228 F. Supp. 145 | S.D.N.Y. | 1964
This is a declaratory judgment action brought by the United States to determine whether it or respondent Cargo Salvage Corporation has the right to cargo aboard a wrecked vessel on the bottom of Lake Huron. For reasons indicated below, the Court concludes that the cargo belongs to respondent.
The S.S. Monrovia, a Liberian ship, with a cargo of steel,
On October 1, 1959, a Chicago law firm sent a letter
Apparently, at about the same time, the Engineers were also making plans to salvage the cargo. On September 23, 1960, the Engineers issued invitations for bids to remove the wreck of the S.S. Monrovia to a clear swept depth of forty feet.
Respondent bases its claim to the cargo on assignments made to it by the insurance underwriters who became subrogated to the rights of the cargo interest upon payment to it of the insured value. Libelant United States claims that it has the right to dispose of the cargo pursuant to Section 19 of the Rivers and Harbors Appropriation Act of March 3, 1899, 30 Stat. 1154, 33 U.S.C. § 414, arguing that this statute permits it to remove and dispose of an obstruction to navigation and all cargo on board, if the obstruction is not removed by the private owner. Application of the statute in this case to cut off the alleged rights of the cargo interest raises questions of statutory construction and, according to Cargo Salvage, constitutional issues, as well.
The United States argues that Cargo Salvage does not have any legal interest in the cargo or, if it does, it must recover its full damages for any injury from a third party. The contentions that Cargo Salvage has no proper interest in the cargo will be considered first.
The government attacks the assignments to Cargo Salvage on a number of grounds. The first is that the only consideration for the assignments were promises by Cargo Salvage that it would endeavor to effect salvage and after “payment of all proper expenses and charges” would turn over any net recovery to the underwriters. The government argues that these are “assignments for collection” and as such do not convey sufficient interest to Cargo Salvage to allow it to make claim to the cargo. However, an “assignment for collection” conveys legal title and interest to maintain suit. Rosenblum v. Dingfelder, 111 F.2d 406 (2 Cir. 1940); see generally 3 Moore, Federal Practice ¶ 17.09 p. 1341 (2 ed. 1963).
The government further contends that the assignments to Cargo Salvage are null and void by virtue of the anti-assignment statute, 31 U.S.C. § 203. This statute nullifies assignments of claims upon the United States unless there is compliance with certain conditions, concededly not met by the assignments involved here. In support of its position, the government cites, inter alia, United States v. Gillis, 95 U.S. (5 Otto) 407, 24 L.Ed. 503 (1877) and Coté v. United States, 3 Ct.Cl. 64 (1867). In those cases, confederate property had been lawfully seized by the government during the Civil War and sold. Suit was brought for return of the proceeds under an act of Congress setting forth the conditions under which the former owners of property so seized could claim the proceeds of the sale of the property. Act of March 3, 1863, 12 Stat. 820. It was held in both cases that the anti-assignment statute forbade assignments of claims for these proceeds. However, in those cases the United States was clearly the owner of the property before it
The United States further argues that Cargo Salvage should not be allowed to interfere with assertion by the United States of interest in the cargo, since Cargo Salvage can obtain full recovery for loss of the cargo from the 5.5. Royalton. In a suit brought by cargo owners and underwriters against the 5.5. Royalton growing out of the collision which sank the S.S. Monrovia, the Sixth Circuit has held that the S.S. Royalton was partly at fault in causing the collision and resulting loss. Federal Ins. Co. v. S.S. Royalton, 312 F.2d 671 (6 Cir. 1963). However, the fact that Cargo Salvage may have a claim against the S.S. Royalton does not mean that it is not entitled to salvage the cargo, if it is the legal owner thereof. In fact, the converse is true, since it has a legal obligation to mitigate damages and salvage, where feasible, is part of this obligation. Compagnie De Navigation Fraissinet & Cyprien Fabre, S.A. v. Mondial United Corp., 316 F.2d 163, 171 (5 Cir. 1963) ; Cargill, Inc. v. The Frank A. Lowery, 159 F.Supp. 133 (N.D.N.Y.1957), aff’d per curiam, 251 F.2d 845 (2 Cir.), cert, denied, 356 U.S. 951, 78 S.Ct. 917, 2 L.Ed.2d 845 (1958).
Finally, the government urges that Cargo Salvage has no interest in the cargo because, for various reasons,
“Whenever the navigation of any river, lake, harbor, sound, bay, canal, or other navigable waters of the United States shall be obstructed or endangered by any sunken vessel, boat, water craft, raft, or other similar obstruction, and such obstruction has existed for a longer period than thirty days, or whenever the abandonment of such obstruction can be legally established in a less space of time, the sunken vessel, boat, water craft, raft, or other obstruction shall be subject to be broken up, removed, sold, or otherwise disposed of by the Secretary of the Army at his discretion, without liability for any damage to the owners of the same: Provided, That in his discretion, the Secretary of the Army may cause reasonable notice of such obstruction of not less than thirty days, unless the legal abandonment of the obstruction can be established in a less time, to be given by publication, addressed ‘To whom it may concern,’ in a newspaper published nearest to the locality of the obstruction, requiring the removal thereof: And provided also, That the Secretary of the Army may, in his discretion, at or*150 after the time of giving such notice, cause sealed proposals to be solicited by public advertisement, giving reasonable notice of not less than ten days, for the removal of such obstruction as soon as possible after the expiration of the above specified thirty days’ notice, in case it has not in the meantime been so removed, these proposals and contracts, at his discretion, to be conditioned that such vessel, boat, water craft, raft, or other obstruction, and all cargo and property contained therein, shall become the property of the contractor, and the contract shall be awarded to the bidder making the proposition most advantageous to the United States: Provided, That such bidder shall give satisfactory security to execute the work: Provided further, That any money received from the sale of any such wreck, or from any contractor for the removal of wrecks, under this paragraph shall be covered into the Treasury of the United States.”
The key questions in construing Section 414 are: (1) whether it can be used to cut off the rights of an owner of cargo, as well as the rights of the owner of a vessel; (2) if so, whether the cargo must independently be an obstruction to navigation for the statute to be applied; and (3) whether notice under the statute must be given to the cargo interest.
In support of the position that all cargo in submerged vessels which become obstructions to navigation are covered by the statute, the United States relies on the following language from the second proviso in Section 414:
“[T]he Secretary of the Army may * * * cause sealed proposals to be solicited * * * for the removal of such obstruction * * *, these proposals and contracts, * * * to be conditioned that such vessel, boat, water craft, raft, or other obstruction, and all cargo and property contained therein, shall become the property of the contractor, and the contract shall be awarded to the bidder making the proposition most advantageous to the United States * * * ” (Emphasis added.)
The United States argues that the emphasized language clearly extends the reach of the statute to all property contained in the sunken vessel, including cargo. Respondent interprets the word! “cargo” in this section as meaning only cargo owned by the owner of the vessel, and not cargo (such as the steel here)' owned by another interest. This argument is based on the fact that the word cargo does not appear in the first part of Section 414, which provides that any sunken vessel which obstructs navigation for more than thirty days is subject to. being “broken up, removed, sold, or otherwise disposed of by the Secretary of the Army * * Nor does the word cargo appear in the immediately following first proviso which provides that notice, in the discretion of the Secretary of the Army, requiring the removal of the obstruction may be given in a newspaper published nearest the locality of the obstruction. Respondents then argue that “the words ‘cargo and property,’ used for the first time in this third part of section 414, appear to have been included as an afterthought.”
Section 414 was originally passed in 1899, and the legislative his
“[T]he two sections afford provision for the interests of commerce and at the same time give to the owners of wrecks and abandoned property all possible protection consistent with the essential interests of navigation.” (Emphasis added.)
H.R.Rep.No.1826, 55th Cong., 3d Sess. 4 (1899). Thus, the Report describes three separate interests: “interests of commerce,” “owners of wrecks,” and owners of “abandoned property.”
“This act modifies the existing law. It contains two provisions — section [414], providing for ordinary cases, the scope of which is not greatly different from existing statutes on the subject. * * * ”
Once the previous statutes governing removal of wrecks are examined, it becomes evident that cargo meant, at the time of the passage in 1899 of what is now 33 U.S.C. § 414, an interest totally distinct from the ownership of the vessel itself. Thus, Section 4 of the Rivers and Harbors Act of June. 14, 1880, 21 Stat. 180, 197 stated:
“Whenever * * * the navigation of any river, lake * * * or other navigable water of the United States, shall be obstructed or endangered by any sunken vessel or water-craft, it shall be the duty of the Secretary of War * * * to cause reasonable notice, of not less than thirty days, to be given, personally or by publication, at least once a week in the newspaper published nearest the locality of such sunken vessel or craft, to all persons interested in such vessel or craft, or in the cargo thereof, of the purpose of said Secretary, unless such vessel or craft shall be removed as soon thereafter as practicable by the parties interested therein, to cause the same to be removed. If such sunken vessel or craft and cargo shall not be removed by the parties interested therein as soon as practicable after the date of the giving of such notice by publication, or after such personal service of notice, * * * such sunken vessel or craft shall be treated as abandoned * * * and the Secretary of War shall proceed to remove the same. Such sunken vessel or craft and cargo and all property therein when so removed shall * * * be sold to the highest bidder # * * and the proceeds of such sales shall be deposited in the Treasury of the United States.” (Emphasis added.)
The Rivers and Harbors Act of August 2, 1882, 22 Stat. 191, 208, enlarged the power of the Secretary of War to allow him to “sell and dispose of any such sunken craft, vessel, or cargo, or property therein, before the raising or removal thereof * * *.” (Emphasis added.) The prior statutes clearly differentiated between interest in the vessel and interest in the cargo and there is nothing to
The next question in construing this statute is raised by Cargo Salvage’s argument that even if Section 414 applies to cargo owned by an interest independent of the hull, the hull of the S.S. Monrovia and the cargo do not constitute an obstruction to navigation and, consequently, Section 414 is inapplicable to the cargo. Although one witness called by the United States testified that it would be safer for navigation if the wreck of the S.S. Monrovia were completely removed,
Respondent interprets Section 414 as requiring the dividing of a ship into segments and would require the cargo and hull containing it to be an independent menace to navigation in order for the statute to operate upon them. However, the statute refers to obstruction by “any sunken vessel * * and a mast is part of the vessel. The statute is in terms of the entity, and not its individual parts. Carried to its logical extreme, respondent’s reasoning would result in dividing vessels into bow and stern, superstructure and hull, port and starboard, an approach clearly illogical and impractical. In Zubik v. United States, 190 F.2d 278, 282 (3 Cir. 1951), the Court held that a lower barge was an obstruction to navigation even though it did not independently menace navigation, but merely served as a foundation upon which rested another barge which did obstruct navigation. I hold that if any part of a ship constitutes an obstruction to navigation, this is enough to trigger the statute.
All of the above brings us to the major problem raised by this case — whether any notice under Section 414 must be given by the government to the cargo interest before its right to cargo can be cut off. It is clear that no such notice was given by the government to the cargo interest before the invitations to bid were issued on September 23, 1960.
Section 414 is not a model of clarity .and resolution of the problems raised by its construction is troublesome. Cf. United States v. Bethlehem Steel Corp., 319 F.2d 512 (9 Cir. 1963), cert, denied, '375 U.S. 966, 84 S.Ct. 484, 11 L.Ed.2d 415 (1964). The questions raised include the following: does Section 414 require notice to interested parties; if not, is it •constitutional; if it does provide for notice, is notice to the hull owner sufficient or must notice be given to the cargo interest, as well; if only the former, does This deprive the cargo interest of constitutional rights; if the government is not required to give notice, but decides to do so, must the notice be to both the Lull owner and cargo interest; if notice is given solely to the hull owner, does this violate any constitutional right of the cargo interest ?
On the subject of notice, Section 414 provides only:
“That in his discretion, the Secretary of the Army may cause reasonable notice of such obstruction of not less than thirty days, unless the legal abandonment of the obstruction can be established in a less time, to be given by publication, addressed ‘To whom it may concern,’ in a newspaper published nearest to the locality of the obstruction, requiring the removal thereof * *
The notice called for by the section appears to be discretionary, not obligatory. This construction is in accord with Zubik v. United States, 190 F.2d 278 (3 Cir. 1951). In that case, the Court held that since notice under Section 414 was purely discretionary, removal of a barge was not arbitrary or unreasonable, even though notice had not been given to the owner. This is a change from Section 414’s predecessor quoted above (Section 4 of the River and Harbor Act of June 14, 1880). That statute required the Secretary of War to give reasonable notice “to all persons interested in such vessel * * * or in the cargo thereof, of the purpose of said Secretary, unless such vessel or craft shall be removed as soon thereafter as practical by the parties interested therein, to cause the same to be removed” and provided that such notice could be given either by publication or personally. The change in the notice requirement, of course, is a substantial one, despite the statement in the House Report quoted above that the “scope” of what is now Section 414 “is not greatly different” from the prior statutes. Thus, it is reasonably clear that the statute envisions cutting off of the rights of the hull owner and cargo interest even if the government gives no notice to either party.
Whether this is constitutional is another problem. However, it is not necessary to reach the constitutional question because the crucial issue in this case is whether, if the government decides to give notice in its discretion, notice must be given to both the hull owner and cargo interest. This problem is one of statutory construction and, ultimately, of constitutional validity, since construction of the statute to allow notice to only one interest may be unconstitutional.
Section 414 obviously contemplates the possibility of notice. It refers
The crucial question, therefore, becomes whether the government has decided to furnish any notice at all under Section 414. Throughout the period of this controversy a regulation of the Engineers, 33 C.F.R. § 209.190 provided, in part, as follows:
Ҥ 209.190 Removal of wrecks and other obstructions.
“(a) Laws relative to removal of wrecks and obstructions. The laws relating to removal of wrecks are contained in sections 15, 19, and 20 of the River and Harbor Act of March 3, 1899, and section 1 of the act of August 16, 1937. Section 15 of the former act provides that it shall be the duty of the owner to mark the location of the wreck immediately and until removed or abandoned; sections 19 and 20 authorize removal under the direction of the Secretary of the Army if the owner does not take action; section 19 governs in cases where removal is not an urgent necessity; and section 20 applies to emergencies where the interests of navigation require immediate action. Section 1 of the latter act provides for action in ease the owner fails to mark a wreck suitably.
* -X-
“(c) General procedure on wrecks and obstructions. (1) District Engineers receiving information of the existence of any wreck or similar obstruction in navigable waters of the United States within the limits of their districts will at once ascertain whether navigation is obstructed or endangered. If the obstruction is found to be of a character requiring removal thereof the District Engineer will promptly inform the owner of the provisions of law on the subject.
“(2) Vessel owners, mastei's and others interested are encouraged to send to the District Engineer as prompt and accurate reports as possible of wrecks and their approximate location.
“(3) If removal is commenced by the owner the District Engineer will keep himself informed of the progress of the work and will exercise*155 sufficient supervision of the operations to insure that they cause no unreasonable interference with navigation and that the operations are diligently prosecuted as required by law. If removal by the United States is found necessary proceedings must be promptly instituted in accordance with the appropriate provisions of law. In such case if the owner has not marked the obstruction the District Engineer will immediately request the district commander of Coast Guard to see that marks are established.
“(4) In the removal and disposal of sunken vessels the District Engineer will ascertain from the owner, if known, whether there is a Government interest in the vessel by way of mortgage or otherwise, and if such interest be found he will ascertain what disposition is desired by the Maritime Commission or other agency of the Government having such interest before offering the vessel for sale to the public.
*
“(h) Removal of obstructions under section 19 of the River and Harbor Act of March S, 1899. Action under this section for removal of an obstruction requires prior authority from the Chief of Engineers and may be undertaken only when navigation of navigable waters of the United States is obstructed or endangered, and if the obstruction has been in existence for a longer period than thirty days, or its abandonment by the owner can be legally established in a shorter period. The obstruction can be removed by any method deemed most advantageous.” (Emphasis partially added.)
Thus, it is clear that the government in this Regulation has taken upon itself the obligation of providing some notice under Section 414, that is to “promptly inform the owner of the provisions of law on the subject” of removal of wrecks.
The United States argues that no notice was required since (1) the Engineers assumed that the cargo interest had given up any attempt to salvage; (2) the cargo interest knew of the hull owner’s abandonment; and (3) the Engi
The argument that it was assumed by the Engineers that the cargo interest had given up any attempt to salvage is probably based on the October 1, 1959 letter from the Chicago law firm representing the hull owner to the effect that the hull owner abandoned his interest and that the cargo owner, represented by a New York law firm, intended “to undertake cargo salvage operations this autumn.”
Further, even if the cargo interest knew of the hull owner’s intent to abandon, it did not necessarily know at that time of the provisions of law (which the Engineers’ Regulation required be called to the attention of the “owner”) and of the Engineers’ view that 33 U.S.C. § 414 was applicable to-cargo owned independently of the hull. Lastly, it is not correct that notice to-the cargo interest could be given here through notice to the hull owner. It is-true that in certain emergency situations, the master of a ship can act as agents-for cargo. However, this doctrine does-not have application where the cargo-owner can be communicated with without imprudent delay. Carver, Carriage of Goods By Sea, 507-14 (10th ed„ 1957). The government cites an early case in which the master of a ship was allowed to institute suit on behalf of cargo for damages resulting from a wreck. Newell v. Norton and Ship, 70' U.S. (3 Wall.) 257, 18 L.Ed. 271 (1865). However, no case is cited to the Court, holding that this doctrine has application to a notice statute, especially where notice by publication is authorized and where the time for action does not preclude notice to the cargo interest directly. As a matter of fact, this agency argument undermines the Engineers’ ultimate legal position. If the hull owner acted as agent for cargo interest, then its-letter of October 1, 1959,
Lastly, the Engineers argue that by September 29, 1960,
Accordingly, I hold that the interest of Cargo Salvage in the cargo in question has not been cut off. This does not mean that the Engineers at some future date may not enforce 33 U.S.C. § 414 against this cargo. Vitarelli v. Seaton, supra, 359 U.S. at 546, 79 S.Ct. 968, 3 L.Ed.2d 1012. It does mean that at the time of the decree to be entered herein, the government does not have any interest in the cargo. Thereafter, Cargo Salvage may take immediate steps in compliance with Section 414 and any applicable regulations to salvage the cargo.
This opinion incorporates findings of fact and conclusions of law pursuant to Admiralty Rule 46%. Submit decree on notice in accordance with this opinion.
. There was other cargo aboard, but no claim is asserted by its owner’s.
. During 1961, there were 5,768 vessel passages along the down-bound lane. Transcript [hereinafter cited as “Tr.”], p. 68. The navigation season on Lake Huron is roughly coextensive with the spring and summer months. Tr. pp. 52, 68, 85.
. Tr. p. 50. The up-bound and down-bound lanes are set by the Lake Carriers Association.
. A survey was first attempted in the fall of 1959, but had to be abandoned because of adverse weather. The survey was completed in April 1960. Tr. p. 68.
. Tr. pp. 48-49.
. Tr. pp. 92-94, 131.
. Libelant Ex. 3.
. Libelant Ex. 1.
. Tr. p. 161.
. Tr. p. 145.
. Tr. pp. 145-46.
. Tr. p. 147.
. Tr. p. 150; Respondent Ex. J.
. Tr. p. 151.
. Tr. p. 29; Respondent Ex. A.
. Libelant Ex. 4.
. Tr. p. 29.
. Tr. pp. 33-34.
. Tr. p. 151; Respondent Ex. K.
. Tr. pp. 60, 82, 85, 152-54. The buoy is being maintained by the Engineers at an annual expense of $600.
. The arguments are (1) the assignments by the underwriters were not made within thirty days of the sinking, (2) there is no proof that the underwriters themselves acquired any interest through subrogation within thirty days of the sinking, (3) any interest Cargo Salvage had was lost by operation of law. Trial Brief of the United States, pp. 4r-10
. Brief on Behalf of Respondent, Cargo Salvage Corporation, p. 23.
. See generally Koonce, Federal Laws Affecting River & Harbor Works, speech given at the Engineer School, Fort Humphreys, Virginia (April 23, 1926), attached to Trial Brief of the United States.
. In Cargill, Inc. v. The Frank A. Lowery, supra, the Engineers removed and sold a barge and cargo under 33 U.S.C. § 415 and retained the proceeds from the sale of the cargo even though owned independently of the hull. The wording of §§ 414 and 415 are similar and should be construed in pari materia.
. Of course, it may be argued, as no doubt respondent would, that “owners of wrecks and abandoned property” refers to one interest.
. Tr. pp. 46-47, 50.
. Tr. pp. 47, 101.
. Tr. pp. 48-49.
. Respondent Ex. A.
. Tr. pp. 51-52, 101.
. Tr. p. 98; Libelant’s Supplemental Brief, pp. 1-4.
. Libelant’s Supplemental Brief, p. 5, citing Zubik v. United States, 190 F.2d 278 (3 Cir. 1951).
. Some other questions raised by § 414 winch need not be answered at this time are (1) does the thirty-day period start running from the time of the wreck (the government’s position here), from the time the Engineers determine the wreck to be an obstruction, or from the giving of notice; (2) is the thirty-day period required for removal so short as to be unconstitutional; (3) what is the effect of the government’s practice of not requiring removal within thirty days, but only an intention to remove (see note 41 infra); and (4) if a cargo interest acts within a thirty-day period, does it merely have to remove its cargo or also remove the obstruction? In Zubik v. United States, supra, cargo was removed from a barge some three months after sinking leaving the barge still an obstruction to navigation, apparently without objec- . tion by the government.
. Neither party in its pre- or post-trial briefs or at trial informed the Court of this Regulation. However, in a conference held after the trial, the Court called the Regulation to the attention of the parties to ascertain their position with respect thereto. Subsequently, additional briefs were submitted, and the United States reasserted its previous arguments and made some additional points, which will be discussed below.
. Tr. p. 95; Libelant’s Supplemental Brief, p. 1. By October 1959, the Engineers knew there was a separate cargo interest. Tr. p. 28.
. Cargo Salvage argues that the Regulation, as well as § 414, requires notice to cargo interest. Respondent’s Supplemental Brief, p. 8.
. Libelant Ex. 3.
. Tr. p. 147; Respondent Ex. J. This agreement was never carried out. It is not clear from the record whether the Engineers know about this contract when they sent out the invitations to bid the following month, but it is clear that they knew of the contract shortly thereafter. Tr. pp. 88-92; Respondent Ex. B.
. See note 33 supra. Under the earlier statutes, “reasonable notice, of not less than thirty days” was required to be given and the “vessel” was “treated as abandoned” if the “vessel or craft and cargo [was] not * * removed by the parties interested therein as soon as practicable after the date of the giving of such notice by publication, or after such, personal service of notice * *
. Libelant Ex. 3.
. The government made clear at trial that its position is not that removal of an obstruction must be completed within a thirty-day period, but that within this period the Engineers must be informed that the obstruction will be removed. Tr. pp. 19-20; Libelant’s Supplemental Brief, p. 7.
. This was the date of letter from the cargo interest to the Engineers after learning of plans by the United States to dispose of the cargo. See text accompanying note 16 supra.
. Libelant’s Supplemental Brief, p. 3.
. That contractors looked to the value of the cargo for their profit is shown by Respondent Exs. A, J, and K.