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INDUSTRIAL WAXES v. BROWN

July 22, 1957

INDUSTRIAL WAXES, Inc., Plaintiff,
v.
Gerald Few BROWN, Defendant



The opinion of the court was delivered by: RYAN

This suit has been filed by Industrial Waxes, Inc., an Ohio corporation, as plaintiff against certain named underwriters at Lloyd's to recover under contracts of insurance for losses alleged to have been sustained by plaintiff due to the destruction by fire of two shipments of Industrial Waxes, totaling approximately 200 tons. The losses befell while the goods were stored in a customs warehouse at Valparaiso, Chile.

The complaint alleges that jurisdiction is based on diversity and it was stipulated at trial that New York law applied in determining all legal rights of the parties involved and particularly in determining plaintiff's right to maintain this suit -- that is, whether plaintiff was the owner in law of the insured shipments, -- and the construction and interpretation of the terms of the policy.

Trial to the Court presented no issue to the following material facts.

 Plaintiff has for many years been engaged in the business of selling and shipping industrial waxes to customers throughout the world. It had insured all shipments made from the United States with Lloyd's underwriters under an open cover contract. Lukis, Stewart & Co., insurance brokers at Montreal, were authorized to issue each year a memorandum of open cover setting forth the conditions, terms and rates for particular shipments to be covered following declaration by the plaintiff. There issued in this suit memorandum of open cover No. 50/4058 which was effective for the year October 30, 1950 to October 29, 1951. The procedure followed was that Lukis furnished plaintiff with a number of forms of Lloyd's Certificates of Insurance whereon plaintiff declared each shipment to be insured, the commodity shipped, its value, port of exit, destination and course of voyage. When so declared and signed by plaintiff, the original of the declaration would go forward with the shipping documents and a copy would be sent to Lukis who would in turn bill plaintiff at rates scheduled in the open cover and collect the premium due. The two shipments in suit were declared, covered and the premiums paid.

 These shipments were the last of five to be forwarded by plaintiff under a contract to sell five hundred tons of waxes to Sociedad Nacional de Velas, S.A. (Sonavelas) of Santiago, Chile. This contract of February 9, 1951 provided that the shipments would be made in lots of about 100 tons per month beginning March, 1951 and that the terms of payment were cash against documents. The confirmation of this order listed as base of the sale 'FOB, C & F, CIF, $ 7.80 per one hundred lbs. FAS New Orleans.' This is to be read that the goods were sold CIF Valparaiso, FOB New Orleans. The rate of exchange applicable to the contract was 60 pesos per dollar. Approximately 300 tons had been shipped and received by the purchaser before the first of the two shipments in suit left Tulsa, Okla., on March 30, 1951. This shipment arrived at Valparaiso, the recognized point of entry for importation to Santiago, on May 4, 1951. The second of the shipments left Tulsa on May 18, 1951 and reached Valparaiso on July 8, 1951. An import license bearing No. 192 for the entry of these goods into Chile had been previously issued by the authorized Chilean government agency. Each shipment upon arrival at Valparaiso was placed in customs and remained there until destroyed by fire on October 5, 1951. The first -- having been in customs for a period of 5 months and the second almost three months. But a delay of this length in a customs' warehouse pending entry was neither unusual nor unexpected and was long a matter of common knowledge to exporters to the West Coast of South America. I find all parties chargeable with knowledge of these conditions. Shipments frequently were required to remain in customs at Valparaiso pending release and clearance of dollars to meet the sight drafts and invoices which accompanied and were part of the shipping documents. This dollar clearance was under the control of and issued from an agency of the Chilean government, 'Condecor'. When the shipments had arrived in Chile, dollar exchange was tight and under strict control by Condecor; indeed prior shipments under the contract had also rested in customs at Valparaiso pending release of dollars for similar periods. It is not contended that the deposit of the goods in the customs warehouse at the port constituted a deviation in or abandonment of the insured voyage.

 Plaintiff to secure payment from Sonavelas had forwarded through its American bank to the Banco de Chile at Santiago drafts for collection with each shipment. The Banco de Chile notified the consignee-purchaser Sonavelas of the arrival of each shipment and that it was holding the documents subject to collection, who in turn applied through government channels for license or permission to purchase the necessary United States dollars to effect the release and delivery of the shipping documents to it by the Banco de Chile. After each shipment had been in customs at Valparaiso for more than thirty days the Banco de Chile, without specific instructions from the plaintiff, effected insurance on the two shipments in Cia Franco-Chilena de Seguros against risk of fire. The cost of this insurance was charged to Sonavelas; plaintiff was not furnished with any policy of insurance so written and has not seen the policy and has no knowledge of its terms or conditions.

 The loss by fire was duly reported by plaintiff to Gibbs y Cia. the defendant's designated agents at Valparaiso and they inspected the shipments at the warehouse and found them a total loss.

 Following the fire the plaintiff with the concurrence of defendant and at their suggestion retained a Chilean attorney to enforce collection under the Chilean insurance for the account of the plaintiff or the defendant. After due notice to the defendants of a contemplated settlement and an offer to the defendants to allow them to participate in the settlement and their refusal to do so, the claim against the insurer in Chile was settled and plaintiff collected from it 3,617,414 pesos, less 236,869.64 pesos expenses for collection charges. Plaintiff has held this amount in pesos available to defendants.

 It is upon these undisputed facts that plaintiff seeks to recover $ 43,803 the insured value of the two shipments covered by the policy issued by defendant and lost by fire on October 5, 1951. We conclude that the plaintiff is entitled to judgment against the defendants in that amount with interest and costs of this suit.

 Defendant urges by way of defense:

 1. That plaintiff is not the real party in interest, contending that title to the shipments passed to Sonavelas under the contract of sale prior to the loss.

 I must examine the contract between Industrial and Sonavelas to ascertain when title to the goods passed from one to the other.

 The order of February 6, 1951 sent from Santiago and addressed to plaintiff at Cincinnati, O., by M. S. McGoldrick (Ex. 2 of P.T. order) recites on its face: 'Condiciones -- Pagadero contra documentos per el Banco de Chile' (Conditions -- Payment against documents through the Banco de Chile); printed on the reverse is: 'Notes: 1. Waxes is to arrange shipment of this material to Valparaiso de Chile at customer's risk and expense. Marine and War Risk Insurance will be covered for an amount equivalent to invoice value, plus freight and insurance charges, increased by 10% from ...


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