1 F. Cas. 885 | U.S. Circuit Court for the District of Massachusetts | 1822
There cannot at ! the present day be any serious doubt that a court of equity has authority to reform a contract, where there has been an omission of a material stipulation by mistake. And a policy of insurance is just as much within the reach of the principle, as any other written contract. Graves v. Boston Marine Ins. Co., 2 Cranch, [6 U. S.] 419; Henkle v. Royal Exch. Assur. Co.. 1 Ves. Sr. 317; Townshend v. Stangroom. 6 Ves. 328, 333; Motteux v. Governor of London Assur. Co., 1 Atk. 545; Ramsbottom v. Gosden, 1 Ves. & B. 165; Watt v. Grove, 2 Sch. & L. 492: Gillespie v. Moon, 2 Johns. Ch. 585: Marsh. Ins. b. 1, c. 8, § 4, and notes; Hogan v. Delaware Ins. Co., [Case No. 6,582;] Condy’s Marsh. Ins. 345a, note; Lyman v. United Ins. Co., 2 Johns. Ch. 630. But a court of equity ought to be extremely cautious in the exercise of such an authority, seeing that it trenches upon one of the most salutary rules of evidence, that parol evidence ought not to be admitted to vary a written instrument. ' It ought, therefore, in all cases to withhold
In the present case the memorandum signed by the plaintiffs after it was agreed to by the president of the company, constituted a .good and valid agreement binding upon the parties. The by laws of the company make it in such a ease expressly obligatory upon .them. And if there be an omission in the policy of any clause constituting a part of that agreement, it ought in equity and good ■conscience to be corrected. It is not sufficient for the underwriters, that they suppose the words do not cover a particular risk, for they may mistake the law, and their mistake shall not prejudice the other party. When once the contract is agreed to, whatever that contract, by a just and reasonable interpretation, includes, the underwriters are bound to insert in the policy, and if they omit to do it the assured has a right to insist upon a perfect conformity to the •original proposition and agreement. The case under such circumstances is clearly distinguishable from the cases referred to at the bar [Lyman v. United Ins. Co.,] 2 Johns. Ch. 630; [Vandervoort v. Smith,] 2 Caines, 153, where the proposals for insurance never assumed any obligatory shape, and could therefore be considered in no other light, than as proposals, which were merged on the execution of the formal instrument. Here the proposal was agreed to and formed the basis for the execution of the policy; ■and there is no pretence to say that it was ever afterwards varied by the parties. The true question then is, whether the omitted clause in the contemplation of both the parties was to be inserted in the policy. I say both the parties, because it must be a joint intent and assent. It is not sufficient that one of the parties intended it, if it was not agreed to by the other. If the clause was to be inserted in the policy, then it is no answer on the part of the underwriters, that they may possibly be liable for the risk of illicit trade against the known general usage and designs of the corporation. They must take the legal consequences of all that stands in the text of their contract. And the opinions of the very respectable gentlemen, who have testified in this case, demonstrate that the general understanding of merchants is in perfect conformity to the principles of law on this subject. We must then resort in the first place to the memorandum itself to ascertain what was the contract to be executed. It is not pretended that every thing contained in the memorandum was to be inserted in the policy. It is perfectly notorious that proposals of this nature often contain remarks, representations, and queries for the information and guidance of the underwriters, which cannot by any reasonable construction be supposed proper for insertion in the policy. In many instances the insertion would be absurd, and in some might be repugnant to the obvious intent of the parties in their final act. This very “memorandum illustrates the truth of these observations; for it contains particulars of inquiry and information, which neither party now supposes to belong to the policy. It is not sufficient therefore to show that a clause is in the memorandum, to justify its insertion in the policy, unless from its nature and object it clearly formed a part of the contract. A clause may in the event become material and decisive of a right if inserted, which may nevertheless, at the time of the proposal, not have been contemplated by either party as a part of the policy. It might make all the difference between a representation and a warranty, a difference in many cases of the most serious importance.
The memorandum in the present case contains a perfect description of the ship, the master, and the voyage intended to be insured; and the policy follows this description with the most minute care. It was drawn up according to the understanding of the insurance company as a full description of the risk; and it was received without objection by the plaintiffs. No application was made to alter it, until after the loss occurred, and then the materiality of the clause now in question became apparent. It is argued that being material, the plaintiffs are now entitled to have it inserted, because the parties must be presumed to have contemplated the insertion of every thing material to the risk. That is true in a limited sense; but not universally. If the clause be material in the event, it must still be seen whether in fact it constituted, in the understanding of the parties, a part of the original contract. If there had been an omission of a descriptive part of the voyage, or of the name of one of the owners, it would have been perfectly clear that these must have constituted a necessary part of the policy upon the true import of the memorandum, and therefore the presumption of mistake would be irresistible. But if the clause be a mere statement of a fact, which in its place in the memorandum may be either construed a mere representation, or a modification of the terms of the contract, it stands equivocal, and the like presumption cannot prevail.
It is material here to consider that the answer of the company explicitly denies any intention to insert the clause, or to become liable for the risk of illicit trade. The latter might be true, and yet if they had in fact bound themselves to such a risk, their mistake of the law would not help them. But the circumstance of the denial is not insignificant, as it stands confirmed by their acts. If their practice is not to insure illicit voyages, and the policy conforms to this practice, it would require strong evidence to force upon them such a risk by a construction of a memorandum clause, which justly might admit of various interpretations, and might fairly be understood in different ways. The premium in a case of this nature is certainly not decisive either way; but if it be the usual premium for the com-t inon risks, is affords some presumption that I the underwriters did not contemplate unusual risks; and in this view it may aid in the construction of doubtful words.
The rule of. courts of equity is not to reform a policy, unless the mistake be made out by the clearest evidence. The cases of Henkle v. Royal Exch. Assur. Co., 1 Ves. Sr. 317, before Lord Hardwicke; of Lyman v. United Ins. Co., 2 Johns. Ch. 630, before Mr. Chancellor Kent; of Hogan v. Delaware Ins. Co., [Case No. 6,582,J Condy’s Marsh. Ins. 345a, note, Whart. Dig. 320, before Mr. Justice Washington; and of Graves v. Boston Marine Ins. Co., 2 Crunch, [6 U. S.] 419, 442, before the supreme court of the United States, — are conclusive upon this point. The asserted omission in the present case is indeed incontestable upon the evidence; but whether it was a part of the contract omitted by mistake is, to say the least of it, extremely questionable. I do not mean to say that the plaintiffs did not act with the most perfect fairness, or did not contemplate an indemnity against the very loss, which has occurred. I believe they did; and that whatever security was to be obtained by a policy conforming to the substance of the memorandum they meant to provide for. The difficulty lies not in the honesty or reasonableness of their intentions, but in giving effect to those intentions, if they were not communicated in such a manner to the underwriters, in the memorandum, as to lead them to the conclusion, that the omitted clause was a part of the proposed contract Whatever might be my opinion as a private man upon the propriety of inserting the clause, as a judge sitting in equity I should have extreme difficulty in saying that the case afforded plenary evidence of any mistake which the court was called upon to rectify. The terms of the memorandum are not necessarily matters of contract, and if they are ambiguous in their import or object, the parties must be left to their rights upon the policy as executed. Perhaps it is the less necessary to dwell on this point, because I am of opinion that if there be a mistake in the policy, ibis is not the tribunal to correct it. The authority over this subject is generally confided, and most conveniently, to courts of equity. The rules of evidence and the modes of relief in these courts are admirably adapted to cases of this nature; and it appears to me that the jurisdiction exclusively attaches these. To be sure in a certain sense, and in the exercise of their general jurisdiction, courts of admiralty may be properly said to be courts of equity, that is, courts proceeding ex aequo et bono, and not confined to the narrow notions of the common law. But courts of admiralty may be properly said to tion to administer relief as courts of equity. They cannot entertain an original bill or libel for specific performance, or to correct a mistake, or to grant relief against a fraud, though they may perhaps sometimes, like
If therefore any thing in point of law, material to the plaintiffs’ case, depends upon this clause, and a mistake has occurred in omitting it, my judgment is that a court of admiralty is incapable of administering the proper relief. The remedy lies at common law, for damages for nonperformance of the original agreement, or in equity, for a specific performance by reforming the policy. In the present suit I can only deal with the policy, as it stands. And this leads me to the other question made at the bar, which has always appeared to me to be the turning point of the cause, and to be in itself of very great difficulty and nicety. If in the investigation of it I could derive any consolation from full and learned arguments, I should be bound to make the acknowledgement, that nothing has been omitted. Still I cannot say, that I have arrived at a conclusion without very considerable hesitation.
It is perfectly settled that the underwriters, by the general terms of the policy, are not liable for any loss arising from foreign illicit trade, unless the policy be underwritten with the full knowledge on their part that such was the object of the voyage. This is the general doctrine of foreign maritime writers, and has been recognized in the fullest manner by the common law tribunals. 2 Valin, lib. 3, tit. 6, art. 49, pp. 127, 128, 130; Cleirac Be Guidon, c. 2, arts. 2, 5, pp. 233, 234; Santema, p. 4, note 17; Id. p. 5, note 10; Straeeha, Assecur, Gloss. 5, p. 23; Loc-cenius, lib. 2, c. 5, note 7, p. 981; Koccus, Anee, note 21; 1 Emerig. c. 8, § 5, p. 212; Targa, c. 71; Molloy, bk. 2, c. 7, § 15, p. 288; Marsh, Ins. bk. 1, c. 3, § 1, p. 60; Anon., 2 Vem. 176; Planche v. Fletcher, 1 Doug. 251; Gardiner v. Smith, 1 Johns. Cas. 141; Richardson v. Maine Fire & Marine Ins. Co., 6 Mass. 102; Parker v. Jones, 13 Mass. 173; Pollock v. Babcock, 6 Mass. 234. The reason of the doctrine is obvious. If the voyage be lawful, the underwriters cannot be presumed to undertake risks occasioned by a violation of law by the owner or his agents; and in such case the law, notwithstanding the general terms of the policy, will exempt them from such losses. But if the trade is known to be illicit, and can be carried on only by smuggling, and the underwriters do not make an exception of the risk of illicit trade, there is the strongest presumption of their intention to take it. Their knowledge does not indeed add new terms to the policy; but it takes away any pretence for saying that the loss by seizure, which is, an “arrest, restraint, or detainment of the sovereign” within the policy, was not contemplated by the parties. In the present case it is clear that no illicit trade was intended to be covered by the policy, for the trade was not supposed to be prohibited at the time. It is true that it was well known that Jamaica, as a colony of Great Britain, was restricted from foreign trade by the British colonial system. But it was as well known that authority had been given to the king to open the colonial ports under certain circumstances. The Adams, Edw. Adm. 289, 303; 46 Geo. HI. c. 3; The Vixen, 1 Dod. 136. And this authority was supposed still in existence and might be exercised and promulgated through the colonial governor. The intelligence in newspapers without doubt led both parties to the belief, that this authority had then been, or would, before the arrival of the vessel, be rightfully exercised; and both parties proceeded in the insurance upon the ground that the trade would be lawful. In point of fact the port was not opened, and immediately upon the brig’s arrival in port, she was seized and condemned for an illegal importation of goods, contrary to the navigation acts of Great Britain. These acts make it illegal to import any goods into any of the colonies except in ships, British built, and owned and navigated by British seamen to the extent of three-fourths of the crew. 12 Oar. II. c. 18; 7 & 8 Wm. HI. c. 22. The libel against the Union and cargo proceeds upon these acts for the forfeiture. And it is perfectly clear by the whole- current of authority that a voluntary arrival in port with a cargo constitutes an importation, within the purview of these and other revenue acts. The Eleanor. Edw. Adm. 135, 160; The Adams, Edw. Adm. 289, 298; The Sarah,
There can then be no doubt that the arrival .at Jamaica being voluntary, and not from necessity or stress of weather, brought the •case within the prohibitions of these laws; and that consequently the condemnation might be rightfully made upon this general .ground, although the mistake of the master as to the trade being lawful, was the sole •cause of his going into port. The question then is narrowed down to this consideration, whether the knowledge of the underwriters •of the destination to Jamaica, under the circumstances, makes them liable for a loss by illicit trade, occasioned by mistake and ignorance and against the intentions of the owners. If the trade to Jamaica was prohibited universally, and this fact was understood by the underwriters, they would have been held to the risk of illicit trade. If the trade had been previously open, and was closed during the voyage, they might have been exonerated from that risk. The trade was not open at the time, but the parties contemplated that it would be during the voyage; and then comes the point, whether the underwriters took upon themselves the chance of its being open, and of course the risk of its being illicit.
It cannot be denied that the general words ■of the policy coupled with the knowledge of the actual destination fully authorized the voyage to Jamaica; as fully, indeed, in my judgment, as if the words had been inserted .in the policy. And the case is put in the .strongest manner, when it is asked what would be the effect, if the policy had been for a voyage in terms to Jamaica. I do not know, that this wotdd relieve us from a single difficulty, for the same question would still recur, whether under the circumstances it covered the risk of an illicit entry into the ports of that island.
There is not a single case where the underwriters have been held responsible for losses of this nature, unless they have in express terms, or by fair implication, assumed it. If the present policy had contained an express exception of losses by Illicit trade, a condemnation for proceeding to Jamaica, although there had been no actual trading there, would have been within the exception. The case of Church v. Hubbart, 2 Cranch, [6 U. S.] 187, 232, is an authority directly in point; and that has been followed in the supreme court of Massachusetts. Higginson v. Pomeroy, 11 Mass. 104. See, also, Smith v. Delaware Ins. Co., 7 Cranch, [11 U. S.] 434. So that where the risk of illicit trade is not designed to be taken, the presumption is that the risk ■of proceeding to the port for this purpose is not taken. Is there any difference between a risk excluded by express words and a risk excluded by fair implication? If the underwriters are not presumed to take the risk of illicit trade, are they to be presumed from the same facts to take the risk of an illegal arrival or importation?
It is argued that the underwriters having insured the voyage to Jamaica must be presumed to warrant a right of entry into the port at least for the purpose of inquiry. That if they authorize the going to the port, they warrant by implication that the voyage to the port is lawful and thus assume the risk of seizure on this account If this were so, the argument would be exceedingly strong in favour of the plaintiffs. But the authorities do not seem to speak pointedly to such a conclusion. The fair result of the cases in England and in Massachusetts is, that a denial of entry or an interdiction of commerce at the port of destination is not a risk within the common policy. Hadkinson v. Robinson, 3 Bos. & P. 388; Ludbock v. Rowcroft, 5 Esp. 50; Parkin v. Tunno, 11 East, 22; Richardson v. Maine Ins. Co., 6 Mass. 102, 115. The decisions in New York do indeed maintain a different doctrine. See Suydam v. Marine Ins. Co., 1 Johns. 181; Schmidt v. United Ins. Co., Id. 249; Craig v. United Ins. Co., 6 Johns. 226. The supreme court of the United States has held that a restraint by blockade after the commencement of the voyage is a peril within the policy. Olivera v. Union Ins. Co., 3 Wheat. 183. And it was also decided, in conformity with the English eases, that the breaking up of the voyage for fear of capture, because the port of destination was shut, is not a peril within the policy. It was there said, “that the underwriter does not warrant that the vessel shall have a right to trade at the port of destination; but only that notwithstanding the perils insured against, the vessel shall proceed to such port.” Smith v. Universal Ins. Co., 6 Wheat. 176. But this language was used in a case where the underwriters were expressly exempted from losses by illicit trade; so that it is in no degree different from that held in Suydam v. Marine Ins. Co., in New York. 1 Johns. 181. The precise point whether seizure for going into an interdicted port, which it is supposed might be open, is a risk within the common policy, does not appear to have arisen in England. In Hadkinson v. Robinson, 3 Bos. & P. 388, Lord Alvanley admitted, that if the vessel had proceeded to Naples and had been actually seized, the loss might have been within the policy. Chief Justice Parsons, in Richardson v. Maine Ins. Co., 6 Mass. 102, 115, said, “If new regulations, made during the voyage, should render the trade illicit, and the master on his arrival should violate those regulations, and for that cause the property insured should be confiscated, the assurer will not be answerable, unless he had insured against seizure for illicit trade.” This language may perhaps cover the case, where the master ignorantly violates the new regulations; but it it does not seem addressed to a case, where
Not being able to find the doctrine established that an insurance to a port includes, -on the part of the underwriters, the risk of going into the port in violation of law, except where the risk of prohibited trade is ..assumed. I do not feel at liberty to incorporate it into the construction of the policy. 'The true principle seems to me to be this, ■that the policy guarantees an indemnity in going to the port against all losses by the perils insured against; and unless the peril ■of illicit entry at the port be contemplated as one of the risks insured against, the ■underwriters are not held. The risk of illicit entry is not presumed to be taken -where the trade is not known to be prohibited and expected • during the voyage to remain so. If both parties contemplate the trade as free, the policy covers only the ordinary risks. It is only when the trade is not expected to be carried on except by violation of the laws, that the underwriters are presumed to take that risk upon themselves. The chance of illicit trade is never assumed, unless it is clearly intended to be carried on.
It is asked, if the contingency of illicit trade was not contemplated in this case, what reason was there to insert the clause in the memorandum, that the brig was bound to Jamaica. My answer is, that it might be material information to the underwriters. They might wish to know the intended voyage; and if it were to an interdicted port, it might, even with the exception of prohibited trade, be a risk, which they might not choose to assume. But the same memorandum informed the underwriters that if the brig was not allowed to sell at Jamaica, she was to go to Cuba. This is a plain declaration, that the owners did not mean to force an illicit trade • at Jamaica, or an illicit entry there. It was equivalent on their part to a notice, that the brig, though bound to a British colony, was intended to sail only on a lawful voyage, and that the insurance was to cover it as such. And if the owners had concealed the fact of a destination to Jamaica from the underwriters, as the general words of the policy would lead them to presume the voyage was to lawful ports only, it might have been questionable, if the concealment would not have avoided the policy. At all events, it would certainly have done so, if there would have been any increase of premium or risk. The owners in this respect conducted themselves with the most entire good faith and frankness.
What would have been the effect if the memorandum had only said, “The. Union is bound to Kingston, Jamaica,” I pretend not to decide. It is supposed in the argument, that it would then have clearly covered the risk of an illicit entry. But is this certain? If the parties contemplated only a lawful voyage, and the information led them to the belief, that such a voyage was lawful, could the underwriters be presumed to take the risk of its possible illegality? The law does not say that the underwriter takes the risk of illicit trade, where he by mistake supposes it lawful, but where the trade being known to be illicit, he cannot be presumed from the nature of the voyage to have had any other object in contemplation. Admitting even that the underwriters took the risk of the vessel’s going to Jamaica to make inquiries, it is not shown that this was in point of law an illicit act. The very statute on which this condemnation was founded is for an illegal importation of goods, not for an inquiry before arrival in port. There is no British statute within my knowledge that makes it a cause of forfeiture to lie off a colonial port or to make inquiries, if near the port, whether it be open or not. The statutes of Car. II. and Wm. III. apply only to importations consummated by a voluntary arrival in port. Unless therefore an arrival in port were necessary for the purpose of inquiry, which can
It is certainly true that both parties must have contemplated that the ports of Jamaica might not be open, for the memorandum provides in that case for a voyage to another island. But the effect of this is to show, not that the underwriters meant to take the risk of the voyage, being illicit, but that they meant to provide another voyage, if it should turn out to be illicit. They engage that the vessel may go to Jamaica, if allowed, if not, then she may go to Cuba. In a case of this peculiar cast I have searched the foreign jurists with a hope of meeting with some principles to illustrate it. But I cannot say that the search has resulted in anything satisfactory. "Valin, after remarking, that illicit trade is not covered by a policy, where the underwriter is not informed of the risk at the time of the insurance, says, that his opinion is the same, in cases where the insured is himself ignorant that the trade is prohibited. 2 Yalin, lib. 3, tit. 0, Assur. art. 49, pp. 127, 128.
Upon the whole my' opinion is, after considerable hesitation, that the present policy, under all the circumstances of this case, did not cover the loss by the condemnation of the property for an illicit importation into Jamaica.
There is another point in the cause, upon which it may be thought necessary, after the full argument at the bar. that I should express an opinion. It is, that the loss was occasioned by the misconduct of the master in setting up a false pretence of distress, and that if the truth of the case had been stated, no condemnation could have been decreed. "Whether in any case the underwriters are liable for a loss by any of the perils in the policy, the remote cause of which is the negligence and misconduct of the master and mariners not amounting to barratry, is a vexed question, upon which opposite opinions have been expressed by very distinguished courts. In England the point has recently received after a solemn discussion a decision in the affirmative, (Busk v. Royal Exch. Assur. Co., 2 Barn. & Ald. 73; Walker v. Maitland, 5 Barn. & Ald. 171; Mal. Law Merch. 111; Law v. Hollingsworth, 7 Durn. & E. [Term R.] 160; Park Ins. (6th Ed.) c. 3, p. 83; Carruthers v. Sydebotham, 4 Maule & S. 86; Marsh. Ins. c. 12, § 6. p. 519; Id. § 3, p. 494;) though it is not difficult to perceive, that the former opinions inclined the other way. In New York the point has been unequivocally settled in the negative, (Vos v. United Ins. Co., 2 Johns. Cas. 180; Grim v. Phoenix Ins. Co., 13 Johns. 451;) and that appears to be the leading opinion also in Massachusetts. Cleveland v. Union Ins. Co., 8 Mass. 308. 320; Coffin v. Newburyport Marine Ins. Co., 9 Mass. 446. The foreign jurists generally concur in exempting the underwriters from losses by the fault of the master, unless that risk is expressly assumed. 2 Valin, lib. 3, tit. 6, Assur. art. 27, p. 79; Poth. Assur. note 64; 1 Emerigon, c. 12, § 17, p. 434; and see [Busk v. Royal Exch. Assur. Co.,] 2 Barn. & Ald. 80, 81; Miller, Ins. 136, 138, etc.; Carevegis Dis. 142, notes 26, 27. In this diversity of doctrine I desire to suspend my own judgment, until the question is absolutely necessary to be decided. In the present case I am not satisfied that the loss was occasioned by the misconduct of the •master. The libel and condemnation are for an illegal importation; and it is said, that if the arrival had been for the mere purpose of inquiry and had been so asserted, it would have been no breach of the statutes restricting the colonial trade. But it appears to me, that a voluntary importation of the goods, though under mistake or for the purpose of inquiry, is within the prohibitions of these statutes. The case of The Sarah, decided by Lord Stowell, (then Sir William Scott), is directly in point, (1 Dod. 79; The Vixen, Id. 136;) and no judge ever understood the colonial laws better or administered them with more lenity. I am therefore spared the necessity of looking at the more general question, since whatever may be the extent of the misconduct of the master, it is not shown to have been the efficient cause of this loss.
As however upon a principal point, the reformation of the policy, my opinion proceeds upon a defect of jurisdiction in the court, I think the plaintiffs are entitled to have that question litigated in another forum, and shall therefore decree that the libel be dismissed without prejudice to any other suit.