured with reasonable diligence, and that respondent had lost said recourse by reason of the bar of the statute of limitations, still there is no pretence that the respondent was misled into believing that the libellants had abandoned their claim against him, and the fact was that they promptly brought suit in this country to recover against the shipowner. Without considering the averment in the last amendment to the libel, by which the recovery by the owner of the Johnson from the Thirlmere was alleged, the first libel informed the respondent that the claim arising from the bond was pressed'against him. If between the time of the filing of the first libel (July 20, 1887) and the time of the hearing (November 22, 1893) a claim against an insurance company in favor of the respondent was lost by laches, such loss was the. result of his own conduct.

Under all the circumstances, particularly as the rejection of the claim in the courts of G-reat Britain was not upon the merits, we are of.opinion that the trial court did not abuse its discretion in refusing leave to amend the answer.

The decree of the Circuit Court of Appeals must be reversed, and that of the District Court affirmed, and it is so ordered.