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Columbian Insurance Company v. Catlett. 12 W. had $10,000 on board. The intermediate landing of a portion of the cargo in the course of the voyage, was wholly immaterial, in the understanding of the parties, so long as the value on board was sufficient to cover the insurance. If the clause, usual in policies in the eastern States, as to priority of insurance, had been here incorporated, and there had been a subsequent insurance, this, as the prior policy, must have first attached to the extent of the sum insured during the whole voyage. If there had been a subsequent insurance without any such clause, it might form a case for contribution among the various underwriters; but would in no shape affect the rights of the assured. The loss, therefore, must be apportioned between the parties, in the proportion which the sum insured bears to the amount of value on board at the time of the loss; that is, as $10,000 bears to $12,328.25.
The next question is, whether the freight for the outward voyage is to be deducted from the salvage, and allowed the assured, who was owner of the ship as well as the cargo. The amount reported by the auditor is not disputed, and the controversy is, whether it is a charge upon the salvage in the hands of the underwriters. In point of fact, no freight was or could be payable in this case, for the plain reason that the assured was owner of the ship, and there could, therefore, be no lien upon the cargo or its proceeds for the same.
But in point of law the case is not supposed to be varied [*396 ] by * this circumstance; for if the freight would be a proper
charge on the salvage, if a third person were'owner of the ship, in the hands of the assured, there is no reason why it should not be allowed when the assured is owner. We consider the law on this point as conclusively settled. As between the owner of the ship and the owner of the cargo, the former has a lien upon the cargo for all the freight which becomes due and payable to him, whether it be a full or pro rata freight. But freight is a charge upon the cargo, against which the underwriters do not, in any event, whether of abandonment with salvage, or of partial loss, undertake to indemnify the owner of the cargo. In order to obtain the sal. vage, when in the hands of the ship-owner, it may become necessary for the underwriters to pay the amount of the freight, for which they have a lien, as it may to pay any other charge created by the act of the owner of the cargo. But this does not change the nature or extent of the responsibility of the underwriters. As between them. selves and the assured, they have a right to deduct the amount so paid from the loss, or to recover it in any other manner, as money paid for the use of the latter. This doctrine was expressly held by the Court of King's Bench, in Baillie v. Modigliani, Marshall, Ins, Columbian Insurance Company v. Catlett. 12 W. 736, and was confirmed in the fullest manner in this court, in Caze and Richaud v. The Baltimore Insurance Company, 7 C. 358.
It only remains to notice an objection made to the form of the declaration. It is said that there is no averment in the declaration that any preliminary proofs of loss were offered to the company, nor of any promise to pay in sixty days after such proofs, according to the terms of the policy, nor that any abandonment or notice was given to the underwriters. It was, in our judgment, wholly unnecessary to aver the latter facts. The abandonment and notice thereof are but matters of evidence to establish the fact of a total loss, which is expressly averred in the declaration. As to the other part of the objection, it proceeds upon a mistake of the terms of the declaration. There is an express averment, after the allegation of the loss, that the company, on, &c., at, &c., had notice thereof, and by means thereof became liable, &c., and in consideration thereof promised * that they would pay the plaintiff the [ * 397 ] sum due, “ according to the tenor and effect of the said policy of insurance.” This is a sufficient averment of a promise to pay according to the stipulations of the policy, and conforms to the general course of precedents in pleading.
Upon the whole, it is the opinion of this court that the judgment of the court below, so far as it allowed the freight of $2,041.25 to the assured, is erroneous and ought to be reversed ; and that, in all other respects, it ought to be affirmed.
JOHNSON, J. I concur with the court in all the points decided in this cause, except that which relates to freight. On that, it is my impression that they have misapprehended the case, the question, and the doctrine on which it turns. If so, it is not to be wondered at if it should appear that they have decided upon the authority of adjudications which have no bearing upon the case.
The great disadvantage of Catlett's cause arises from the form in which this question is presented. It is raised in the adjustment of this loss, and comes up so confounded and blended with other matters, that it may well bewilder those who are more conversant with special pleadings than with mercantile statements. To give this question a fair chance with a lawyer, it should have come up on an action instituted by the underwriters to recover of the ship-owner money which arose from the proceeds of an abandoned cargo, and had been remitted to the owner. The questions on the subject of freight would then have been distinctly presented, to wit, whether the freight had been earned, and whether the owner had not a right to set it off against the proceeds of the abandoned cargo. And who Columbian Insurance Company v. Catlett. 12 W. would then entertain a doubt upon the subject? Would the shipowner have been permitted to pay over the proceeds of the abandoned cargo to the underwriters, and take his remedy against the shipper of the goods ? No one can imagine such a doctrine. It is said that the owner of the cargo shall, in no case, throw the
freight upon the underwriter. But there are other interests [*398 ] always involved in such cases, besides those * of owner and
underwriter of the cargo. The ship-owner has his rights, and is not bound to forego his lien on the cargo for the freight, and to look to an absent or insolvent owner or insurer, for indemnity. The master is his agent to receive the freight, as well as agent of the underwriter to remit the salvage, and has a right, nay, is bound, to take care of the interests of his employer. .
It is not, therefore, the owner of the cargo who throws the freight upon the underwriter, but the owner of the ship, in the fair exercise of his unquestionable rights. It is clear, then, that the freight may be legally thrown upon the underwriters, by the act of another, even in opposition to the will of the insured. It must, then, be ascer. tained whether the underwriter who has thus had the freight thrown upon him, by having it deducted from the proceeds of the salvage, can recover it back from the insured. And, in order to examine the question distinctly, we will suppose the case of a payment of a loss before the freight has been thus thrown upon the underwriter; that is, before the proceeds of the salvage have been realized and remitted to the ship-owner, and by him applied to his own freight.
And on what principle could a right in the insurer to recover back, in such an action against the insured, be maintained ?
It must be recollected that I am here speaking of the case of an abandonment on a voyage in which freight has been earned. In cases of absolute total loss, no freight can be earned; but in that of a technical total loss, it is well known that freight may be earned. It was not disputed in the argument, that freight, in this case, was earned; and the sufficiency of the abandonment to cast the loss upon the underwriters, is now decided. It is true, the underwriters did not accept the abandonment, and have not, by any express act, accepted the salvage, but they are doing it now, when they lay claim to the proceeds of the salvage remitted to Catlett. If they do not mean to be incumbered with the freight, let them withdraw their claim to the remittance, and Catlett then remains in possession of the cargo, subject to his lien for freight.
The case must, then, be considered as one in which the [*399 ] * freight is earned, and both the abandonment and salvage
accepted; but the proceeds of the latter remitted to the
Columbian Insurance Company v. Catlett. 12 W. ship-owner, and by him retained for freight. The question will be whether, in such a case, the underwriter, who has thus been compelled, in effect, to pay the freight, can recover it, in any form of action, from the insured ?
What is the effect of a valid abandonment? The right here contended for is, “ the right to pay the freight out of the salvage.” It is not true, in a sense applicable to this case, that the insured has no right to throw the freight upon the insurer. The right to abandon positively implies a right to throw the freight upon the underwriter indirectly. It is a right to charge him with a total loss, and if he gets nothing from the wreck, the insured has only asserted his rights against him to their acknowledged extent. It is a right to convert a partial actual loss into a technical total loss.
There is one technical total loss familiarly known to lawyers and merchants, which occurs without abandonment. I mean, where the goods saved are less in value than the freight. There is a complete analogy between the two cases; and, in the latter case, it is expressly adjudged, and so laid down by the best elementary writers, “that the insured has a right to apply the salvage to pay the freight, 2 Marsh. 588, giving credit for the balance only to the underwriter.” 2 Marsh. 619. And this is precisely the right which Catlett contends for in the present case.
The right so to apply the salvage results unavoidably from the received and acknowledged consequences of the right of abandonment.
Take the familiar case that occurs every day in time of war. A vessel is captured by an enemy; the insurer on the cargo hears of it, tenders his abandonment, and it is accepted and paid. Who, at that period, would think of making a discount of the freight from the policy? It has not been earned; the insured never was liable for it. But the ship is rescued by her crew, proceeds on her voyage, arrives in safety, and delivers her cargo. Here freight is earned, and must be paid; but by whom? Certainly not by the shipper, for he is divorced from the adventure, and the goods are as * much [ * 400 ] the property of the underwriters as if they had purchased and shipped them.
I have mentioned the case of an accepted abandonment; but the effect of a valid abandonment is the same as if it had been accepted.
In the case at bar, at what point of time did the transfer of interest take place ? Certainly, at the instant when the accident happened. The abandonment has the same effect as if the owner and insurer had been on board, and the abandonment made at the moment the misfortune occurred. But freight had not then been earned ; the Columbian Insurance Company v. Catlett. 12 W. liability for it had not attached on the insured ; and, in the eye of the law, as between him and the underwriter, it could no more attach on him than if the cargo had then gone to the bottom. By the abandonment, it is as to him as if it had gone to the bottom. The law places it in that situation, by declaring it a total loss; and the language of the books on this subject is, “ that he ought not to be placed in a worse situation than if the cargo had gone to the bottom.” Boyfield and Brown, 2 Str. et passim. The insured never incurred the liability for the freight, but the underwriters did; for when the freight was earned, he stood in the place of the insured.
In arguing to show that a liability for the freight never did attach upon the insured, as between him and the underwriter, I have considered the transfer by abandonment as taking place at the moment of the accident. But as to the effect of the abandonment the law goes further, and considers the underwriter in the light of the owner from the commencement of the voyage. Marshall, 601–2. Upon this principle it is that, in the case of a ship insured and abandoned, the underwriter is entitled to whatever freight she may afterwards earn. In the language of Mr. Marshall, “ the insurer becomes the legal assignee and owner, and from that time he is liable for all her future outgoings, and, consequently, entitled to all her future earnings."
But if entitled to freight to be earned by the ship, why should not the cargo in his hands remain liable for freight to be afterwards incurred ? Liability in the one instance is the correlative of right in
the other. It is altogether a mistake to call this charging [ * 401 ] the underwriter with the freight. The * proposition affirmed
is that the abandonment does not discharge the cargo from the lien for the freight, to which it was subject in the hands of the insured. Even in the hands of the owner, this liability was not unlimited and unconditional; for if damage is incurred, (by perils of the sea, not from internal decay,) and the salvage goods will not pay the freight in value, the owner is not bound to receive them. Of his interest in this behalf he may judge for himself; it is only when he does receive them that he must pay. And this is precisely the alternative which Catlett holds out to the underwriters.
There is a very strong, and, I think, conclusive adjudication on this subject, to be found in the third volume of the Massachusetts Reports; it is the case of Frothingham v. Prince, p. 563, vol. 3.
Wages are to the ship what freight is to the cargo; a contingent liability attaching only on the fulfilment of the contract. In the case referred to, a vessel had been insured from St. Ubes to a port of discharge in the United States. She was cast away on Cape Cod,