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December 30, 1975

ARTHUR HENRY CHESTER, et al., Defendants, and AMETCO SHIPPING, INC., Intervening Plaintiff

The opinion of the court was delivered by: DUFFY


 This is an action on a marine insurance policy to recover for the constructive total loss of the insured vessel, the JOSEPH H, which was owned by the plaintiff corporation and insured by the defendants. The intervening plaintiff claims that a certain amount of any such recovery should be paid to it since it held a mortgage on the vessel.

 Plaintiff Joseph Navigation Corp. was organized under the laws of Liberia in October 1968 by Arthur J. Halpern and his mother Mrs. Evelyn Halpern, for the purpose of acquiring title to a cargo vessel to be named the JOSEPH H. The vessel was built in Germany in 1950 and was a small dry cargo ship registered under the Liberian flag. The vessel was purchased by the Joseph Navigation Corp. on November 1, 1960 for $147,500, which was financed in part by a loan from the intervening plaintiff, Ametco Shipping, Inc., and secured by a preferred ship mortgage in the principal sum of $107,500. The rest of the purchase price of the vessel was obtained by a $40,000 unsecured loan from Mrs. Evelyn Halpern.

 Between September 11, 1969 and September 13, 1969, the JOSEPH H under the command of Captain Carlos Cabezas, loaded a full cargo of salted cattle hides in Milwaukee, which were to be delivered to Russia. The ship did not sail from Milwaukee until September 21st, and arrived in Montreal on September 28th. The ship proceeded from Montreal headed for Riga on the morning of October 2nd.

 While at Montreal six crew members signed off the vessel and five new crew members joined the vessel, including a new chief engineer, a new chief officer and a new third engineer. The new chief officer, Niels Eric Ladefoged, was not licensed as a master or a chief officer but merely held a third officer's license. Captain Cabezas and Mr. Ladefoged were the only deck officers aboard the vessel upon sailing from Montreal. The two deck officers stood watch in six hour shifts; the Captain stood watch from 6 until 12 and Mr. Ladefoged stood watch from 12 until 6.

 As indicated above, the vessel broke ground at Montreal on the morning of October 2nd to put out up the St. Lawrence River and for the North Atlantic crossing.

 The vessel was equipped with two magnetic compasses. She was also equipped with a fathometer but it was not in working order. Radar for the ship was also not in operating condition and apparently the radar had not been operational for some extended period of time.

 As the JOSEPH H was proceeding down the St. Lawrence River, outward bound from Montreal, she encountered engine trouble and in the evening of October 2nd anchored at the entrance to Bic Channel for repairs.

 Shortly before 6 o'clock on the morning of October 3rd, Mr. Ladefoged was relieved by Captain Cabezas and Ladefoged retired to his bunk. The log indicates that there was dense fog at that time. The log also indicates that at 6:15 the anchor was weighed and the JOSEPH H proceeded in the foggy weather. At about 7:30, according to the log, the JOSEPH H ran aground on a reef near Bic Island.

 Salvage tugs were engaged which after lightening the vessel of some of its cargo of hides, pulled the JOSEPH H free and towed it first to Tadoussac, Quebec, on October 7th, and from there to Quebec City, where the vessel arrived on October 10th. Captain Cabeza shortly thereafter was hospitalized for cancer and on October 17th died. On December 5, 1969, while the vessel still lay at Quebec, plaintiff tendered abandonment to the underwriters, which was refused.

 In the meantime, Salvage Association, London, acting on defendant's behalf, inspected the physical condition of the vessel on October 8, 1969, at Tadoussac and on subsequent dates at Quebec. The Salvage Association surveyors reached the following conclusion:

"In assessing this casualty and in the light of the divers' report and the known damages to the vessel it is the opinion of the undersigned that the cost of salvage and repairs would exceed the insured cost of the vessel."

 In January 1972, Joseph Navigation Corp. alleging the constructive total loss of the JOSEPH H, in consequence of insured perils, commenced this action against the defendants to recover $300,000, the agreed hull insurance value, plus $75,000, the amount of additional or increased value, total loss only insurance.

 In April of 1970, the vessel was sold by judicial sale at Quebec for $6,000.

 It is defendants' contention that the damages to the JOSEPH H did not result from insured peril and the defendants have denied that the vessel became a constructive total loss ...

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