Carrington v. The Ann C. Pratt

5 F. Cas. 150, 10 N.Y. Leg. Obs. 193

Opinion

WARE, District Judge.

Several objections have been made to the libellant’s right to recover in this case. In the first place it is said that it was the duty of Airey when he was blown off by the gale, to have returned to St Michael’s and restored the command of the vessel to the master, and that there was nothing in the state of the weather that rendered this impracticable. But whatever fault may have been committed by Airey in this part of his conduct, whether an error of judgment or a delinquency of a graver character, it cannot affect the libel-lant The vessel came into St. Thomas in distress. It is certain that repairs were needed. There was a regular survey by competent surveyors, appointed by the American consul, and there is nothing in the evidence to impeach the fairness and honesty of the surveyors. The libellant knew nothing of the causes which brought her there, without her master and without her papers, except what he could learn from Airey and the crew, and their account sufficiently explained the fact. On the separation of the master from the vessel by death or casualty, the mate succeeds to his authority as heres nec-essarius; the law imposes on him the duties and responsibilities, and clothes him with the authority of master. This substitution is a contingency that is contemplated by his engagement, which cannot be declined by him but by a default of duty. Arriving at St Thomas as he did, he had all the authority to order necessary repairs, and to make all contracts for that purpose that he would have had, if he had been originally appointed master. The circumstances under which he arrived, it may be said, ought to suggest caution and prudence, and to awaken the vigilance of those who dealt with him, but his authority was the same as would have been that of the original master. Airey, who was now the acting master, not having the control of means adequate to meet the cost of repairs, and being unable to obtain them on the personal credit of the owners, was authorized to borrow on the credit of the vessel. But it is said that this authority, having its origin in necessity, is limited to the cost of such repairs as are indispensably necessary to enable the ship to proceed on her voyage; that the repairs ordered exceeded that necessity, and that beyond this the master has no authority to charge the owners by a resort to the onerous expedient of a bottomry bond. And it is argued that beyond this títere was a want of prudence and a wasteful extravagance in malting the repairs that were made.

This argument presents itself with a double aspect — First, as it touches the rights of the lender; and secondly, as it questions the discretion and good faith of the master. As it affects the bottomry creditor, the answer appears to me to be very obvious. All that is required of the lender in such cases, is to be assured that an unprovided necessity exists, and that the means cannot be obtained on the personal credit of the owners. If the money is then advanced in good faith, without collusion with the master for the purpose of fraud, the lender is not bound to see to its application. Emerig. Tracts a la Grosse, c. 4, § 7; Dig. 14, 1, 1, 59; The Jane, 1 Dod. 4C5. If the sum advanced is somewhat more than is strictly necessary, unless the lender's suspicions are justly awakened by gross and manifest extravagance, his claim under his bond will not be impaired. For when a case of apparent necessity exists, the law does not impose on him the responsibility of determining the extent of repairs required. The lender, says Emeri-gon, is justified in relying on the honesty of the master; and besides, if he were required to decide on the nature and necessity of repairs. it would be requisite for him to be an expert in the business, — il faut 6tre du metier.

As relates to the master the arguments apply with more force. His authority to borrow money on bottomry is strictly limited to the necessities of the ship; and in order to justify himself to the owners, he must show the extent of the necessity. But then the question will return, what in the sense of the law are necessary repairs? The text-writers on this subject merely use the words necessary repairs, without proceeding to describe, except in very vague and general terms, what they are. In what sense then is the word necessary used in this connection? Is it, in the strict sense, repairs that are indispensable to enable the vessel to proceed on her voyage, or is it, in a more loose sense, such as are proper, fit and suitable under the circumstances? This question was raised and very fully considered by the- circuit court, in the case of The Fortitude [Case No. 4,953], and the conclusion to which the court arrived, after a very elaborate examination of the theoretical writers as well as the judicial decisions on the subject, was that the word necessary was used in the latter sense, as including wThat was proper and suitable under the circumstances. The same doctrine in substance was held by Lord Tenterden, in the case of Webster v. Teekamp, 4 Barn. & Ald. 354.

The propc-r test to determine what in the sense of the law are necessary repairs, is found by inquiring what a prudent owner, having a proper regard to the safety of the property at risk, and the security of the lives of the crew, would do if he were present. In this case the repairs ordered by the master wore only such as were recommended by the surveyors in their report, and this, it appears to me, is sufficient to exonerate the master from any imputation of bad faith.

But the most difficult objection to be overcome is the charge of meditated 'fraud; not on the owners of the vessel, but on the underwriters. To enable the owners to perpetrate the fraud, two sets of papers and accounts were made up by the libellant, one for the owners, by which the matter was to be settled and the payment made. This account made the whole cost of the repairs to be $4,4G0.S3. Deducting $310160 for cash received of tlie master; $216.S5, the avails of the sale of the cargo; $250, discounted by Bland, the contractor, who made the repairs, —left $3,0S3.38 as the amount actually advanced by the libellant; and adding the maritime premium, $193.S7, it amounts to $3,-S77.25. For this sum a bill of exchange was drawn by Airey on Seth Pratt, the father of the master and owner, he having been left at St Michael, and not expected to return in season to meet the bill. Together with the bill a written agreement was sent hy which the libellants agreed to discomit the maritime interest, and to take $3,0S3.3S in satisfaction of the bond, provided the bill was duly honored and the payment duly made. With these papers another package of accounts and papers was sent, for the use of the owners in adjusting and settling the loss with the underwriters. These accounts showed the cost of the repairs to amount to $4.712.57, and after deducting $216.S5, the sum received from the sale of the remains of the cargo, but without any deduction for the cash received of the master or the discount of the contractor, loft the amount advanced by Car-rington $4,591.42, and for this sum the bond was executed, which, with the addition of the maritime premium, amounts to $5,050.50. The reason given by Carrington, in his letter to Seth Pratt, to whom the papers were sent, for preparing this duplicate set of accounts, is, that It was “done to protect your son’s interest; for doubtless you are aware that there are many charges, attending vessels similarly circumstanced as the Aun C. Pratt, which the insurers and underwriters will not admit; consequently owners of vessels have to protect their interests and make up their accounts in such a form as their officers will admit of.” After this explanation of the fabricated papers and accounts, he proceeds to say: “The other package of papers relate to the owners and in the account current, which will be there found, the facts and original charges are those set forth, showing the balance due to us to be only $3,877.25, and for which amount Capt. Airey has given us a ■draft on you, and. we have an agreement with him, as we do have with all others, who favor us with their business similarly circumstanced, that we are to relinquish the 10 per cent, maritime premium which persons making advances on vessels exact.” The calm self-possession and air of frankness with which all this is disclosed would lead one to suppose that such practices belonged to the ordinary usages and common business habits of the place; and I feel a secret persuasion that I might do injustice to Messrs. Carrington & Co. to impute to them a greater looseness of mercantile morality than is customary in such transactions in that community, or perhaps in other commercial places, under like circumstances. But I feel bound to say that I cannot view such practices, even if sanctioned to some extent by custom, in the same light in which the interested parties appear to contemplate them, and I trust that I shall be doing no disservice to the general interests of commerce by suggesting that they cannot be tolerated in a court of justice. The letter of Carrington shows that the bond was executed for a larger sum than wras due, and that false accounts were fabricated to support the bond and to enable the owners to extort from the underwriters a larger sum than by their contract they were bound to pay.

It being apparent that the bond is tainted with fraud can an action be maintained upon it? In the admiralty a bond may be good for a part and bad for a part. If demands are mixed up in it for which the creditor is not entitled to claim maritime interest, as for money which had boon previously advanced on the personal credit of the oumer, with other advances for which he had stipulated for this security, this will not vitiate tlie bond in toto. He ipay recover upon it so much of the consideration as is good, and it will be rejected for the residue. The Aurora, 1 Wheat. [14 U. S.] 96; The Hero, 2 Dod. 146; The Packet [Case No. 10,654], But I am not aware that this equitable indulgence has ever been extended to a fraudulent bond. Prom the language of Lord Stowell, in the case of The Tartar, 1 Hagg. Adm. 14, I infer the contrary. “This court,” he says, “proceeding on principles of general equity, does not hold that a bottomry, bad in part, necessarily vitiates the rest.” But he immediately adds, “It may be invalidated by a case of fraud and ill conduct of the party; and if such a charge could be established, then indeed this bond -would share the fate of the other unprofitable transactions connected with this vessel.” A plain intimation that a bond tainted by fraud is even in the admiralty a totally void instrument. The fraud to which Lord Stowell alludes is undoubtedly a fraud on the owners, and in the present case, as all the facts were disclosed and explained, no fraud was attempted or intended on them. But in its original concoction, it was intended to operate as a fraud on the underwriters, who were ultimately to bear .the loss; and in morals it certainly makes no difference, and ought to make none in law, whether the fraud was intended to affect the primary or the ultimate party who was to suffer by the loss. But even if the usurers are to be considered as third persons and strangers to the transaction, a bond is sometimes, even by the rigid rules of the common law, held to be void when it is intended to operate as a fraud on a third person, though it may be perfectly fair and unimpeachable between the parties. Such was the case of Boynton v. Hubbard, 7 Mass. 112. That action was on a post obit bond, and though the jury found that the transaction was fair and free from fraud betw'een the parties, judgment was arrested, and the bond held to be void on principles of public policy applicable to such transactions, because it operated as a fraud on third persons. And it appears to me that such a bond as this, framed with a view of practising a fraud on underwriters, ought to be held void, though as between the immediate parties there is no fraud. It is easy for parties in foreign countries to make up accounts and find vouchers to sustain exaggerated losses, and it is difficult for under waiters to detect the fraud that is concealed under fabricated papers. They are obliged to increase their premiums on fair and honest ship owners to cover risks of this kind. And it seems to me when a bottomry creditor lends himself to a transaction of this kind, though he may not derive any direct profit from it himself, that a proper regard to the best interests of fair and honest trade as well as a due respect for commercial morality requires that the bond should be held to be void, and the creditor left to seek such other remedy for the amount justly due as his ease admits. Under these views of the subject, I must pronounce against the bond. If I have come to a wrong conclusion, I am happy that my opinion is open to be reviewed by a higher court. But though the bond be void, this does not of necessity vitiate the consideration for w'hich it was given, so far as it was meritorious. For repairs and supplies furnished the law7 gives a lien on the vessel without any instrument of hypothecation, which the creditor may enforce by process in rem. The counsel for the libellant has amended his libel by filing an allegation to meet this posture of the case, founded on the consideration, in which he claims the actual amount advanced for the repairs and supplies. This I have no doubt of his right to recover. In the account current which is supported by regular vouchers, this appears to he ?3,6S3.3S. But this being awarded on the hypothecation implied by law, does not carry maritime interest.

[NOTE. The claimant, Leonard B. Pratt, appealed to the circuit court, where the decree herein was reversed, and the libel dismissed. See Tlie Ann C. Pratt, Case No. 400. The libel-lant then appealed to the supreme court, where the circuit court decree was affirmed. See Car-rington v. The Ann C. Pratt. IS How. (59 U. S.) (13. For the grounds of affirmation, see note to The Ann C. Pratt, supra. [The case of Arey v. The Ann C. Pratt, for wages, was heard and decided at the same time, and is reported with this case in 10 N. X. Leg. Obs., at page 199. See Case No. 113a.]