Commercial Trading Company, Inc., Plaintiff-appellant-cross Appellee, v. Hartford Fire Insurance Company, a Corporation,defendant-appellee-cross Appellant, 466 F.2d 1239 (5th Cir. 1972)

"Touching the adventures and perils which the Company is contented to bear, and take upon itself, they are of the seas, fires, assailing thieves, jettisons, criminal barratry of the Master and Mariners, and all other like perils, losses and misfortunes that have or shall come to hurt, detriment or damage of the said goods and merchandise, or any part thereof except as may be otherwise provided for herein or endorsed hereon."

So provides the traditional perils clause of the open marine cargo policy of insurance upon which Plaintiff-Appellant, Commercial Trading Company, the holder of order bills of lading covering four shipments of Costa Rican meat, instituted this action against Insurer, Hartford Fire Insurance Company, to recover those losses occasioned by the ocean carrier's misdelivery of the cargoes to the notify party without first obtaining the outstanding order bills.¹  The question is whether delivery without surrender of order bills of lading is imputable to the shipmaster to make it thereby criminal barratry or "like" criminal barratry. The answer is: No.

The Trial Court, over strenuous objections from Insurer, concluded that Commercial was an assured rather than a loss payee and further concluded that the loss occurred during the period of coverage provided by the policy. The Court held, however, that the loss was not occasioned by a peril insured against under the policy and rendered judgment in favor of Insurer. Both parties appealed. Commercial, of course, here contends that the Court was half wrong while Insurer advances the anchor-to- windward argument that the Court was only half right.²  Finding ourselves in at least partial agreement with both parties, and in total agreement with the Trial Court, we affirm. In so doing, we limit our discussion (see note 2, supra) to the question of whether the misdelivery of the subject cargoes constituted a peril insured against under the policy.

The Facts

The facts may here be severely capsulated. In 1962 Commercial Trading extended a line of credit to Progressive Meat Packers, Inc. a Philadelphia based meat importing company, under which Progressive was to continue the importation of substantial quantities of meat from Costa Rica.³  Prior to Commercial's entry into the financial picture, shipments from the Costa Rican seller (Beef Products Co. Ltd.) to Progressive had moved from Puerto Limon to Tampa, Florida aboard M/V Kirk-Co and M/V Kirk-C. The ultimate destination and the method of delivery remained unchanged after Progressive's arrangement with Commercial crystallized. What did ultimately change, however, was the form of bills under which the shipments were carried. For prior to May 13, 1963, shipments from Beef Products to Progressive had moved under straight bills of lading. On that date the first of the four here involved-ultimately lost-shipments arrived under order bills which designated Progressive as the notify party and Commercial's financier, Trade Bank and Trust Company (see note 3, supra), as the order consignee. The carrier-guilty of the ultimate commercial faux pas-without first obtaining the outstanding order bills, delivered these four cargoes to Progressive. As a result of these misdeliveries, Commercial was left holding not only the negotiable bills covering the four never to be recovered shipments of Costa Rican meat, but worse the proverbial bag. For, as might well have been predicted, a short time after taking delivery of the subject shipments Progressive went broke.⁴ 

In this last ditch effort to recover its quite substantial losses,⁵  Commercial urges that the misdeliveries constituted "criminal barratry". In the alternative, Commercial seeks to recover under the "all other like perils" clause of the policy.

Criminal Barratry

"Barratry must partake of something criminal and must be committed against the owner by the master and mariners."⁶ 

Although we neither advocate nor condone illreasoned reliance upon rules of law having their foundations in factual settings which no longer exist,⁷  this case presents a situation-most comforting to us in these times of marked and quite often dramatic change-where the applicable rule has at least outlived its pronouncer. For the business of marine underwriting is even today steeped in yesterday's traditions. Indeed, the policy provision here at issue is almost identical to that commonly used in Eighteenth Century England. See Saskatchewan Government Ins. Office v. Spot Pack, Inc., 5 Cir., 1957, 242 F.2d 385, 391, 1957 A.M.C. 655; Reliance Ins. Co. v. Escapade, 5 Cir., 1960, 280 F.2d 482, 488, 1961 A.M.C. 2410.

Particularly appropriate even today is Lord Mansfield's statement of some two hundred years ago.

"The point to be considered is whether barratry, in the sense in which it is used in our policies of insurance, can be committed against any but the owners of the ship . . . It is clear beyond contradiction that it cannot. For barratry is something contrary to the duty of the master or mariners, the very terms of which require that it must be in the relation in which they stand to the owners of the ship . . [Barratry could only be committed] against the owners of the ship. The point is too clear to require any further discussion."

Nutt v. Bourdieu, 1789, 1 T.R. 323.

For several hundred years, countless assureds have attempted to broaden this traditional, and still adhered to notion of just what "barratry", as used in marine cargo policies, actually means. Commercial here joins that ever-increasing number, arguing that a shipmaster's delivery of cargo without surrender of negotiable bills of lading surely must fall within this long recognized and so often repeated definition. In this argument, however, Commercial presupposes that which we are not persuaded should be presupposed and ignores that which we are powerless to ignore.

For as Commercial-although reluctantly - recognizes, the most basic consideration in determining whether or not the acts complained of constitute barratry is the question of whether or not those acts were committed by the master or mariners.⁸  If they were not, of course, the inquiry abruptly halts. Here, there is considerable doubt that this most basic question could be answered in the affirmative. For the record clearly demonstrates that the master was given no formal instructions concerning the delivery or cargo by the owners and what informal directives he may have received came from none other than the owners' general agent, who not only had the primary management responsibility for the day to day operation of the vessels⁹  but also actively participated in-if not directed-the premature delivery of the subject shipments to Progressive.¹⁰  It is this active participation in the misdeliveries on the part of the general agent which gives rise to a very strong inference that at most the masters of M/V Kirk-C and M/V Kirk-Co did nothing more than follow the directions of the general agent, who had satisfied himself that everything was in order (see note 9, supra), in releasing the cargoes to Progressive.

In the practical, if not legal sense, it seems apparent that the shipmasters here involved-as is likely true of their counterparts in today's complex business world-were in this case victims of this "golden age" of specialization being supplanted in their clipper ship traditional responsibility by the general agent, his retained customs broker and that everincreasing corps of paper processors and clerks.¹¹ 

Of course, Commercial's claim rests on a theory that since it constitutes a legal wrong-civil at least, and perhaps sometimes criminal¹² -for which a shipowner may suffer loss at the hands of the unrequited shipper this is a sufficiently grave act of wrong against the owner to satisfy the pungent language of the definitions.¹³ 

But this theory is not enough here. For this record reveals that neither the shipowner nor its managing general agent ever for a moment entertained the idea that its shipmasters were to stand by the hatches to personally obtain outstanding bills of lading before releasing the sling load to an awaiting receiver. Granted that this was within shipowner's powers and the bills of lading in traditional legalese made the shipmaster an identified actor in the process of receipting for the goods, the law did not compel shipowner to demand that the shipmaster carry out any such duty. To the contrary, both the silence of this record and the action of the general agent (note 10, supra) were more than enough to support the conclusion that this was not the case of shipmasters, properly instructed in their duties as to cargo delivery, breaching the obligations with that perverseness required to satisfy the ancient characterization of criminal barratry.

But even if-and the if is quite a big one-these acts can be considered those of the shipmasters, Commercial still runs headlong into Judge Krentzman's findings-passing the Plimsoll line of F.R.Civ.P. 52(a)-that although the misdeliveries were the result of negligence on the part of the shipowners' representatives-shipmaster or others- there was no criminal intent on the part of anyone involved to defraud or in any way harm the owners.¹⁴ 

For as the Trial Judge so correctly recognized, "in the absence of fraud, nothing but acts of known criminality, gross malversation, or the like can amount to barratry; loss arising from the incompetence of the Captain, from a mistake as to the meaning of his instructions, or misapprehension of the best mode of carrying them into effect, can never amount to barratry * * *." Arnould, supra, at 768. Here, although the misdeliveries most certainly resulted from ignorance on the part of the owners' general agent as to the legal significance of the order bills (see note 14, supra) the acts of the shipmasters clearly do not reach that degree of malversation necessary to provide a basis for recovery under the "criminal barratry" clause. Echoing Lord Mansfield's optimistic utterance of some two hundred years ago, "the point is too clear to require any further discussion." The misdeliveries did not constitute criminal barratry.¹⁵ 

All Other Like Perils

Recognizing full well that the "all other like perils" clause of the policy "is not to be brushed aside as 'essentially a flourish, adding nothing of substance'," Feinburg v. Insurance Company of North America, 1 Cir., 1958, 260 F.2d 523, 527, we begin our consideration in this regard with the further recognition of the far from startling proposition that a "like peril" must indeed be a like peril, " [the other like perils clause] does not, of course, cover perils unlike those enumerated. * * * [I]ts obvious purpose was to include in the coverage all losses which, although perhaps not technically or strictly speaking covered in the specific perils enumerated, are very similar to or very much like the enumerated perils." Feinburg, supra, 260 F.2d at 527.

Aware of the glaring dissimilarity between the misdelivery of cargo on one hand and the other specified perils on the other, Commercial contends that such misdelivery is so much like "criminal barratry" as to fall within the ambit of coverage. The Trial Court, relying primarily upon the District Court's opinion in Southport Fisheries, Inc. v. Saskatchewan Government Insurance Office, E.D.N.C., 1958, 161 F. Supp. 81,¹⁶  held that since the risk here involved was not "peculiar to the maritime" coverage was not provided under the like perils clause. Commercial Trading, supra, 326 F. Supp. at 906. Here, Commercial attempts to refute this conclusion by arguing that since an ocean going vessel and ocean bills of lading were involved, the misdelivery of the subject cargoes literally "reeked with the smell of the sea". Except to concur in this odor test, we find it unnecessary to resolve this question since to be somewhat "like" criminal barratry at least requires a moral characteristic to take the omissions of the shipmasters out of the category of negligence, yea even seagoing ignorance or stupidity.

Whether the beacon is a Feinburg light, or a Southport Fisheries light, or a Feinburg-Southport Fisheries light, or even a Southport Fisheries-Feinburg light, we reach the same conclusion. Commercial loses.

Affirmed.