COLLISION DAMAGES-HOW MEASURED LOSS OF

CONTRACTS

By Donald Mackay

Generally speaking, the assessment of damages in collision cases, is what lawyers term a jury question; that does not mean that the case is tried by a jury, but the judge tries to regard the matter as a business question and endeavors to decide it as if he were one of the twelve men in an imaginary jury box. This method, however, carries with it the risk of degenerating into rule of thumb or even haphazard methods of ascertaining the damage. In fact, we have not seldom received the impression in some trials that by the time the learned judge got to the stage of accounting for damage, his mental attitude was, that the claim being as a matter of course largely inflated, his business was to consider how small he could make it. In a recent decision of the Court of Session, The Vitruvia, 1923 S. L. T. 401, the law a to the principles determining the ascertainment of damage was expounded with some fullness and precision and we are glad to be able to give our readers a resume of the law on this important subject.

The liability of the wrongdoing shipowner for the consequences of his wrongful act is determined by the extent to which the injury occasioned to the pursuer was a natural and probable consequence of that act. A ship is a thing by the use of which money may be earned, and if the effect of the injury is to detain the ship, then the injurer is liable both in the expenses of the detention and the amount of the profit lost. In The "Argentino" (14 A. C. 519 at p. 523) Lord Herschell said: "I think the damages which flow directly and naturally or in the ordinary course of things from the wrongful act cannot be regarded as too remote. The loss of the use of a vessel and of the earning which would ordi

narily be derived from its use during the time it is under repair and therefore not available for trading purposes is certainly damage which directly and naturally flows from a collision." This principle has been frequently applied. It was applied by Sir Francis Jeune in The "Kate" ([1899] P. 165), where the learned President laid it down that the general principle which governs the assessment of damages is "restitutio in integrum quali fied by the condition that the damage sought to be recovered must not be too remote." The same doctrine was upheld by the Court of Appeal in The "Racine" ([1906] P. 273). The burden, however, of proving the detention of the ship and the loss which has been thereby caused rests upon the pursuers.

The Defenders (Defendants) in the case of The Vitruvia" maintained on the facts that no detention had been proved to be due to the collision, and contended that during the period while the "Vitruvia" was in dock for repairs, she was not seaworthy and was unable to earn profit. It is necessary to examine the facts on this subject.

It appeared from the charter-parties produced that on 16th of December, 1919, a chain of charter-parties had been arranged for the "Vitruvia." Further charter-parties were entered into on 12th of April, 1920, and 25th of June, 1920, and on the evidence the Court had no doubt, that, fitted with tanks as the "Vitruvia" was, she would have had no difficulty in obtaining continuous employment during the year 1920 at the high freight then prevailing. In 1919 the "Vitruvia" had been engaged on Admirality service, and the vessel's masts had been removed. In January, 1920, the vessel was returned by the Government to the pursuers, who made arrangements to have her masts refitted at Glasgow. She arrived at the Tail of the Bank on the 23rd of January. She was lying at anchor there on the 25th of January when the collision occurred. The

damage sustained was entirely above the water-line, and did not render the vessel unseaworthy. She was then awaiting a berth at the dock, and no dock was available until January 30th. The services of the crane to ship the masts could not be obtained until the 4th of February, and her masts were thereafter shipped. She loaded bunkers on the 10th of February and sailed under the charter-party then current on the 13th of February.

In the interim the damage caused by the collision had been surveyed by both parties. The survey occupied three days. It was not possible to carry out any of the work of the repairs to the ship concurrently with bunkering, as the collision damage was in the same part of the ship as the coal bunkers. But the ship's cable, which had been injured in the collision, was reconditioned and repaired, and the cost of this had been adjusted.

While the "Vitruvia" was lying in dock in the beginning of February the problem which the collision presented to her managers was one of some difficulty. As appears from the survey report, and the repairer's account, substantial repairs were necessary as the result of the collision. Labor was scarce and the conditions in the yards were difficult. On the other hand, the "Vitruvia" was seaworthy and capable of fulfilling the chain. of valuable charters which she had recently entered into, and her managers were being urged to deliver.

The can

celling date of the charters, viz., 15th of March, 1920, was approaching.

In these circumstances the Court considered the managers of the "Vitruvia" were right in deciding to postpone the execution of the collision repairs until after the charters were implemented, when they had reason to anticipate that labor would be more plentiful and labor conditions somewhat improved. The managers' decision to sail was communicated to the defenders, and they took no exception to it. On the 12th of March, 1920, the pur

suers' managers wrote to the defenders intimating that they would give due notice when the "Vitruvia" would be ready for repairs, and that they would keep down the cost of the repairs and time. On the 20th of July the pursuer's managers intimated that the "Vitruvia" would return to this country for repairs in the course of three or four weeks, and no exception was at any time stated by the defenders to this course being followed. Again the Court were of opinion, it was a reasonable course for the pursuers to take, and no suggestion was made that they had unduly delayed to repair the damage.

It was proved in the evidence that the "Vitruvia" came to Glasgow in ballast in the month of August, 1920, to have the collision repairs carried out. She was at that time surveyed again on behalf of the defenders, and no suggestion was made. by them that the repairs should not then be carried out. The repairs were commenced on the 12th of August and completed on the 3rd of September, as the defenders' surveyors' report and the repairers' account showed. They thus occupied a period of twenty-two days.

It was suggested by the defenders that the repairs should have been executed while the 'Vitruvia" was undergoing her ordinary survey. The survey was not due until November, 1922. The Court held, however, that the pursuers were not bound to keep their ship in a damaged condition until that date and in result they found that the whole period of twenty-one days' detention was caused by the collision repairs. There was the least hesitation in accepting this figure, as the pursuers had not included any period. either in respect of the overhaul of the ship's cable which was rendered necessary by the collision, or in respect of the survey of the damage.

From the evidence of the "Vitruvia's" engagements under the charter-parties produced, it appeared that the vessel would have been at sea earning profit for the

pursuers, if she not been damaged by the collision and detained for twenty-two days to effect the necessary repairs. The agreed rate of profit of £531:10:5 per day was a high figure and reflected only the very large profits which ship owners were apparently able to earn at that time. As regards on cost charges, the figure was adjusted at £127:10 per day. The total for these two items reached the large figures of £11,693:8:10 and £2805, respectively. The dock dues, pilotage charges, etc., amount in toto to £244:19:6. As the pursuers would have had to incur charges. of this nature in connection with the repair to the propeller and some other repairs, they debited themselves with onehalf of this sum and charged the defenders with the balance. The Court thought this was a very reasonable proposal, and adopted it.

Judgment was accordingly given against the defendants for £16,030:13:11.

LICENSES-BLUE SKY LAW

RAYNARD v STATE

96 So. 722

(Court of Appeals of Alabama. June 26, 1923.)

Under Blue Sky Law Oct. 1, 1920, § 2, making a sale of speculative securities without a permit by means of an advertisement, circular, or prospectus, or by any other form of public offering an offense, a private sale or offer to sell is not illegal, since the act does not apply if the sale or offer for sale is made without the employment of any of the inhibited means.

G. M. Raynard, alias F. S. Wells, was convicted of violating the Blue Sky Law, and appeals. Affirmed.

The third count of the indictment is as follows:

"The grand jury of said county further charge that, before the finding of this indictment and subsequent to the 1st day of October, 1920, G. M. Raynard, whose Christian name is to the grand jury unknown, alias F. S. Wells, whose Christian name is to the grand jury unknown, did, contrary to law, sell, or offer to sell, in this state, by means of an advertisement, circulars, or

prospectus, or by other form of public offering, speculative securities, to-wit, contracts for the future delivery of shares of the capi tal stock, or capital stock, of the Mortgage & Funding Company, whose name is otherwise to the grand jury unknown, and, further, whether said company be a corporation, a stock company, an unincorporated associa tion, a partnership, or an individual, being to the grand jury unknown, without there first having been issued unto said company, by the president of the State Securities Commission of Alabama, a permit to sell, or offer for sale, in this state, said securities, as is required by the statutes in such cases made and provided."

Percy G. Gellert, of Birmingham, for appellant.

Harwell G. Davis, Atty. Gen., and Lamarx Field, Asst. Atty. Gen., for the State.

FOSTER, J. The defendant was charged with the violation of the act approved October 1, 1920. Said act is entitled "An act to amend an act entitled, an act to prevent frauds and impositions upon the people of the state and to protect investors," etc. This leg islative enactment is commonly called the "Blue Sky Law." Laws 1920, p. 60.

The indictment contained eight counts, each of which charged in the language of the statute that the defendant did sell, or offer for sale in this state by means of an advertisement, circulars, or prospectus, or by other form of public offering, speculative securities, etc., without first having obtained a permit as is required by the statutes in such cases made and provided.

(1, 2). The indictment was sufficient, for in order to constitute a violation of the statute in question the selling or offering for sale of any speculative securities defined in section 2 of said act, such selling or offering for sale must be by means of an advertisement, circular, or prospectus, or by any other form of public offering, without having obtained a permit so to do from the Public Service Commis sion as the law requires. It is clear from the provisions of said act, supra, that unless the selling or offering for sale is accomplished by one or all of the means designated, that is, by advertising said speculative securities, or by circulars or prospectus or some other form of public offering, then said act does not apply, and if the speculative securities are sold or offered for sale without the employment of any of the inhibited means, supra, the act in question is not violated and no permit from the Public Service Commission is required or

necessary. In other words, "if the selling or offering for sale of a speculative security is done by private sale or by privately offering for sale, the Blue Sky Law of this state has no application to such private sales or private offer to sell, for the statute is directed only to the sale or offer to sell speculative securities" by means of any advertisement, circulars or prospectus, or by any other form of public offering.

The defendant in the instant case was convicted under the third count of the indictment, and was duly sentenced to serve an indeterminate term of imprisonment in the state penitentiary for not less than three years nor more than four years, from which judgment of conviction and sentence he appeals.

(3) The record contains certain refused charges, and also a motion for a new trial which was overruled. The appeal is upon the record proper without bill of exceptions. This being true, we are without authority to review the action of the lower court in denying the motion or in refusing the charges requested, as these matters are not presented. Ross v. State, 16 Ala. App. 393, 78 South. 309; Holmes v. State, 17 Ala. App. 631, 88 South. 194.

The record is free from error. Let the judgment appealed from stand affirmed.

Affirmed.

NOTE Securities Within the Blue Sky Laws.-California-Where one having a lease and option on mining property was selling interests therein, and in a trust under which it was to be operated, evidenced by certificates and each representing 1-3000 part of the property and assets of the trust, such interests were "securities," within the California statute, and a permit from the commissioner of corporations for their sale was necessary. Agnew v. Daugherty, Cal., 209 Pac. 34.

Where four persons engaged in business under a declaration of trust making such persons trustees, and as such trustees sold unit interest in the business to persons for whom they carried on the business and held title to the property in trust, and to whom they issued unit certificates transferring to the holder a proportional interest in the property held by the trustees in pursuance of the trust, the sale of such unit shares without a permit from the corporation commissioner violated the Blue Sky Law of California, such business constituting a "company," within that law. Ex parte Girard, Cal., 200 Pac. 593.

Idaho The word "association," as used in the Idaho Blue Sky Law (as amended by Laws 1921, c. 20), includes a common law trust organized for the purpose of dealing in and developing oil land and oil wells, and the sale of its units without complying with that law

was unlawful. State v. Cosgrove, Idaho, 210 Pac. 393.

Iowa-Interests in a "common-law company" organized under a trust agreement vesting in the trustees even more than the powers usually conferred on corporations, giving them absolute control of all the company's property and assets, and practically excluding the shareholders from any voice in its management, are "stock" within the blue Sky Act (Code Supplemental Supp. 1915, §§ 1920u-1920u22), requiring permits to sell stocks and that dealers therein give a bond (section 1920u16) forfeitable on violation of the act.-Wagner v. Kelso, Ia., 192 N. W. 1.

Kansas-A written contract undertaking to sell a patent right, is not within the Kansas Blue Sky Law, requiring a permit from the bank commissioner for the sale of speculative securities as defined by section 1 of the Act. Schomoyser v. Van Hosen, Kan., 208 Pac. 554.

a

Kentucky-A trust estate, composed of a trustee, who sold shares and issued certificates delegating to the trustee the power to control the estate on behalf of the shareholders, was common law trust, and as such included within the term "corporation, person, co-partnership, company, or association," within the law of Kentucky prohibiting the sale of securities of a domestic investment company, etc. King v. Com., Ky., 246 S. W. 162

Under Blue Sky Law, § 2, making corpora tions which sell any contract, stock, bond, or other securities investment companies subject to the terms of the act, the word "contract" was not intended to include all classes of contracts which may be an instrumentality for the perpetration of fraud, but is limited to what is ordinarily understood as a security investment, since the general purpose of the law is to protect investors in "securities," which are defined as written assurances for the return or payment of money, evidences of indebtedness; and necessarily mean the investment of funds in a designated portion of the assets and capital of a concern, with a view of receiving a profit through the efforts of others than the investor, and therefore that law does not apply to the sale by a wholesale grocer of service contracts to retail dealers.-Lewis v. Creasey Corporation, Ky., 248 S. W. 1046.

Michigan-It is not a violation of the Michigan law for an owner of stock to sell it when the sale is not made in the course of continued and successive transactions of a similar nature; he not beng a "dealer" in such case. Dows v. Schuh, Mich., 172 N. W. 418; Edward v. Ioor, Mich., 172 N. W. 620.

The shares of a common law trust held to be "stock," within the Michigan Blue Sky Law, and the association to be an "investment company." People v. Clum, Mich., 182 N. W. 136.

Sale by a stockholder to other stockholders of his own stock, some of which stood in the names of members of his family, was not a sale by a "dealer," within the Michigan Blue Sky Law, and therefore not in violation of that law. Dursum v. Benedict, Mich., 176 N. W. 459.

The transfer of stock of a corporation for stock of another corporation organized to take over the stock of the former corporation and issue its stock in payment therefor is a "sale," within the Michigan law. Edward v. Ioor, Mich., 172 N. W. 620.

Minnesota.-There is no hard and fast rule for determining whether a security is or is not within the Blue Sky Law. State v. Gopher Tire & Rubber Co., Minn., 177 N. W. 937.

An investment contract for the purchase of real estate in the form of a short option for the sale of the land, is within the Minnesota Act. State v. Evans, Minn., 191 N. W. 425.

The Minnesota statute is not applicable to the sale by the owner of stock issued by a company not engaged in the business within the state of selling its securities. Gutterson v. Pearson, Minn., 189 N. W. 458.

"Units" issued and sold by an "oil syndicate," an unincorporated association, are within the term "investment securities," as used in the Minnesota Blue Sky Law, making criminal the selling of securities without a license. State v. Summerland, Minn., 185 N. W. 255.

A corporation issuing and selling certificates which provide that, in consideration of a sum paid by the purchaser and his assistance in promoting the sale of goods manufactured by the corporation, he shall share in the profits of the business, is engaged in the business of selling securities, within the Minnesota Blue Sky Law. State v. Gopher Tire & Rubber Co., Minn., 177 N. W. 937.

Where the owner of a leasehold of oil lands executed an instrument called a "statement and purchase," wherein purchasers subscribing were to have certain units, the moneys derived to be used in development, and finally a corporation was to be organized in which the unit holders were to be proportionately interested, and in the profits of which they were to share proportionately, these instruments were investment contracts within Laws 1917, c. 429, as amended by Laws 1919, cc. 105, 257, and not contracts for the sale of undivided interests in land.-State v. Ogden, Minn., 191 N. W. 916.

Missouri-A syndicate having articles of association resembling the articles of agreement of a corporation and giving the organization full power to engage in the general oil business, providing for a capital divided into shares having a par value and placing the management in certain persons, and purported stock certificates issued stating that the holder's interest was not in the property as such, but in stock or shares, held within the Blue Sky Law (Rev. St. 1919, §§ 11919-11932), making it illegal to transact business or sell shares before obtaining a permit from the bank commissioner.Landwehr v. Lingenielder, Mo. App., 249 S. W. 723.)

A common-law company operating under a declaration of trust, by the terms of which neither the trustees nor shareholders could be held individually liable for the debts of the concern, was an unincorporated association organized for the purpose of selling shares of stock, within the Blue Sky Law of Missouri. Schmidt v. Stortz, Mo. App., 236 S. W. 694.

An unincorporated building and loan association organized under Rev. St. Mo. 1919, section 10263, was not required to obtain permission to do business from the State Banking Commissioner, under the Missouri Blue Sky Law. State ex rel. Great American Home Sav Institution v. Lee, Mo., 233 S. W. 20.

Nebraska-The Blue Sky Law of Nebraska. before the amendment of 1919, was construed to cover Nebraska corporations, created after the law was enacted, for a period of one year only, after which time such corporations were released from the operation of its provisions. Nebraska State Ry. Comm. v. Alfalfa Butter Co., Neb., 178 N. W. 766.

North Carolina.-A foreign corporation of fering acreage for sale and agreeing to plant on the land fig cuttings and to cultivate them, and upon full payment to convey the title to the lands to the purchaser, is an "investment company" offering "evidences of property" and offering its "obligations," so as to fall within the North Carolina Blue Sky Law. State v. Agey, 171 N. C. 831, 88 S. E. 726.

Oklahoma-Where an individual, without solicitation or influence of stock sales induce ments, purchases an undivided interest in an undeveloped oil lease, with the expectation of becoming one of its promoters, the assignor of such interest under the circumstances shown is not within the purview and intent of the regulations and penalties of the Blue Sky Law of Oklahoma. Hornaday v. State, Okl. Cr. App., 208 Pac. 228.

Oregon The Oregon law does not apply to purchase of stock of a farmer elevator company from the company by citizens of a community to induce it to construct an elevator in that place, where the stock was not sold for profit nor on commission, nor offered to the public. Kirk v. Farmers' Union Grain Agency, Oreg., 202 Pac. 731.

Tennessee-A corporation organized under the laws of Delaware, which undertook to establish a wholesale drug business in the state, is one which the Blue Sky Law of Tennessee was designed to include. Goodyear v. Meux, Tenn., 228 S. W. 57.

West Virginia-Under the law of West Vir ginia, if promoters of a corporation not on a dividend-paying basis transfer to it property for a consideration above $500 in cash or equiv alent in stocks or securities, it is unlawful for them to sell any stocks or securities in such state until a subscription blank, showing amount of such payment or issue for the property and other information deemed necessary, shall have been filed with the state auditor, and to recognize subscriptions or applications upon other than such blanks signed by subscribers or applicants. Conway v. Bailey, W. Va., 112 S. E. 579.

Wisconsin-A contract of membership in an association which gave the member the right to purchase goods from the association at a small stipulated percentage above cost, but which gave no other interest to the member in the association, was not an obligation for the sale of which a permit was required under the Wisconsin law. Creasy Corp. v. Enz Bros. Co., Wis., 187 N. W. 666.