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gree of intelligence and skill would have suggested some effort to find out her draft; but she was water-logged, the waves washing over her at midships, and when it is considered that lumber-carrying vessels as a rule do not draw as much water as was proved to be the case here, that the master of the Shawmut was acquainted with the port of Jacksonville, and his owners had an agent there, and that he had no personal acquaintance with the port of Charleston, although the Atlantic Coast Pilot, a copy of which he had in his possession, would have given him the necessary information as to the depth of water on the bar at Charleston, it cannot be imputed to him as a culpable fault that he endeavored to make that port, which was nearer in distance. The first officer, who was aboard the Myrtle Tunnel, estimated her draft at 25 feet. If such had been the case, she could by pumping out have been enabled to cross the St. John's Bar. After the tug Paulsen, however, came up with him early in the afternoon and gave him positive information as to the schooner's depth of draft, it was obvious that she could not cross St. John's Bar, and futile to attempt to take her to Jacksonville. It then became his duty to take her to Charleston, where alone she could find safe anchorage, and he would not have been absolved from responsibility for any damage had any accrued by delay or otherwise. The information communicated to him by the master of the Paulsen was accompanied by a demand that the schooner be turned over to him and to his consort the Cynthia, and as the master of the Shawmut was presumably not well informed as to his legal rights, it was not unnatural that he should desire to communicate with his owners, and, as he testifies that he was then only 18 miles from the St. John's Bar, the court does not acquiesce in the contention of the claimant that there was gross and culpable misconduct in proceeding on his way. A high degree of care and prudence would have suggested that he proceed to Charleston, where eventually he was compelled to go; but the rule of diligence obligatory upon salvors is that of ordinary care. The law does not and should not scrutinize too narrowly a service begun with meritorious motive to save property exposed to destruction, and so long as the salvor acts in good faith and exercises that skill and care which a man of ordinary prudence and capacity would be expected to use in the preservation of his own property, his claim for remuneration ought not to be defeated by showing that a greater degree of skill might have avoided any possible peril. Every hour's delay in removing a disabled vessel from the perils of the open sea to a safe anchorage should be avoided; but the salvor in this case had an interest in the salved vessel jointly with the owner, and his conduct, measured by that standard, which requires the same skill as is demanded for the preservation of one's own property, while it may not be free from criticism, seems to be free from that degree of censurable fault which should deprive him of the remuneration to which he is otherwise entitled. The imputation of improper motive in desiring thereby to enhance his reward does not seem to be sustained.
The second fault imputed is in remaining at the St. John's Bar from Monday evening until Wednesday morning, when he started for Charleston. It is some distance from the mouth of the bar to Jacksonville, where the master could communicate with the agent, and it was not until Tuesday evening that the agent, who had to communicate with the owners in Philadelphia, gave him his instructions. While the court does not approve of such tardiness, it cannot characterize it as grossly culpable.
The third charge is in rejecting offers of assistance from the tugs Cynthia and Paulsen, in not employing them to pump out the Myrtle Tunnel, and in the Shawmut proceeding to tow the schooner with an imperfect hawser. The master of the Shawmut had sent his engineer and others aboard the schooner while at the St. John's Bar to pump her out; but it was found that the pumps were not in working order, and after he determined to go to Charleston it does not seem to have been necessary to have pumped her out or to have called upon the tugs for that purpose, and nothing was done. Early on Îuesday
, morning, in a sudden squall, the hawser parted near the bits, and the schooner was carried out to sea, where the Shawmut proceeded to retake her. Every effort seems to have been made in Jacksonville to procure a new hawser, but none was obtainable. The agent of the steamship tried to buy a hawser from Capt. Avery of the Cynthia, who refused to sell it, saying that he would not furnish him tools to work with, but that he was willing to aid in every way possible, and to assist in towing, and so forth. The steamship’s agent has testified that, in a conversation with Capt. Avery, the latter proffered assistance as a co-salvor, and there seems to have been at different times during the period covered by the service a misconception on both sides of the respective rights and obligations of salvor and owner; but the exigencies of the case do not seem to render it necessary to state the law on that point with any fullness. That the owner has the right to offer assistance in salving his property could scarcely be disputed; nor can it be questioned that it is the duty of the salvor to accept such assistance if he needs it. The only disputed point is whether the salvor needed the assistance of the two tugs. That the Shawmut ought not to have undertaken to tow the schooner with a damaged hawser, if he would thereby endanger her safety, if he could procure a sound one, is not open to doubt. There is no direct testimony as to the condition of the hawser, except that it parted on the night of the squall. If it parted by reason of the chafing, and it remained sufficiently long and sufficiently strong to answer the purpose of towing the vessel to Charleston, there does not seem to be any ground to impute culpable negligence in so using it, and the event proved that this was the case. The testimony of Capt. Avery was that he did not at that time consider it an act of grave imprudence on the part of the Shawmut to make the attempt, especially in view of the fact that the two tugs accompanied the Shawmut and the schooner as a convoy, and were at hand to render assistance if any was needed, and so avowed their intention, and, as already stated, the hawser turned out to be amply sufficient for the purpose, and the vessel was brought safely to Charleston.
Fourth. The next ground of complaint is that on arrival at the bar of Charleston the agent of the steamship hired two tugs, at a cost of $500, to bring the schooner into the harbor. The tugs Paulsen and Cynthia had been hired by the owners at the expense of $150 a day each to search for their vessel. They were at the St. John's Bar, and offered to assist, if needed. The Shawmut did not need their service in towing, as she had sufficient power for that purpose, and, as it turned out, did not absolutely need the hawser; but on arrival at the bar of Charleston tugs were needed to bring the schooner into port. The tugs Cynthia and Paulsen were there. They had left St. John's Bar in company with the Shawmut, and had been in sight of her all the way. The master of the Shawmut and the agent of the steamship, who came to Charleston, well knew that the tugs were there, willing and able to do the service desired. They rejected this service and subjected the owners to the wholly unnecessary expense of hiring other tugs. This was inexcusable, and was done under the mistaken assumption that the Cynthia and Paulsen might claim to be co-salvors, and the award to the Shawmut thereby diminished. Even if such claim on the part of the tugs had been well founded, the amount to be allowed them would have been passed upon by the courts, and it is not to be lightly presumed that any court would give its sanction to any extravagant pretentions for such a service. This specification of fault in the salvor is sustained. The extent of it is easily measured. It amounts to $500, the sum paid for the tugs, which will not be allowed as costs.
As the court has no doubt that this is a meritorious case of salvage successfully accomplished, it only remains to fix the amount of the award. The Supreme Court, in Post v. Jones, 19 How. 150, 15 L. Ed. 618, says that the true principle is adequate reward according to the circumstances of the case. This court has hitherto in cases of derelicts adhered to the ancient rule of awarding a moiety, with great confidence in its wisdom, as affording some guide to and limit upon judicial discretion. This rule has never been regarded as inflexible, and it must bend to circumstances. Two opposing considerations are always operative upon the conscience and judgment in this class of cases. The one is the consideration of public policy, which leads to the giving of a bounty sufficiently liberal to induce vessels to undertake the labor and to incur the hazards of towing floating wrecks and removing them out of the pathway of commerce, where they are a menace to life and property, lying like hidden and uncharted rocks. It is within the experience of the court that the regular lines of passenger steamships plying up and down this coast are reluctant to undertake this service, and some substantial reward is required to stimulate it. The other consideration is that for the owner, who has been led by providential calamity to abandon his property for the time being. The value of the property salved, the danger to it, the risk of life, the skill, labor, and the duration of service are all elements which have to be considered. The court has fixed the value of the schooner in this case at $33,000, and the value of the cargo at $5,500. There was no risk of life, no especial skill, or extraordinary labor. The danger to the schooner as she lay when taken by the libelant was not so great as is usual in derelict cases, for the owners at considerable expense, and with great promptitude, had employed ocean-going tugs, under the command of skillful men, to cruise in search of her, and there was reasonable probability that they would have found her soon after she was taken in tow by the Shawmut.
It seems, therefore, that an award of one-third would be proper in the circumstances detailed, and a decree for such amount will be entered, which will carry all the costs incurred, except for the hiring of the tugs at Charleston, referred to above.
TELLER V. TONOPAH & G. R. R.
(Circuit Court, E. D. Pennsylvania. August 30, 1907.)
No. 17, April Sess. 1906.
1. CORPORATIONS-DIRECTORS—CONTRACT WITH COMPANY,
That directors of a corporation are personally interested in a contract made with the company and are to a certain extent to profit by it does not necessarily condemn the transaction. It merely calls upon them to justify it.
[Ed. Note.—For cases in point, see Cent. Dig. vol. 12, Corporations, $8
1401–1415.] 2 SAME-STOCKHOLDER'S SUIT-INJUNCTION AGAINST CARRYING OUT CON
Defendant railroad company entered into a contract with a syndicate, some members of which were its directors, and which had built a connecting line of road, by which defendant was to become guarantor of bonds of a company organized to own such road to the amount of $1,250,000, and was to receive 51 per cent. of the stock of such company, the syndicate to receive the remainder and the bonds in payment for the road. The control of such line was of great advantage to defendant, and the agreement was 'approved and ratified by a large majority of the stockholders. There was no proof of any fraud or attempt on the part of the members of the syndicate who were also directors of defendant to use their official position to benefit themselves at the expense of defendant, and they did not in fact control the syndicate. Held, that a single minority stockholder had no standing in equity to enjoin the carrying out of such contract upon allegations that it ought to be more favorable to defendant.
[Ed. Note.--For cases in point, see Cent. Dig. vol. 12, Corporations, i 1438.]
In Equity. On final hearing.
ARCHBALD, District Judge (specially assigned). This is a bill to prevent the consummation by the defendant company, of which the complainant is a stockholder, of a projected agreement, by which it is proposed to guarantee the bonds of the Goldfield & Bullfrog Railroad to the amount of $1,250,000, in exchange for 51 per cent. of the capital stock of that company, of the face value of $637,500. The charge is that the bargain is an unfair one, having been brought about by the directors of the defendant company with a syndicate of which they are members, formed to promote the construction of the railroad, the imputation being that they have taken advantage of their official position to favor themselves and their associates personally. The defendant company's railroad runs from a point on the Southern Pacific Railroad, about 100 miles, through Tonopah to Goldfield, both in the state of Nevada, the part to the one place having first been built, and then the part to the other as an independent matter, and the two amalgamated; and the road about which there is this controversy is an extension of 79 miles beyond the end of the existing line to the newly developed mining region, bearing the euphonious name of Bullfrog, which has recently come into prominence. The complainant holds 2225 shares of stock (ỹ preferred and 1525 common, together of the par value of $2,240) out of a total of 21,500 shares, and stands alone in his opposition to the agreement, which was ratified by the rest of the stockholders at a meeting of the company, although it is said that one or two others while not joining in the suit are in sympathy with it. But, notwithstanding this disparity, he is entitled to maintain the bill on his own account, if he is right with regard to the subject of it. Neither does it matter that he was offered an interest in the first syndicate proposed, which he declined, and subsequently wanted to get into the present one, after which he began these proceedings; although it cannot be said to inspire confidence in the good faith of them. Nor is it to prejudice him that there was a previous bill by which, upon much the same grounds, he opposed and undertook to prevent the consolidation of the original railroad to Tonopah with the extension to Goldfield, which he now acknowledges was imperative, and has proved immensely profitable; the exchange of stock for bonds which he forced
-the one paying 17 per cent. and upwards, and the other 6-discrediting his efforts if not suggesting an undue inclination to litigate.
The position of the complainant is that the Bullfrog extension was so manifestly a paying proposition from the start, and so absolutely necessary to the business of the company, that the directors should either have seen to it that the company built the road itself, instead of lending its credit to others to do so, or if that was not practicable, and it was to be built by a syndicate in which the directors were interested, that the company should get all the stock instead of merely a half of it, the enterprise being financed upon the company's guaranty. The facts are not exactly so, to say nothing of the use made of them. But that is not material. The ability of the company to build on its own account is asserted on the strength of the large returns received from the operation of its road, and the $350,000 of bonds in its treasury expressly reserved for the acquisition of new and additional property out of the issue authorized to take up those of the underlying companies. The credit of the company also, it is claimed, if effective for the benefit of others, was equally available in its own behalf; in which connection it is pointed out that the members of the syndicate have only been called on to pay 25 per cent. of their subscriptions, the rest of the money to build—some $600,000—having been obtained on the syndicate agreement without more. The complainant is even inclined to think that, if for any reason it could not raise the money on its own obligations, the directors who are men of large means should have got it for the company on their personal credit. These are somewhat novel ideas—some of them—but they are not necessarily to be rejected upon that ground. Upon examination, however, they will be found to be altogether untenable, both legally and financially.