Matson Navigation Co. v. United States , 141 F. Supp. 929 ( 1956 )

Laramore, Judge,

delivered the opinion of the court:

This is a congressional reference case by which the plaintiffs, Matson Navigation Company (hereinafter referred to as Matson) and Union Oil Company of California (hereinafter referred to as Union), seek to recover from the defendant for the loss of their two vessels, the Lahaina and the Montebello, which were sunk by Japanese submarines shortly after the Pearl Harbor attack.¹

The facts relating to the Matson claim are as follows. On November 26,1941, the U. S. Maritime Commission notified Matson that the Commission required the Lahaina, due in San Francisco in December, for a voyage from the Pacific Coast to Vladivostok, U. S. S. R. The Lahaina was to sail on December 18, 1941. Matson instructed that the vessel be dispatched by December 4, 1941, or earlier.

On December 4, 1941, the Lahaina, carrying a miscellaneous cargo, left the Port of Ahukini, Kauai, Territory of Hawaii, bound for San Francisco, Calif. On December 7, 1941, a radio message from the Fourteenth Naval District of the U. S. Navy was received ordering the Lahaina to the nearest friendly or United States port. Upon receipt of this message the vessel reversed its course and proceeded back toward the Territory of Hawaii, the nearest friendly port.

On December 8, 1941, the master of the Lahaina received a message from the commandant of the Twelfth Naval District, U. S. Navy, commanding the master to proceed toward Point Concepcion, Calif. The master reversed his vessel’s course and proceeded toward Point Concepcion.

On December 11, 1941, the Lahaina, when about 700 miles east of Hawaii at latitude 27°35' North and longitude 147°25' West, encountered a Japanese submarine which shelled and sunk her. The Lahaina was insured in favor of Matson against ordinary marine risks in the amount of $800,000 but had no war-risk insurance.

Matson applied to the U. S. Maritime Commission on December 8, 1941, for war-risk hull insurance on the Lahaina and other ships of its fleet. This was the first such application received by the Commission after December 7, 1941. The Commission did not issue such insurance at that time because it had not made a finding that commercial war-risk insurance for privately owned American-flag vessels was not available on reasonable terms and conditions. However, on December 8, 1941, the director of the Division of Insurance of the Commission pointed out that Matson was seeking insurance from the Commission and recommended that a finding be made that commercial insurance was not available on reasonable terms and conditions. On December 11,1941, the Commission approved the recommendation. Matson was, as a consequence, provided insurance as of December 20,1941, and public announcement of the action of the Commission in authorizing insurance on privately owned American-flag vessels was made on December 30,. 1941.

The evidence shows that Matson, on December 8, 1941, sent a telegram to the American Marine Insurance Syndicate in New York City requesting a quotation of rates for 10 unnamed vessels en route to or from San Francisco and the Hawaiian Islands. There is no reply to this inquiry in evidence. Also, on December 8, 1941, the U. S. Maritime Commission contacted the American Marine Hull Insurance Syndicate by telephone regarding the availability of war-risk insurance and was advised that there was no suspension of insurance but that the quoting of rates for voyages in the Pacific was subject to the decision of the committee which was to meet at 2: 30 that afternoon. The evidence fails to show whether the committee met and the results of the meeting, if there was one. By a 3-way telephone conversation the same day the syndicate agent advised that “rates had been quoted for all risks offered and that he had heard nothing from Matson but was ready to bind its vessels at rates to be fixed by the committee.” On December 12, 1941, another request for a quotation of hull war-risk rates was made by Matson and the Lahaina was mentioned. The evidence in reply to this inquiry is that no quotation was then available but that London, on December 15, 1941, quoted a 2-percent rate. Matson did thereafter procure war-risk insurance on 12 of its vessels from the syndicate and canceled it effective December 20,1941, the date the U. S. Maritime Commission insurance attached.

Matson filed a claim on December 29, 1944, with the War Damage Corporation for the loss of the Lahaina. This claim was denied on January 19, 1945, on the ground that vessels were not properly in transit within the meaning of section 5 (g) of tlie Reconstruction Finance Corporation Act, as amended, 56 Stat. 174, and tliat vessels such as Matson’s were excluded from the protection under that act. Suit was filed against the War Damage Corporation in the District Court on March 22, 1945, for the stipulated fair cash value of the vessel, $615,000. The District Court concluded, after a review of the history of the act, that it was intended to protect only “cargoes in transit which were not insurable by the Maritime Commission and insurable otherwise only through private sources at prohibitive costs. * * * Ships were otherwise covered.” Matson Nav. Co. v. War Damage Corporation, 74 F. Supp. 705, 709-710. The Court of Appeals affirmed the decision, 172 F. 2d 942, and the Supreme Court denied certiorari, 337 U. S. 939.

The facts relating to the Union claim are as follows. The Montebello, a tanker, arrived in Port San Luis, Calif., on December 20, 1941. On that date two American vessels came under enemy attack off the coast of California. These were the first such attacks in the Pacific coastal waters. Union was aware of these attacks. Port San Luis was an open port or roadstead and the vessel was just as subject to attack there as it would be in the open sea. Union discussed the danger with the local Navy routing office and it was agreed that if the vessel sailed, it should follow a course as close to the coast as could be done with safety. It was not necessary to obtain permission from the Navy to sail. The Montebello, loaded with oil, was cleared through customs for a voyage to its subsidiary in Canada with no intermediate stops. She was painted a wartime color, blacked out, and radio silence was maintained. She sailed about 1:00 a. m. on December 23, 1941, and at about 5:00 a. m. was torpedoed and sunk by enemy action between 3 and 5y2 miles from the shoreline of the coast of California but over the continental shelf.

Union, both before and after Pearl Harbor, maintained marine war-risk insurance on vessels engaged in foreign trade other than Pacific coastwise trade. Late on Monday, December 22, 1941, Union sought to secure commercial war-risk insurance on seven of its vessels including the Montebello. The insurance was promptly provided but did not become effective until 1:00 p. m. on December 23, and since the Montebello was sunk that morning it was excluded from coverage. There is no evidence to show that Union could not have secured commercial war-risk insurance on the Montebello at an earlier date had it sought to do so. The vessel was covered for one and one-half million dollars by commercial war-risk insurance as well as marine insurance coverage on a trip to Vladivostok in the fall of 1941. Union had not sought war-risk insurance from the Maritime Commission before the sinking of the Montebello.

Union presented a claim to the War Insurance Corporation (name was later changed to War Damage Corporation) on January 15, 1942, in the amount of $1,001,031 for the destruction of the Montebello and her cargo. The claim was denied and suit was brought in the District Court on September 10,1946. It was stipulated by the parties in the suit in the District Court that the fair value of the Montebello, its cargo and stores, was $1,001,431.72. The sole issue presented to the jury was whether the Montebello was within 3 miles of the shoreline of the United States when it was sunk. The jury found that it was not, and the court in an unpublished decision entered judgment for the defendant. Union did not appeal.

The first question presented is whether the plaintiffs have a legal claim against the United States based on section 5 (g) of the Deconstruction Finance Corporation Act, supra. The pertinent part of that section is set forth below.² The plaintiffs contend that their vessels were personal property within the meaning of section 5 (g), supra, and therefore they were covered by the free insurance from December 6, 1941, to July 1, 1942. Matson contends that the Lahaina was “property in transit” and Union contends that the Montebello was “property situated in the United States” within the meaning of section 5 (g), supra.

We agree with the decisions of the District Court and the Court of Appeals in Matson Nav. Co. v. War Damage Corporation, supra, that the property-in-transit clause was limited to cargo and was not intended to cover vessels. The Maritime Commission was already authorized by the Merchant Marine Act of 1936, as amended, 46 U. S. C. § 1128 et seg., to provide war-risk insurance if such insurance was not available on reasonable terms and conditions from commercial insurance companies. The legislative history, which was detailed by the District Court, clearly indicates that section 5 (g), supra, was not intended to include merchant vessels. Accordingly, we find, irrespective of the valid defenses of the statute of limitations and res judicata, that neither the Matson Navigation Company nor the Union Oil Company of California have a legal claim against the United States for the loss of their vessels the Lahaina and the Montebello.

The remaining legal question is whether the Montebello was, for purposes of determining whether its cargo was covered by the free insurance, “situated in the United States” or in a place “determined by the President to be under the dominion and control of the United States,” when sunk. The jury found that the Montebello was sunk beyond the 3-mile limit and Union’s suit was dismissed by the District Court. It is conceded that the Montebello was over the continental shelf when sunk.

Union contends that the Presidential Proclamation 2667, Sept. 28, 1945, 59 Stat. 884, entitled “Policy of the United States with respect to the Natural Resources of the Subsoil and Sea Bed of the Continental Shelf,” established that the Montebello was sunk in the United States or in a place determined by the President to be under the dominion and control of the United States.³

Union’s contention is not well founded. Vessels on the high seas are not within the United States and while on the high seas are not in a place under the dominion and control of the United States. The Presidential Proclamation specifically stated: “The character as high seas of the waters above the continental shelf and the right to their free and unimpeded navigation are in no way thus affected.” Further, the Presidental Proclamation was after the Montebello was sunk, and the terms of the Proclamation indicate it was prospective only. Also, the Proclamation was before the trial of the case in the District Court, and since Union could have raised that question there it is res judicata. Cromwell v. County of Sac, 94 U. S. 351, 352.

We turn now to the question of whether the plaintiffs have an equitable claim against the United States. The plaintiffs contend that they have an equitable claim; i. e., equitable in the broad moral sense as defined in Gay Street Corporation of Baltimore v. United States, 130 C. Cls. 341. The plaintiffs state that to select this single class of property for exclusion from the free war-risk protection is patently unfair, especially when the need for, and the public service of, merchant vessels during this period shortly after Pearl Harbor is considered. Merchant vessels were excluded from the protection of the so-called War Damage Act because the Maritime Commission was authorized to insure when it found commercial insurance could not be obtained on reasonable terms and conditions. Commercial war-risk insurance was available to both plaintiffs. It is true that the Maritime Commission found that adequate insurance on reasonable terms and conditions was not available. However, during this brief period from December I, 1941, to December 31,1941, when Maritime insurance was not available and when commercial insurance was available, we feel that the plaintiffs should have obtained commercial insurance even though terms and conditions were not too desirable, knowing that either the terms and conditions were reasonable dr that the Maritime Commission would, in a matter of weeks, find that they were unreasonable and provide insurance on reasonable terms and conditions. The refusal of plaintiffs to obtain commercial insurance on the Lahaina and the Monte-hello resulted in plaintiffs being their own insurers. We see no reason to shift this loss to the United States. Commercial war-risk insurance was obtained by Matson on its other vessels and canceled when Maritime insurance became available. War inevitably produces hardships, suffering, and losses. Allocation and priority orders were issued that had devastating effects on many businesses. Many wartime regulations were imposed that resulted in unfair treatment. Many persons were called upon to make sacrifices during this period. We find no more moral obligation on the part of the United States to reimburse these plaintiffs for their losses, which could have been prevented, than we do for the persons referred to above.

The actions of the Navy with respect to the Lahaina do not give rise to any moral responsibility on the part of the United States. The Lahaina would still have been hundreds of miles off shore even if she had received no orders from the Navy. Whether she would have been sunk is questionable.

The time of sailing and the course of the Montebello were under the complete control and discretion of Union. Why the Montebello did not wait one day before sailing to see if she had insurance is not explained.

The fact that the plaintiffs paid money to the War Damage Corporation as premiums on policies of insurance issued for the protection of other properties does not give rise to any moral obligation on the part of the United States. The plaintiffs received the protection for their properties during the life of the policies.

Plaintiffs do not have a legal or equitable claim against the United States for the loss of the Lahama and the Montebello and cargo.

If Congress should choose to grant relief to the Matson Navigation Company for the loss of the Lahaina or the Union Oil Company of California for the loss of the Montebello and her cargo, it would be a gratuity.

This opinion and the findings of fact, together with the conclusions thereon, will be certified to Congress pursuant to House Resolution 546, 83d Congress, 2d session.

Madden, Judge; Whitaker, Judge; Littleton, Judge; and Jones, Chief Judge, concur.

BINDINGS OP PACT

The court, having considered the evidence, the report of Commissioner Marion T. Bennett, and the briefs and argument of counsel, makes findings of fact as follows:

1. House Resolution 546, 83d Congress, 2d session, dated June 8,1954, referring this claim, reads as follows:

Resolved., That the bill (H. R. 1950) entitled “A bill for the relief of the Union Oil Company of California and the Matson Navigation Company”, together with all accompanying papers, is hereby referred to the United States Court of Claims pursuant to sections 1492 and 2509 of title 28, United States Code; and said court shall proceed expeditiously with the same in accordance with the provisions of said sections and report to the House, at the earliest practicable date, giving such findings of fact and conclusions thereon as shall be sufficient to inform the Congress of the nature and character of the demand, as a claim legal or equitable, against tbe United States, and the amount, if any, legally or equitably due from the United States to the claimant.

2. H. E. 1950, 83d Congress, 1st session, referred to in the above resolution, reads as follows:

Be it enacted, by the Senate and Home of Representatives of the United States of America m Congress assembled., That out of the sums (of $210,751,618.65) representing profits of the War Damage Corporation, which were required to be covered into the Treasury of the United States pursuant to Public Law 268, Eightieth Congress (61 Stat. 579), the Secretary of the Treasury be, and he is hereby, authorized and directed to pay, to the Union Oil Company of California and the Matson Navigation Company the sums of $1,001,031 and $615,-000, respectively.

The payment of the sum of $1,001,031 shall be in full settlement of all claims of the said Union Oil Company of California against the United States on account of the loss of its tanker vessel steamship Montebello as a result of attack by a Japanese submarine on December 23, 1941. The payment of the sum of $615,000 to the said Matson Navigation Company shall be in full settlement of all claims against the United States on account of the loss of its ship the steamship Lahaina as a result of attack by a Japanese submarine on December 11,1941: Provided, That no part of the amounts appropriated in this Act in excess of 10 per centum thereof shall be paid or delivered to or received by any agent or attorney on account of services rendered in connection with these claims, and the same shall be unlawful, any contract to the contrary notwithstanding. Any person violating the provisions of this Act shall be deemed guilty of a misdemeanor and upon conviction thereof shall be fined in any sum not exceeding $1,000.

3. The War Damage Corporation, herein referred to as War Damage, was the successor in name to the War Insurance Corporation and was organized under the provisions of the Eeconstruction Finance Corporation Act of January 22, 1932 (47 Stat. 5), as amended. The corporation is now dissolved. Its successor in interest was the Eeconstruction Finance Corporation. The EFC is now in liquidation and its successor in interest is the Secretary of the Treasury of the United States.

4. Public Law 506, 77th. Congress, which authorizéd the Eeconstruction Finance Corporation to provide funds for war risk insurance to the War Damage Corporation (56 Stat. 174) was approved on March 27, 1942. It states in part:

Sec. 2. The Eeconstruction Finance Corporation Act, as amended, is hereby amended by inserting after section 5e thereof the following new sections: * * *

Sec. 5g. (a) * * * The Eeconstruction Finance Corporation is authorized to and shall empower the War Damage Corporation to use its funds to provide, through insurance, reinsurance, or otherwise, reasonable protection against loss of or damage to property, real and personal, which may result from enemy attack (including any action taken by the military, naval, or air forces of the United States in resisting enemy attack), with such general exceptions as the War Damage Corporation, with the approval of the Secretary of Commerce, may deem advisable. Such protection shall be made available through the War Damage Corporation on and after a date to be determined and published by the Secretary of Commerce which shall not be later than July 1, 1942, upon the payment of such premium or other charge, and subject to such terms and conditions, as the War Damage Corporation, with the approval of the Secretary of Commerce, may establish, * * *. Such protection shall be applicable only (1) to such property situated in the United States (including the several States and the District of Columbia), the Philippine Islands, the Canal Zone, the Territories and possessions of the United States, and in such other places as may be determined by the President to be under the dominion and control of the United States, (2) to such property in transit between any points located in- any of the foregoing) and (3) to all bridges between the United States and Canada and between the United States and Mexico: Provided, That such protection shall not be applicable after the date determined by the Secretary of Commerce under this subsection to property in transit upon which the United States Maritime Commission is authorized to provide marine war-risk insurance. The War Damage Corporation, with the approval of the Secretary of Commerce, may _ suspend, restrict, or otherwise limit such protection in any area to the extent that it may determine to be necessary or advisable in consideration of the loss of control over such area by the United States making it impossible or impracticable to provide such, protection in such area.

(b) Subject to the authorizations and limitations prescribed in subsection (a), any loss or damage to any such property sustained subsequent to December 6,1941, and prior to the date determined by the Secretary of Commerce under subsection (a), may be compensated by the War Damage Corporation without requiring a contract of insurance or the payment of premium or other charge, and such loss or damage may be adjusted as if a policy covering such property was in fact in force at the time of such loss or damage.

THE MATSON CI/AIM

5. The Matson Navigation Company, hereafter referred to as Matson, is a corporation organized under the laws of the State of California with its principal offices in San Francisco. During the period pertinent here it was the owner of about 40 United States flag vessels which it employed as a common carrier for hire of miscellaneous cargoes between the Hawaiian Islands and the West Coast ports of the United States, with a limited number engaged in trade between West Coast ports and the Far East. One of these vessels was the Lahama, a steel hull steamship of 8,200 deadweight tons and 10 knots speed, built in 1920.

6. On November 26,1941, the United States Maritime Commission notified Matson that the Commission required the Lahaina, due in San Francisco early in December, for a voyage from the Pacific Coast of the United States to Vladivostok, U. S. S. It. Matson inquired of its offices in Hawaii as to the date of departure and was advised that it was contemplated the Lahama would sail December 18. Upon receipt of this information Matson advised its offices in Hawaii that the Lahaina was desired by the Commission at the earliest possible date and instructed that the vessel be dispatched by December 4 or earlier.

7. On December 4, 1941, the Lahaina, carrying a miscellaneous cargo, left the port of Ahukini, Kauai, Territory of Hawaii, bound for San Francisco, California. On December 7,1941, the master of the vessel received a radio message from the Fourteenth Naval District of the United States Navy ordering the Lahaina to the nearest friendly or United States .port. Upon receipt of this message the vessel reversed its course and proceeded back toward the Territory of Hawaii, the nearest friendly port.

8. On December 8,1941, the master of the Lahaina received a message from the Commandant of the Twelfth Naval District, United States Navy, which in contradiction to the message from the Fourteenth District on December 7, commanded the master to proceed toward Point Concepcion, California. Upon receipt of the second message the master once more reversed his vessel’s course and proceeded toward Point Concepcion, which is approximately 250 miles south of San Francisco, the original destination.

9. On December 11, 1941, the Lahaina, when about 700 miles east of Hawaii at latitude 27°35' North and longitude 147°25' West, encountered a submarine of the Imperial Japanese Navy which shelled it at about 1:40 p. m. The vessel sank on December 12 at about 12:30 p. m. There was a total loss of the vessel and cargo, salvage efforts being unsuccessful. The Lahaina was insured in favor of Matson against ordinary marine risks in the amount of $800,000. There was no commercial or United States Maritime Commission marine war risk insurance of any kind or type carried on the Lahaina in December 1941.

10. On December 8, 1941, Matson applied to the United States Maritime Commission for war risk hull insurance on the Lahaina and other ships of the Matson fleet. This was the first such application received by the Commission after December 7,1941. The Commission did not issue such insurance at that time because the Commission had not made a finding that commercial war risk insurance for privately owned American-flag vessels was not available on reasonable terms and conditions. On December 8 the Director of the Division of Insurance of the Commission expressed the view that the events of December 7 might make commercial rates prohibitive and constitute a burden on waterborne commerce. Pie pointed out that Matson was seeking insurance from the Commission and recommended as follows :

(1) That the Commission determine, as required by Section 221 of Public Law No. 677 — 76th Congress, that insurance adequate for the needs of the waterborne commerce of the United States cannot be obtained on reasonable terms and conditions from companies authorized to do an insurance business in a state of the United States, whenever it so appears to the Director, Division of Insurance; * * *

The foregoing recommendation was unanimously approved by the Commission on December 11, 1941. Matson was, as a consequence, provided insurance as of December 20, 1941. Public announcement was made on December 30,1941, of the action of the Commission in authorizing insurance on ships under the law. The announcement is set forth in finding 15.

11. On December 8, 1941, Matson sent a telegram to the American Marine Insurance Syndicate in New York City. This telegram asked for a quotation of rates for ten unnamed vessels of Matson en route to or from San Francisco and the Hawaiian Islands. There is no reply to this inquiry in evidence. On December 12 another request for a quotation of hull war risk rates was made and the Lahaina was mentioned. Evidence in reply to this inquiry is that no quotation was then available but that London on December 15, quoted a 2-percent rate.

12. On December 8,1941, the Director of Insurance for the Maritime Commission contacted the American Marine Hull Insurance Syndicate over the telephone regarding availability of war risk insurance for Matson and was advised that there was no suspension of insurance but that the quoting of rates for voyages in the Pacific was subject to the decision of the committee which was to meet at 2:30 that afternoon. Matson’s secretary in Washington, D. C., was advised of this and being unable himself to contact New York, the defendant’s representative established telephone contact over the Government’s private wire and there ensued a three-way conversation. The insurance syndicate agent advised that rates had. been quoted for all risks offered and that he had heard nothing from Matson but was ready to bind its vessels at rates to be fixed by the committee. Mat-son’s secretary then determined to notify his home office in San Francisco so that if it wanted to take action on this information it could do so. Matson did proceed to secure war risk insurance from this source on 12 vessels and sent a telegram cancelling the same on December 20,1941, effective from tbe moment the Government insurance attached as described in finding 10.

IS. Three public announcements were made by the defendant regarding war risk insurance. The first such release was as follows:

Federal Loan Agency

Washington, December 13, 1941.

Jesse Jones, Federal Loan Administrator, announced today that, with the approval of the President, the Reconstruction Finance Corporation has created the War Insurance Corporation, with a capital of $100 million to provide reasonable protection against losses resulting from enemy attacks which may be sustained by owners of property in continental United States through damage to or destruction of, buildings, structures, and personal property, including goods, growing crops, and orchards.

Pending completion of details, any such losses will be protected from December 13,1941, up to a total of $100 million.

Accounts, bills, currency, debts, evidences of debts, money, notes, securities, paintings, and other objects of art will not be covered.

For the time being, no premium will be charged for this protection, and no declaration or reports required, unless there is a loss.

Other terms and conditions for such protection will be announced as established.

No protection will be available to owners of property who, m the opinion of the President, are unfriendly to the United States.

14. The following announcement was made on December 22, 1941:

Jesse Jones, Federal Loan Administrator, today announced that, with the approval of the President, the War Insurance Corporation, created by Reconstruction Finance Corporation with a capital of $100 million, will extend the same protection to property owners in Alaska, Hawaii, the Philippine Islands, Puerto Rico, and the Virgin Islands as it does to property owners in continental United States.

As previously announced, the War Insurance Corporation will provide reasonable protection against losses resulting from enemy attacks -which may be sustained by such property owners through damage to, or destruction of, buildings, structures, and personal property, including goods, growing crops, and orchards. Accounts, bills, currency, debts, evidences of debt, money, notes, securities, paintings, and other objects of art will not be covered.

When the plan has been fully worked out, it is expected that a premium may be charged for coverage of losses in excess of some stated amount. In the meantime, no application or report will be required unless there is a loss. Other terms and conditions for such protection will be announced as they are established. No protection will be available to owners of property who, in the opinion of the President, are unfriendly to the United States.

15. The following announcement was made by the Maritime Commission on December 30,1941:

The United States Maritime Commission announces that it has set up machinery to provide War Eisk Insurance and Reinsurance on American ships. This action was taken under enabling legislation passed by Congress in June 1940 and under a $40,000,000 fund which was set up shortly thereafter. Under the terms of the Act in question, insurance may be provided whenever in the opinion of the Commission adequate insurance is not obtainable from American commercial underwriters at reasonable terms and conditions. The Commission is also authorized to provide War Risk Insurance and Reinsurance on the lives of crews of American vessels and on cargo carried on American vessels. The present announcement deals only with the insurance on the ships themselves.

The following announcement was made by the Secretary of Commerce in Washington, D. C., on December 30, 1941:

Jesse Jones, Secretary of Commerce, today announced that War Damage Corporation will investigate claims for loss of property in transit between any points located in the United States, and the Canal Zone, and the Territories and possessions of the United States with the exception of the Philippine Islands. All claims for loss of property in transit between such points which resulted directly from enemy attack between December 6,1941, and July 1,1942, should be filed with the Washington office of War Damage Corporation on or before February 1, 1943. Investigation of such claims will be conducted in accordance with the provisions of Section 5g of the Eeconstruction Finance Corporation Act, as amended.

All claimants are notified that, notwithstanding the investigation, War Damage Corporation reserves the right, in accordance with the statute and the regulations issued thereunder, to determine whether or not the Corporation is liable.

16. Matson communicated with the War Damage Corporation by letter on December 29,1944, making a claim and was advised in reply on January 19, 1945, as follows:

The statutory provisions regarding property in transit to which you refer are not interpreted by this Corporation as intended to have application to vessels, and, pursuant to authority contained in the Act, all vessels and water-craft other than (a) those used exclusively for storage, housing, manufacturing or generating power, (b) vessels while under construction, until delivery by the builder or sailing on delivery or trial trip, whichever shall first occur, and (c) pleasure water-craft while laid up afloat or ashore, have, with the approval of the Secretary of Commerce, been excluded from the protection authorized by the Act of March 27, 1942. It is,, therefore, impossible for this Corporation to recognize the claim stated in your letter.

17. On or about March 22,1945, Matson brought an action in the District Court of the United States for the Northern District of California, Southern Division, against the War Damage Corporation, praying for the sum of $615,000 as reimbursement for the loss and destruction of the Lahaina. It was stipulated between plaintiff and defendant that at the time of her loss the fair cash value of the vessel was $615,000, subject to the objections of defendant that the market value was irrelevant and immaterial. Evidence at the trial of the instant suit established that the vessel was built at a cost of $1,788,938.57 in 1920. It came into the hands of Matson in 1936 or 1937. Matson’s books reflected a net book value for the Lcchaina on December 11, 1941, the date of its sinking, of $37,438.57.

18. The District Court entered judgment for the defendant War Damage Corporation on November 17, 1947 (74 F. Supp. 705). Its findings and opinion are included herein by reference. The court concluded, after a review of the legislative history, that the act of March 27, 1942, was intended to protect only “cargoes in transit which were not insurable by the Maritime Commission and insurable otherwise only through private sources at prohibitive costs. * * * Ships were otherwise covered.”

19. The judgment of the District Court was appealed to the Ninth Circuit Court of Appeals which affirmed the decision below on February 28,1949 (172 F. (2d) 942). The opinion of the Circuit Court is included herein by reference. That court said in part:

The question for decision is whether a ship constitutes “property in transit” within the intendment of this statute * * * (56 Stat. 174). From the inception of the legislation to the final enactment of the statute protection for ships appears- to have formed no part of this particular program. The evidence to this effect is simply overwhelming * * *.

Matson petitioned the Supreme Court of the United States for a writ of certiorari but this was denied on June 20, 1949 (337 U. S. 939).

20. Matson has not assigned its claim for the vessel Lahaina nor has it received anything for its loss from the defendant.

THE UNION OH CLAIM

21. The plaintiff, Union Oil Company of California, hereafter referred to as Union Oil, at all times here material, was a corporation organized and existing under the laws of the State of California with its principal offices in Los An-geles and was the owner of a steel hull tanker of 12,304 deadweight tons known as the Montebello.

22. The Montebello arrived in Port San Luis, California, on December 20, 1941. On that date two American vessels came under enemy attack off the coast of California. These were the first such attacks in the Pacific Coastal waters. These events were promptly reported in the newspapers and came to the attention of Union Oil. Plaintiff was concerned about the safety of the Montebello because it was at Port San Luis, which, being an open port or roadstead, made the vessel just as subject to attack as if in the open sea. Union Oil was anxious for the vessel to sail and its port captain discussed tbe problem with, the local Navy routing office. It was agreed that if. the vessel did sail it would be better for her to follow a course as close to the coast as could be done with safety. It was not necessary to get permission from the Navy to sail. Union Oil understood the Navy was taking preventive measures against submarines.

23. The Montebello was cleared through Customs for a voyage to Canada with no intermediate stops. She was blacked outNfor navigation and radio* silence was maintained. The vessel set sail about 1:00 a. m. on December 23, 1941, with a cargo of oil. On or about 5:00 a. m. the vessel was torpedoed and sunk by enemy action. The destruction took place in the Pacific Ocean at a point near the Piedras Blancas Lighthouse between three and five and one-half miles from the shoreline of the coast of California but over the continental shelf.

24. Union Oil both before and after Pearl Harbor maintained marine war risk insurance on vessels engaged in foreign trade other than Pacific coastwise trade. Late on Monday, December 22,1941, Union Oil sought to secure commercial war risk insurance on seven of its vessels including the Montebello. The insurance was promptly provided but did not become effective until 1: 00 p. m. on December 23 and as the Montebello was sunk that morning it was excluded from coverage. The vessel was insured only against ordinary marine risks. There are no facts to establish that Union Oil could not have secured commercial war risk insurance on the Montebello at an earlier date had it sought the same. The vessel was covered for one and one-half million dollars by commercial war risk insurance as well as marine insurance coverage on a trip to Vladivostok in the fall of 1941. Before the sinking of the Montebello its owners had not sought war risk insurance from the defendant.

25. On January 15, 1942, Union Oil presented a claim to the War Insurance Corporation in the amount of $1,001,031 for and on account of the destruction of the Montebello and her cargo, but the claim was denied and nothing has been paid thereon. On September 10, 1946, Union Oil brought suit against the War Damage Corporation in the- United States District Court for the Northern District of California, Southern Division. It was stipulated between the parties to the suit in District Court that the fair cash market value of the Montebello on December 23, 1941, was $922,800 and her cargo of 73,570.99 barrels of crude oil had a fair market value of $71,731.72. The fair market value of the fuel oil aboard was $3,900 and $3,000 for the commissary stores. The total value was thus $1,001,431.72.

The original cost of the Montebello was $2,294,626.83 in 1921. As of October 31,1941, the net book value of the vessel was $315,000. The District Court case was tried before a jury which found for the defendant War Damage Corporation. Union Oil did not appeal this determination.

26. Union Oil has not assigned its claim for the loss of the Montebello nor has it received anything from any agency of the Government of the United States for its loss.

27. The War Damage Corporation did not pay any claims for loss of ships under the free protection provisions of the act cited above. Three such claims were made, two of which are involved in the instant suit.

28. H. R. 1950, set forth in finding 2, provides that both plaintiffs be paid out of the sums representing profits of the War Damage Corporation which were required to be covered into the Treasury of the United States pursuant to Public Law 268,80th Congress. Paragraph 23 (d) of plaintiff’s petition pleads that as plaintiffs paid premiums to the War Damage Corporation after July 1, 1942, they contributed to said profits of the Corporation and are equitably entitled to recover therefrom for losses occurring prior thereto. There is no evidence that such payments were on hulls.

29. The Act of March 27,1942, Public Law 506 of the 77th Congress, included losses occurring in the Philippine Islands but the War Damage Corporation suspended payments for such losses after the capture of the Philippines by the Japanese. Subsequently, the Corporation had a survey made of estimated losses in the Philippines. The Philippine Rehabilitation Act, Public Law 370 of the 79th Congress, approved on April 30, 1946 (60 Stat. 128), was enacted setting up the Philippine War Damage Commission for the purpose of handling the claims which the War Damage Corporation previously had authority to settle in the Philippines. Several hundred million dollars were paid for war damage in the Philippines pursuant to this law. The evidence establishes that payments by the United States to claimants from losses arising from the operation of the Act of March 27, 1942, including payments made in the Philippines under subsequent legislation here described, far exceeded any funds covered into the Treasury from war risk premiums paid.

1 House Resolution 546, 83d Congress, 2d Session, dated June 8, 1954, referring this claim, reads as follows:

“Resolved, That the bill (H. R. 1950) entitled ‘A hill for the relief of the Union Oil Company of California and the Matson Navigation Company,’ together with all accompanying papers, is hereby referred to the United States Court of Claims pursuant to sections 1492 and 2509 of title 28, united States Code; and said court shall proceed expeditiously with the same in accordance with the provisions of said sections and report to the House, at the earliest practicable date, giving such findings of fact and conclusions thereon as shall be sufficient to inform the Congress of the nature and character of the demand, as a claim legal or equitable, against the United States, and the amount, if any, legally or equitably due from the United States to the claimant.”

2 Sec. 5g. (a) * * * The Reconstruction Finance Corporation is authorized to and shall empower the War Damage Corporation to use its funds to provide, through insurance, reinsurance, or otherwise, reasonable protection against loss of or damage to property, real and personal, which may result from enemy attack (including any action taken by the military, naval, or air forces of the united States in resisting enemy attack), with such general exceptions as the War Damage Corporation, with the approval of the Secretary of Commerce, may deem advisable. Such protection shall be made available through the War Damage Corporation on and after a date to be determined and published by the Secretary of Commerce which shall not be later than July 1, 1942, upon the payment of such premium or other charge, and subject to such terms and conditions, as the War Damage Corporation, with the approval of the Secretary of Commerce, may establish, * * *. Such protection shall be applicable only (1) to such property situated in the United States (including the several States and the District of Columbia), the Philippine Islands, the Canal Zone, the Territories and possessions of the United States, and in such other places as may be determined by the President to be under the dominion and control of the United States, (2) to such property in transit between any points located in any of the foregoing, and (3) to all bridges between the united States and Canada and between the United States and Mexico: Provided, That such protection shall not be applicable after the date determined by the Secretary of Commerce under this subsection to property in transit upon which the United States Maritime Commission is authorized to provide marine war-risk insurance. The War Damage Corporation, with the approval of the Secretary of Commerce, may suspend, restrict, or otherwise limit such protection in any area to the extent that it may determine to be necessary or advisable in consideration of the loss of control over such area by the United States making it impossible or impracticable to provide such protection in such area.

(b) Subject to the authorizations and limitations prescribed in subsection (a), any loss or damage to any such property sustained subsequent to December 6, 1941, and prior to the date determined by the Secretary of Commerce under subsection (a), may be compensated by the War Damage Corporation without requiring a contract of insurance or the payment of premium or other charge, and such loss or damage may be adjusted as if a policy covering such property was in fact in force at the time of such loss or damage.

3 * * * Now, Therefore, I, Harry S. Truman, President of the United States of America, do hereby proclaim the following policy of the United States of America with respect to the natural resources of the subsoil and sea bed of the continental shelf.

Having concern for the urgency of conserving and prudently utilizing its natural resources, the Government of the United States regards the natural resources of the subsoil and sea bed of the continental shelf beneath the high seas but contiguous to the coasts of the United States as appertaining to the United States, subject to its jurisdiction and control. In cases where the continental shelf extends to the shores of another State, or is shared with an adjacent State, the boundary shall be determined by the United States and the State concerned in accordance with equitable principles. The character as high seas of the waters above the continental shelf and the right to their free and unimpeded navigation are in no way thus affected.