U.S. Supreme Court Livingston & Gilchrist v. Maryland Insurance Company, 10 U.S. 6 Cranch 274 274 (1810)
Livingston & Gilchrist v. Maryland Insurance Company
10 U.S. (6 Cranch) 274
ERROR TO THE CIRCUIT COURT
FOR THE DISTRICT OF MARYLAND
The assured are not understood to warrant that the whole cargo is neutral, but that the interest insured is neutral.
The right to abandon may be kept in suspense by mutual consent
The effect of a misrepresentation or concealment upon a policy depends upon its materiality to the risk, which must be decided by a jury under the direction of a court.
If a vessel take on board papers which increase the risk of capture, and if it be not the regular usage of the trade insured to take such papers, the nondisclosure of the fact that they would be on board will vacate the policy.
If the interest of one joint owner of a cargo be insured, and if that interest be neutral, it is no breach of the warranty of neutrality if the other joint owner, whose interest is not insured, be a belligerent.
If foreign laws and regulations respecting trade be not proved to have been in writing as public edicts, they may be proved by parol.
Error to the Circuit Court for the District of Maryland in an action of covenant upon a policy (of insurance against capture only) upon goods laden on board the ship Herkimer from Guyaquil, or her last port of discharge in South America, to New York; the goods were warranted to be American property, "proof of which to be required in the United States only." The ship and cargo were captured by a British ship of war and condemned at Halifax as prize.
The defense set up by the underwriters was
1. That one Baruro, a Spanish subject, was interested in the cargo, and that Baruro being a subject of one of the belligerents, the warranty of neutrality was forfeited.
2. That certain Spanish papers were found on board stating the cargo to be the property of Baruro, and although Baruro might not be interested in the cargo, yet these papers, not being necessary according to the usual course of the trade, were the cause of the condemnation, and as this cause proceeded from the act of the insured, the underwriters were not liable.
3. That although the interest of the plaintiffs Livingston & Gilchrist, was neutral, yet the concealment of the interest of Baruro vitiated the policy.
4. That the abandonment was not made in due time.
To these objections the plaintiffs answered
1. That Baruro was not part owner of the goods; he had only a contingent interest in the profits of the voyage. That the subject insured was only the interest
of the plaintiffs, which was strictly neutral property.
2. That the Spanish papers were necessary to carry on the voyage insured according to the nature and course of the trade.
3. That the interest of Baruro was not such as they were bound to disclose.
Upon the trial of the issue of non infregit conventionem, the jury found a special verdict and a bill of exceptions was taken by the plaintiffs in error to the instruction of the court to the jury that parol evidence was not competent to prove
"that according to the uniform and longstanding laws of Spain relative to the trade of her colonies in America, and especially of Peru, no goods could, at and about the time of the making the policy in the declaration mentioned, be imported into or exported from the colony of Peru from or to any other than a Spanish port in Europe, or in any other than a Spanish bottom, without a special license from the King of Spain for that purpose, and that such licenses, at and about the said time, were never granted with respect to the said colony of Peru to any but Spanish subjects, and that according to the constant course and usage of the trade to and from that colony under such licenses, it was usual and necessary for the property to appear in the said colony and at its departure therefrom as the property of a Spanish subject and of the person holding the license, to be accompanied by such Spanish papers as were necessary to give it that appearance, and to be cleared out as such from the port of departure in Peru, such licenses not being avowedly transferable, although by observing the above-mentioned formalities and precautions, American property at and about the said time might be and sometimes was imported into and exported from, the said colony by American citizens by virtue and under the protection of such licenses."
The order for insurance, which was supposed to
amount to a representation that the whole cargo was neutral property, was contained in a letter from the plaintiff Gilchrist to Webster & Co. at Baltimore, in which he says
"On the recommendation of Messrs. Church & Demmill, I take the liberty of requesting you to effect insurance in your city on the cargo of the ship Herkimer, Church, master, from Guyaquil or her last port of departure in South America to New York, against loss by capture only, warranted American property and free from all loss on account of seizure for illicit or prohibited trade. The owners are already insured against the dangers of the seas, and all other risks except that of capture. You will please to insure to the amount of fifty thousand dollars in valued policies. You have already had a description of the ship from Messrs. Church & Demmill, the agents of Mr. Jackson, who is the owner, and which I presume is correct. By a letter received from Mr. James Baxter, the supercargo, dated at Lima, 23 September, 1805, he did not expect the Herkimer would sail from Guyaquil until the last of February. I think proper to mention that the insurance will be on account of Mr. Brockholst Livingston and myself. Mr. Baxter and Mr. Griswold are also concerned, but the first gentleman thinks there is so little danger of capture that in his letter from Lima he expressly directs no insurance to be made for him against this risk, and Mr. Griswold is not here to consult. Both these gentlemen, as well as those for whom you are desired to make insurance, are native Americans."
The description of the ship, as given by Church & Demmill and referred to in the above letter, was as follows:
"She is a fine ship of about 400 tons burden, about three years old, sheathed and coppered to the bends, built in the State of New York, and her owner a native American citizen. She sailed from Boston on 12 May last, bound for Lima, with liberty to go to one other port in South America, not west of Guyaquil and from thence to New York."
"She has permission to trade there. "
On 5 June, 1806, the plaintiff Gilchrist, wrote to Webster & Co. at Baltimore informing them of the capture of the vessel and that the plaintiffs had sent an agent to Halifax to act in behalf of the concerned, and desiring that this information should be communicated to the underwriters, and assurances that the plaintiffs should act throughout with due regard to their respective interests. He then says
"I should like them to approbate the owners in taking every measure they may judge best for our mutual interest, without prejudice to our right. I ought likewise to mention that one of the owners has also gone in her, so the underwriters will observe every measure calculated to protect their and our interest has been speedily pursued."
This letter was laid before the underwriters, who returned it with their answer endorsed thereon "read and approved."
On 22 August, 1806, after the condemnation in the court of vice-admiralty, the plaintiffs abandoned to the underwriters.
MR. CHIEF JUSTICE MARSHALL delivered the opinion of the Court as follows:
In this case, several questions have occurred on which the Court has not yet formed an opinion. The application of rules and principles, which have been framed for an action on the case, to an action of covenant is an operation of some difficulty. The Court has not decided with precision on the extent of the plea that the defendant has not broken his covenant, nor on the testimony which may be admitted under that plea. Some difficulty also arises from the circumstances that the parties have gone to trial under the expectation that the whole merits of the case were
open under the issue which was joined, and that such expectation was authorized by the invariable usage of the courts of Maryland, and of the circuit court sitting in that state.
Upon the inspection of the special verdict in this case, it is supposed that however these points may be decided, a venire facias de novo would probably he awarded, and as the delay of a term would be a great inconvenience to the parties, it is deemed advisable to award it now.
There are, however, some points which have been argued at great length on which an opinion has been formed, which will now be delivered.
It is essential, in this form of action especially, to distinguish accurately between the warranty contained in the policy and those extrinsic circumstances, such as misrepresentation or concealment, which have been deemed sufficient to discharge the underwriters. Although the effect of a breach of a warranty and of a material misrepresentation may be the same on a policy, yet they cannot be confounded together in deciding on pleadings or on a special verdict.
The warranty in this case is in these words: "warranted by the assured to be American property, proof of which to be required in the United States only."
The interest insured is admitted to be American property in the strictest sense of the term; but it is contended that Baruro, a Spanish subject, had an interest in the cargo, which falsifies the warranty.
Whether Baruro could be considered as having an interest in the cargo or not is a question of some intricacy which the Court has not decided, and which, if determined in the one way or the other, would not affect the warranty, because the assured are not understood to warrant that the whole cargo is neutral, but that the interest insured is neutral.
If the assured represented the whole cargo to be neutral when it was not, or if it concealed the interest of a belligerent when it ought to have been disclosed, which facts this Court neither affirm nor deny, the effect of the misrepresentation or concealment on the policy depends on its materiality to the risk. This must be decided by a jury under the direction of a court. In this case, it has not been decided. Consequently, were it even to be admitted that under the peculiar circumstances of this case these facts might be taken into consideration without being specially pleaded, a venire facias de novo would be necessary in order to ascertain their materiality.
So too with respect to the Spanish papers found on board.
It is said that the verdict finds their materiality by finding that the fair premium on American property disguised as Spanish, on the voyage insured, was twenty-five percent, whereas the premium in this case was only ten percent
But it does not appear to the Court that this property was, by these papers, disguised as Spanish. It is found to have been the constant course of the trade to have them on board, and consequently they cannot be understood to disguise the property as Spanish when there are other papers which prove it to be American.
It is, too, as yet undecided that this matter could be given in evidence on this issue.
Although this verdict and these pleadings do not present the merits of the cause in such form as to enable the Court to decide them, there are some insulated points from which the cause may be relieved.
The reference to the letter of Church and Demmill which was made by the assured in their letter of 26 March to Alexander Webster & Co. has
been treated both as a representation and as a warranty which is falsified by the sentence of condemnation.
There is no color for this opinion.
Most clearly it is not a warranty, for it is not introduced into the policy, and if it were a representation, it only goes to the actual state of the ship at the time, not to her future conduct.
But it is not even a representation. Marshall, p. 336, is full and clear on this point,
The letter of the assured of 5 June is understood to ask the permission of the underwriters to keep their right to abandon in a state of suspense, and the note made by the president and directors on that letter is understood as granting that permission. It is difficult to ascribe this letter to any other motive.
It has been asked for how long a time is this permission given? The answer is obvious. It is at least to continue while the property continued in its then situation, unless it should be sooner determined by one of the parties. The assured might abandon previous to the sentence, or immediately afterwards, and the underwriters might at any time require the assured to elect immediately either to abandon or to waive the right so to do. Since they have not made this communication, their original permission continued in force. But the jury has not found that the abandonment was or was not in due time.
It is also the opinion of the Court that, as the laws and regulation by which this trade was regulated are not proved to have been in writing as public edicts, but may have depended on instructions to the governor, they may be proved by parol.
The judgment is to be reversed because the special verdict is defective, and the cause remanded with directions to award a venire facias de novo.
In the second case it is ordered to be certified that if the jury should be of opinion that the Spanish papers mentioned in this case were material to the risk, and that it was not the regular usage of the trade insured to take a such papers on board, the nondisclosure of the fact that they would be on board would vitiate the policy; but if the jury should be of opinion that they were not material to the risk or that it was the regular usage of the trade to take such papers on board, that they would not vitiate the policy.