China Mutual Insurance v. Force , 142 N.Y. 90 ( 1894 )

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The principal question, which is presented for our consideration, relates to the effect which should be allowed to the decrees of the Vice Admiralty Court in Rangoon. No question is made about its exercise of jurisdiction in seizing and ordering the sale of the vessel, cargo etc.; neither is any question made as to the rights of the salvor to receive salvage moneys out of the fund in the registry of the court. The question is whether, after seizure and sale of the property and the award of salvage moneys, the Admiralty Court could summarily proceed upon the application of the Chartered Bank of India etc., as it did, with respect to the surplus moneys in its registry. Was its decree as to that matter conclusive upon these plaintiffs and are they debarred from setting up that, however conclusive may have been its decree with respect to the sale of the property, or the award of salvage moneys, they are not concluded from inquiring into the sufficiency of the proceedings to divest them of their proprietary interest in the remainder of the proceeds. After the best consideration I have been able to give to the subject, I think these questions are to be answered in the negative. I am not aware that any rule of the Admiralty Law requires us to answer them otherwise, and although the proceeding was in rem, nevertheless, the court was bound to proceed, in the determination of rights to the proceeds, by proper judicial proceedings; without which its decree could not, and ought not to be conclusive. Mr. Justice STORY observed inBradstreet v. Neptune Ins. Co. (3 Sumn. 600), with respect to an essential element for the conclusiveness of a foreign judgment: "That element is that there have been proper judicial proceedings upon which to found the decree;" and he proceeds to describe them, mentioning the necessity of personal or public notice of the proceedings so that the parties in interest may have an opportunity to be heard. Other than what the seizure of the vessel, cargo etc. is deemed to import to the world, there was no notice of any kind to the owner of either and if any publication was made in the whole proceeding, it was under an order directing the bailiff to advertise his sale in certain newspapers. Beyond the petition of the Chartered Bank for the condemnation of the vessel and the order for the payment of the petitioner from the proceeds, subject to the salvor's claim, the foreign record does not disclose any process or proceeding for the determination of the question of its right. Was this record sufficient to show that the court competently exercised its jurisdictional powers, so as to bind parties with adverse interests by its decree? I think not. The proceeding before the admiralty court was against the vessel, cargo etc., and jurisdiction was acquired by their seizure; which is supposed to constitute due notice to all parties interested and to empower the court to order the disposition of the property seized. It proceeded to order a sale of the vessel, cargo etc., to protect all interests therein, and the effect of the sale was to discharge all liens and to transfer them to the proceeds. The sale passed the title to the property sold as to all the world; although the owners did not appear, and were not heard. The judgment of the court acting in rem, by general maritime law, extinguished the title of the owner and is conclusive upon the title, transfer and disposition of the property itself, in whatever place it may be found, and by whomsoever it may be questioned. These principles of admiralty law have been long settled and are too familiar to need the citation of authorities.

There is no dispute here about the competency of the court in Rangoon to act upon the property and to sell it; nor, when the proceeds came into its registry, to direct the payment thereout of the salvor's claim. The difficulty is to see upon what legal principle the court could dispose of the surplus proceeds remaining in the registry, without adjudging as to the title to them, in some manner which would exhibit an observance of essential legal processes. I think that the power of the court to act competently in a summary manner, as against adverse parties without notice, was limited to the seizure and sale of the property and the award of salvage moneys to the salvors. Thereafter, the court, though in possession of and with jurisdiction over the fund, was bound to proceed in some regular way and upon some notice, in order to determine the relative claims of owners and claimants. I am quite unable to see how the mere order to pay the claim out of the surplus moneys is equivalent to an adjudication, which we must regard as conclusive in its nature. After ordering the sale of the property and adjudging upon the salvor's claim, the question of the right of the Chartered Bank to be paid from a fund, which belonged to others, was one inter alios and in justice and in reason, as it seems to me, those other parties should have had their day in court. Subject to the claim for salvage, the proceeds of the sale of the condemned property belonged to the owners of the vessel and cargo; whatever the liens against them. The principle of a jurisdiction in a court of admiralty power to act summarily and conclusively, without actual notice to parties interested in the property, would seem to have been sufficiently satisfied in the proceedings in question, without extending it so as to permit a disposition of these surplus moneys, upon the mere petition of a claimant and without notice of any description. The 43d rule, of the admiralty rules adopted by the United States Supreme Court in 1844, reads that "any person having an interest in any proceeds in the registry of the court shall have a right by petition, or otherwise, to intervene pro interesse suo for a delivery thereof to him; and upon due notice to the adverse parties, if any, the court shall and may proceed summarily to hear and decide thereon and to decree therein according to law and justice." These rules represent the general course of admiralty practice, as it came to us from the civil law courts, as modified in English courts, and were intended to be in general harmony with the practice in the maritime courts of other nations. (See Benedict's Adm. §§ 11, 356; Henry's Adm. Pr. § 114.)

The spirit of the rule referred to makes notice necessary to a valid decree, disposing of proceeds remaining in the registry of the court, and the appropriateness of its application is not affected by the fact that the claimant here was already in court by its proceeding against the vessel. This surplus of proceeds, in the registry of the court, belonged, in legal contemplation, to the original owners of vessel and cargo, and were there for distribution only. It was the duty of the court to preserve them for all who had claims upon them; and if it allowed claims to be paid, before the legal right of a claimant was established by due process of law, "it would be nothing else than allowing a man's property to be taken from him without his consent and without judgment of law." (The Phebe, 1 Ware's Rep. 360, 365.) It was remarked in Harper v. The New Brig (Gilpin's Rep. at p. 546) that "the power of a court of admiralty over these remnants, or surplusses, is not an arbitrary power, but is governed by principles, which the court is bound to observe before it acts, whether there be or be not a party in court, having an interest or disposition to obtain a proper distribution of them." So far as this foreign record shows, the decree was ex parte, upon the petitioner's statement, and seems as little entitled to be regarded as conclusive, as the sentence, commented upon by Mr Justice STORY, in Bradstreet v. Neptune Ins. Co. (supra). Upon authority, as well as upon principle, I think, while the admiralty court retains jurisdiction over the disposition of the proceeds remaining in its registry, after satisfying the purpose for which its jurisdiction was originally called into exercise, which was, I consider, here the sale of the vessel and property saved and payment of the salvors, that jurisdiction is competently exercised only upon due process of law, by which parties having adverse interests are given an opportunity to be heard. In TheSybil (4 Wheat. 98), after salvage had been decreed out of proceeds, a claim was interposed by the ship owners for freight and average. Mr. Justice JOHNSON, observing that the court was pretty well satisfied that no freight was earned and that average might have been claimed, said, "in the case then depending, the Circuit Court could not have awarded either of those demands. The question is inter alios. There was no pretext for claiming either as against the salvors and the ship owners ought to have pursued their rights by libel, or petition by way of libel, against the portion of the proceeds of the cargo which was adjudged to the shippers. These parties were entitled to be heard upon such a claim and could only be called upon to answer in that mode." In Andrews v. Wall (3 How. U.S. at p. 573), Mr. Justice STORY said: "This is a case of proceeds rightfully in the possession and custody of the admiralty; and it would seem to be, and we are of opinion that it is, an inherent incident to the jurisdiction of that court, to entertain supplemental suits by the parties in interest, to ascertain to whom those proceeds rightfully belong, and to deliver them over to the parties who establish the lawful ownership thereof. This is familiarly known and exercised in cases of the sales of ships to satisfy claims for seamen's wages, for bottomry bonds, for salvage services, and for supplies of materialmen, where, after satisfaction thereof, there remain what is technically called ``remnants and surplusses,' in the registry of the admiralty." If these defendants had a maritime lien, which survived the destruction of the vessel, and they had some proprietary interest in the proceeds in the registry of the court, the general rule, as stated by Mr. Benedict, in his work on admiralty, (§ 305) required that "before the proceeds are distributed, the court on proper proceedings for such purpose, should adjudicate upon the claims to such proceeds arising from liens upon them."

In Sheppard v. Taylor (5 Peters, 675, 711), it was remarked, with respect to the lien for the wages of seamen upon proceeds, that "it is the familiar practice of the court to exert its jurisdiction over them, by way of monition to the parties holding the proceeds;" who, in that case, were the assignees of the owners.

I think our conclusion must be that the order or decree of the Vice Admiralty Court in Rangoon, directing the payment from the proceeds in its registry of the demand of the Chartered Bank, was not conclusive upon these plaintiffs. There was no actual adjudication upon the question of title, through those proceedings which are recognized to be proper, whether in admiralty, at common law, or in equity. That the decree of a foreign court of admiralty is conclusive, upon the point on which the condemnation of the property rested, is not to be disputed; but that it may decree conclusively upon other points incidental to the distribution of the proceeds, without some proper proceedings giving support to the decree, I am not prepared to admit.

Having reached that conclusion, there remains the question whether the defendants are not, nevertheless, entitled to retain the moneys so awarded to them. They say that they had a legal lien upon the cargo for proportional freight. The charter party provided for the payment of freight upon delivery of cargo at port of discharge. It is well settled that, unless the contract of parties provides for the payment of freight pro rataitineris, it is not earned except by a performance of the voyage and the delivery of the cargo at the place of destination. (TheTornado, 108 U.S. 342; N.Y.C. H.R.R.R. Co. v. Standard OilCo., 87 N.Y. 486.) I see nothing in this case to warrant us in saying that the facts constituted any exception to that rule. Nor is the question affected by the "law of the flag," as the defendants have argued. The fact that the vessel was Italian does not subject the contract of shipment to the operation of the Italian Commercial Code. The obligation of the shippers of the cargo is to be determined by the law of the place, where the contract of affreightment was made. In the case of the LiverpoolSteam Co. v. Phenix Ins. Co. (129 U.S. 397), an action brought by an insurance company claiming to be subrogated to the rights of owners of goods on board the "Montana," a British vessel, the question was elaborately discussed, in an opinion by Mr. Justice GRAY, whether, where a contract was made in New York for the shipment upon a British vessel of goods to Great Britain, where the damage itself occurred, questions arising upon the contract should be determined by British law. Many cases in English and American courts were reviewed, including that in this court ofDyke v. Erie R. Co. (45 N.Y. 113), and, upon the great preponderance, if not the uniform concurrence of authority, it was held that the nature, obligation and interpretation of the contract are to be governed by the law of the place where it is made. "A contract of affreightment," it was said, "made in a country between citizens, or residents thereof, and the performance of which begins there, is to be governed by the law of that country, unless the parties * * * clearly manifest a mutual intention that it shall be governed by the law of some other country." (And see Faulkner v. Hart, 82 N.Y. 413.)

For the reasons expressed, I think the judgment appealed from should be affirmed, with costs.

All concur.

Judgment affirmed.