Suzuki v. National Surety Co.

290 F. 942 | 2d Cir. | 1923

AUGUSTUS N. HAND, District Judge

(after stating the facts as above). Plaintiffs contend that the three days’ notice of default in payment of hire “nominated in the bond” meant three days after knowledge of default. There was in fact a default, no matter what interpretation may be given to the master’s cables, and no matter how far they were true. Until November 28 the vessel was discharging her cargo without injury to it. Under such circumstances she was performing her functions, there had been no ‘loss of time,” and the “breakdown” clause of the charter had not become operative. If the master sent cables to mislead the plaintiffs as to the condition of her hull, he never informed them that she could not discharge, or of any facts which showed that she was at the time off hire. The most that can be said of the effect of his cables is that they gave Cragin & Co. reason to believe that she'would become off hire after she had reached New York and had been placed in dry dock. She was going there to take on another cargo after repairs were made. The three days’ notice after default were prescribed in the bond, and compliance with that requirement was a condition of liability. National Surety Co. v. Long, 125 Fed. 887, 60 C. C. A. 623; United States Fidelity & Guaranty Co. v. Rice, 148 Fed. 206, 78 C. C. A. 164.

It is also contended that the knowledge of the master that the vessel was not off hire "cannot he imputed to the plaintiffs because he was not their agent in respect to the unloading of the cargo (The Santona [C. C.] 152 Fed. 516), and was, moreover, engaged in a fraud upon them. He was, however, their agent in respect to the possession and general management of the vessel (The Santona, supra), and his knowledge that she was on hire was their knowledge (Pine Mountain Iron & Coal Co. v. Bailey, 94 Fed. 258, 36 C. C. A. 229). Nor did any purpose of personal gain which the master had in representing that the vessel was leaking so that she would have to go into dry dock when she reached New York relate to the time that she was discharging or indicate that she was unfit for that purpose. He made no representation when he sent the cables that she was then off hire. The plaintiffs made no attempt to learn whether the ship had ceased discharging, or was for any reason off hire, on November 17:

“Notice of facts which would incite a man of ordinary prudence to an inquiry under similar circumstances is notice of all the facts which a reasonably diligent inquiry would disclose.” Coder v. McPherson, 152 Fed. 951, 82 C. C. A. 91; Grandison v. National Bank of Commerce, 231 Fed. 809, 145 C. C. A. 620.

On the contrary, they insisted that hire was due, and demanded payment from Cragin & Co. on that date. She continued regularly to discharge until November 28. It is to be remembered that the right of the surety company to prompt notice was no merely technical right. It had the right to proceed to carry out the charter party itself in the event of default, or to pursue the charterer who failed to perform, and thus attempt to mitigate damages. Without such a notice the surety was remediless, and if the plaintiffs are right could do nothing but wait and pay. The decisions relating to fidelity bonds do not apply. American Surety v. Pauly, 170 U. S. 133, 18 Sup. Ct. 552, 42 L. Ed. 977; United States Fidelity & Guaranty Co. v. Walker, 248 Fed. 42, 160 C. C. A. 182. Persons occupying positions of trust and. giving bonds for honest conduct inevitably conceal their breaches of trust, and it is a reasonable rule that a notice of default need not be given by the obligee until actual knowledge, of the default has reached him, or such a condition of affairs exists as shows that absence of knowledge is due to the obligee’s own negligence. In the present case, personal knowledge as to whether the vessel was off hire could readily have been had by the Suzuki firm and was possessed by the master of the vessel, who was their agent. The charter hire was due on a definite date, which the plaintiffs knew. If they wished to avoid giving the notice within three days as prescribed, they must at least show that they were misled, or took some means to discover whether the vessel was off hire.

It follows that (1) the vessel was in fact not off hire on November 17, when hire was demanded; (2) nothing was done to lead the plaintiffs to believe that the hire was not then due; (3) the condition precedent to liability on the part of the surety company was not complied with, and the complaint was properly dismissed.

The judgment must accordingly be affirmed.