Appeal from District Court of the United States for the Southern District of New York.
Before AUGUSTUS N. HAND, CHASE, and FRANK, Circuit Judges.
This appeal is from a judgment of the District Court for the Southern District of New York in a suit for a declaratory judgment to determine the liability of the plaintiffs on a policy of marine insurance. The plaintiffs and the defendants moved for judgment on the pleadings. The motion of the defendants was granted and from the judgment entered thereon, 53 F.Supp. 516, the plaintiffs have appealed.
On August 26, 1938, the plaintiffs issued a marine insurance policy for $45,000 covering, inter alia, the legal liability up to the amount of the policy, of defendant Henry DuBois Sons Company for collision damages caused by its tug Ariosa. They became severally liable, each for a stated percentage, for the amount of the insurance. The defendant Hartford Fire Insurance Company issued to the DuBois Company on August 26th in the same year a policy of insurance in the amount of $10,000 covering within the policy limits physical damage to its dump scow D 22. both of these policies were in effect when the Ariosa while towing the D 22 brought the latter into collision with a steamship, the Segundo, owned by a third party.
In litigation which followed, it was established that the collision was without fault on the part of the D 22 and was caused by the mutual fault of the Ariosa and the Segundo, and each was held for half damages. The Ariosa was not injured. The damage to the scow was less in amount than that sustained by the Segundo and the half damages due the latter were paid to her owners by the payment of the excess of one half its damages over one half the damages of the D 22. The plaintiffs made this payment under the Ariosa policy and there is now no controversy in respect to that.
The ariosa policy which the plaintiffs had issued contained a so-called "sister ship" clause, however, under the provisions of which the liability of the Ariosa for the remaining one half the damages the D 22 sustained is, so far as the underwriters are concerned, to be treated as though the tug and scow did not have a common owner. Had the scow not been insured at all it is clear and undisputed that the plaintiffs would have been bound under the policy on the Ariosa not only to pay to the Segundo one half its damages but to pay one half the scow's damages also. In paying the Segundo in discharge of the liability to it, the plaintiffs took credit for one half the damage to the scow. The DuBois Company presented a claim to the plaintiffs under the Ariosa policy which included this one half of the scow's damages plus the remaining one half. The plaintiffs paid the claim after making adjustments which included a deduction with interest of the amount the DuBois Company had received from the Hartford Fire Insurance Company under the following conditions.
While the litigation above mentioned was pending, the Hartford Fire Insurance Company advanced to DuBois the full amount collectible on its policy on the scow, $9,900.00, on a loan receipt reading as follows:
"Received from Hartford Fire Insurance Company the sum of Nine Thousand Nine Hundred and 00/100 Dollars as a loan and to the extent of such loan made, to be repayable only out of any net recovery the undersigned may effect from any person and/or persons, firm or corporations, on or by reason of any claim for loss or damage to the dumper 'D-22' sustained and/or arising out of and/or connected in any manner with an accident occurring on or about the 7th day of December, 1938 between the dumper 'D-22', while in tow of the tug 'Ariosa' and the Steamship 'Segundo' by reason whereof the dumper 'D-22' was damaged.
"The undersigned hereby pledges to the said insurance company such claim or claims and any recovery thereon to the extent of the amount hereinbefore loaned.
"In further consideration of said loan, the undersigned agrees to present any and all claims and to begin and prosecute any and all legal proceedings and/or arbitrations which the said insurance company may require the undersigned to present, begin or prosecute, and further agrees not to settle or compromise any such claim, legal proceeding or arbitration without the consent in writing of the said insurance company.
"The expense of any such litigation shall be apportioned pro rata between the insurance company and the undersigned in accordance with the amount of the various interests.
"The undersigned hereby agrees to execute, upon request, in its name, any and all documents which may be deemed advisable by said insurance company to carry ...