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February 7, 1972

Myles J. ROSENTHAL, Plaintiff,
Kenneth Gordon POLAND, Defendant

Newman, Customs Court Judge, Sitting by Designation.

The opinion of the court was delivered by: NEWMAN

NEWMAN, Customs Court Judge, Sitting by Designation.

Plaintiff *fn1" sues, pursuant to the admiralty and maritime jurisdiction of the court (28 U.S.C. ยง 1333), to recover under a contract of marine insurance for a constructive total loss of the ferryboat Orange in May 1965. The complaint demands judgment for $99,500, representing the insured value of the vessel ($100,000) less the proceeds of the salvage ($2,000), plus "sue and labor" expenses ($1,500), interest from May 23, 1965, and costs.

 Defendant does not dispute the execution and delivery of the insurance contract, nor that there was a constructive total loss of the Orange. Rather, defendant denies liability under the policy primarily on the basis that plaintiff allegedly misrepresented and concealed material facts concerning the value of the vessel. Inasmuch as defendant considers the policy to be void, return of all premiums has been tendered to plaintiff. Hence, the basic issue concerns the validity of the contested insurance contract.

 The Record Plaintiff introduced ten exhibits in evidence, submitted for identification two series of checks and their listing, a contract for "sale" of the Dutchess (a "sister ship" of the Orange), and called five witnesses: Lawrence L. Rosenthal -- brother of Myles, and his insurance broker; Richard LeVangie -- a computer engineer, who had boating and navigation as hobbies, and had contacted Myles Rosenthal to offer his services as a volunteer upon learning of Rosenthal's purchase of "one of the old Newburgh ferry- boats"; Conrad Milster -- chief engineer at Pratt In- stitute in Brooklyn, intensely interested in machinery and a collector of marine artifacts; Frank O. Braynard -- a "specialist in the ports and intermodel section" of the Maritime Administra- tion, and an "expert in the field of preservation and historical employment of ves- sels of historical import"; *fn2" and William B. Mollard, Jr. -- a ship sales broker, who identified an executed contract dated May 23, 1967 relating to the sale of the Dutchess for "box topping", i.e. increasing the gross tonnage from 596 to 1,500 under the Ship Exchange Act. Defendant introduced seven documents in evidence, but called no witnesses. The documents are: Exhibit A -- "Report of Survey" by Marine Claim Services, Inc. covering the nature and extent of the damage to the Orange. Exhibit B -- Toplis and Harding, Inc. survey re- port covering the damage to and thefts from the Orange. Exhibit C -- A memorandum from F.M. Pommer of Wohlreich & Anderson, Ltd., correspondent brokers, to Swann & Everett, Ltd., Lloyd's brokers, forwarding "cop- ies of expired cover notes, survey and snaps", and requesting that insurance coverage on the Orange be bound im- mediately. Exhibit D -- Cover notes for the Orange addressed to Sayre & Toso, Inc. by Joseph Had- ley (Insurance) Ltd. Exhibit E -- A letter from Swann & Everett, Ltd. to Wohlreich & Anderson, Ltd., for- warding a cover note relating to the Orange. Exhibit F -- A "speed message" from F.M. Pom- mer to Swann & Everett, Ltd. request- ing the underwriter's agreement to painting, "fixing up" and charging the boilers of the Orange for Coast Guard testing. Exhibit G -- A survey report on the Orange by the United States Salvage Association Inc., per L.R. Chapman, Surveyor, indicating an "estimated cost of re- production" of $750,000 and an "estimated market value" of $100,000.


 Until November 3, 1963 the New York State Bridge Authority operated the Beacon-Newburgh ferry line for transporting passengers and automobiles across the Hudson River, and for that purpose utilized three vessels: the Orange, the Dutchess and the Beacon. On November 2, 1963 the newly constructed Beacon-Newburgh Bridge was opened, and the Bridge Authority advertised for sealed bids on the three vessels.

 Since the early 1950's, plaintiff had held an especial interest in the steam propelled ferryboats plying the Beacon-Newburgh line, located near the boarding school he attended in Hyde Park. Indeed, the Beacon-Newburgh line had historical significance, having been in continuous operation since it was chartered by King George II in 1743.

 Later, and as an engineer by profession, plaintiff was a steam machinery and ferryboat buff. He had an extremely strong interest in reciprocating steam engines, particularly those found on vessels that were rapidly disappearing from the East Coast of the United States by 1960, with an intense basic concern in the preservation of this type of machinery.

 Upon learning that the Beacon-Newburgh Bridge was to be constructed, plaintiff became interested in the Orange since he knew completion of the bridge inevitably would result in the termination of the ferry service. So far as plaintiff knew, the Beacon-Newburg ferry line was the last ferry service operating north of New York City.

 Prior to the actual termination of the ferry service due to the completion of the Beacon-Newburgh Bridge, plaintiff, accompanied by another engineer and machinery hobbyist, Conrad Milster, made numerous trips to and on the Orange to take motion pictures, sound recordings of her propulsion plant, and make examinations of her hull. *fn3" From these studies, plaintiff learned that the Orange had several unique characteristics: she was a steam-driven, hand-fired, coal burning ferry that typified not only vessels of her time (she was launched in 1914), but also of those built around 1880; the Orange was one of the last of the doublended ferries; the boat possessed substantially all of her original materials, viz. her hull, propulsion machinery and superstructure were substantially the same in 1963 as when she was built; despite her nearly fifty years of age, the Orange was in "mint condition" having been well maintained; from an operational standpoint, the Orange represented an excellent compromise between maximum size and minimum expense; and the Orange was certificated by the United States Coast Guard for carriage of passengers.

 In sum, plaintiff concluded that the Orange was "the last of a kind," and the only vessel on the Beacon-Newburgh line worthy of preservation as an operating commercial artifact of the steam navigation era. *fn4" Consequently, plaintiff decided to submit a bid to the Bridge Authority, mainly motivated by the fear that if he did not purchase the Orange, the ferryboat would be scrapped.

 In arriving at a figure to submit as a bid at the sale of the Orange, plaintiff knew that the market for ferryboats was relatively limited and that the Orange would probably be sold for her scrap value. Two bids were submitted for the Orange, one for $2,850 by plaintiff and another for $2,600 by Witte Marine Equipment Co., a dealer in used marine equipment. Plaintiff's bid was accepted. The Dutchess and Beacon were sold to Witte for $2,600 and $2,100, respectively. Of the three vessels, the Orange had the most expensive equipment, including some $9,000 worth of radar equipment, as well as valuable copper estimated by plaintiff to be worth $5,000 or $6,000.

 The sale of the Orange to plaintiff and the purchase price were accorded considerable prominence and publicity in eight metropolitan newspapers (including The New York Times, the New York Herald Tribune, the New York Sunday News *fn5" and the New York Journal American), on television, *fn6" and in the bimonthly historical magazine American Heritage distributed all around the world. An eleven page article in the April 1964 American Heritage, "Farewell to the Ferry" (pp. 38-49), speaks of the Orange in its opening paragraph and contains a picture of that ferryboat on the first page. In a subsequent portion of the article, almost two pages (pp. 48-49) are devoted to a second large picture of the Orange with several paragraphs specifically discussing the Orange and her "still-glowing brasswork". The article states, in part (at page 49):

For the Orange herself there may yet be a few years of answering engine-room bells added to the even fifty she has already put in. At the auction which saw her sisters sold for scrap, she was bid in for $2,850 by Myles Rosenthal, a consulting engineer for whom she had become a femme fatale. Late last fall, he and a group of friends fired up her coal-burning boilers and brought her down the Hudson to Jersey City, where he plans to refit her for charter trips. * * *

 Virtually all the articles -- including those published in the widely circulated Times and Herald Tribune -- emphasized the fact that the Orange had been purchased at auction for the sum of $2,850. Thus, the Times of November 26, 1963 carried a feature story *fn7" stating, in part: "Mr. Rosenthal bid $2,850 for the Orange, and since he was the high bidder, the New York State Bridge Authority indicated yesterday that he would become the likely owner * * *". And again, the Times on November 28, 1963, crediting an Associated Press report, stated in part: "Myles Rosenthal of New York City paid $2,850 for the third boat, the Orange ".

 The Sunday News of December 29, 1963, page 4, carried a full page illustrated story *fn8" depicting Rosenthal and the Orange, reciting the details of the purchase.

 The Orange was delivered to plaintiff at Beacon, New York on November 24, 1963. After a good deal of work performed by plaintiff and several other ferryboat buffs, the Orange sailed down the Hudson River on November 30, 1963 with great fanfare to Jersey City, New Jersey where the boat was drydocked. *fn9" In the dramatics of that occasion, "[en] route her whistle defied the enemy by saluting every river town that had once had a ferry". *fn10" Thereafter, she was moored at several different docks or piers. From the time the Orange arrived at Jersey City in late 1963 until her destruction and sale of the salvage about two years later, the vessel was under virtually continuous maintenance and repair. *fn11" Plaintiff paid for a ...

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