In a case of collision occasioned by the negligence of the
officers or hands of one of the vessels, without any neglect,
privity, or knowledge of her owner, and where said vessel took fire
and sank with loss of cargo, and never completed her voyage nor
earned any freight, but was afterwards raised and repaired, and was
then libeled and seized on behalf of the owners of her cargo, and
claimed and bonded at her then value by her owner, who filed an
answer and a petition for limited liability, and where it further
appeared that the owner received certain moneys for insurance of
the ship against loss by fire,
held:
(1) That the owner was entitled to a limitation of liability to
the value of his interest in ship and freight under the act of
1851. Sections 4282-4287 Rev.Stat.
(2) That the point of time at which the amount or value of the
owner's interest in ship and freight is to be taken for fixing his
liability is the termination of the voyage on which the loss or
damage occurs.
(3) That if the ship is lost at sea or the voyage be otherwise
broken up before arriving at her port of destination, the voyage is
then terminated for the purpose of fixing the owner's
liability.
(4) That in the present case, the voyage was terminated when the
ship had sunk, and that her value at that time was the limit of the
owner's liability, and that the subsequent raising of the wreck and
repair of the ship, giving her an increased value, had nothing to
do with the liability of the owner.
(5) That no freight except what is earned is to be estimated in
fixing the amount of the owner's liability.
(6) That insurance is no part of the owner's interest in the
ship or freight within the meaning of the law, and does not enter
into the amount for which the owner is held liable.
(7) That the limitation of liability is applicable to
proceedings
in rem against the ship as well as to
proceedings
in personam against the owner; the limitation
extends to the owner's property as well as to his person.
(8) That the right to proceed for a limitation of liability, is
not lost or waived by a surrender of the ship to underwriters.
In this case, although an application for limitation of
liability had been originally
Page 118 U. S. 469
overruled by the district court, and an interlocutory decree had
been rendered in favor of the libellants for their entire damage,
with a reference for proofs and a report by the master, yet the
court, after the decision of this Court in
Norwich
Co. v. Wright, 13 Wall. 104, relating to the same
collision, and the promulgation of the additional rules adopted by
this Court, received a new petition and ordered a new appraisement
to ascertain the value of the ship whilst lying sunk, and made a
decree limiting the liability of the owner to the value at that
time.
Held that the district court had jurisdiction to
receive such new petition and to take such proceedings.
The case was stated by the Court as follows:
This case arose out of a collision which occurred on Long Island
Sound, opposite Huntington, on the 18th of April, 1866, between the
steamboat
City of Norwich, belonging to the Norwich and
New York Transportation Company, the appellees, and the schooner
General S. Van Vliet, belonging to William A. Wright and
others, appellants, by which the schooner and her cargo were sunk
and lost, and the steamboat was set on fire and sunk, and her cargo
lost. The owners of the schooner filed a libel
in personam
in the District Court of the United States for the District of
Connecticut against the owners of the steamboat, and obtained a
decree for about $20,000 for the schooner, and about $2,000 for her
cargo, with interest. Before the decree was passed, the respondents
filed a petition stating that proceedings
in rem had been
commenced against the steamboat in the District Court of the United
States for the Eastern District of New York for the recovery of
damages for the loss of the cargo on board said steamboat, and they
prayed leave to show the whole amount of damages sustained by all
parties, and the value of the steamer and her freight then pending,
and that the libellants might have a decree for only such
proportion of damages sustained by them as the value of steamer and
freight bore to the whole amount of damages sustained by all
parties by the collision, this claim being made under the Limited
Liability Act of 1851. The district court denied the prayer of this
petition, holding that it had no jurisdiction to give relief. On
appeal to the circuit court, the decree was affirmed and the
petition for limitation of liability was denied on the ground that
cases of collision were not within the act. The case then
Page 118 U. S. 470
came to this Court, and we held first that the act of 1851
adopted the general maritime law in reference to limited liability,
as contradistinguished from the English law measuring the liability
by the value of ship and freight after, instead of before, the
collision; secondly, that the act embraced cases of damage received
by collision as well as cases of injury to the cargo of the
offending ship; thirdly, that the district courts of the United
States, as courts of admiralty, have jurisdiction to administer the
law; fourthly, that the proper court to hear and determine the
question is the court which has possession of the fund -- that is,
the ship and freight, or the proceeds and value thereof. And in
view of the want of rules of procedure and of any uniform practice
on the subject, we directed that proceedings should be suspended in
the District Court of Connecticut in order to give the respondents
an opportunity of making the proper application to the District
Court of the Eastern District of New York, which had possession of
the steamer, or a stipulation for her value in lieu of the steamer
itself. We also adopted some general rules of practice for the aid
and guidance of the district courts in such cases.
Norwich
Co. v. Wright, 13 Wall. 104.
The libel
in rem, filed in the District Court for the
Eastern District of New York, was filed by George Place and Charles
Place (now appellants here), in August, 1866, after the steamboat
had been raised and carried to the shore of Long Island, and
repaired. The Norwich and New York Transportation Company appeared
as claimants, and filed an answer, and a petition to have the
benefit of the act of 1851 for a limitation of their liability to
the value of the steamboat and freight pending at the time of the
collision and fire. Other libels were also filed by other owners of
cargo. The steamer as repaired was appraised at $70,000.
On the 13th day of June, 1872, after the decision of this Court
was rendered in the case of
Norwich Co. v.
Wright, 13 Wall. 126, the company, by leave of the
court, filed a new petition in the District Court for the Eastern
District of New York for the benefit of limited liability under the
act of 1851, comformable to the rules adopted by this Court.
Page 118 U. S. 471
The petition stated the various claims against the vessel
arising out of the collision (amounting to nearly $150,000), the
previous proceedings that had been taken, the libels that had been
filed, the circumstances of the loss, the raising and repair of the
vessel, etc., and prayed for a new appraisement in accordance with
the decision of this Court, a monition to claimants, etc., as will
more fully appear in the finding of facts made by the circuit
court, hereinafter stated.
Orders for publication and appraisement were made pursuant to
the prayer of the petition, and the commissioner appointed to make
the appraisement reported as follows, to-wit:
"In ascertaining the value of the steamboat
City of
Norwich, as directed by the order of reference herein, I have
followed what I understood to have been the decision of the Supreme
Court of the United States in the case of
Wright
against the owners of this boat, 13 Wall. 104, and have ascertained
her value in the situation and condition she was in after the
collision, and before she was raised, and I find from the testimony
taken before me that she was at that time of the value of $2,500. I
have arrived at such value by taking the testimony as to her value
in New York after she was raised by her owners and brought there,
which shows that she was then and there worth the sum of $25,000,
and I have deducted from that amount the sum of $22,500, being the
sum which, according to the testimony, it had actually cost to
raise her and bring her to New York, which leaves $2,500 to be her
value, as I have above stated."
Exceptions were taken to the report, first that the former
appraisement of $70,000 was binding on the parties and the court;
secondly that the appraisement should have been for the value of
the steamer immediately before the collision; thirdly that it
should have been for the value immediately after the collision,
before the occurrence of damage by the fire; fourthly that there
should have been no deduction for the expenses of raising the
steamer; fifthly that the sum of $600 should have been added for
the pending freight; sixthly that the money received for insurance
on the vessel should have been added, amounting to $49,283.07.
Page 118 U. S. 472
The exceptions were overruled, and a decree was made authorizing
the petitioners to pay into court the sum of $2,500, the value of
the steamer, and directing a monition to issue, citing all parties
interested to appear and prove their claims, restraining the
further prosecution of all suits, and appointing a commissioner to
take proof of claims. On the subsequent report of the commissioner,
a final decree was made in January, 1879, distributing the fund in
court and discharging the petitioners from further demands. The
case was appealed to the circuit court, and argued before Mr.
Justice Strong, who, in October, 1879, affirmed the decree of the
district court, but the decree of affirmance was not entered until
July 3, 1882. That decree is now before us for review.
The finding of facts by the circuit court is substantially as
follows:
1. It states the fact of the collision and that
"it was caused by the negligence of the steamboat's officers or
hands, without any design, neglect, privity, or knowledge of her
owners. Very soon, within half an hour after the collision, the
boat took fire, her deck and upper works were burned off, and she
sunk in about twenty fathoms of water. The fire was the direct
consequence of the collision, and inseparable from it. It was
caused by the rushing of the waters through the broken hull of the
boat, whereby the fire was driven out of the furnaces upon the
woodwork, and the boat sank by reason of her filling with
water."
"2. At the time of the disaster, the boat had a cargo of
merchandise on board belonging to different freighters, all of
which was totally lost. The freight then pending amounted to $600,
but none of it was earned or received by the ship owners."
"3. Sometime after the steamboat was sunk and her cargo
destroyed, she was raised by salvors, and taken to the Long Island
shore, within the port of New York, where she was repaired."
4. It states the suit by Wright & Co., in the District Court
of the United States for the District of Connecticut, and the
decision of the supreme court in that case.
5. It states the proceedings upon libel filed by George and
Page 118 U. S. 473
Charles Place in the District Court for the Eastern District of
New York, the appraisement at $70,000, and the release of the
vessel to the complainants (the Norwich & New York Trans. Co.),
upon their giving stipulation therefor, adding:
"The stipulation purported to be for the security not only of
the Messrs. Place, but also for the benefit of all persons who
might, by due proceedings in said court, show themselves entitled
to liens upon the vessel by reason of said collision. The
appraisement was of the value of the vessel as it was after she had
been raised and repaired. It was returned into the court on the
11th of March, 1867, and the stipulation in the amount of the
appraisement was filed on the 29th day of the same month. On the
20th day of December, 1869, the district court ordered decrees to
be entered in favor of the libellants in all the suits commenced
against the steamer as aforesaid."
"6. Such was the condition of the litigation when the present
petition was filed in July, 1872, after the rendition of the
judgment by the supreme court in the case of the libel of William
A. Wright
et al. in the District Court of Connecticut. The
petition prayed that, in conformity with the act of Congress, the
decision of the Supreme Court, and the admiralty rules made in
pursuance thereof, the court would cause an appraisement to be made
of the value of the interest of the petitioners in the steamboat,
and her freight for the voyage in which she was employed, for which
they were liable, and that an order should be made for paying the
amount of such valuation into court, or for giving a stipulation
therefor, with sureties. It prayed further for a monition against
all the persons claiming damages arising out of the said collision
and fire, citing them to appear and make proof of their claims, and
it prayed also for a restraining order against the further
prosecution of all or any suits against the steamboat or the
petitioners for any damage caused by the collision, fire, and loss.
There was also a prayer for general relief. The monition was
issued, the appellants appeared, and an order was made for an
appraisement of the amount of value of the interest of the
petitioners as owners, respectively, of said steamboat and her
freight, pending for the voyage upon which she was employed, for
which the petitioners
Page 118 U. S. 474
were liable. A restraining order, as prayed for, was also made.
Pursuant to the direction of the court, an appraisement was made.
The appraiser ascertained and reported the value of the steamboat
as she lay immediately after the collision and fire and before she
was raised, to have been $2,500, and the district court confirmed
the report, and ordered the amount to be paid into the registry,
which was accordingly done."
"7. The value of the interest of the petitioners in the
steamboat, as she was immediately after the disaster, was $2,500,
and no more."
"8. The value of that interest immediately before the collision
was $70,000."
"9. When the collision occurred, the steamboat was insured
against fire (not against marine disaster), and upon the several
policies the petitioners, as owners, have recovered from the
underwriters the sum of $49,283.07; that part of said sum was
recovered by the petitioner herein in an action brought by it in
the Circuit Court of the United States for the District of
Connecticut, on one of said five policies, against the Western
Massachusetts Insurance Company. One of the defenses in that action
was that the loss and damages were occasioned by the collision
(which is the same mentioned in these proceedings), while the
petitioner herein claimed that the greater part of the loss was by
fire. The court held in that case that there were two classes of
losses: one, the damage done the steamer by the collision itself,
and the other caused by the fire. The damages caused by the
collision were proved at $15,000. The damages caused by the fire
were determined to be $69,000. The said insurance company moved for
a new trial, but the motion was denied."
"10. The steamboat itself has never been surrendered or
transferred to a trustee for the persons injured by her fault."
The conclusions at which Justice Strong arrived upon these facts
were 1st, that the value of the steamboat immediately after the
collision and fire, as she lay at the bottom of the Sound, with her
pending freight, was the measure of the owners' liability, and the
amount to be apportioned; 2d, that insurance is not an interest in
the vessel within the meaning
Page 118 U. S. 475
of the third section of the act of 1851, or § 4283 of the
Revised Statutes; 3d, that the limitation of the owners' liability
under the act is as applicable when the proceeding is
in
rem, as when it is
in personam, so that if the
owner's liability is only the amount of the vessel's value when at
the bottom of the Sound, the vessel's liability, after being raised
and repaired, is no greater.
Page 118 U. S. 489
MR. JUSTICE BRADLEY, after stating the case as above reported,
delivered the opinion of the Court.
The first ground of error which we shall notice is the alleged
want of jurisdiction in the district court to allow a
reappraisement of the steamboat for the purpose of fixing her value
as the limit of the owners' liability after her value had once been
appraised at $70,000 and she had been delivered to the claimants
upon their stipulation for that amount. This ground cannot be
maintained, because the question had not then been decided what
particular time was to be taken for fixing the value of the vessel
in reference to the limited liability of the owners. They wished to
have possession of her, and were willing to give a stipulation for
her full value at that time in order to obtain such possession. Had
the vessel remained in custody until the final petition for a
limited liability was filed, the court would have been at liberty
then to determine the time at which the value of the vessel should
be taken for that purpose and to order a new appraisement if
necessary. The stipulation given merely stood in place of the
vessel itself, and did not deprive the court of any of its power.
The subsequent trial on the merits, the interlocutory decree in
favor of the libellants, and the report of the commissioner showing
the amount of their damage did not preclude the claimants from
exercising their right to proceed for a limitation of their
liability under the rules of procedure adopted by this Court. The
trial on the merits resulted in determining which vessel was in
fault, and in liquidating the amount of damage sustained by the
libellants, to be used as a basis of their
pro rata share
in the fund which might ultimately be decreed subject to their
claim and the claims of other parties. It did not settle the amount
of that fund, nor the extent of the liability of the owners of the
steamer. In the case of
The Benefactor, 103 U.
S. 239, this matter was fully considered, and we held
that
"the amount recovered, whether before the limitation proceedings
are commenced or afterwards, and whether in the court of first
instance or an appellate court, will stand as the recoveror's basis
for
pro rata division when the condemned fund is
distributed. In all other respects, the proceedings for obtaining
a
Page 118 U. S. 490
limitation of liability may proceed in the ordinary course."
In view of the want of any settled practice on the subject, this
Court, in its opinion in the case of
Norwich Co. v.
Wright, suggested the precise course which was
taken by the petitioners. 13 Wall. 126. We think it was the proper
course, and that the district court had jurisdiction to entertain
the petition and to order a new appraisement.
The next question to be considered is at what time ought the
value of the vessel and her pending freight to be taken, in fixing
the amount of her owners' liability? Ought it to be taken as it was
immediately before the collision, or afterwards? And if afterwards
at what time afterwards?
The first question has been repeatedly answered by the decisions
of this Court. We held in
Norwich Co. v. Wright, and have
held and decided in many cases since, that the act of Congress
adopted the rule of the maritime law as contradistinguished from
that of the English law on this subject, and that the value of the
vessel and freight after, and not before, the collision is to be
taken. But at what precise time after the collision this value
should be taken has not been fully determined so as to establish a
general rule on the subject. That is a question which deserves some
consideration. In the case of
The Scotland, 105 U. S.
24, the collision occurred opposite Fire Island Light,
and the steamer being much injured, put back in order, if possible,
to return to New York; but was unable to get further than the
middle ground outside and south of Sandy Hook, where she sunk, and
nothing was saved but a few strippings taken from her before she
went down. We held that these strippings were all of the ship that
could be valued, although she had run thirty or forty miles after
the collision. The value was taken, not as it was or as it might
have been supposed to be immediately after the collision, but as it
was after the effects of the collision were fully developed in the
sinking of the ship.
An examination of the statute will afford light on this subject.
Section 4283 declares that the liability of the owner of any vessel
(for various acts and things mentioned) shall "in no case" exceed
the value of his interest in the vessel and her
Page 118 U. S. 491
freight then pending. When it says "in no case," does it mean
that for each case of "embezzlement, loss, destruction, collision,"
etc., happening during the whole voyage, his liability may extend
to the value of his whole interest in the vessel? Twenty cases
might occur in the course of a voyage, and all at different times.
Does not the provision made in § 4284, for compensation
pro rata to each party injured, apply to all cases of loss
and damage happening during the entire voyage -- happening, that
is, by the fault of the master or crew, and without the privity or
knowledge of the owner? Pending freight is of no value to the ship
owner until it is earned, and it is not earned, if earned at all,
until the conclusion of the voyage. Does this not show that every
"case" in which the principle of limited liability is to be applied
means every voyage? We think it does. It seems to us that the fair
inference to be drawn from § 4283 is that the voyage defines
the limits and boundary of the cases or case to which the law is to
be applied.
This is rendered certain by the language of § 4284, which
is:
"Whenever any such embezzlement, loss, or destruction is
suffered by several freighters or owners of goods, wares,
merchandise, or any property whatever,
on the same voyage,
and the whole value of the vessel, and her freight for the voyage,
is not sufficient to make compensation to each of them, they shall
receive compensation from the owner of the vessel in proportion to
their respective losses."
There may be more than one case of embezzlement during the
voyage, and more than one case of loss and destruction, and they
may happen at different and successive times, yet they are to be
compensated
pro rata. This shows conclusively that it must
be at the termination of the "voyage" that the vessel is to be
appraised, and the freight (if any be earned) is to be added to the
account for the purpose of showing the amount of the owner's
liability.
This conclusion is corroborated by § 4285, which declares
that it shall be a sufficient compliance with the requirements of
the law if the owner shall transfer his interest in the vessel and
freight to a trustee for the benefit of the claimants. In most
cases, this cannot be done until the voyage is ended, for until
Page 118 U. S. 492
then, the embezzlement, loss, or destruction of property cannot
be known.
And this was manifestly the maritime law, for by that law, the
abandonment of the ship and freight (when not lost) was the remedy
of the owners to acquit themselves of liability, and, of course,
this could only be done at the termination of the voyage. If the
ship was lost and the voyage never completed, the owners were freed
from all liability. Boulay-Paty, Droit Com.Mar. tit. 3, sec. 1, pp.
263, 275, &c.; Emerigon, Contrats a la Grosse, c. 4, sec. 11,
§§ 1, 2; Valin, Com. lib. II, tit. VIII, art. II;
Consolato del Mare, cc. 34 (141), 186 (182), 227 (194), 239; 2
Pardessus, Collection des lois Maritimes anterieur au XVIII Siecle;
Cleirac, Nav. de Rivieres, art. XV.
If, however, by reason of the loss or sinking of the ship, the
voyage is never completed, but is broken up and ended by causes
over which the owners have no control, the value of the ship (if it
has any value) at the time of such breaking up and ending of the
voyage must be taken as the measure of the owners' liability. In
most cases of this character, no freight will be earned; but if any
shall have been earned, it will be added to the value of the ship
in estimating the amount of the owner's liability. These
consequences are so obvious that no attempt at argument can make
them any plainer.
If this view is correct, it follows as a matter of course that
any salvage operations undertaken for the purpose of recovering
from the bottom of the sea any portion of the wreck after the
disastrous ending of the voyage as above supposed can have no
effect on the question of the liability of the owners. Their
liability is fixed when the voyage is ended. The subsequent history
of the wreck can only furnish evidence of its value at that point
of time. And it makes no difference in this regard whether the
salvage is effected by the owners or by any other persons. Having
fixed the point of time at which the value is to be taken, the
statute does the rest. It declares that the liability of the owner
shall in no case exceed the amount or value of the interest of such
owner in such vessel and her freight then pending. If the vessel
arrives in port in a damaged condition
Page 118 U. S. 493
and earns some freight, the value at that time is the measure of
liability; if she goes to the bottom and earns no freight, the
value at that time is the criterion. And the benefit of the statute
may be obtained either by abandoning the vessel to the creditors or
persons injured, or by having her appraisement made, and paying the
money into court, or giving a stipulation in lieu of it and keeping
the vessel. This double remedy given by our statute is a great
convenience to all parties. It does not make two measures or
standards of liability, for the measure is the same whichever
course is adopted, but it enables the owner to lay out money in
recovering and repairing the ship without increasing the burden to
which he is subjected.
It follows from this that the proper valuation of the steamer
was taken in the court below -- namely the value which she had when
she had sunk and was lying on the bottom of the sea. That was the
termination of the voyage.
The next question to be considered is whether the petitioners
were bound to account for the insurance money received by them for
the loss of the steamer as a part of their interest in the same.
The statute, § 4283, declares that the liability of the owner
shall not exceed the amount or value of his
interest in the
vessel and her freight, and § 4285 declares that it shall
be a sufficient compliance with the law if he shall transfer his
interest in such vessel and freight, for the benefit of
the claimants, to a trustee. Is insurance an interest in the vessel
or freight insured, within the meaning of the law? That is the
precise question before us.
It seems to us at first view that the learned justice who
decided the case below was right in holding that the word
"interest" was intended to refer to the extent or amount of
ownership which the party had in the vessel, such as his aliquot
share if he was only a part owner, or his contingent interest if
that was the character of his ownership. He might be absolute owner
of the whole ship, or he might own but a small fractional part of
her, or he might have a temporary or contingent ownership of some
kind or to some extent. Whatever the extent or character of his
ownership might be -- that is to
Page 118 U. S. 494
say, whatever his interest in the ship might be -- the amount or
value of that interest was to be the measure of his liability. This
view is corroborated by reference to a rule of law which we suppose
to be perfectly well settled, namely that the insurance which a
person has on property is not an interest in the property itself,
but is a collateral contract, personal to the insured, guaranteeing
him against loss of the property by fire or other specified
casualty but not conferring upon him any interest in the property.
That interest he has already by virtue of his ownership. If it were
not for a rule of public policy against wagers, requiring insurance
to be for indemnity merely, he could just as well take out
insurance on another's property as on his own, and it is manifest
that this would give him no interest in the property. He would have
an interest in the event of its destruction or nondestruction, but
no interest in the property. A man's interest in property insured
is so distinct from the insurance that unless he has such an
interest independent of the insurance, his policy will be void.
This rule of law manifests itself in various ways. If a
mortgagor insures the property mortgaged, the mortgagee has no
interest in the insurance. He may stipulate that the policy shall
be assigned to him, and the mortgagor may agree to assign it; and
if it be assigned with the insurer's consent, the mortgagee will
then have the benefit of it; or, if not assigned according to
agreement, the mortgagee may have relief in equity to obtain the
benefit of it.
So where property is sold, the insurance does not follow it, but
ceases to have any value unless the insurer consent to the transfer
of the policy to the grantee of the property. In other words, the
contract of insurance does not attach itself to the thing insured,
nor go with it when it is transferred.
It is hardly necessary to cite authorities for a rule which has
become so elementary. We will only refer to a few of them. Lord
Chancellor King, in
Lynch v. Dalzell, 4 Bro.P.C. 431; Lord
Hardwicke in
Sadlers Co. v. Badcock, 2 Atk. 554;
Carroll v. Boston Mar. Ins. Co., 8 Mass. 515;
Columbia Ins. Co. v.
Lawrence, 10 Pet. 507,
35 U. S. 512;
Carpenter v.
Prov.
Page 118 U. S. 495
Wash. Ins. Co., 16 Pet. 495,
41 U. S. 503;
Aetna Ins. Co. v. Tyler, 16 Wend. 386, 397;
Wilson v.
Hill, 3 Met. 68;
Powles v. Innes, 11 M. & W. 13;
McDonald v. Black, 20 Ohio, 185;
Plympton v. Ins.
Co., 43 Vt. 497.
Carroll v. Boston Marine Ins. Co., Powles
v. Innes, and
McDonald v. Black were cases of marine
insurance, and the same rule was followed in those cases as in
cases of insurance against fire.
It is not an irrelevant consideration in this regard that the
owner of the property is under no obligation to have it insured. It
is purely a matter of his own option. And being so, it would seem
to be only fair and right, and a logical consequence, that if he
chooses to insure, he should have the benefit of the insurance. He
does not take the price of insurance from the thing insured, but
takes it out of the general mass of his estate, to which his
general creditors have a right to look for the satisfaction of
their claims. They are the creditors who have the best right to the
insurance.
Stress is laid upon the hardship of the case. It is said to be
unjust that the ship owner should be entirely indemnified for the
loss of his vessel, and that the parties who have suffered loss
from the collision by the fault of his employees should get nothing
for their indemnity. This mode of contrasting the condition of the
parties is fallacious. If the ship owner is indemnified against
loss, it is because he has seen fit to provide himself with
insurance. The parties suffering loss from the collision could, if
they chose, protect themselves in the same way. In fact, they
generally do so, and when they do, it becomes a question between
their insurers and the ship owner whether they or he shall have the
benefit of his insurance. His insurers have to pay his loss; why
should not the insurers of the other parties pay their loss? The
truth is that the whole question, after all, comes back to this:
whether a limited liability of ship owners is consonant to public
policy or not. Congress has declared that it is, and they, and not
we, are the judges of that question.
Having, as we think, ascertained the true construction of the
statute, the point in dispute is really settled. It is a question
of construction, and does not require an examination of the
Page 118 U. S. 496
general maritime law to determine it. If the rule of the
maritime law is different, the statute must prevail. But from such
examination as we have been able to make, we think that the weight
of maritime authority is in accord with the disposition of our
statute as we have construed it, and that the statute has adopted
the maritime law on this point as well as on the question of time
for estimating the value of the ship.
The contract of insurance is of modern origin. It is not
mentioned in the early treatises or compilations of maritime law.
It is but little noticed prior to the sixteenth century. On a
question like the present, we naturally turn to the French writers,
who are distinguished for their great learning and acumen on
maritime subjects. The principal text law on which they rely prior
to the Code of Commerce adopted in the present century is the
Ordinance de la Marine of 1681. By this ordinance it is declared
that the owners of ships shall be responsible for the acts of the
master; but they shall be discharged therefrom by abandoning their
vessel and freight. The Code of Commerce, Art. 216, has
substantially the same provision. Beyond this general declaration
(which is simply an announcement of the maritime law on the
subject), the special rules applicable to particular cases, and
necessary for securing the benefit of the general rule in all, have
to be drawn from the general principles of the same maritime law.
Whether, in abandoning the ship to the creditors, the owners are or
are not obliged to abandon the insurance effected on the ship is a
question which had to be decided by the application of the general
principles referred to.
The history of opinion among maritime writers on this subject is
briefly this:
Valin and Emerigon, two great French jurists, contemporaries and
friends, wrote on the maritime law. In 1760, Valin published his
New Commentary on the Ordinance of the Marine of 1681. In 1783,
Emerigon published his Treatise on Assurances and Contracts of
Bottomry (Traite des Assurances et Contrats a la Grosse) Emerigon
furnished Valin a large portion of the materials of which the
latter's commentary was composed. Both of them are regarded as
great authorities on maritime law. These jurists differed on
the
Page 118 U. S. 497
question we are considering. Valin thought that those who
furnished materials and supplies for a ship, and those who labored
on its construction or repair, should have the power of
transferring their lien on the vessel to the insurance money
received by the owner for its loss. He reasons that this should be
so because the materialmen and the workmen helped to make the thing
which forms the subject of the insurance, while he admits that the
Parlement of Bourdeaux had decided otherwise as late as September,
1758. So that the views expressed by Valin seem to be his opinion
of what the law ought to be, rather than what it was. Valin Com.,
Vol. I, 315, 316, lib. 1, tit. XII, art. III.
Emerigon strenuously opposes Valin's opinion. His reasons are
that liens are
stricti juris, and are not to be extended
by construction; that if Valin's rule is well founded, a vendor on
credit would have a lien on the price arising on a subsequent sale
of the same thing by his vendee after the thing itself had ceased
to exist, which was contrary to repeated decisions; that by
stronger reason, materialmen and workmen have no lien on the
assurance of a ship which never belonged to them, for there is
nothing essentially common between the right of pledge and that of
property; that the ordinance gives no privilege to the materialmen
and workmen except on the ship, and therefore they have none on the
insurance, according to the rule of strict construction already
stated; that if the ship were represented by the insurance, it
would be necessary to give the same privilege to the seamen and all
other privileged creditors, which would destroy the whole object of
insurance; that, on the same principle, insurance ought to be
represented by reinsurance, which, it is well settled, cannot be
done. Emerigon, Contrats a la grosse, c. 12, sec. 7.
The opinion of Emerigon was followed with but little dissent
until a recent period. The most prominent writer who disagreed with
him was Pardessus, who, in the first edition of his Droit
Commercial, published in 1814 (Art. 663), after stating the general
rule that the owner may discharge himself from responsibility by
abandoning the ship and freight, added: "If these things have been
insured, he ought to abandon also
Page 118 U. S. 498
his rights against the insurers." This sentiment is repeated as
his personal opinion in the subsequent editions of his work (same
art. 663), but he is obliged to concede that the law is otherwise.
In the edition of 1841, art. 594, 2d, after asking the question
whether a creditor, having a privilege or an hypothecation on a
thing insured, could require a distribution of the insurance money
as would be made of the price on a sale, he says,
"I think not; there is not the same reason. In the case of sale,
the price must in the nature of things represent the thing sold,
the owner parting with it only for that. In the case of insurance,
the thing has perished; it has not been assigned in consideration
of any price. The debtor has procured, it is true, a guarantee by
the effect of which the insurer pays him the value of it, but this
guarantee is the result of an agreement independent of the
engagements of the assured with any particular creditors. The value
paid does not represent the thing insured, except in the relations
between the insurer and the insured; not in the relation between
the latter and his creditors, except as an accession to the mass of
his property, against which the creditors may prosecute their
actions according to the principle of the civil law by which all
the property of a debtor is the common pledge of his creditors; but
without any preference, none of them having a peculiar right to a
privilege on the contract of insurance which has caused the amount
assured to be added to the assets of the common debtor. It would be
otherwise undoubtedly if the debtor, in borrowing upon an
hypothecation of a house insured, should at the same time assign to
his creditor the contingent benefits of the insurance, to serve for
his discharge to that extent, and if the creditor should duly
notify the insurer,"
&c.
This passage shows that even Pardessus admitted the law to be as
Emerigon had declared it.
Boulay-Paty, the contemporary of Pardessus, who published his
work on Maritime Commercial Law (Droit Commercial Maritime) in
1821, warmly espouses the views of Emerigon. His observations on
the subject are exceedingly sensible and persuasive. After quoting
the views of Valin and Emerigon, he says:
"We must agree that Emerigon's opinion is most
Page 118 U. S. 499
conformable to principle, and that the transfer or subrogation
of which Valin speaks is not admissible,"
that is, the transfer of the lien from the property to the
insurance. He adds:
"The axiom
subrogatum tenet locum subrogati should be
understood as applicable when the thing has been changed into
something else by the owner, who has received the other thing in
its place, as in the case when the owner of a ship has sold it, it
is certain that the lien is transferred according to undoubted law
to the price. But when the thing is perished in the hands of the
debtor, certainly all lien is extinct. L 8 ff,
quibus modis
pignus vel hypotheca solvitur. Is it possible to suppose that
an insurance, which is an agreement foreign to the creditors
holding liens, which has been effected between the owners and a
third party, can have the effect to bring again into life the lien
on the ship?"
Vol. I, p. 135.
He goes on to argue the question at great length and with much
force, but it would extend this opinion too much to quote his
argument at length. One more extract will suffice. After showing
the difference between abandonment to the lien creditors and
surrender to the insurers, and that the latter does not interfere
with or prevent the former, he says:
"The product of the insurance is the price of the premium which
the ship owner has paid to insure the ship. This premium is not
bound as a security for debts and obligations contracted by the
captain; the law expressly binds the ship and freight alone to
that. The Code of Commerce gives to shippers a lien only on ship
and freight; consequently they have none on the insurance. In
general, the ship is not represented by the insurance, which, after
the loss of the ship, becomes a right existing by itself, which
gives a direct personal action in favor of the insured."
"All these principals, besides, agree with equity and the well
understood interests of commerce. Without this rule, indeed,
insurances on the hull of a ship would become illusory for her
owner, since he would have no way, even by stipulating for a
guarantee against barratry of the master, which it is customary to
do, to protect himself against any other loss than that of the
premium, and yet this is both the object of insurance
Page 118 U. S. 500
and the motive for which the premium is paid."
Vol. I, pp. 291-292.
During the seven years from 1827 to 1834, an animated
controversy was carried on in France on the question whether
article 216 of the Code of Commerce, in speaking of the "acts"
(
faits) of the master, meant to include his contracts
lawfully made in the course of the voyage, or only his wrongful
acts, and finally the matter came before the legislative body for
solution. In 1841, that body modified article 216 so as to
expressly embrace contracts of the master as well as other acts. It
was at the same time sought to introduce a clause which should
render it the owner's duty, in abandoning the ship and freight to
obtain the benefit of limited liability, also to abandon his claim
for insurance on them; but this provision failed to receive assent.
The law remained as it had always been.
In 1859, two very able works were published in France in which
the subject was again discussed, one by Edmond Dufour entitled
"Droit Maritime" and one by J. Bedarride entitled "Droit
Commercial," a commentary on the Code the Commerce.
Dufour attempted to renew the controversy, although he admitted
that the views of Emerigon had been acquiesced in even by
Pardessus, and that Valin stood alone. He says:
"Doctrine and jurisprudence, after some hesitation, pronounced
themselves, as is well known, against the existence of a privilege
or hypothecation on the indemnity due from the insurer, and in that
way the general principle which Emerigon had adopted as the basis
of his theory penetrated men's minds as an indisputable truth which
ought thenceforth to govern all indemnities of insurance. Thus it
is, for example, that M. Pardessus, speaking of this question in
relation to maritime credits, comes back for its solution to the
general principles relating to insurance, so that the opinion of
Valin seems to be crushed under this imposing unanimity."
Dufour, Droit Maritime, Art. 261.
Dufour then devotes many pages to argue the question
ab
origine, persuading himself that he has established the
correctness of Valin's views. But his admission at the beginning of
his argument demonstrates that the maritime jurisprudence of France
was in accordance with the opinion of Emerigon.
Page 118 U. S. 501
In consequence, probably, of this effort to bring the matter
again into question, Bedarride examined the subject with great
care, both on principle and authority, and showed that the law was
not only settled, but should not be disturbed. Bedarride, Droit
Commercial, Art. 295. But the advocates of change persisted in
their efforts until finally, on the 22d of December, 1874, on the
passage of a law to render ships susceptible of hypothecation, they
procured a section to be inserted (sec. 17) declaring that in case
of loss or disablement of the ship, the rights of the creditors
(that is, hypothecation creditors) may be enforced not only against
the portions saved or their proceeds, but (in the order of
registry) against the proceeds of any assurances that may have been
effected by the borrower on the hypothecated ship. This law,
however, does not extend to tacit liens or privileges.
For further authorities in the French law, to the same effect as
Boulay-paty and Bedarride,
see 2 Pouget, Principes de
Droit Mar. vol. 2, pp. 415-419, ed. 1858; 3 Eloy et Guerrand, Des
Capitaines, Mait. et Pat. vol. 3, art. 1894 (1860); Caumont, Dict.
de Droit Mar. tit. "Abandon Mar." §§ 54, 55; De
Villeneuve et Masse, Dict. du Contentieux Commercial, "Armateur,"
20.
In Germany, the history of the question has been to some extent
the reverse of what it has been in France. The Prussian Code,
adopted in 1794, allowed ship owners to "free themselves from
responsibility in all cases by a surrender of the ship, including
all benefits of the voyage and their rights against the insurers."
But Prussia was the only country that adopted this rule in relation
to insurance. In 1856, a scheme was set on foot to have a
conference to prepare a general commercial code for all the German
states. Commissioners were appointed by the several states for this
purpose, who held repeated sessions but came to no agreement on a
general code until March, 1862. The Prussian commissioners
strenuously urged the adoption of their law on the subject of
subrogation to the claims for insurance. The arguments presented by
them are spread before us to some length in one of the briefs of
the counsel for the appellants. The convention, however, were not
convinced, and rejected the proposition, and the Prussian
commissioners were
Page 118 U. S. 502
obliged to yield the point, and now all Germany, under this new
commercial code, adheres to the old maritime law. It is only
necessary to add that in the discussions of the convention it was
conceded that the maritime law had never required the surrender of
the insurance, but only that of the ship and freight. By the
commercial code of Holland and the Ordinance of Bremen this rule is
expressly formulated.
It appears, therefore, that the disposition of our statute is in
conformity with the general maritime law of Europe, and that the
recent legislation in France (1874) is an innovation upon that
law.
It is next contended that the act of Congress does not extend to
the exoneration of the ship, but only exonerates the owners by a
surrender of the ship and freight, and therefore that the plea of
limited liability cannot be received in a proceeding
in
rem. But this argument overlooks the fact that the law gives a
two-fold remedy: surrender of the ship or payment of its value, and
declares that the liability of the owner in the cases provided for
shall not exceed the amount or value of his interest in the ship
and freight. This provision is absolute, and the owner may have the
benefit of it not only by a surrender of the ship and freight, but
by paying into court the amount of their value, appraised as of the
time when the liability is fixed. This, as we have seen, enables
the owner to reclaim the ship and put it into complete repair
without increasing the amount of his liability. The absolute
declaration of the statute that his liability shall not exceed the
amount or value of the ship and freight, to-wit at the termination
of the voyage, has the effect, when that amount is paid into court
under judicial sanction, of discharging the owner's liability, and
thereby of extinguishing the liens on the vessel itself and of
transferring those liens to the fund in court. This is always the
result when the owner is allowed to bond his vessel by payment of
its appraised value into court or by filing a stipulation with
sureties in lieu of such payment. The vessel is always discharged
from the liens existing upon it when it has been subjected to a
judicial sale by order of the admiralty court or when it has been
delivered to the owner on his stipulation with sureties.
Page 118 U. S. 503
The claim that the lien attaches to the repairs and betterments
which the owner puts upon the vessel after the amount of his
liability has been fixed is requgnant to the entire drift and
spirit of the statute. In ordinary cases, it may be true, and
undoubtedly is true, that a lien or privilege on the ship extends
to and affects all its accretions by repair or otherwise; but in
the case of a claim for limited liability under the statute, the
dispositions of the statute are to govern, and these, as we have
seen, fix the amount of liability at a certain time, and when that
liability is discharged the lien is discharged, no matter what the
then value of the ship may have come to by means of alterations and
repairs.
The time when the amount of liability should be paid into court
will depend upon circumstances. If the owner sets up his claim to
limited liability in his answer, and does not seek a general
concurrence of creditors, it will be sufficient if the amount is
paid after the trial of the cause, and the ascertainment of the
amount of liability in the decree. Payment and satisfaction of the
decree will be a discharge of the owner as against all creditors
represented in the decree.
To say that an owner is not liable but that his vessel is liable
seems to us like talking in riddles. A man's liability for a demand
against him is measured by the amount of property that may be taken
from him to satisfy that demand. In the matter of liability, a man
and his property cannot be separated unless where, for public
reasons, the law exempts particular kinds of property from seizure,
such as the tools of a mechanic, the homestead of a family, etc.
His property is what those who deal with him rely on for the
fulfillment of his obligations. Personal arrest and restraint, when
resorted to, are merely means of getting at his property. Certain
parts of his property may become solely and exclusively liable for
certain demands, as a ship bound in bottomry, or subject to seizure
for contraband cargo or illegal trade, and it may even be called
"the guilty thing;" but the liability of the thing is so exactly
the owner's liability that a discharge or pardon extended to him
will operate as a release of his property. It is true that in
United States v. Mason, 6 Bissell 350, it was held that in
a
Page 118 U. S. 504
proceeding
in rem for a forfeiture of goods, the owner
might be compelled to testify, because the suit is not against him,
but against the goods. That decision however, was disapproved by
this Court in the case of
Boyd v. United States,
116 U. S. 616,
116 U. S. 637,
in which it is said:
"Nor can we assent to the proposition that the proceeding
[
in rem] is not in effect a proceeding against the owner
of the property as well as against the goods, for it is his breach
of the laws which has to be proved to establish the forfeiture, and
it is his property which is sought to be forfeited. In the words of
a great judge: 'Goods, as goods, cannot offend, forfeit, unlade,
pay duties, or the like, but men whose goods they are.' Vaughan,
C.J., in
Sheppard v. Gosnold, Vaugh. 159, 172, approved by
Ch. Baron Parker in
Mitchell v. Torup, Parker 227,
236."
But the argument is at war with the spirit as well as the text
of our decisions on the subject of limited liability. The case of
The Benefactor 102 U. S. 214, is
precisely in point. That was a case of libel
in rem
against the vessel in fault, and the proceeding for a limited
liability was sustained. It is true that this particular point was
not raised, but the parties in the case were represented by able
and experienced counsel, and the point would certainly have been
raised if they had regarded it as tenable.
We are not only satisfied that the law does not compel the ship
owner to surrender his insurance in order to have the benefit of
limited liability, but that a contrary result would defeat the
principal object of the law. That object was to enable merchants to
invest money in ships without subjecting them to an indefinite
hazard of losing their whole property by the negligence or
misconduct of the master or crew, but only subjecting them to the
loss of their investment. Now to construe the law in such a manner
as to prevent the merchant from contracting with an insurance
company for indemnity against the loss of his investment is
contrary to the spirit of commercial jurisprudence. Why should he
not be allowed to purchase such an indemnity? Is it against public
policy? That cannot be, for public policy would equally condemn all
insurance by which a man provides indemnity for himself
Page 118 U. S. 505
against the risks of fire, losses at sea, and other casualties.
To hold that this cannot be done tends to discourage those who
might otherwise be willing to invest their money in the shipping
business. It would virtually and in effect bring back the law to
the English rule, by which the owner is made liable for the value
of the ship before collision -- the very thing which, in all our
decisions on the subject, we have held it was the intention of
Congress to avoid by adopting the maritime rule. That this would be
the result is evident, because all ship owners insure the greater
part of their interest in the ship, and by losing their insurance
they would lose the value of their ship in every case. No form of
agreement could be framed by which they could protect themselves.
This is a result entirely foreign to the spirit of our
legislation.
When it was urged upon the Chamber of Peers of France in 1841 to
pass a law requiring the abandonment of insurance as well as of
ship and freight in order to relieve the owner from liability, the
suggestion was not entertained. The opinion of the majority was
that the relations between the ship owner and lenders or shippers
ought to remain entirely independent of contracts of insurance
which either could make; that an obligation to abandon insurance
would have no other tendency than to prevent insurance by the
owner, since he would be deprived of the benefit of it in case of
loss. Bedarride, art. 295, vol. 3, p. 361.
The argument that to allow the owner to keep his insurance would
encourage negligence and recklessness on his part can always be
made in every case of insurance. It has been made and answered a
hundred times. Generally a sufficient portion of the value of the
thing insured remains uncovered by insurance to prevent
indifference to loss, and if the temptation to wish it does exist
in any case, the retributions are so fearful as to repress the
thought. To the honor of human nature, the exceptions to the rule
are exceedingly rare.
It is also contended that the right to proceed for a limited
liability is waived and lost by a surrender of the vessel to the
insurers, because it is then out of the owner's power to abandon
the ship to the claimants who have liens upon her. This
Page 118 U. S. 506
argument assumes that abandonment is necessary, which is not the
case under our law. Payment of the ship's value into court or
setting up the matter as a defense is quite as efficacious. But if
abandonment were necessary, as it is by the maritime law, a
surrender to the insurers does not interfere with or prevent a
subsequent abandonment to the creditors. The insurers take the ship
cum onere, and stand in no better plight than the original
owners. The liens against the ship are not extinguished by the
surrender to the insurers, but may be prosecuted by the creditors
notwithstanding such surrender unless proceedings for a limited
liability are instituted. This is fully shown by Boulay-Paty, vol.
1, pp. 293-297, and by Bedarride in Article 291 of his work before
cited. The former, after showing that abandonment to the lien
creditors may be made notwithstanding a previous surrender to the
insurers, and explaining the reason of it, says:
"It follows from thence that the owner may, by abandonment, turn
the shippers [of cargo] over to the insurers [now become the owners
by the surrender of ship and freight to them], and thus make
abandonment and surrender at the same time."
1 Boulay-Paty, 295.
This disposes of all the important points in the case, and leads
to the conclusion that the decree of the circuit court was right,
and it is
Affirmed.
MR. JUSTICE MATTHEWS, with whom concurred MR., JUSTICE MILLER,
MR. JUSTICE HARLAN, and MR. JUSTICE GRAY, dissented. Thjeir
dissenting opinion will be found at page
118 U. S. 526,
post, after the opinion of the Court in
The Great
Western.
