Case Name: THE NEW BEDFORD COMPANY'S CASE. The New Bedford and New York Propeller Company, Appellants, v. The United States, Appellees
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1874
Citations: 8 Ct. Cl. 23
Docket Number: 
Parties: THE NEW BEDFORD COMPANY'S CASE. The New Bedford and New York Propeller Company, Appellants, v. The United States, Appellees.
Judges: 
Reporter: United States Court of Claims Reports
Volume: 8
Pages: 23–30

Head Matter:
THE NEW BEDFORD COMPANY'S CASE. The New Bedford and New York Propeller Company, Appellants, v. The United States, Appellees.
(5 Court of Claims R., p. 270; 14 Wallace R., p. 671.)
On the claimants’ Appeal.
A charter-party appraise^ the value of the vessel, and, provides that if she he retained in the Government’s service until her earnings (less certain deductions) equal the appraised value, then she shall become the property of the Government; or if the Government, “ at any time during the continuance of the charter,” elect to purchase her, then they shall have the right to talce her at the appraised value, and all money paid on account of her services (less the deductions) shall apply on account of the purchase; the war risk is to he borne by the Government, the marine by the owners. Before the earnings equal the appraised value, andbefore the Government indicates an intent to purchase, she is destroyed by a torpedo in the Cape Fear Fives', March, 1865. The owners are paid by the officers of the Treasury only the balance remaining after deducting her earnings. The oioners seek to recover the appraised value under the insurance clause irrespective of her earnings. The Court of Claims decides that under such a charter-party the Government becomes the equitable owner of the vessel to the extent of the sum earned; and that whether she was talcen under the option given to purchase, or perished by one of the perils against ivhich the Government engaged to insure, this accruing clause was equally applicable. Judgment for the defendants. The claimant’s appeal.
Where the charter-ijarty of a vessel appraises her value and provides that. if she be retained in the charterers’ service until her earnings (less certain deductions) equal her appraised value, she shall become their property; or that if they “ at any time during the continuance of the cha/i'ter ” elect to purchase her, they shall have the right to take her at the appraised value, and all payments on account of her services (less the deductions) shall apply on account of her purchase, there the charter vests an equitable ownership in the charterers, who acquire thereby an insurable interest; and the insurable interest of the owners is proportion-ably reduced, even though the vessel does not become the property of the charterers under the first clause, and they do not signify an intent to purchase hor under the second. And in such a case the liability of the charterers as insurers (under a special insurance clause in the contract) is limited to the balance remaining after deducting the vessel’s earnings. ,,
The Reporters’ statement of the case:
The Court of Claims found as facts in the case that the parties had executed a charter-party which contained the following clauses:
“ The war risk- to be borne by the United States •, the marine risk to be borne by the owners.
“ The said vessel is valued and appraised at the sum of forty thousand dollars, and should she be retained so long in the service of the United States that the money paid and due on account of said charter (deducting therefrom the actual cost of running and keeping in repair the said vessel during the said time, together with the net profit of thirty-three per cent, per annum on said appraised value) shall be equal to said appraised value, then the said vessel shall become the property of the .United States without further payment, except such sum as inay then be due on account of the services of the said vessel, rendered under the said vessel-charter.
“And further, if at any time during the continuance of this charter, the United States shall elect to purchase the said vessel, then they shall have the right to take her at the appraised value at the date of charter, and all money then already paid and due on account of said charter (deducting therefrom the actual cost of running and keeping in repair the said vessel during the said time, together with a net profit of thirty-three per cent, per annum on the original appraised value) shall apply on account of the said purchase.”
The Court of Claims also found among other things:
4th. That the said steamer remained in the military service of the defendants until the 4th day of March, 1865, when she was sunk in the Cape Fear River by the explosion of a torpedo which had been placed there by the public enemy. The said steamer was so sunk without fault or negligence on the part of the owner, and the owner then and thereupon abandoned the said steamer as a total loss.
5th. That the claimant presented to the Government a claim for $40,000 for the loss of the said steamer. The claim was transmitted by the Quartermaster-General to the Third Auditor on the 14th day of February, 1866, and on the 15th day of June, 1866, the Third Auditor made the following adjudication:
“ Treasury Department,
“ Third Auditor’s Opeioe, June 15,1866.
“ In pursuance of an act of Congress approved 3d of March, 1849, entitled ‘An act to provide for the payment of horses and other iiroperty lost or destroyed in the military service of the United States,’ as amended and corrected by the fifth section of the act of March 3d, 1863, it is adjudged by me that there is due from the United States’to the ‘New Bedford and New York Steam Propeller Companyfor the steamer ‘ Thorn,’ destroyed by a torpedo on the 4th day of March, 1885, near Fort Anderson, in Cape Fear Hirer, N. 0., while in the military service of the Upited States, the sum of twenty-eight thousand six hundred and two dollars and thirty-six cents, ($28,602.36.)
“JOHN WILSON,.
“ Third Auditor.”
6th. That the amount so adjudged due by the Third Auditor was paid to, and received by, the claimant, and no other or further sum was ever paid on account of the loss of the claimant’s said steamer.
• 7th. That the said steamer, when she entered the service, and at the time of her loss, was of the value of $40,000.
The United States never at any time notified the claimant of their election to purchase said vessel, or to take her under the accruing or purchase clause of the charter-party.
And as a Conclusion of law, the court held, that the United ' States, under such a charter-party, became the equitable owner of the vessel to the extent of the sum earned over and above the expenses and profits stipulated for; and that to the extent of such sum the owners had received so much payment on the price of the vessel; and that whether she was taken by the United States under the option given to purchase at any time, or perished by one of the perils against which , the United States engaged to insure, this accruing clause was equally applicable. It was only the balance due on the price of the vessel which the original owner could claim, and not the amount of the valuation.
Messrs. If. P. Chip man, T. J. Durant, and O. F. Peek for the claimants, appellants:
1st. In this case there was an amount found to be due,,according to the statement of an accounting officer of the United States Treasury Department, of a certain sum of money, $28,602.36, in favor of the petitioners, which sum was paid to and received by petitioners. Was the receipt of this amount by the petitioners such an act as precludes them from recovering the remainder, or $11,397.64, which, added to the amount paid, would make the value of their boat $40,000 ?
The sum of all the recent decisions of the Supreme Court is, that where an unliquidated de'mand is disputed by the debtor, and a compromise on a smaller sum is arrived at, the receipt of such sum by the creditor is a waiver of all right to claim the remainder. The case now before the court does not come within the scope of the principles of cases quoted. Here there was no receipt given of any kind, and no compromise of a disputed claim, but simply a partial payment on a liquidated demand about which there could be legally no dispute whatever.
2d. The contract of charter-party between the petitioner and the Government' made the United States an insurer against the risk by which the vessel perished ; she was worth $40,000 at the time she entered the service, and at that sum she was valued in the charter-party. Whether this was an open or a valued policy, the Government was an underwriter, then, for forty thousand dollars. It was a liquidated claim. The claimant presented it to the Quartermaster-General at $40,000; the Quartermaster-General admitted it at that amount. There was no dispute about value, either when the claimant made his demand for a total loss, or at any other time.
3d. The vessel having perished on 4th of March, 1865, by the peril insured against, the petitioner made his claim for the insurance. The relation in which he stood to the United States by his contract, and by his claim under it, was that of an assured party towards his underwriter. That attitude, so far as petitioner was concerned, was never changed. Nearly a year after the loss, on the 14th February, 1866, the Quartermaster-General writes to the Third Auditor of the Treasury, transmitting for his information and official action the final account for purchase of steamer Thorn, which was the first intimation ever made, by the United States of a design to purchase. The Quartermaster-General has by law the power, when authorized by the Secretary of War, to procure and provide means of transport for the army, its stores, artillery, and camp equipage. Act March 28,1812, (2 Stat. L., p. 696.) But he cannot purchase any steam or sailing vessel until the same shall be first inspected by one or more competent naval officers detailed, &o., &o. Act July 4, 1864, (13 Stat. L., p. 397.) With such purchases made by the Quartermaster-General, the Third Auditor of the Treasury has no legal connection whatever; he can only adjust claims for property lost or destroyed in the military service. Act March 3,1849, (9 Stat. L., pp. 414-15.) Act March, 1863, (12 Stat. L., p. 743.) Act' 28th July, 1866, (14 Stat. L., p. 327.)
' 4th. The right of the United States to purchase did not exist at the time the Quartermaster-General attempted to exercise it. They could purchase only during the continuance of the charter, which came to an end with the destruction of the vessel, eleven months before the action of the Quartermaster-General. “ The extinction of the thing due extinguishes the debt, when the thing is wholly destroyed.” See Evans’s Pothier, Phil., 1849, p. 338, (624.)
5th. A thing which is destroyed, i. e., does not exist, cannot be the subject of the contract of sale. After the vessel was destroyed it was impossible for the United States to buy it, andfor the petitioner to sell it. u Three particulars are included in a valid sale, namely, a thing which is the subject of it, a price, and a consent of parties. If the subject of the intended sale have no existence actually or potentially, there can be no valid sale.” Long on Sales, page 3.
6th. The Court of Claims, avoiding the error-of the Quartermaster-General, has fallen into one of a similar kind, in endeavoring to bring the case under another clause of the contract. The Court held that under such a charter-party the United States became the equitable owner of the vessel to the extent of the sum earned, over and above the expenses and profits stipulated for, and that to the extent of such sum the owners had received so much payment on the price of the vessel. See-reasoning of the court in this pase, 5 C. Cls. R., p. 274, and in Sjyear & Lang’s Case, id., p. 169, et seq.
Mr. Assistant Attorney-General Hill for the United States, appellees:
First. It is submitted that the adjudication by the Third Auditor of the amount to be paid the appellants in this case, and the acceptance of the -amount by them, must, under the recent decisions of this court, be considered a final settlement of their claim; and as they acquiesced for nearly two years before bringing suit in this payment, they would seem to have so considered it. United States v. Child, (12 Wall., 232;) United States v. Clyde, (13 Wall.)
Second. The construction put by the Court of Claims upon the two clauses in the charter-party, quoted above, was correct. By the first clause the vessel is valued at the sum of $40,000; and it is then provided that should she be retained so long in the service of the United States that the money paid and due on account of said charter (making certain deductions) shall be equal to said appraised value, then the vessel shall become the property of the United States. This cannot be considered in any other light than as giving the United States an equitable interest in the vessel to the extent of the money actually paid and due for her services on account "of the charter — an interest which, like a lien, would prevent any third party acquiring any property in the vessel, interfering with the rights of the Government. At any moment, under the second clause, by paying the amount still remaining due, the Government could become the actual and sole owner of the vessel. Such being the relations of the parties, how was this affected by the loss or destruction of the vessel ? • That destruction would undoubtedly have, relieved the claimants from any obligation they incurred to sell, and deliver the vessel to the Government. But if the Government, notwithstanding this destruction, were willing still to elect to pay the amount which the parties had agreed should be considered as the value of the vessel, and to treat the vessel as still existing and in their possession, then the claimants could not refuse to accept it on the ground that the vessel was destroyed.
It may be contended that the Government would have lost their equitable rights in the vessel, if they had discharged it from the service before the owners had received the amount which is fixed upon as the purchase-money. But the distinction between such a case and the present is, that there the Government would voluntarily have abandoned their rights, and the maxim, Volenti non fit injuria, would apply to the case.

Opinion:
Mr. Justice Strong
delivered the opinion of the.court:
The agreement between the plaintiffs and the United States was not a mere contract of affreightment. The vessel, it is true, was let to hire for an indefinite period, not less than thirty days, and the charterers undertook to pay one hundred and fifty dollars for each and everyday she might be employed under the contract, and to bear the war risk, the marine risk being borne by the plaintiffs. But, beyond this, the contract looked to a sale of the vessel to the charterers at a stipulated price. Her value was fixed at forty thousand dollars, and it was agreed that should she be retained in the service of the United States until the money paid and due on account of the charter should be equal to such value, (after deducting therefrom the cost of running and keeping her in repair, together with a percentage on her appraised value,) she should become the property of the United States without further payment, except of such sum as might then be due on account of her hire under the charter. Another clause in the agreement stipulated, in effect, that at any time during the continuance of the charter, namely, while the vessel was employed by the charterers, and until she should be returned to the owners at New York, the United States might elect to purchase her, they might take her at her appraised value, (viz., $40,000,) in which case all money paid and due on account of the charter, after making the deductions above mentioned, it was agreed should be applied on account of the purchase. The plain meaning of these stipulations is that transmission of the ownership of the vessel to the United States was contemplated; that the transmission of ownership was to be at the option of the United States; that in no event were the plaintiffs to have more than' forty thousand dollars for her, and that this sum might be paid in full by the per diem hire, in which case the vessel was to become the property of the Government so soon as the hire, less the specified deductions, should equal in amount the price named, or at such earlier time as the United States might elect to take her at that price. The plaintiffs, therefore, were in no contingency entitled to more than the price fixed for the vessel by the contract. Whether received as freight or in direct payment of the stipulated price, all money which was paid them, or became due to them, was consideration for the transmission of title, if the United States chose so to regard it. In effect, therefore, the contract vested an equitable ownership in the defendants, proportioned to the money paid and due under the charter. Had a third party, with knowledge of the agreement, bought the vessel from the plaintiffs, he would.doubtless have acquired only a right to the purchase-money remaining unpaid at the time of his purchase, if the charterers had after- wards elected to take the vessel during her retention as purchasers, or had retained her until the freight equaled the price agreed upon.
It is true the United States became insurers against war risks, and the vessel was destroyed by such a risk before the freight earned amounted to the appraised value or price. But as insurers they were only bound to make good the loss the plaintiffs sustained, and as the plaintiffs had agreed to sell for forty thousand dollars, that loss could not have exceeded what remained unpaid of that sum. It cannot be doubted that the United States had also under the contract an insurable interest. Suppose both they and the plaintiffs had insured severally for their interests, as they might have done, with another underwriter, could more than forty .thousand dollars, the value of the vessel, have been recovered on both the policies ? That will not be maintained. Or, suppose the plaintiffs had insured against marine risks, and the vessel had been lost by one of them. By the contract they undertook such risks. If the vessel had been lost on the day before the freight, less the deductions agreed upon, would have amounted to her entire value, could the plaintiffs have recovered the whole forty thousand dollars, and have retained it, together with the thirty-nine thousand eight hundred and fifty dollars paid or due for freight 1 Would not the policy have inured to the benefit of the United States to the extent of the payments made 1 To hold that it would not would be giving to the contract a most unreasonable construction. And if not, how can the plaintiffs now be entitled to the whole value of the vessel, in addition to all they have received for her hire, as if no part of her price had been paid, or as if the United States had no interest ? We think they are not thus entitled. In our opinion the Government had an equitable interest in the vessel at the time she was lost, and as the interest of the plaintiffs amounted to no more than forty thousand dollars, which -sum they have already received, they have no further just claim.
The judgment is affirmed.