Freret v. Harris Trust
DMC Category Rating: Developed
Case Note Submitted by Emilio G. Boehringer, an attorney with Healy & Baillie, LLP, New York. Healy & Baillie are the International Contributors to the website for the United States of America
In Effjohn, Sureties issued a bond to
Commodore to provide security for passengers who pre-paid for cruises on one of
Commodore's vessels, but who, through no fault of their own, never sailed.
Sureties were obligated to refund unearned passenger revenues if Commodore was
unable to do so. The Sureties claimed a maritime lien for necessaries against
Commodoreís vessels based on the bond.
In Effjohn, the court held that the bond at issue was not a maritime contract, reasoning that "not every contract that relates to maritime matters warrants the invocation of admiralty jurisdiction." Additionally, unlike maritime insurance contracts, surety bonds were not a well-established part of maritime law, and merely agreeing as a surety to pay damages for another's breach of a maritime charter is not a maritime contract. This, the court held, was particularly so given that the bond was only a measure taken to protect consumers and had no relation to operating vessels.
The court rejected Suretiesí subrogation argument, reasoning that whether a surety was subrogated to a maritime lien hinged on whether the passengers themselves had maritime liens. Since the passengersí contracts were executory, because Commodore declared bankruptcy before they had embarked on the vessels, the court held the contracts did not give rise to a maritime lien.
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