Admiral Oriental Line v. United States

The United States (defendant) contracted with Atlantic Gulf & Oriental S.S. Company (Atlantic) to operate its ship, the Elkton, on a voyage to deliver cargo. Atlantic contracted with Admiral Oriental Line (Admiral) (plaintiff) to help with the operations and ensure the vessel remained in seaworthy condition. All profits from the voyage were to go to the United States. Admiral shipped the Elkton out of Pulupandan. However, during the voyage a typhoon occurred, and the Elkton was lost at sea. In response, the owners of the cargo sued Admiral and Atlantic for damages. Admiral and Atlantic each paid their own defense expenses. Admiral then filed a suit against Atlantic to recover for its expenses, claiming that it was an agent of Atlantic and had paid the expenses to defend the suit on Atlantic’s behalf. Atlantic then filed a suit against the United States on the ground that the United States was the principal of the entire venture and was therefore responsible for covering all expenses related to the suit. The trial court dismissed both the suit filed by Admiral against Atlantic and the suit filed by Atlantic against the United States. Admiral and Atlantic appealed. On appeal, Atlantic argued that it should have been given notice by Admiral that it could be liable for defending the suit. The United States argued that because Admiral was its subagent, i.e., an agent of its agent, that the United States was not responsible for paying any expenses owed to Admiral.