North German Lloyd v. Guaranty Trust Company/Opinion of the Court

[Argument of Counsel from pages 13-15 intentionally omitted]

Messrs. J. Parker Kirlin and Charles R. Hickox for the Guaranty Trust company.

[Argument of Counsel from pages 15-20 intentionally omitted]

Messrs. James M. Beck, Carl A. Mead, and Edward E. Blodgett for the National City Bank.

Mr. Justice Holmes delivered the opinion of the court:

This writ was granted to review two decrees that reversed decrees of the district court, dismissing libels against the steamship Kronprinzessin Cecilie. 238 Fed. 668; 228 Fed. 946, 965. The libels alleged breaches of contract by the steamship in turning back from her voyage from New York and failing to transport kegs of gold to their destinations, Plymouth and Cherbourg, on the eve of the outbreak of the present war. The question is whether the turning back was justified by the facts that we shall state.

The Kronprinzessin Cecilie was a German steamship owned by the claimant, a German corporation. On July 27, 1914, she received the gold in New York for the above destinations, giving bills of lading in American form, referring to the Harter Act, and we assume, governed by our law in respect of the justification set up. Early on July 28 she sailed for Bremerhaven, Germany, via the mentioned ports, having on board 1,892 persons, of whom 667 were Germans, passengers and crew; 406, Austrians; 151, Russians; 8, Bulgars; 7, Serbs; 1, Roumanian; 14, English; 7, French; 304, Americans; and 2 or 3 from Italy, Belgium, Holland, ete. She continued on her voyage until about 11.05 P. M., Greenwich time, July 31, when she turned back; being then in 46x 46' N. latitude and 30x 21' W. longitude from Greenwich, and distant from Plymouth about 1.070 nautical miles. At that moment the master knew that war had been declared by Austria against Servia (July 28), that Germany had declined a proposal by Sir Edward Grey for a conference of Ambassadors in London; that orders had been issued for the German fleet to concentrate in home waters; that British battle squadrons were ready for service; that Germany had sent an ultimatum to Russia; and that business was practically suspended on the London Stock Exchange. He had proceeded about as far as he could with coal enough to return if that should prove needful, and was of opinion that the proper course was to turn back. He reached Bar Harbor, Maine, on August 4, avoiding New York on account of supposed danger from British cruisers, and returned the gold to the parties entitled to the same.

On July 31 the German Emperor declared a state of war, and the directors of the company at Bremen, knowing that that had been or forthwith would be declared, sent a wireless to the master: 'War has broken out with England, France, and Russia, Return to New York.' Thereupon he turned back. The probability was that the steamship, if not interfered with or prevented by accident or unfavorable weather, would have reached Plymouth between 11 P. M. August 2, and 1 A. M. August 3, and would have delivered the gold destined for England, to be forwarded to London by 6 A. M., August 3. On August 1st, at 9:40 P. M., before the earliest moment for probably reaching Plymouth, had the voyage kept on, the master received a wireless message from the German Imperial Marine Office: 'Threatening danger of war. Touch at no port [of] England, France, Russia.' On the same day Germany declared war on Russia. On August 2, Germany demanded of Belgium passage for German troops, and seized two English vessels with their cargoes. Explanations were offered for the seizures, but the vessels were detained. The German Army entered Luxembourg, and there were skirmishes with French troops. On August 3, Germany was at war with France, and at 11 P. M., on August 4, with England. On August 4 some German vessels were detained by England, and early on the fifth were seized as prize, e. g., The Prinz Adalbert, L. R. [1916] P. 81, 85 L. J. Prob. N. S. 108, 114 L. T. N. S. 567, 32 Times L. R. 378, 60 Sol. Jo. 480. No general history of the times is necessary. It is enough to add that from the moment Austria declared war on Servia the great danger of a general war was known to all.

With regard to the principles upon which the obligations of the vessel are to be determined it is plain that, although there was a bill of lading in which the only exception to the agreement relied upon as relevant was 'arrest and restraint of princes, rulers, or people,' other exceptions necessarily are to be implied; at least, unless the phrase 'restraint of princes' be stretched beyond its literal intent. The seeming absolute confinement to the words of an express contract indicated by the older cases like Paradine v. Jane, Aleyn, 26, 82 Eng. Reprint, 897, has been mitigated so far as to exclude from the risks of contracts for conduct (other than the transfer of fungibles like money), some, at least, which, if they had been dealt with, it cannot be believed that the contractee would have demanded or the contractor would have assumed. Baily v. De Crespigny, L. R. 4 Q. B. 180, 185, 38 L. J. Q. B. N. S. 98, 19 L. T. N. S. 681, 17 Week. Rep. 494, 15 Eng. Rul. Cas. 799. Familiar examples are contracts for personal service, excused by death, or contracts depending upon the existence of a particular thing. Taylor v. Caldwell, 3 Best & S. 826, 839, 122 Eng. Reprint, 309, 32 L. J. Q. B. N. S. 164, 8 L. T. N. S. 356, 11 Week. Rep. 726, 6 Eng. Rul. Cas. 603. It has been held that a laborer was excused by the prevalence of cholera in the place where he had undertaken to work. Lakeman v. Pollard, 43 Me. 463, 69 Am. Dec. 77. The same principles apply to contracts of shipment. If it had been certain that the vessel would have been seized as prize upon reaching England, there can be no doubt that it would have been warranted in turning back. See Mitsui & Co. v. Watts, W. & Co. [1916] 2 K. B. 826, 845, 85 L. J. K. B. N. S. 1721, 115 L. T. N. S. 248 [1916] W. N. 271, 32 Times L. R. 622; The Styria v. Morgan, 186 U.S. 1, 46 L. ed. 1027, 22 Sup. Ct. Rep. 731. The owner of a cargo upon a foreign ship cannot expect the foreign master to run greater risks than he would in respect to goods of his own nation. The Teutonia, L. R. 4 P. C. 171, 8 Moore, P. C. C. N. S. 411, 17 Eng. Reprint, 366, 41 L. J. Prob. N. S. 57, 26 L. T. N. S. 48, 20 Week. Rep. 421; The San Roman, L. R. 5 P. C. 301, 307, 42 L. J. Prob. N. S. 46, 21 Week. Rep. 393, 1 Asp. Mar. L. Cas. 603. And when we add to the seizure of the vessel the possible detention of the German and some of the other passengers, the proposition is doubly clear. Cases deciding what is and what is not within the risk of an insurance policy throw little light upon the standard of conduct to be applied in a case like this. But we see no ground to doubt that Chief Justice Marshall and Chief Justice Kent would have concurred in the views that we express. Oliver v. Maryland Ins. Co. 7 Cranch, 487, 493, 3 L. ed. 414, 416; Craig v. United Ins. Co. 6 Johns. 226, 250, 253, 5 Am. Dec. 222. See also British & F. M. Ins. Co. v. Sanday [1916] A. C. 650, 85 L. J. K. B. N. S. 550, 21 Com. Cas. 154, 114 L. T. N. S. 521 [1916] W. N. 44, 32 Times L. R. 266, 60 Sol. Jo. 253.

What we have said so far we hardly suppose to be denied. But if it be true that the master was not bound to deliver the gold in England at the cost of capture, it must follow that he was entitled to take reasonable precautions to avoid that result, and the question narrows itself to whether the joint judgment of the master and the owners in favor of return was wrong. It was the opinion very generally acted upon by German shipowners. The order from the Imperial Marine Office, if not a binding command, at least shows that if the master had remained upon his course one day longer, and had received the message, it would have been his duty as a prudent man to turn back. But if he had waited till then, there would have been a question whether his coal would hold out. Moreover, if he would have been required to turn back before delivering, it hardly could change his liability that he prophetically and rightly had anticipated the absolute requirement by twenty-four hours. We are wholly unable to accept the argument that although a shipowner may give up his voyage to avoid capture after war is declared, he never is at liberty to anticipate war. In this case the anticipation was correct, and the master is not to be put in the wrong by nice calculations that if all went well he might have delivered the gold and escaped capture by the margin of a few hours. In our opinion the event shows that he acted as a prudent man.

We agree with the counsel for the libellants that on July 27 neither party to the contract thought that it would not be performed. It was made in the usual form, and, as we gather, charged no unusual or additional sum because of an apprehension of war. It follows, in our opinion, that the document is to be construed in the same way that the same regular printed form would be construed if it had been issued when no apprehensions were felt. It embodied simply an ordinary bailment to a common carrier, subject to the implied exceptions which it would be extravagant to say were excluded because they were not written in. Business contracts must be construed with business sense, as they naturally would be understood by intelligent men of affairs. The case of The Styria, supra, although not strictly in point, tends in the direction of the principles that we adopt.

Decree reversed.

Mr. Justice Pitney and Mr. Justice Clarke dissent, upon grounds expressed in the opinions delivered by Circuit Judges Dodge and Bingham in the circuit court of appeals, 238 Fed. 668.