People ex rel. Illinois Historic Preservation Agency v. Zych
Annotate this Case
SIXTH DIVISION
October 31, 1997
No. 1-96-2223
THE PEOPLE ex rel. ILLINOIS HISTORIC ) Appeal from the
PRESERVATION AGENCY and DEPARTMENT ) Circuit Court of
OF TRANSPORTATION, ) Cook County
)
Plaintiff-Appellant, )
)
v. )
)
HARRY ZYCH, d/b/a American Diving )
and Salvage Company; LADY ELGIN )
FOUNDATION, INC.; and CIGNA PROPERTY )
CASUALTY INSURANCE COMPANY, ) Honorable
) Margaret Stanton McBride,
Defendants-Appellees. ) Judge Presiding.
PRESIDING JUSTICE GREIMAN delivered the opinion of the
court:
In 1860, a ship named the Lady Elgin sank in Lake Michigan
following a collision with the schooner Augusta. In 1989, 129
years later, defendant Harry Zych discovered the shipwreck. The
instant action concerns competing claims to the ownership of the
wreckage.
Plaintiff, the State of Illinois ex rel. Illinois Historic
Preservation Agency and Department of Transportation (the State),
claims title to the Lady Elgin shipwreck under the Federal
Abandoned Shipwreck Act of 1987 (the Act) (43 U.S.C. secs. 2101
through 2106 (1988)).
Defendants CIGNA Property and Casualty Insurance Company
(CIGNA) and the Lady Elgin Foundation, Inc. (the Foundation)
claim that they jointly hold title. Defendant Harry Zych (Zych)
created the Foundation and located the shipwreck. CIGNA is the
successor in interest to the Aetna Insurance Company (Aetna),
which insured the Lady Elgin and its cargo in 1860. CIGNA
assigned a portion of its interest in the shipwreck to the
Foundation.
Following a bench trial, defendants were awarded title based
on the determination that (1) Aetna became the owner of the wreck
and its contents when it paid off claims in 1860; and (2) Aetna
had not abandoned its ownership interest in the intervening 129
years.
This appeal raises three issues: (1) whether Aetna, the
predecessor of CIGNA, acquired title to the Lady Elgin when it
paid the insurance claims to the ship's owner; (2) assuming Aetna
acquired title, whether Aetna abandoned its interest; and (3)
whether the State established that the Lady Elgin was listed or
determined eligible for listing in the National Register of
Historic Places.
We find that Aetna acquired title to the Lady Elgin. We
also find that Aetna/CIGNA abandoned its interest in the
shipwreck and that the Lady Elgin shipwreck was listed in the
National Register of Historic Places for purposes of the Act.
Accordingly, we reverse the trial court's order that awarded
title to defendants.
The history and legacy of the Lady Elgin have been well
documented as the second-greatest tragedy in the history of the
Great Lakes and have been celebrated in both story and song.
Zych v. Wrecked Vessel Believed To Be the "Lady Elgin", 960 F.2d 665, 666-67 (7th Cir. 1992).
On the evening of September 7, 1860, the Lady Elgin left
Chicago on its way to Wisconsin. On board the ship were 393
passengers, including members of a militia group called the Union
Guards from an Irish, Democratic ward in Milwaukee who had taken
their wives, children and friends to Chicago to attend a
political rally for Stephen Douglas, a presidential candidate
against Abraham Lincoln.
As the passengers danced to the music of the bands in the
deck areas, a thunderstorm developed. About 2 a.m., a schooner
named the Augusta rammed the Lady Elgin and continued its course
to Chicago. Within 30 minutes after the collision, the Lady
Elgin broke into pieces and sank about 10 miles off shore.
Rescue efforts saved only 96 of the 393 passengers on board.
Legend has it that the disaster caused the transfer of political
power in Milwaukee from the Irish to the Germans because so many
Irish political activists died in the shipwreck.
The wreckage remained undiscovered until Zych found it in
1989, a few miles off the shore of Highland Park. To assert
ownership rights as the finder of the wreckage, Zych filed an in
rem admiralty action in the United States District Court for the
Northern District of Illinois. Zych v. Unidentified, Wrecked &
Abandoned Vessel, Believed To Be the SB "Lady Elgin", 755 F. Supp. 213 (N.D. Ill. 1990).
The ownership rights of the Lady Elgin were the subject of
federal litigation from August 1989 (the filing of Zych's
admiralty action) until July 1992 when the federal district court
entered an order declaring that the Lady Elgin Foundation, and
not Harry Zych, "is the sole owner of the shipwrecked vessel
believed to be the Lady Elgin as against all the world with the
exception of the State of Illinois." Zych v. The Unidentified,
Wrecked & Abandoned Vessel, Believed To Be the SB "Lady Elgin",
No. 89--C--6501 (1992) (unpublished judgment order).
In September 1992, the State filed the instant cause of
action seeking a declaratory judgment and asserted that it owned
the shipwreck under the Act. In May 1996, the trial commenced.
Zych testified that he is a professional diver and engages
primarily in salvage and oil field activity. Zych first became
involved in the Lady Elgin in 1969 when he went wreck diving with
some local divers. Zych later researched the history of the ship
and began his own underwater search in 1971. From 1972 through
1989, Zych's search was not a full-time job but rather an
activity he did on weekends and when time allowed away from his
regular job. In 1989 Zych located the Lady Elgin in 53 feet of
water in Lake Michigan about four miles off shore from Highland
Park.
At trial, the State admitted into evidence copies of six
letters from 1860 relating to the Lady Elgin and partial
reconstructions of those letters. CIGNA, Aetna's successor,
recovered these documents from the archives of Aetna. The
letters were authored by Thomas Alexander, who was a vice-
president of Aetna, or by E.G. Ripley, who was the president of
Aetna.
By letter dated September 11, 1860, Alexander wrote to
Aetna's agents in Chicago (Hubbard and Hunt) and stated that he
had been informed by telegraph of the loss of the Lady Elgin.
Alexander wrote "hope we escape any claims on *** cargo." Gurdon
Saltonstall Hubbard was both an agent of Aetna and the owner of
the Lady Elgin.
By another letter dated September 11, 1860, Alexander wrote
to an Aetna agent in Buffalo, New York (Captain E.P. Door), about
the ship named Augusta, i.e., the ship that collided with the
Lady Elgin, causing it to sink. Alexander stated that the
newspapers reported that the Augusta had "been libelled for
$42,000" and asked whether this had been done by the owners of
the Lady Elgin.
By letter dated September 13, 1860, Ripley wrote to J.B.
Bennett, who is identified in the transcription notes as Aetna's
general agent in Cincinnati, Ohio. Ripley stated that "[w]e had
$5000 on the 'Lady Elgin' and $2500 on cargo -- the Boat belonged
to Mr. Hubbard mainly."
By letter dated September 22, 1860, Ripley wrote to Hubbard
and Hunt in Chicago. Ripley acknowledged receipt of "papers
relating to claims for" the Lady Elgin, including invoices of
certain shipments. Ripley stated that "[w]e wish to pay these
claims as soon as they are properly proved -- let them be thus
prepared, and reduced to the cash point and pay them."
By letter dated October 10, 1860, Alexander wrote to Hubbard
and Hunt in Chicago. The letter states that the Lady Elgin "gave
us a strong pull upon our small receipts." The letter further
states
"We regret that Mr. Hubbard declines to allow us the
legal interest? off his claim because we should prefer
to pay it at that rate -- and because we think the
circumstances would justify his concession of the legal
interests in this case -- however, we shall not discuss
the point and permit the claim to layover until its
maturity. [P]ermit us to confirm Capt. Dorr
instructions not to accept an abandonment of the
vessel, for the reason which he informs us he gave you
on his recent visit to Chicago."
In the sixth and final letter, dated November 15, 1860,
Alexander wrote to Hubbard and Hunt in Chicago and stated that
"[w]e take notice of the payment of $11993 20/100 to GSHubbard in
full of policy on Lady Elgin."
Three witnesses testified as marine insurance experts: (1)
Victor Simone, for the State; (2) Ivan Avery, called by the
State; and (3) George Stellwag, for defendants.
As the State's witness, Victor Simone opined that Aetna
never acquired title to the Lady Elgin based upon (1) a response
by CIGNA in a request to admit where CIGNA "[a]dmitted that on
October 10, 1860, an abandonment of the Lady Elgin was not
accepted by Aetna"; (2) the absence of anything to indicate that
Aetna acquired title; and (3) common and economic sense that
would prompt an insurance company not to want any part of the
wreck that had very little salvage value and not to want to
assume any potential liabilities. Referring to the October 10,
1860, letter, Simone testified that the letter clearly indicates
that Aetna would not accept abandonment. Simone further opined
that, even assuming that Aetna acquired title, Aetna's actions
prove that it abandoned any interests in the vessel.
Simone testified that in the maritime insurance field, the
"acceptance of abandonment" means that the insurance company
accepts complete responsibility for the vessel and has title to
it. With the acceptance of abandonment, an insurance company
accepts the liability associated with the abandonment, most
especially the removal of the wreck. An insurance company's
refusal to accept abandonment signifies that it does not wish to
own the vessel and declines to take title to it.
Simone testified that the payment of claims by the insurance
company has nothing to do with acceptance or rejection of
abandonment but, rather, is determined by whether the claim was
covered by the policy. The claim for the loss of Lady Elgin was
paid because the insurance policies covered collision. Refusing
to accept abandonment occurs when the insurance company pays the
claims and then refuses an offer of abandonment. Such a refusal
means that the insurance company does not want to accept title to
the vessel, does not want any part of the vessel, and is just
paying the claim. Simone stated that an insurance company's
refusal to accept abandonment is "very common" and he is not
familiar with any instance where an insurance company accepted
abandonment. Simone explained that if an insurance company
accepted abandonment, it "would then become responsible for
anything that would occur for which [it] could be held legally
liable." Silence on the part of the insurance company is not
enough to accept abandonment and, instead, indicates that it does
not want any part of the vessel.
Simone testified that acceptance or rejection of
abandonment, i.e., accepting or not accepting title, has nothing
to do with subrogation. According to Simone, subrogation has
nothing to do with title, and the rights of subrogation against
third parties have nothing to do with ownership of a vessel.
Simone explained, and the other experts agreed, the
difference between a total loss of a vessel and a constructive
total loss. A total loss means that there is no value to the
vessel whatsoever. For example, a total loss would be a vessel
that sinks in 5,000 feet of water without any hope of getting
back up again. A constructive total loss would exist if the cost
of recovering the vessel or salving the vessel would far exceed
its insured value. Simone testified that the Lady Elgin was a
total loss. Simone further testified that an insurance company
never has to accept title to the vessel.
Ivan H. Avery is a vice-president of Recovery Insurance
International, a company owned by the CIGNA Corporation. Avery
had CIGNA engage in a search to locate any documents relating to
the Lady Elgin, and the search produced only the six 1860 letters
that were introduced. In addressing the lack of documentation,
Avery explained that, in 1860, claims were handled, received, and
paid in the field, not in the home office, due to the problems
with transmission of information at that time. Thus, according
to Avery, the policy and claim information would have been
located in the agency in Chicago, not in Hartford, Connecticut.
Avery believed that the original policy and claim information
were in Chicago and burned in the Chicago fire because Hubbard
and Hunt's office was totally destroyed in that fire. Avery
further testified, however, that he would have expected more than
six letters to have been found and that some documents or files
were destroyed over time.
Avery opined that Aetna accepted abandonment based on two of
the 1860 letters, October 10 and November 15. Avery testified
that, although the letters do not specifically state that Aetna
accepted abandonment, the November 15 letter specifically states
that the claim was paid and the payment of the claim was
considerably higher than the value stated in the policy. Avery
testified that abandonment could not be accepted until the claim
was paid.
Avery testified that an insurance company has a choice to
accept or reject abandonment and, if it does not accept
abandonment, it does not become the owner of the vessel.
Acceptance of abandonment means acceptance of any potential
liabilities that might be associated with the vessel, such as
unregistered cargo, loss of lives, and the recovery of the
vessel.
Avery testified that the Lady Elgin was a total loss.
Although the Lady Elgin itself had no value because it was no
longer salable, some of the equipment and the contents of the
vessel had value. Although CIGNA was not able to find a cargo
list for the Lady Elgin, the known contents of the ship included
boilers, cattle, and rifles. The primary value of the Lady Elgin
today is its historical value.
Avery testified that there was no need for any tendering of
abandonment in a total loss case because abandonment is automatic
upon payment of the loss. Avery stated that even though the
insurance company had the option of not exercising ownership
rights by refusing to accept abandonment, the practice in 1860
"with very, very few exceptions *** was for the company to accept
the ownership of a vessel in a case of a total loss."
Referring to a September 11, 1860, letter, Avery testified
that the $42,000 possible liability of the Augusta for the loss
of the Lady Elgin was a factor for Aetna to consider because the
potential liability of the Augusta would be favorable to the
owner of the Lady Elgin. Assuming that there was an abandonment
of the vessel by its original owner, the subrogation rights would
go to the insurance company and would include a cause of action
against the Augusta or any other potentially liable entity or
individual. The potential for subrogation recovery would be a
very strong factor for Aetna to consider in determining whether
to accept abandonment. Avery does not know whether the Augusta
was ever required to pay the $42,000.
George Stellwag, a marine insurance consultant, testified on
behalf of defendants. Stellwag believed that since Hubbard was
both an agent of Aetna and the owner of the ship, Alexander
wanted to oversee some of loss payments in relation to that
claim. Stellwag agreed with the other experts that the Lady
Elgin was a total loss.
Stellwag testified that, once the claim is paid by the
underwriters on a total loss of a vessel, ownership goes to the
underwriters and this passage of title need not be evidenced in
writing. Stellwag believed that the entry "not to accept
abandonment of the vessel," in the October 10, 1860, letter was a
recommendation because it was too early to decide whether to
accept or reject abandonment. Stellwag testified that
"abandonment takes place at the payment of the total loss, and so
there would be no necessity prior to that to make any decision."
Even after the payment of claims, however, the insurer can still
refuse to accept title.
Three witnesses testified about the feasibility of locating
the wreckage of the Lady Elgin over the course of time: Robert
Kutzleb, Martin Klein, and Taras Lyseenko.
Robert Kutzleb, who testified on behalf of the State, had no
doubt that the wreckage could have been found in 1860 if a
concerted effort had been made but opined that it would not have
made economic sense in 1860 for anyone to engage in such an
effort. Kutzleb described four rudimentary methods of underwater
search available in 1860. One method, referred to as the wire
span method, was to run a wire between two ships that were spaced
apart at a fixed distance. The wire would be lowered to the
bottom, and the ships would proceed very slowly to drag the wire
along the bottom. If the wire caught on anything, the ships
would slow down and be drawn together. A second option would
have been for one or more ships to troll while dragging one or
more grapples, which are hooks with tines turned up. The grapple
would snag on objects located underwater. Similarly, a third
option would have been to drag a fish net underwater. A fourth
available alternative would have been to use divers to search
underwater. Diving apparatus was available in 1860. Kutzleb
testified that all four of the search methods described would
have worked to find the shipwreck, which was located at a depth
of 53 feet.
Kutzleb further testified that the approximate location of
the ship would not have been difficult to ascertain after the
wreck. The appropriate search area could have been easily
established in 1860 because pieces of the ship, items from the
ship and passengers on the ship came ashore at known points. In
addition, a tugboat found a piece of the ship's bow anchored
about six miles from the shoreline. In fact, Zych found the same
bow and anchor seven miles from the shore. Moreover, the 250
rescuers on the shoreline saw bodies and cargo drifting in the
water. Kutzleb stated that, from this information, "a wonderful
line of bearing" could have been established from these points.
Martin Klein, who testified on behalf of defendants, opined
that the use of the dragging method of locating a shipwreck would
have been very difficult because the ship was broken into many
pieces. The state of the art in salvage technology in 1960,
according to Klein, was also "very rudimentary." Klein believed
that the main reason it took so long to discover the shipwreck
was because the wreck was not located where the general accounts
placed it. Klein opined that the chances of locating the Lady
Elgin before 1989 "almost negligible" given the search and
navigational technology available during the time frame of Zych's
search, i.e., 1970-89. Klein also opined that using then-
existing technology, the shipwreck could have been found in the
late 1960s.
Taras Lyseenko, who testified on behalf of defendants,
described his occupation as a shipwreck treasure hunter.
Lyseenko engaged in a three-day search for the Lady Elgin and
came within about five miles of the wreck. Lyseenko did not view
the search as a profit-making venture and did not put major
effort into the search. Lyseenko testified that the Lady Elgin
could have been found in 1860 with enough manpower, money and
equipment.
Zych testified that the shipwreck could have been located in
1860 with a great degree of difficulty. Zych testified that the
EG&G sidescan sonar was sufficient to locate the shipwreck in
1967 but opined that it was not commercially feasible to begin
searching for the Lady Elgin before 1971.
William Wheeler is employed by the State of Illinois in the
Historic Preservation Agency. Wheeler's duties include the
overseeing of the process of nominating sites to the National
Register of Historic Places in Illinois. In his capacity as the
state historic preservation officer, Wheeler authored a letter on
March 9, 1994, with a nomination of the Lady Elgin shipwreck site
to the National Register of Historic Places. Eventually, on
February 17, 1995, the Lady Elgin shipwreck was listed on the
National Register of Historic Places.
On May 13, 1996, the trial court entered judgment in favor
of defendants. The trial court found that the State had not
established an abandonment by Aetna of an interest in the ship.
The trial court also noted that the State had not established
abandonment under either of two standards: by a preponderance of
the evidence or by strong and convincing evidence. The trial
court also found that the alleged register of the ship on the
National Register of Historic Places was seriously questionable
but, in effect, not relevant in light of the finding of no
abandonment.
On appeal, the State asserts that Aetna never obtained an
ownership interest in the Lady Elgin because the admission by
CIGNA that Aetna refused to accept an abandonment as of October
10, 1860, constitutes a conclusive admission that Aetna never
acquired title. The State also maintains that a refusal to
accept abandonment cannot occur before the insurance company pays
the claims.
Defendants contend that Aetna acquired ownership by virtue
of payment on the insurance policies. We agree with defendants.
In number 46 of the State's request to admit facts to CIGNA,
the State propounded the following fact: "Aetna refused or
declined to accept abandonment of the Lady Elgin." CIGNA
answered: "Admitted that on October 10, 1860, an abandonment of
the Lady Elgin was not accepted by Aetna." The October 10, 1860,
letter referenced in the admission, authored by Alexander of
Aetna and sent to Aetna's agents in Chicago (Hubbard and Hunt),
stated: "Permit us to confirm Capt. Dorr instructions not to
accept an abandonment of the vessel, for the reason which he
informs us he gave you on his recent visit to Chicago."
In number 48 of the State's request to admit facts to CIGNA,
the State propounded the following fact: "At no time did Aetna or
CIGNA accept an abandonment of the Lady Elgin." CIGNA responded
"Denied."
The State's reliance on number 46 of its request to admit
facts as conclusive to Aetna's rejection of abandonment ignores
CIGNA's absolute denial as stated in number 48. Defendants'
position has remained the same in pretrial proceedings and at
trial, i.e., on October 10, 1860, Aetna would not accept
abandonment but the subsequent payment of claims in full by Aetna
on November 15, 1860, constituted acceptance of abandonment and
transfer of title as a matter of law.
Under the guidelines to the Act, an insurance company
acquires title to a wrecked vessel upon the payment of the full
value of the vessel to the owner:
"When the owner of a sunken vessel is paid the full
value of the vessel (such as receiving payment from an
insurance underwriter) the shipwreck is not considered to be
abandoned. In such cases, title to the wrecked vessel is
passed to the party who paid the owner." Abandoned
Shipwreck Act Guidelines, 55 Fed. Reg. 50120-21 (1990).
Relying on this regulation, the ninth circuit held that when
the insurance companies paid claims on the wrecked vessel, they
"took title to at least part of the wreck by right of subrogation
and under the [Act's] regulations." Deep Sea Research, Inc. v.
The Brother Jonathan, 102 F.3d 379, 388 (9th Cir. 1996). The
only records available in the Brother Jonathan case were
newspaper accounts published at the time of the shipwreck, i.e.,
1865. Brother Jonathan, 102 F.3d at 382. The newspaper accounts
stated that about one third of the cargo on board was insured and
there was no evidence that the ship itself was insured. Brother
Jonathan, 102 F.3d at 382. Thus, the ninth circuit based its
holding that insurance companies acquired title on "a newspaper
article dating from the time of the wreck listing a number of
insurance companies that insured the cargo of the" wrecked
vessel. Brother Jonathan, 102 F.3d at 388.
If the newspaper accounts and partial insurance coverage
were sufficient to hold that the insurance companies acquired
title in Brother Jonathan, the instant case most certainly has
enough evidence to establish that title passed to Aetna in 1860.
In the present case, there is no dispute that Aetna insured the
Lady Elgin, that the wreck was a total loss, and that Aetna paid
the owner of the ship (Hubbard) under the insurance policy. By
letter dated September 13, 1860, Aetna insured the ship for
$5,000 and the cargo for $2,500 ("[w]e had $5000 on the "Lady
Elgin" and $2500 on cargo"). By letter dated November 15, 1860,
Aetna acknowledged payment of $11,993.20 in full payment to
Hubbard, the owner of the ship ("[w]e take notice of the payment
of $11993 20/100 to GSHubbard in full of policy on Lady Elgin").
Accordingly, Aetna paid about $4,500 above the policy coverage.
The experts at trial agreed that an insurer had the option
to accept or reject abandonment by the ship's owner. Although
the expert testimony revealed conflicting reasons as to why Aetna
may have wanted to reject or accept abandonment based on
potential liabilities or subrogation rights that would derive
from such decision, the evidence established that payment was
made by Aetna to the ship's owner and, under the Act's
regulations, title then passed to Aetna.
Next, the State asserts that the passage of time and Aetna's
inaction during the 129-year time period between the wreck of the
Lady Elgin (1860) and the discovery of the wreckage (1989) compel
a conclusion that Aetna abandoned any interest that it held in
the ship. The State argues that, as a matter of law, Aetna
abandoned any interest when it made no effort to recover the
wreckage, did not explore the possibility of recovering the
wreckage, and displayed no interest in the ship for a period of
129 years. We agree.
The Act provides that the federal government asserts title
to certain abandoned shipwrecks and then transfers the title to
the state where the shipwreck is located. 43 U.S.C. secs.
2105(a),(c) (1988). To qualify under the Act, the shipwreck must
be (1) abandoned; (2) embedded in submerged lands of a state; and
(3) "is included in or determined eligible for inclusion in the
National Register." 43 U.S.C. secs. 2105(a)(3) (1988). In the
present case, the trial court took judicial notice of the fact
that the Lady Elgin is located in the submerged lands of Illinois
and this element of the Act is not in dispute on appeal.
The sole inquiry under the Act "is whether a ship has been
abandoned so as to give the state a claim." Fairport
International Exploration, Inc. v. Shipwrecked Vessel Known as
The Captain Lawrence, 105 F.3d 1078, 1085 (6th Cir. 1997).
Whether a vessel has been abandoned is a factual question to be
reviewed for clear error. Fairport, 105 F.3d at 1082.
The term "abandoned" is not defined in the Act. However,
as previously stated, the guidelines to the Act provide:
"(a) When the owner of a sunken vessel is paid the full
value of the vessel (such as receiving payment from an
insurance underwriter) the shipwreck is not considered to be
abandoned. In such cases, title to the wrecked vessel is
passed to the party who paid the owner." 55 Fed. Reg.
50120-21 (1990).
Defendants assert that subsection (a) of this regulation is
dispositive of the issue here because the November 15, 1860,
letter noted "the payment of $1193 20/100 to GSHubbard in full of
policy on Lady Elgin."
The State argues that, under defendants' interpretation, an
insurer that takes title by paying claims can never lose title by
abandonment. Defendants' view, according to the State, is
inconsistent with the language of the definition taken as a whole
and with the Act's intent that historic shipwrecks be managed by
the states. Moreover, the guidelines are not binding. H.R. Rep.
No. 100--514, Pt. 2, at 7 (1988), reprinted in 1988 U.S.C.C.A.N.
370, 375 ("[w]hile recognizing that the guidelines are
nonbinding, the Committee strongly encourages the states to act
consistently with the guidelines").
We agree with the State's position. Although subsection (a)
authorizes the transfer of title to Aetna in 1860 upon the
payment of the insurance claims, it does not provide that the new
owner could never abandon its interest. To accept defendants'
position on this guideline as absolute would defeat the entire
purpose of the Act.
Ships have lured seekers of treasures since the days of
discoverers of new lands and pirates. Likewise, courts have
entertained legal disputes over sunken ships and their buried
valuables. To resolve such disputes, courts generally and
historically have employed the law of finds or the law of
salvage. In short, the law of finds espouses the principle of
finders, keepers. The law of salvage allows the original owners
of the wrecked ships and their cargo to retain ownership but also
grants the salvors compensation for their service. See Columbus-
-America Discovery Group v. Atlantic Mutual Insurance Co., 974 F.2d 450 (4th Cir. 1992) (held that the underwriters had not
abandoned their interest in a ship that sank in 1857 and was
found in 1987, and that the law of salvage should be applied);
see also Annotation, Rights in and Ownership of Wrecked or
Derelict Vessels and Their Contents Not Cast Upon the Shore, 63
A.L.R.2d 1369 (1959).
The United States Congress, however, in an unusual
legislative move, expressly abrogated the laws of finds and
salvage in the Act. Section 2106 specifically provides that
"[t]he law of salvage and the law of finds shall not apply to
abandoned shipwrecks to which section 2105 of this title
applies." 43 U.S.C. sec. 2106(a) (1988). Furthermore, the Act
was effective only to legal proceedings brought after April 28,
1988. 43 U.S.C. sec. 2106(c) (1988).
The legislative history of the Act recognized that admiralty
law developed to encourage the salvage of commercial goods and,
thus, its focus is commercial, not cultural resource management
or recreation. As technological advances substantially have
eased access to shipwrecks, tens of thousands of shipwrecks have
been located. Simultaneous with the increased discovery of
shipwrecks, historic shipwrecks, containing both historic
information and tangible artifacts, have increasingly been
recognized as cultural resources needing greater protection.
H.R. Rep. No. 100--514(I), Pt. 1, at 1 (1988), reprinted in 1988
U.S.C.C.A.N. 365 (Background section).
With these principles in mind, the House Committee that
considered the bill that became the Act observed "these admiralty
principles [the laws of finds and salvage] are not well-suited to
the preservation of historic and other shipwrecks to which this
Act applies. *** In light of today's experience and conditions,
the committee does not believe that the law of finds and the law
of salvage well serve the protection of our nation's maritime
heritage. This heritage is best protected by states acting
through their historic preservation programs consistent with
federal guidance." H.R. Rep. No. 100--514, Pt. 2, at 8 (1988),
reprinted in 1988 U.S.C.C.A.N. 370, 377. In addition, the House
Committee stated that abandonment can be implied or inferred:
"The Committee notes that the term 'abandoned' does not require
the original owner to actively disclaim title or ownership. The
abandonment or relinquishment of ownership rights may be implied
or otherwise inferred, as by an owner never asserting any control
over or otherwise indicating his claim of possession of the
shipwreck." H.R. Rep. No. 100--514,. Pt. 1, at 2 (1988),
reprinted in 1988 U.S.C.C.A.N. 365, 366.
Abandonment by implication or inference is, in part,
consistent with "the traditional rule that a wreck is not
abandoned unless either 1) title is affirmatively renounced or 2)
abandonment can be inferred from the lapse of time or failure to
pursue salvage efforts on the part of the owners." (Emphasis in
original.) Fairport International Exploration, Inc. v.
Shipwrecked Vessel Known as The Captain Lawrence, 105 F.3d 1078,
1085 (6th Cir. 1997), petition for cert. filed (June 4, 1997),
quoting Deep Sea Research, Inc. v. The Brother Jonathan, 89 F.3d 680, 688 (9th Cir. 1996), cert. granted, California v. Deep Sea
Research, Inc., ___ U.S. ___, 138 L. Ed. 2d 192, 117 S. Ct. 2430
(1997). Notably, in Fairport, the state prevailed, a finding of
abandonment was upheld, and a petition for certiorari is
currently pending. In Brother Jonathan, the state did not
prevail and the United Sates Supreme Court granted certiorari.
The sixth circuit in Fairport acknowledged that a second
approach follows, in effect, the first prong of the traditional
rule requiring an affirmative renouncement of title. This second
approach requires abandonment to be shown by a voluntary act,
which must be proved by a clear and unmistakable affirmative act
to indicate a purpose to repudiate ownership. Fairport, 105 F.3d
at 1085, citing Columbus-America Discovery Group v. Atlantic
Mutual Insurance Co., 974 F.2d 450, 461 (4th Cir. 1992).
In Fairport, the sixth circuit expressly held that it would
"follow the lead of Brother Jonathan rather than that of
Columbus-America." Fairport, 105 F.3d at 1085. The sixth
circuit reasoned as follows: "Common sense makes readily
apparent that the statute did not contemplate a court's requiring
express abandonment; such explicit action is obviously rare
indeed, and application of such a rule would render the [Act] a
virtual nullity." Fairport, 105 F.3d at 1085.
We agree with the reasoning in Fairport and with the
traditional approach, which allows abandonment to be inferred
from circumstantial evidence, such as the lapse of time or
failure to pursue salvage efforts on the part of the owners.
In the present case, a 129-year period of time lapsed
between the wreck of the Lady Elgin and the discovery of the
wreck. The last known reference made by Aetna about the ship
occurred in the November 15, 1860, letter noting the payment to
Hubbard. The rationale for Aetna's continued custody of the six
1860 letters for over a century cannot be known for certain.
Defendants would suggest that such retention indicates Aetna's
desire to assert a claim of ownership; the State suggests that
Aetna wanted to document that it had paid off the claims and
would not be liable for any other potential claims, such as for
removing the wreckage. It is known for certain, however, that
Aetna expressed no interest in the ship for 129 years and such an
extended period of time strongly implies abandonment.
The expert testimony revealed that salvage efforts could
have been made in 1860 through rudimentary methods but such
efforts were not economically feasible. The testimony further
revealed, however, that technological developments over the
course of time made it far easier to locate shipwrecks in the
late 1960s and early 1970s. Notwithstanding the availability of
the technological advancements, Aetna still made no efforts to
salvage the shipwreck when it had a realistic opportunity to do
so for about 20 years before Zych located it.
Applying the standard that allows abandonment to be
established by circumstantial evidence, and in light of the
length of time in which Aetna displayed complete inaction toward
the Lady Elgin and its inaction after the appropriate technology
was developed, we find that the trial court erred in finding that
Aetna did not abandon its interest. In light of the legislative
history of the Act, the directives and purpose of the Act, and
the inferential standard of establishing abandonment, we find
that the trial court erred in finding no abandonment under the
facts of this case.
Finally, defendants contest the validity of the listing of
the Lady Elgin shipwreck in the National Register of Historic
Places. Defendants, however, do not dispute that the Lady Elgin
was listed in the National Register of Historic Places on
February 17, 1995. In the alternative, assuming that the listing
was proper, defendants contend that the February 1995 listing had
no effect on the title to the Lady Elgin in May 1989 when Zych
found the wreck.
For the Act to apply, the abandoned shipwreck at issue must
be "included in or determined eligible for inclusion in the
National Register." 43 U.S.C. sec. 2105(a)(3) (1988). The Act
further provides:
"The public shall be given adequate notice of the
location of any shipwreck to which title is asserted under
this section. The Secretary of the Interior, after
consultation with the appropriate State Historic
Preservation Officer, shall make a written determination
that an abandoned shipwreck meets the criteria for
eligibility for inclusion in the National Register of
Historic Places under clause (a)(3) ***." 43 U.S.C. sec.
2105(b) (1988).
The Code of Federal Regulations authorizes the Secretary of
Interior to expand and maintain the National Register, and sets
forth the procedural requirements for listing properties on the
National Register. 36 C.F.R. sec. 60.1(a) (1996) (the Code).
The state historic preservation officer is responsible for
identifying and nominating eligible properties to the National
Register. 36 C.F.R. sec. 60.6(a) (1996). The procedure for
nominating and listing a property in the National Register
includes an opportunity for property owners to object. 36 C.F.R.
sec. 60.6 (1996).
The record reveals that on March 9, 1994, William Wheeler,
as the Illinois state historic preservation officer, applied for
the registration of the Lady Elgin shipwreck on the National
Register of Historic Places in a letter to Carol Shull, the
keeper of the National Register. Wheeler's letter notified Shull
that ownership of the shipwreck was contested in both federal and
state courts. Wheeler further advised Shull of the result in the
federal litigation and that a consent decree had been entered in
the state matter. Wheeler also informed Shull that the
settlement in the state litigation was not yet complete and, in
fact, was questionable because Zych would be attempting to have
the settlement set aside. Furthermore, the Lady Elgin Foundation
had filed an objection. Due to the ongoing state court case,
Shull requested and received further documentation from Wheeler.
After receiving and considering all the relevant information, the
"Lady Elgin Shipwreck" was listed in the National Register of
Historic Places on February 17, 1995.
The Act only requires that the abandoned shipwreck at issue
be eligible for or listed in the National Register. The Act does
not authorize a party to collaterally contest the validity of
that listing. There is no dispute that the Lady Elgin shipwreck
is listed in the National Register and, therefore, that element
of the Act has been satisfied.
For all the foregoing reasons, we find that all elements of
the Act have been satisfied and reverse the trial court's order
that awarded title to the Lady Elgin shipwreck to defendants.
A few words about the dissent. First, the dissent suggests
that we have invaded the domain of the trial court by reweighing
the facts. Actually, there are almost no facts in dispute. Even
the parties' experts do not vary greatly in their conclusions.
We do, however, apply those facts, as a matter of law, in a
different manner than the trial court and in accordance with the
most recent cases decided under the Act.
Second, the dissent is critical of our reliance upon the
provisions of the Act, its legislative history and purpose. The
supremacy clause of the United States Constitution mandates that
federal statutes, together with the federal Constitution and
treaties, "shall be the supreme Law of the Land; and the Judges
in every State shall be bound thereby, any Thing in the
Constitution or Laws of any State to the Contrary
notwithstanding." U.S. Const., art. VI, cl. 2. Thus, our
federal Constitution provides that such enactments are the
supreme law of the land and, unlike the dissent, we follow the
Act.
Third, the decision in Columbus-America, the case upon which
the dissent relies, was not decided under the Act because the
shipwreck therein was discovered before the effective date of the
Act. The court in Columbus-America discussed and rested their
decision in accordance with the laws of finds and salvage, i.e.,
laws that the Act expressly abrogated.
Fourth, the dissent does not bother to cite and discuss the
cases that have been decided under the Act, let alone, offer
anything that would distinguish Fairport. In addition, the
dissent fails to acknowledge the discussion among the circuits as
to whether express abandonment is required or whether abandonment
may be inferred from circumstantial evidence, such as the failure
to do anything for 129 years with 20 of those years being within
the time frame of appropriate technology.
Fifth, contrary to the dissent, the record indicates that it
was Zych who contacted CIGNA in order to settle any claim about
which he had concern. To the surprise of nobody, the parties
were willing to share in a piece of the action.
Lastly, we are reminded of the words of Justice Frederick S.
Green, one of the most distinguished members of the Illinois
Appellate Court for the last two decades:
"Perhaps my optimism in believing that frequent dissent need
not damage the collegiality of the court arises from my
belief that the style of dissent which is most persuasive
is also one which is collegial. Logic should be the cutting
edge of such a document. Emotional argument, ridicule, or
personal attack upon other panelists which injures
collegiality are usually unpersuasive to all who are not
already committed to the position of the dissent and may
offend even those leaning toward the legal position of the
dissenter." (Emphasis in original.) F. Green, Dissenting
While on a Collegial Court of Review, 6 Appellate Law Review
10, 16 (1994).
Reversed.
QUINN, J., concurs in all of the above except neither
concurs nor dissents from the last paragraph thereof.
ZWICK, J., concurs in part and dissents in part.
October 31, 1997
No. 1-96-2223
THE PEOPLE ex rel. ILLINOIS HISTORIC ) Appeal from the
PRESERVATION AGENCY and DEPARTMENT ) Circuit Court of
OF TRANSPORTATION, ) Cook County
)
Plaintiff-Appellant, )
)
v. )
)
HARRY ZYCH, d/b/a American Diving )
and Salvage Company; LADY ELGIN )
FOUNDATION, INC.; and CIGNA PROPERTY )
CASUALTY INSURANCE COMPANY, ) Honorable
) Margaret Stanton McBride,
Defendants-Appellees. ) Judge Presiding.
PRESIDING JUSTICE GREIMAN delivered the opinion of the
court:
In 1860, a ship named the Lady Elgin sank in Lake Michigan
following a collision with the schooner Augusta. In 1989, 129
years later, defendant Harry Zych discovered the shipwreck. The
instant action concerns competing claims to the ownership of the
wreckage.
Plaintiff, the State of Illinois ex rel. Illinois Historic
Preservation Agency and Department of Transportation (the State),
claims title to the Lady Elgin shipwreck under the Federal
Abandoned Shipwreck Act of 1987 (the Act) (43 U.S.C. secs. 2101
through 2106 (1988)).
Defendants CIGNA Property and Casualty Insurance Company
(CIGNA) and the Lady Elgin Foundation, Inc. (the Foundation)
claim that they jointly hold title. Defendant Harry Zych (Zych)
created the Foundation and located the shipwreck. CIGNA is the
successor in interest to the Aetna Insurance Company (Aetna),
which insured the Lady Elgin and its cargo in 1860. CIGNA
assigned a portion of its interest in the shipwreck to the
Foundation.
Following a bench trial, defendants were awarded title based
on the determination that (1) Aetna became the owner of the wreck
and its contents when it paid off claims in 1860; and (2) Aetna
had not abandoned its ownership interest in the intervening 129
years.
This appeal raises three issues: (1) whether Aetna, the
predecessor of CIGNA, acquired title to the Lady Elgin when it
paid the insurance claims to the ship's owner; (2) assuming Aetna
acquired title, whether Aetna abandoned its interest; and (3)
whether the State established that the Lady Elgin was listed or
determined eligible for listing in the National Register of
Historic Places.
We find that Aetna acquired title to the Lady Elgin. We
also find that Aetna/CIGNA abandoned its interest in the
shipwreck and that the Lady Elgin shipwreck was listed in the
National Register of Historic Places for purposes of the Act.
Accordingly, we reverse the trial court's order that awarded
title to defendants.
The history and legacy of the Lady Elgin have been well
documented as the second-greatest tragedy in the history of the
Great Lakes and have been celebrated in both story and song.
Zych v. Wrecked Vessel Believed To Be the "Lady Elgin", 960 F.2d 665, 666-67 (7th Cir. 1992).
On the evening of September 7, 1860, the Lady Elgin left
Chicago on its way to Wisconsin. On board the ship were 393
passengers, including members of a militia group called the Union
Guards from an Irish, Democratic ward in Milwaukee who had taken
their wives, children and friends to Chicago to attend a
political rally for Stephen Douglas, a presidential candidate
against Abraham Lincoln.
As the passengers danced to the music of the bands in the
deck areas, a thunderstorm developed. About 2 a.m., a schooner
named the Augusta rammed the Lady Elgin and continued its course
to Chicago. Within 30 minutes after the collision, the Lady
Elgin broke into pieces and sank about 10 miles off shore.
Rescue efforts saved only 96 of the 393 passengers on board.
Legend has it that the disaster caused the transfer of political
power in Milwaukee from the Irish to the Germans because so many
Irish political activists died in the shipwreck.
The wreckage remained undiscovered until Zych found it in
1989, a few miles off the shore of Highland Park. To assert
ownership rights as the finder of the wreckage, Zych filed an in
rem admiralty action in the United States District Court for the
Northern District of Illinois. Zych v. Unidentified, Wrecked &
Abandoned Vessel, Believed To Be the SB "Lady Elgin", 755 F. Supp. 213 (N.D. Ill. 1990).
The ownership rights of the Lady Elgin were the subject of
federal litigation from August 1989 (the filing of Zych's
admiralty action) until July 1992 when the federal district court
entered an order declaring that the Lady Elgin Foundation, and
not Harry Zych, "is the sole owner of the shipwrecked vessel
believed to be the Lady Elgin as against all the world with the
exception of the State of Illinois." Zych v. The Unidentified,
Wrecked & Abandoned Vessel, Believed To Be the SB "Lady Elgin",
No. 89--C--6501 (1992) (unpublished judgment order).
In September 1992, the State filed the instant cause of
action seeking a declaratory judgment and asserted that it owned
the shipwreck under the Act. In May 1996, the trial commenced.
Zych testified that he is a professional diver and engages
primarily in salvage and oil field activity. Zych first became
involved in the Lady Elgin in 1969 when he went wreck diving with
some local divers. Zych later researched the history of the ship
and began his own underwater search in 1971. From 1972 through
1989, Zych's search was not a full-time job but rather an
activity he did on weekends and when time allowed away from his
regular job. In 1989 Zych located the Lady Elgin in 53 feet of
water in Lake Michigan about four miles off shore from Highland
Park.
At trial, the State admitted into evidence copies of six
letters from 1860 relating to the Lady Elgin and partial
reconstructions of those letters. CIGNA, Aetna's successor,
recovered these documents from the archives of Aetna. The
letters were authored by Thomas Alexander, who was a vice-
president of Aetna, or by E.G. Ripley, who was the president of
Aetna.
By letter dated September 11, 1860, Alexander wrote to
Aetna's agents in Chicago (Hubbard and Hunt) and stated that he
had been informed by telegraph of the loss of the Lady Elgin.
Alexander wrote "hope we escape any claims on *** cargo." Gurdon
Saltonstall Hubbard was both an agent of Aetna and the owner of
the Lady Elgin.
By another letter dated September 11, 1860, Alexander wrote
to an Aetna agent in Buffalo, New York (Captain E.P. Door), about
the ship named Augusta, i.e., the ship that collided with the
Lady Elgin, causing it to sink. Alexander stated that the
newspapers reported that the Augusta had "been libelled for
$42,000" and asked whether this had been done by the owners of
the Lady Elgin.
By letter dated September 13, 1860, Ripley wrote to J.B.
Bennett, who is identified in the transcription notes as Aetna's
general agent in Cincinnati, Ohio. Ripley stated that "[w]e had
$5000 on the 'Lady Elgin' and $2500 on cargo -- the Boat belonged
to Mr. Hubbard mainly."
By letter dated September 22, 1860, Ripley wrote to Hubbard
and Hunt in Chicago. Ripley acknowledged receipt of "papers
relating to claims for" the Lady Elgin, including invoices of
certain shipments. Ripley stated that "[w]e wish to pay these
claims as soon as they are properly proved -- let them be thus
prepared, and reduced to the cash point and pay them."
By letter dated October 10, 1860, Alexander wrote to Hubbard
and Hunt in Chicago. The letter states that the Lady Elgin "gave
us a strong pull upon our small receipts." The letter further
states
"We regret that Mr. Hubbard declines to allow us the
legal interest? off his claim because we should prefer
to pay it at that rate -- and because we think the
circumstances would justify his concession of the legal
interests in this case -- however, we shall not discuss
the point and permit the claim to layover until its
maturity. [P]ermit us to confirm Capt. Dorr
instructions not to accept an abandonment of the
vessel, for the reason which he informs us he gave you
on his recent visit to Chicago."
In the sixth and final letter, dated November 15, 1860,
Alexander wrote to Hubbard and Hunt in Chicago and stated that
"[w]e take notice of the payment of $11993 20/100 to GSHubbard in
full of policy on Lady Elgin."
Three witnesses testified as marine insurance experts: (1)
Victor Simone, for the State; (2) Ivan Avery, called by the
State; and (3) George Stellwag, for defendants.
As the State's witness, Victor Simone opined that Aetna
never acquired title to the Lady Elgin based upon (1) a response
by CIGNA in a request to admit where CIGNA "[a]dmitted that on
October 10, 1860, an abandonment of the Lady Elgin was not
accepted by Aetna"; (2) the absence of anything to indicate that
Aetna acquired title; and (3) common and economic sense that
would prompt an insurance company not to want any part of the
wreck that had very little salvage value and not to want to
assume any potential liabilities. Referring to the October 10,
1860, letter, Simone testified that the letter clearly indicates
that Aetna would not accept abandonment. Simone further opined
that, even assuming that Aetna acquired title, Aetna's actions
prove that it abandoned any interests in the vessel.
Simone testified that in the maritime insurance field, the
"acceptance of abandonment" means that the insurance company
accepts complete responsibility for the vessel and has title to
it. With the acceptance of abandonment, an insurance company
accepts the liability associated with the abandonment, most
especially the removal of the wreck. An insurance company's
refusal to accept abandonment signifies that it does not wish to
own the vessel and declines to take title to it.
Simone testified that the payment of claims by the insurance
company has nothing to do with acceptance or rejection of
abandonment but, rather, is determined by whether the claim was
covered by the policy. The claim for the loss of Lady Elgin was
paid because the insurance policies covered collision. Refusing
to accept abandonment occurs when the insurance company pays the
claims and then refuses an offer of abandonment. Such a refusal
means that the insurance company does not want to accept title to
the vessel, does not want any part of the vessel, and is just
paying the claim. Simone stated that an insurance company's
refusal to accept abandonment is "very common" and he is not
familiar with any instance where an insurance company accepted
abandonment. Simone explained that if an insurance company
accepted abandonment, it "would then become responsible for
anything that would occur for which [it] could be held legally
liable." Silence on the part of the insurance company is not
enough to accept abandonment and, instead, indicates that it does
not want any part of the vessel.
Simone testified that acceptance or rejection of
abandonment, i.e., accepting or not accepting title, has nothing
to do with subrogation. According to Simone, subrogation has
nothing to do with title, and the rights of subrogation against
third parties have nothing to do with ownership of a vessel.
Simone explained, and the other experts agreed, the
difference between a total loss of a vessel and a constructive
total loss. A total loss means that there is no value to the
vessel whatsoever. For example, a total loss would be a vessel
that sinks in 5,000 feet of water without any hope of getting
back up again. A constructive total loss would exist if the cost
of recovering the vessel or salving the vessel would far exceed
its insured value. Simone testified that the Lady Elgin was a
total loss. Simone further testified that an insurance company
never has to accept title to the vessel.
Ivan H. Avery is a vice-president of Recovery Insurance
International, a company owned by the CIGNA Corporation. Avery
had CIGNA engage in a search to locate any documents relating to
the Lady Elgin, and the search produced only the six 1860 letters
that were introduced. In addressing the lack of documentation,
Avery explained that, in 1860, claims were handled, received, and
paid in the field, not in the home office, due to the problems
with transmission of information at that time. Thus, according
to Avery, the policy and claim information would have been
located in the agency in Chicago, not in Hartford, Connecticut.
Avery believed that the original policy and claim information
were in Chicago and burned in the Chicago fire because Hubbard
and Hunt's office was totally destroyed in that fire. Avery
further testified, however, that he would have expected more than
six letters to have been found and that some documents or files
were destroyed over time.
Avery opined that Aetna accepted abandonment based on two of
the 1860 letters, October 10 and November 15. Avery testified
that, although the letters do not specifically state that Aetna
accepted abandonment, the November 15 letter specifically states
that the claim was paid and the payment of the claim was
considerably higher than the value stated in the policy. Avery
testified that abandonment could not be accepted until the claim
was paid.
Avery testified that an insurance company has a choice to
accept or reject abandonment and, if it does not accept
abandonment, it does not become the owner of the vessel.
Acceptance of abandonment means acceptance of any potential
liabilities that might be associated with the vessel, such as
unregistered cargo, loss of lives, and the recovery of the
vessel.
Avery testified that the Lady Elgin was a total loss.
Although the Lady Elgin itself had no value because it was no
longer salable, some of the equipment and the contents of the
vessel had value. Although CIGNA was not able to find a cargo
list for the Lady Elgin, the known contents of the ship included
boilers, cattle, and rifles. The primary value of the Lady Elgin
today is its historical value.
Avery testified that there was no need for any tendering of
abandonment in a total loss case because abandonment is automatic
upon payment of the loss. Avery stated that even though the
insurance company had the option of not exercising ownership
rights by refusing to accept abandonment, the practice in 1860
"with very, very few exceptions *** was for the company to accept
the ownership of a vessel in a case of a total loss."
Referring to a September 11, 1860, letter, Avery testified
that the $42,000 possible liability of the Augusta for the loss
of the Lady Elgin was a factor for Aetna to consider because the
potential liability of the Augusta would be favorable to the
owner of the Lady Elgin. Assuming that there was an abandonment
of the vessel by its original owner, the subrogation rights would
go to the insurance company and would include a cause of action
against the Augusta or any other potentially liable entity or
individual. The potential for subrogation recovery would be a
very strong factor for Aetna to consider in determining whether
to accept abandonment. Avery does not know whether the Augusta
was ever required to pay the $42,000.
George Stellwag, a marine insurance consultant, testified on
behalf of defendants. Stellwag believed that since Hubbard was
both an agent of Aetna and the owner of the ship, Alexander
wanted to oversee some of loss payments in relation to that
claim. Stellwag agreed with the other experts that the Lady
Elgin was a total loss.
Stellwag testified that, once the claim is paid by the
underwriters on a total loss of a vessel, ownership goes to the
underwriters and this passage of title need not be evidenced in
writing. Stellwag believed that the entry "not to accept
abandonment of the vessel," in the October 10, 1860, letter was a
recommendation because it was too early to decide whether to
accept or reject abandonment. Stellwag testified that
"abandonment takes place at the payment of the total loss, and so
there would be no necessity prior to that to make any decision."
Even after the payment of claims, however, the insurer can still
refuse to accept title.
Three witnesses testified about the feasibility of locating
the wreckage of the Lady Elgin over the course of time: Robert
Kutzleb, Martin Klein, and Taras Lyseenko.
Robert Kutzleb, who testified on behalf of the State, had no
doubt that the wreckage could have been found in 1860 if a
concerted effort had been made but opined that it would not have
made economic sense in 1860 for anyone to engage in such an
effort. Kutzleb described four rudimentary methods of underwater
search available in 1860. One method, referred to as the wire
span method, was to run a wire between two ships that were spaced
apart at a fixed distance. The wire would be lowered to the
bottom, and the ships would proceed very slowly to drag the wire
along the bottom. If the wire caught on anything, the ships
would slow down and be drawn together. A second option would
have been for one or more ships to troll while dragging one or
more grapples, which are hooks with tines turned up. The grapple
would snag on objects located underwater. Similarly, a third
option would have been to drag a fish net underwater. A fourth
available alternative would have been to use divers to search
underwater. Diving apparatus was available in 1860. Kutzleb
testified that all four of the search methods described would
have worked to find the shipwreck, which was located at a depth
of 53 feet.
Kutzleb further testified that the approximate location of
the ship would not have been difficult to ascertain after the
wreck. The appropriate search area could have been easily
established in 1860 because pieces of the ship, items from the
ship and passengers on the ship came ashore at known points. In
addition, a tugboat found a piece of the ship's bow anchored
about six miles from the shoreline. In fact, Zych found the same
bow and anchor seven miles from the shore. Moreover, the 250
rescuers on the shoreline saw bodies and cargo drifting in the
water. Kutzleb stated that, from this information, "a wonderful
line of bearing" could have been established from these points.
Martin Klein, who testified on behalf of defendants, opined
that the use of the dragging method of locating a shipwreck would
have been very difficult because the ship was broken into many
pieces. The state of the art in salvage technology in 1960,
according to Klein, was also "very rudimentary." Klein believed
that the main reason it took so long to discover the shipwreck
was because the wreck was not located where the general accounts
placed it. Klein opined that the chances of locating the Lady
Elgin before 1989 "almost negligible" given the search and
navigational technology available during the time frame of Zych's
search, i.e., 1970-89. Klein also opined that using then-
existing technology, the shipwreck could have been found in the
late 1960s.
Taras Lyseenko, who testified on behalf of defendants,
described his occupation as a shipwreck treasure hunter.
Lyseenko engaged in a three-day search for the Lady Elgin and
came within about five miles of the wreck. Lyseenko did not view
the search as a profit-making venture and did not put major
effort into the search. Lyseenko testified that the Lady Elgin
could have been found in 1860 with enough manpower, money and
equipment.
Zych testified that the shipwreck could have been located in
1860 with a great degree of difficulty. Zych testified that the
EG&G sidescan sonar was sufficient to locate the shipwreck in
1967 but opined that it was not commercially feasible to begin
searching for the Lady Elgin before 1971.
William Wheeler is employed by the State of Illinois in the
Historic Preservation Agency. Wheeler's duties include the
overseeing of the process of nominating sites to the National
Register of Historic Places in Illinois. In his capacity as the
state historic preservation officer, Wheeler authored a letter on
March 9, 1994, with a nomination of the Lady Elgin shipwreck site
to the National Register of Historic Places. Eventually, on
February 17, 1995, the Lady Elgin shipwreck was listed on the
National Register of Historic Places.
On May 13, 1996, the trial court entered judgment in favor
of defendants. The trial court found that the State had not
established an abandonment by Aetna of an interest in the ship.
The trial court also noted that the State had not established
abandonment under either of two standards: by a preponderance of
the evidence or by strong and convincing evidence. The trial
court also found that the alleged register of the ship on the
National Register of Historic Places was seriously questionable
but, in effect, not relevant in light of the finding of no
abandonment.
On appeal, the State asserts that Aetna never obtained an
ownership interest in the Lady Elgin because the admission by
CIGNA that Aetna refused to accept an abandonment as of October
10, 1860, constitutes a conclusive admission that Aetna never
acquired title. The State also maintains that a refusal to
accept abandonment cannot occur before the insurance company pays
the claims.
Defendants contend that Aetna acquired ownership by virtue
of payment on the insurance policies. We agree with defendants.
In number 46 of the State's request to admit facts to CIGNA,
the State propounded the following fact: "Aetna refused or
declined to accept abandonment of the Lady Elgin." CIGNA
answered: "Admitted that on October 10, 1860, an abandonment of
the Lady Elgin was not accepted by Aetna." The October 10, 1860,
letter referenced in the admission, authored by Alexander of
Aetna and sent to Aetna's agents in Chicago (Hubbard and Hunt),
stated: "Permit us to confirm Capt. Dorr instructions not to
accept an abandonment of the vessel, for the reason which he
informs us he gave you on his recent visit to Chicago."
In number 48 of the State's request to admit facts to CIGNA,
the State propounded the following fact: "At no time did Aetna or
CIGNA accept an abandonment of the Lady Elgin." CIGNA responded
"Denied."
The State's reliance on number 46 of its request to admit
facts as conclusive to Aetna's rejection of abandonment ignores
CIGNA's absolute denial as stated in number 48. Defendants'
position has remained the same in pretrial proceedings and at
trial, i.e., on October 10, 1860, Aetna would not accept
abandonment but the subsequent payment of claims in full by Aetna
on November 15, 1860, constituted acceptance of abandonment and
transfer of title as a matter of law.
Under the guidelines to the Act, an insurance company
acquires title to a wrecked vessel upon the payment of the full
value of the vessel to the owner:
"When the owner of a sunken vessel is paid the full
value of the vessel (such as receiving payment from an
insurance underwriter) the shipwreck is not considered to be
abandoned. In such cases, title to the wrecked vessel is
passed to the party who paid the owner." Abandoned
Shipwreck Act Guidelines, 55 Fed. Reg. 50120-21 (1990).
Relying on this regulation, the ninth circuit held that when
the insurance companies paid claims on the wrecked vessel, they
"took title to at least part of the wreck by right of subrogation
and under the [Act's] regulations." Deep Sea Research, Inc. v.
The Brother Jonathan, 102 F.3d 379, 388 (9th Cir. 1996). The
only records available in the Brother Jonathan case were
newspaper accounts published at the time of the shipwreck, i.e.,
1865. Brother Jonathan, 102 F.3d at 382. The newspaper accounts
stated that about one third of the cargo on board was insured and
there was no evidence that the ship itself was insured. Brother
Jonathan, 102 F.3d at 382. Thus, the ninth circuit based its
holding that insurance companies acquired title on "a newspaper
article dating from the time of the wreck listing a number of
insurance companies that insured the cargo of the" wrecked
vessel. Brother Jonathan, 102 F.3d at 388.
If the newspaper accounts and partial insurance coverage
were sufficient to hold that the insurance companies acquired
title in Brother Jonathan, the instant case most certainly has
enough evidence to establish that title passed to Aetna in 1860.
In the present case, there is no dispute that Aetna insured the
Lady Elgin, that the wreck was a total loss, and that Aetna paid
the owner of the ship (Hubbard) under the insurance policy. By
letter dated September 13, 1860, Aetna insured the ship for
$5,000 and the cargo for $2,500 ("[w]e had $5000 on the "Lady
Elgin" and $2500 on cargo"). By letter dated November 15, 1860,
Aetna acknowledged payment of $11,993.20 in full payment to
Hubbard, the owner of the ship ("[w]e take notice of the payment
of $11993 20/100 to GSHubbard in full of policy on Lady Elgin").
Accordingly, Aetna paid about $4,500 above the policy coverage.
The experts at trial agreed that an insurer had the option
to accept or reject abandonment by the ship's owner. Although
the expert testimony revealed conflicting reasons as to why Aetna
may have wanted to reject or accept abandonment based on
potential liabilities or subrogation rights that would derive
from such decision, the evidence established that payment was
made by Aetna to the ship's owner and, under the Act's
regulations, title then passed to Aetna.
Next, the State asserts that the passage of time and Aetna's
inaction during the 129-year time period between the wreck of the
Lady Elgin (1860) and the discovery of the wreckage (1989) compel
a conclusion that Aetna abandoned any interest that it held in
the ship. The State argues that, as a matter of law, Aetna
abandoned any interest when it made no effort to recover the
wreckage, did not explore the possibility of recovering the
wreckage, and displayed no interest in the ship for a period of
129 years. We agree.
The Act provides that the federal government asserts title
to certain abandoned shipwrecks and then transfers the title to
the state where the shipwreck is located. 43 U.S.C. secs.
2105(a),(c) (1988). To qualify under the Act, the shipwreck must
be (1) abandoned; (2) embedded in submerged lands of a state; and
(3) "is included in or determined eligible for inclusion in the
National Register." 43 U.S.C. secs. 2105(a)(3) (1988). In the
present case, the trial court took judicial notice of the fact
that the Lady Elgin is located in the submerged lands of Illinois
and this element of the Act is not in dispute on appeal.
The sole inquiry under the Act "is whether a ship has been
abandoned so as to give the state a claim." Fairport
International Exploration, Inc. v. Shipwrecked Vessel Known as
The Captain Lawrence, 105 F.3d 1078, 1085 (6th Cir. 1997).
Whether a vessel has been abandoned is a factual question to be
reviewed for clear error. Fairport, 105 F.3d at 1082.
The term "abandoned" is not defined in the Act. However,
as previously stated, the guidelines to the Act provide:
"(a) When the owner of a sunken vessel is paid the full
value of the vessel (such as receiving payment from an
insurance underwriter) the shipwreck is not considered to be
abandoned. In such cases, title to the wrecked vessel is
passed to the party who paid the owner." 55 Fed. Reg.
50120-21 (1990).
Defendants assert that subsection (a) of this regulation is
dispositive of the issue here because the November 15, 1860,
letter noted "the payment of $1193 20/100 to GSHubbard in full of
policy on Lady Elgin."
The State argues that, under defendants' interpretation, an
insurer that takes title by paying claims can never lose title by
abandonment. Defendants' view, according to the State, is
inconsistent with the language of the definition taken as a whole
and with the Act's intent that historic shipwrecks be managed by
the states. Moreover, the guidelines are not binding. H.R. Rep.
No. 100--514, Pt. 2, at 7 (1988), reprinted in 1988 U.S.C.C.A.N.
370, 375 ("[w]hile recognizing that the guidelines are
nonbinding, the Committee strongly encourages the states to act
consistently with the guidelines").
We agree with the State's position. Although subsection (a)
authorizes the transfer of title to Aetna in 1860 upon the
payment of the insurance claims, it does not provide that the new
owner could never abandon its interest. To accept defendants'
position on this guideline as absolute would defeat the entire
purpose of the Act.
Ships have lured seekers of treasures since the days of
discoverers of new lands and pirates. Likewise, courts have
entertained legal disputes over sunken ships and their buried
valuables. To resolve such disputes, courts generally and
historically have employed the law of finds or the law of
salvage. In short, the law of finds espouses the principle of
finders, keepers. The law of salvage allows the original owners
of the wrecked ships and their cargo to retain ownership but also
grants the salvors compensation for their service. See Columbus-
-America Discovery Group v. Atlantic Mutual Insurance Co., 974 F.2d 450 (4th Cir. 1992) (held that the underwriters had not
abandoned their interest in a ship that sank in 1857 and was
found in 1987, and that the law of salvage should be applied);
see also Annotation, Rights in and Ownership of Wrecked or
Derelict Vessels and Their Contents Not Cast Upon the Shore, 63
A.L.R.2d 1369 (1959).
The United States Congress, however, in an unusual
legislative move, expressly abrogated the laws of finds and
salvage in the Act. Section 2106 specifically provides that
"[t]he law of salvage and the law of finds shall not apply to
abandoned shipwrecks to which section 2105 of this title
applies." 43 U.S.C. sec. 2106(a) (1988). Furthermore, the Act
was effective only to legal proceedings brought after April 28,
1988. 43 U.S.C. sec. 2106(c) (1988).
The legislative history of the Act recognized that admiralty
law developed to encourage the salvage of commercial goods and,
thus, its focus is commercial, not cultural resource management
or recreation. As technological advances substantially have
eased access to shipwrecks, tens of thousands of shipwrecks have
been located. Simultaneous with the increased discovery of
shipwrecks, historic shipwrecks, containing both historic
information and tangible artifacts, have increasingly been
recognized as cultural resources needing greater protection.
H.R. Rep. No. 100--514(I), Pt. 1, at 1 (1988), reprinted in 1988
U.S.C.C.A.N. 365 (Background section).
With these principles in mind, the House Committee that
considered the bill that became the Act observed "these admiralty
principles [the laws of finds and salvage] are not well-suited to
the preservation of historic and other shipwrecks to which this
Act applies. *** In light of today's experience and conditions,
the committee does not believe that the law of finds and the law
of salvage well serve the protection of our nation's maritime
heritage. This heritage is best protected by states acting
through their historic preservation programs consistent with
federal guidance." H.R. Rep. No. 100--514, Pt. 2, at 8 (1988),
reprinted in 1988 U.S.C.C.A.N. 370, 377. In addition, the House
Committee stated that abandonment can be implied or inferred:
"The Committee notes that the term 'abandoned' does not require
the original owner to actively disclaim title or ownership. The
abandonment or relinquishment of ownership rights may be implied
or otherwise inferred, as by an owner never asserting any control
over or otherwise indicating his claim of possession of the
shipwreck." H.R. Rep. No. 100--514,. Pt. 1, at 2 (1988),
reprinted in 1988 U.S.C.C.A.N. 365, 366.
Abandonment by implication or inference is, in part,
consistent with "the traditional rule that a wreck is not
abandoned unless either 1) title is affirmatively renounced or 2)
abandonment can be inferred from the lapse of time or failure to
pursue salvage efforts on the part of the owners." (Emphasis in
original.) Fairport International Exploration, Inc. v.
Shipwrecked Vessel Known as The Captain Lawrence, 105 F.3d 1078,
1085 (6th Cir. 1997), petition for cert. filed (June 4, 1997),
quoting Deep Sea Research, Inc. v. The Brother Jonathan, 89 F.3d 680, 688 (9th Cir. 1996), cert. granted, California v. Deep Sea
Research, Inc., ___ U.S. ___, 138 L. Ed. 2d 192, 117 S. Ct. 2430
(1997). Notably, in Fairport, the state prevailed, a finding of
abandonment was upheld, and a petition for certiorari is
currently pending. In Brother Jonathan, the state did not
prevail and the United Sates Supreme Court granted certiorari.
The sixth circuit in Fairport acknowledged that a second
approach follows, in effect, the first prong of the traditional
rule requiring an affirmative renouncement of title. This second
approach requires abandonment to be shown by a voluntary act,
which must be proved by a clear and unmistakable affirmative act
to indicate a purpose to repudiate ownership. Fairport, 105 F.3d
at 1085, citing Columbus-America Discovery Group v. Atlantic
Mutual Insurance Co., 974 F.2d 450, 461 (4th Cir. 1992).
In Fairport, the sixth circuit expressly held that it would
"follow the lead of Brother Jonathan rather than that of
Columbus-America." Fairport, 105 F.3d at 1085. The sixth
circuit reasoned as follows: "Common sense makes readily
apparent that the statute did not contemplate a court's requiring
express abandonment; such explicit action is obviously rare
indeed, and application of such a rule would render the [Act] a
virtual nullity." Fairport, 105 F.3d at 1085.
We agree with the reasoning in Fairport and with the
traditional approach, which allows abandonment to be inferred
from circumstantial evidence, such as the lapse of time or
failure to pursue salvage efforts on the part of the owners.
In the present case, a 129-year period of time lapsed
between the wreck of the Lady Elgin and the discovery of the
wreck. The last known reference made by Aetna about the ship
occurred in the November 15, 1860, letter noting the payment to
Hubbard. The rationale for Aetna's continued custody of the six
1860 letters for over a century cannot be known for certain.
Defendants would suggest that such retention indicates Aetna's
desire to assert a claim of ownership; the State suggests that
Aetna wanted to document that it had paid off the claims and
would not be liable for any other potential claims, such as for
removing the wreckage. It is known for certain, however, that
Aetna expressed no interest in the ship for 129 years and such an
extended period of time strongly implies abandonment.
The expert testimony revealed that salvage efforts could
have been made in 1860 through rudimentary methods but such
efforts were not economically feasible. The testimony further
revealed, however, that technological developments over the
course of time made it far easier to locate shipwrecks in the
late 1960s and early 1970s. Notwithstanding the availability of
the technological advancements, Aetna still made no efforts to
salvage the shipwreck when it had a realistic opportunity to do
so for about 20 years before Zych located it.
Applying the standard that allows abandonment to be
established by circumstantial evidence, and in light of the
length of time in which Aetna displayed complete inaction toward
the Lady Elgin and its inaction after the appropriate technology
was developed, we find that the trial court erred in finding that
Aetna did not abandon its interest. In light of the legislative
history of the Act, the directives and purpose of the Act, and
the inferential standard of establishing abandonment, we find
that the trial court erred in finding no abandonment under the
facts of this case.
Finally, defendants contest the validity of the listing of
the Lady Elgin shipwreck in the National Register of Historic
Places. Defendants, however, do not dispute that the Lady Elgin
was listed in the National Register of Historic Places on
February 17, 1995. In the alternative, assuming that the listing
was proper, defendants contend that the February 1995 listing had
no effect on the title to the Lady Elgin in May 1989 when Zych
found the wreck.
For the Act to apply, the abandoned shipwreck at issue must
be "included in or determined eligible for inclusion in the
National Register." 43 U.S.C. sec. 2105(a)(3) (1988). The Act
further provides:
"The public shall be given adequate notice of the
location of any shipwreck to which title is asserted under
this section. The Secretary of the Interior, after
consultation with the appropriate State Historic
Preservation Officer, shall make a written determination
that an abandoned shipwreck meets the criteria for
eligibility for inclusion in the National Register of
Historic Places under clause (a)(3) ***." 43 U.S.C. sec.
2105(b) (1988).
The Code of Federal Regulations authorizes the Secretary of
Interior to expand and maintain the National Register, and sets
forth the procedural requirements for listing properties on the
National Register. 36 C.F.R. sec. 60.1(a) (1996) (the Code).
The state historic preservation officer is responsible for
identifying and nominating eligible properties to the National
Register. 36 C.F.R. sec. 60.6(a) (1996). The procedure for
nominating and listing a property in the National Register
includes an opportunity for property owners to object. 36 C.F.R.
sec. 60.6 (1996).
The record reveals that on March 9, 1994, William Wheeler,
as the Illinois state historic preservation officer, applied for
the registration of the Lady Elgin shipwreck on the National
Register of Historic Places in a letter to Carol Shull, the
keeper of the National Register. Wheeler's letter notified Shull
that ownership of the shipwreck was contested in both federal and
state courts. Wheeler further advised Shull of the result in the
federal litigation and that a consent decree had been entered in
the state matter. Wheeler also informed Shull that the
settlement in the state litigation was not yet complete and, in
fact, was questionable because Zych would be attempting to have
the settlement set aside. Furthermore, the Lady Elgin Foundation
had filed an objection. Due to the ongoing state court case,
Shull requested and received further documentation from Wheeler.
After receiving and considering all the relevant information, the
"Lady Elgin Shipwreck" was listed in the National Register of
Historic Places on February 17, 1995.
The Act only requires that the abandoned shipwreck at issue
be eligible for or listed in the National Register. The Act does
not authorize a party to collaterally contest the validity of
that listing. There is no dispute that the Lady Elgin shipwreck
is listed in the National Register and, therefore, that element
of the Act has been satisfied.
For all the foregoing reasons, we find that all elements of
the Act have been satisfied and reverse the trial court's order
that awarded title to the Lady Elgin shipwreck to defendants.
A few words about the dissent. First, the dissent suggests
that we have invaded the domain of the trial court by reweighing
the facts. Actually, there are almost no facts in dispute. Even
the parties' experts do not vary greatly in their conclusions.
We do, however, apply those facts, as a matter of law, in a
different manner than the trial court and in accordance with the
most recent cases decided under the Act.
Second, the dissent is critical of our reliance upon the
provisions of the Act, its legislative history and purpose. The
supremacy clause of the United States Constitution mandates that
federal statutes, together with the federal Constitution and
treaties, "shall be the supreme Law of the Land; and the Judges
in every State shall be bound thereby, any Thing in the
Constitution or Laws of any State to the Contrary
notwithstanding." U.S. Const., art. VI, cl. 2. Thus, our
federal Constitution provides that such enactments are the
supreme law of the land and, unlike the dissent, we follow the
Act.
Third, the decision in Columbus-America, the case upon which
the dissent relies, was not decided under the Act because the
shipwreck therein was discovered before the effective date of the
Act. The court in Columbus-America discussed and rested their
decision in accordance with the laws of finds and salvage, i.e.,
laws that the Act expressly abrogated.
Fourth, the dissent does not bother to cite and discuss the
cases that have been decided under the Act, let alone, offer
anything that would distinguish Fairport. In addition, the
dissent fails to acknowledge the discussion among the circuits as
to whether express abandonment is required or whether abandonment
may be inferred from circumstantial evidence, such as the failure
to do anything for 129 years with 20 of those years being within
the time frame of appropriate technology.
Fifth, contrary to the dissent, the record indicates that it
was Zych who contacted CIGNA in order to settle any claim about
which he had concern. To the surprise of nobody, the parties
were willing to share in a piece of the action.
Lastly, we are reminded of the words of Justice Frederick S.
Green, one of the most distinguished members of the Illinois
Appellate Court for the last two decades:
"Perhaps my optimism in believing that frequent dissent need
not damage the collegiality of the court arises from my
belief that the style of dissent which is most persuasive
is also one which is collegial. Logic should be the cutting
edge of such a document. Emotional argument, ridicule, or
personal attack upon other panelists which injures
collegiality are usually unpersuasive to all who are not
already committed to the position of the dissent and may
offend even those leaning toward the legal position of the
dissenter." (Emphasis in original.) F. Green, Dissenting
While on a Collegial Court of Review, 6 Appellate Law Review
10, 16 (1994).
Reversed.
QUINN, J., concurs in all of the above except neither
concurs nor dissents from the last paragraph thereof.
ZWICK, J., concurs in part and dissents in part.
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