Texas Company v. Hogarth Shipping Corporation/Opinion of the Court

This is a suit in admiralty to recover damages for an alleged breach of a voyage charter party entered into in New York, February 6, 1915, between a British corporation, which owned the Baron Ogilvy and other freight ships, and a Texas corporation, which was engaged in shipping and marketing petroleum products. The charter party did not name a particular ship as the subject of the hiring, but required that one of a certain type be designated from among the ships of the British company, on or before March 15. In due time that company named the Baron Ogilvy, and the Texas Company assented. The intended voyage was from a port in Texas to another in South Africa with a full cargo of refined petroleum in cases. The ship was to be tendered at the initial port ready to load between April 15 and May 15, 1915, and in case of default the Texas Company was given the option of canceling or maintaining the charter party. If the vessel was then at that port, the option was to be exercised at once, and if she was not then there, it was to be exercised within 24 hours after her arrival. There was no clause expressly excepting restraints of princes, etc. April 10, 1915, the Baron Ogilvy, while in British waters and being provisioned for the intended voyage, was requisitioned by the British government and pressed into its war service, in which she continuously was retained until October 20 following. On April 12 the British company notified the Texas Company that the vessel had been requisitioned and therefore would not be available to carry out the charter party. The Texas Company thereupon procured another vessel to make the voyage at the time intended, but at an increased freight rate, and subsequently brought this suit against the British company on the theory that the latter had broken the charter party and was liable in damages for the difference between the rate which it was to receive and that actually paid to the other vessel. On the final hearing the District Court rendered a decree for the respondent, the principal grounds of the decision being (a) that when in accordance with the terms of the charter party the Baron Ogilvy was named as the ship to make the voyage the contract became an ordinary voyage charter party for that ship, and none other, and (b) that that ship, before the time for the voyage, was taken in invitum by the owner's government for war use for a period likely to extend beyond the time for the intended voyage, and that this dissolved the charter party and excused the owner from furnishing the ship. (D. C.) 265 Fed. 375. The decree was affirmed by the Circuit Court of Appeals, 267 Fed. 1023; and a writ of certiorari brings the case here. 254 U.S. 625, 41 Sup. Ct. 15, 65 L. Ed. --.

We agree that after the designation of the Baron Ogilvy, conformably to a provision in the charter party, every element of an ordinary voyage charter party for a particular ship was present. It was then as if that vessel had been named at the outset. And, as there was no provision for substituting another ship, there was no obligation on the part of the owner to furnish, nor on the part of the charterer to accept, another. Nickoll & Knight v. Ashton, Edbridge & Co., [1901] 2 K. B. 126, 131. The contract related to a particular ship just as it related to a particular voyage. Neither could be changed without departing from the contract, which could not be done without the consent of both parties.

The libelant challenges the good faith of the owner and seeks by taking mere fragments of the evidence here and there to show that the owner invited the requisition, welcomed it as promising a better return than the charter party, and in effect voluntarily turned the vessel over to the government. But the fragments to which attention is invited must be read with the context and all the evidence must be considered. When this is done it becomes very plain that there is no basis for the challenge. The owner made the usual preparations for complying with the charter party, earnestly sought to prevent the requisitioning of the vessel, urged the existence of the charter party as a reason for leaving her free, and respected the requisition, when made, because no other course was reasonably open. It may not be material, but in fact the charter party gave promise of a better return and called for a service which would be less hazardous. The vessel was taken by the government for the use to which she was subjected and after the taking the owner agreed to furnish certain additional facilities by reason of which a higher compensation was obtained than otherwise would have been allowed. Beyond this the owner was accorded no voice in the matter.

As the ship was British and in British waters and the owner was a British corporation the power of the British government to requisition the ship is beyond question. But the libelant insists that those who assumed to exert this power did not proceed in the mode prescribed, and therefore that the requisition was invalid. The facts adequately proved are as follows: A royal proclamation of August 3, 1914, authorized and empowered the Lords Commissioners of the Admiralty, 'by warrant under the hand of their Secretary,' 'to requisition and take up' British vessels within British waters for use as transports and auxiliaries. The Baron Ogilvy was requisitioned by an order of the Lords Commissioners, and the order was communicated to the owner by a telegram signed 'Transports' and saying: 'SS. Baron Ogilvy is requisitioned under royal proclamation for government service.' The telegram was sent by the Assistant Director of Military Sea Transports, the officer through whom requisitioning orders were executed. This was the usual mode of communicating such orders. Formal warrants never were issued. Generally, the telegraphic communication was followed, after a time, by a letter of like import bearing a block (printed) signature of the Secretary; but in this instance, through an error in office routine, no letter was sent. These letters were intended to be corroborative, but were not deemed essential; and in actual practice the Lords Commissioners and those who executed their orders proceeded on the theory that the ship was taken when the order was received by the owner, however the order was communicated, and that a telegraphic communication of it was effective and must be obeyed. Indeed, the evidence is that if the telegraphic order was not obeyed the vessel would be taken by force. The owner here-six of whose ships had been requisitioned theretofore-so understood the practice and respected the order. It does not appear that the government at any time or in any way disapproved of the practice, but it does appear that in this instance the government treated the telegraphic order as effective by using the ship as a transport for more than six months and compensating the owner accordingly. In these circumstances, the contention that the requisition was invalid is quite untenable. Whether in differenct circumstances it could and should be pronounced invalid here we need not consider. See Underhill v. Hernandez, 168 U.S. 250, 18 Sup. Ct. 53, 42 L. Ed. 456; American Banana Co. v. United Fruit Co., 213 U.S. 347, 29 Sup. Ct. 511, 53 L. Ed. 826, 16 Ann. Cas. 1047; Oetjen v. Central Leather Co., 246 U.S. 297, 303, 304, 38 Sup. Ct. 309, 62 L. Ed. 726; Ricaud v. American Metal Co., 246 U.S. 304, 309, 38 Sup. Ct. 312, 62 L. Ed. 733; Northern Pacific Ry. Co. v. American Trading Co., 195 U.S. 439, 467-468, 25 Sup. Ct. 84, 49 L. Ed. 269.

In the District Court the British Ambassador was permitted to intervene as amicus curiae, object to the adjudication of the libelant's claim and present a certificate avowing that the requisition was a governmental act. Complaint is made of this. The permission was improvidently granted, as was afterwards indicated by this court in other cases. In re Muir, 254 U.S. 522, 41 Sup. Ct. 185, 65 L. Ed.--; The Pesaro, 255 U.S. 216, 41 Sup. Ct. 308, 65 L. Ed. 592. But the libelant was not prejudiced, for the intervention and certificate ultimately were not considered and the decree was rested on the evidence otherwise presented.

Finally, the libelant insists that the requisition, even if valid and not invited by the owner, did not operate to dissolve the charter party or to excuse the owner from performing it. The courts below held otherwise, and we think rightly so.

It long has been settled in the English courts and in those of this country, federal and state, that where parties enter into a contract on the assumption that some particular thing essential to its performance will continue to exist and be available for the purpose and neither agrees to be responsible for its continued existence and availability the contract must be regarded as subject to an implied condition that, if before the time for performance and without the default of either party the particular thing ceases to exist or be available for the purpose, the contract shall be dissolved and the parties excused from performing it. Taylor v. Caldwell, 3 Best & Smith, 826, 839; In re Shipton, Anderson & Co., [1915] 3 K. B. 676; Horlock v. Beal, [1916] 1 A. C. 486, 494, 496, 512; Bank Line, Limited, v. Arthur Capel & Co., [1919] A. C. 435, 445; The Tornado, 108 U.S. 342, 349-351, 2 Sup. Ct. 746, 27 L. Ed. 747; Chicago, Milwaukee & St. Paul Ry. Co. v. Hoyt, 149 U.S. 1, 14, 15, 13 Sup. Ct. 779, 37 L. Ed. 625; Wells v. Calnan, 107 Mass. 514, 9 Am. Rep. 65; Butterfield v. Byron, 153 Mass. 517, 27 N. E. 667, 12 L. R. A. 571, 25 Am. St. Rep. 654; Dexter v. Norton, 47 N. Y. 62, 7 Am. Rep. 415; Clarksville Land Co. v. Harriman, 68 N. H. 374, 44 Atl. 527; Emerich Co. v. Siegel, Cooper & Co., 237 Ill. 610, 86 N. E. 1104, 20 L. R. A. (N. S.) 1114. The principle underlying the rule is widely recognized and applied to various classes of contracts. The Kronprinzessin Cecilie, 244 U.S. 12, 22-24, 37 Sup. Ct. 490, 61 L. Ed. 960. But, of course, it does not apply where the risk is fully covered by a term of the contract, nor where performance is not practically cut off, but only rendered more difficult or costly. Columbus Railway, Power & Light Co. v. Columbus, 249 U.S. 399, 410 et seq., 39 Sup. Ct. 349, 63 L. Ed. 669, 6 A. L. R. 1648. Perhaps the oldest and most familiar application of the principle is to contracts for personal service, where performance is prevented by death or illness. Robinson v. Davison (1871) L. R. 6 Exch. 269; Spalding v. Rosa, 71 N. Y. 40, 27 Am. Rep. 7. Another application widely recognized is where a ship chartered for a voyage, after the date of the charter party and before the time for the voyage, is accidentally destroyed by fire, lost at sea, or injured in such degree as not to be available for the service. The Tornado, supra, was a suit on a contract of affreightment where the ship, before beginning the voyage, was accidentally burned and thereby prevented from undertaking it. This court held that the contract was dissolved, saying (108 U.S. 349, 2 Sup. Ct. 750, 27 L. Ed. 747):

'We are of opinion that by the disaster which occurred before     the ship had broken ground or commenced to earn freight, the      circumstances with reference to which the contract of affreightment was entered into were so altered by      the supervening of occurrences which it cannot be intended      were within the contemplation of the parties in entering into      the contract, that the shipper and the underwriters were      absolved from all liability under the contract of      affreightment. The contract had reference to a particular     ship, to be inexistence existence as a seaworthy vessel and      capable of carrying cargo and earning freight and of entering      on the voyage. All the fundamental conditions forming part of     the contract of the shipowner were wanting at the time when      the earning of freight could commence.'

Here the ship, although still in existence and entirely seaworthy, was rendered unavailable for the performance of the charter party by the requisition. By that supervening act she was impressed into the war service of the British government for a period likely to extend-and which as it turned out did extend-long beyond the time for the charter voyage. In other words, compliance with the charter party was made impossible by an act of state, the charterer was prevented from having the service of the ship and the owner from earning the stipulated freight. The event apparently was not anticipated, and there was no provision casting the risk on either party. Both assumed that the ship would remain available, and that was the basis of their mutual engagements. These, we think, must be regarded as entered into on an implied condition that, if before the time for the voyage the ship was rendered unavailable by such a supervening act as the requisition, the contract should be at an end and the parties absolved from liability under it.

That the charter party was entered into in this country is not material. The important consideration is that it became impossible of performance through a supervening act of state which operated directly on the ship and the parties could not avoid.

Decree affirmed.