Phœnix Insurance v. Parsons

129 N.Y. 86 | NY | 1891

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Upon these facts, two of the questions which arise may be briefly disposed of. In the first place, I entertain no doubt concerning the effect of the clause in the so-called cargo policy, which subjects freight and advances insured thereunder "to the terms and conditions of the freight policy attached thereto." The insurance of the defendants' advances was effected in or by the instrument called the cargo policy. It so reads and it would be straining after construction to import into the language of the added clause referred to a meaning that the freight policy controlled alone, as to the terms and conditions of that insurance. The insertion of the clause must be taken to mean, naturally, that to the terms and conditions of the cargo policy, such are added of the annexed freight policy as were pertinent and might concern the risk. The importance given to the clause grows out of the defendants' effort to avoid the effect of the condition of the cargo policy against any past or future action of the assured, whereby the right of recovery of the assured against the owners had been, or might be, released or lost. The value of that condition in the contract of insurance to the insurer was in the warranty or agreement of the assured that the right of subrogation of the insurer had not been and would not be released, or lost, by any action of the assured. Nothing in the language of the clause we are at present considering imported an exception of the terms of the cargo policy from the contract of insurance.

In the next place, the condition in this cargo policy, relating to any release or loss of the right of recovery against the owners, was clearly broken by the defendants. When, after acceptance of the captain's draft for disbursements upon the bark, the defendants effected the insurance for their advances with the plaintiff, they were without any instructions from the owners. Those instructions came a day or two afterwards, in the letter of April first, and requested the defendants to insure their advances, so that in case of loss they would not call upon the owners for reimbursement. They replied that they had "covered the amount by insurance out only to Buenos Ayres." This was a plain advice to the owners that, to that extent of voyage, their request as to insurance had been complied with. The result was that the insurance effected became one for the owners' benefit, and, in case of the loss of the bark, any moneys received from the insurer would go in discharge of the indebtedness of the owners for if none were recoverable from the insurer, for any cause attributable to the defendants or not, the claim against the owners was, nevertheless, gone. They were thenceforth estopped from asserting any claim against the owners for advances to the bark; for the owners were justified in relying upon the defendants' representations in reply to their instructions to insure, and in believing their personal liability released and the claim transferred to the insurance. It is of no consequence that the insurance was effected before the owners wrote their letter of instruction. By the correspondence of the parties, the agreement was established that the insurance should be for the owners' benefit and their personal liability released. Nor is it material that the defendants may not have realized the effect of their reply to the owners' letter of instruction. The question is, what had the owners in Boston the right to believe and to act upon ? As the right of the defendants to recover against the owners of the bark was lost by their own act, a material condition of the agreement to insure them was broken, and that brings us to the question of what effect the breach had upon the relative rights of the parties to that contract.

Unquestionably, had the insurer known of this violation of the condition of the contract by the defendants, it could have defended against the claim upon the policy. As it was, the breach of the condition had operated to relieve the insurer from the obligation of its contract. And here another question, which suggests itself, may be referred to, and that is that besides a defense to any liability upon the policy for indemnity as to advances, the insurer could have defended against a claim for the payment of so much of the amount of insurance as would not be included within the advances to the bark. Of the $1,500, written under this policy, only the sum of $1,125 was actually for advances to the captain, and the balance, to make up the whole sum of $1,500, which was paid over under the arrangement between the parties, was composed of items of a commission for procuring a charter of the bark for the owners, of a commission on advances, of premium for insurance on the advances and interest on the aggregate of all the items. The insurable interest of the defendants in the vessel, I suppose, might fairly extend so far as to include the commission for lending the money and interest on the money, but it could not extend to the claim for a commission for procuring a charter. The law merchant has always given to the lenders of money, borrowed by the master of a vessel for its necessities, a maritime lien upon the vessel. They have that security, as well as the liability of the owner, and their lien on the vessel constitutes an insurable interest. (See Cowper Rep. 636; Ins. Co. v. Baring, 20 Wall. 159.)

But the commission claimed for procuring a charter for the vessel is a personal liability of the owner, and constitutes no interest in, or lien upon, the vessel, which could make it insurable. Therefore, the policy of insurance here, not only by its language, specified the defendants' advances as the subject of insurance, but the assured had no insurable interest in the vessel as to anything beyond what the term advances might reasonably include. That was the defendants' only interest at risk upon the voyage. The insurer's contract was to indemnify them against any loss in respect thereto, during the voyage, from the perils or sea risks specified. This plaintiff, therefore, could have defended against any claim for the $1,500 written under the policy.

How did the formal assignment by the defendants to plaintiff, with the indorsement over of the captain's draft, affect the situation? Obviously, no claim for the advances passed. Any personal claim for that against the owners had been released by the assured. It was not necessary, as the General Term below considered, that the right of the plaintiff to recover back the moneys paid upon the policy should rest upon any implied warranty in the defendants' assignment to it. Its cause of action was perfect, independently, for it made the payment in ignorance of the defendants' breach of the condition. And the force of that condition was quite as great in aid of a recovery back of the moneys, paid in ignorance of the fact that the defendants had forfeited or lost their right to the enforcement of the owners' personal liability, as it would have been to defend against a claim for payment, if the insurer had been made aware of the breach of the agreement.

The principle of the equitable right of the insurer to subrogation was discussed in the opinions delivered by the vice-chancellor and chancellor in the case of Atlantic MutualIns. Co. v. Storrow (1 Edw. Ch. 627, and 5 Paige, 294), and reference to them may be had. The insurer could not be deprived of that subrogation to the right of the assured, which was his in equity and the loss of which was especially secured against here, in the contract of insurance.

But I think the deed of assignment did have the effect to pass over to the plaintiff whatever claims the defendants had against the owners, growing out of the transactions disclosed here. For the $1,500, paid by the plaintiff for the assignment, it must in fact have become the owner of such of the claims specified in the deed, as were still owing to the defendants. Such would be the commission for procuring a charter of the vessel. That assignment read that it "assigned $1,500, of our claim of $1,570.47, which we have against bark * * * and owners, for advances, commissions, etc." Contemporaneously, the captain's draft was assigned over by indorsement, and that contained the information that the sum of $1,125 represented what had been advanced for disbursements upon the bark. The plaintiff, if it did not actually know, was chargeable with the knowledge, or was put upon its inquiry, that defendants claimed against the owners for other amounts than for mere advances. Of course, the plaintiff supposed it was acquiring the right to all the claims against the owners and, undoubtedly, the object of the assignment was gone with the loss of the claim upon the owners for reimbursement of the advances; but how can it be said that the assignment was ineffectual as to the balance of the claims? They became the plaintiff's property by purchase and I can see no reason why the assignment was not enforceable pro tanto.

There was no error in admitting the record of the United States District Court, in the action between this plaintiff and the owners of the bark. It proved a judgment, rendered by a court having jurisdiction of the subject-matter and of the parties, dismissing the libel, filed by the plaintiff here against the owners of the bark, to recover the advances which the libellant had paid and which it supposed it had acquired the right to recover from the original debtor. The record there showed a case upon the same material facts as here and it was competent evidence of the fact of a judgment dismissing the claim, which the assignment purported to transfer to libellant. (First Natl.Bank v. Fourth Natl. Bank, 89 N.Y. 412.)

The reduction by the General Term of the judgment, by the disallowance of the counsel fees in the Boston suit, is not complained of here. Had these defendants been notified of the suit, the question would have been different and they might have been held to pay that item of damage. As it is, I somewhat doubt that any notice was due them; for the plaintiff was not defending an action, but was suing as the holder of a claim, by the right of subrogation and by virtue of an assignment. However, the reduction has not been made the subject of an appeal. But as to the actual costs, which were paid in that action, I think it right that the plaintiff should recover them. The suit certainly was the natural sequel, or consequence, of the defendants' act.

No other point of the appellants demands our consideration and I advise that the judgment, as entered upon the order of the General Term, should be further modified, by deducting from the amount of the original judgment herein, a sum which shall be equal to the difference between the amount of the verdict of $2,353.11 and an amount made up by adding together the sum of $1,125, advanced on the captain's draft, the commission thereon of two and one-half per cent, and interest on these two sums at six per cent from March 25, 1884, to the day of the trial, and the sum of $36.65 costs of the Boston suit, with interest thereon at six per cent, from October 1, 1889, to the date of trial, and that the judgment as so modified be affirmed, but without costs to either party as against the other.

All concur.

Judgment accordingly.