Livingston & Gilchrist v. Maryland Insurance Company
11 U.S. 506 (1813)

Annotate this Case

U.S. Supreme Court

Livingston & Gilchrist v. Maryland Insurance Company, 11 U.S. 7 Cranch 506 506 (1813)

Livingston & Gilchrist v. Maryland Insurance Company

11 U.S. (7 Cranch) 506

ERROR TO THE CIRCUIT COURT

OF THE DISTRICT OF MARYLAND

Syllabus

A Spanish subject who came to the United Sates in a time of peace between Spain and Great Britain to carry on a trade between this country and the Spanish provinces under a royal Spanish license and who continues to reside here and carry on that trade after the breaking out of war between Great Britain and Spain, is to be considered as an American merchant, although the trade could be lawfully carried on by a Spanish subject only.

To constitute a representation (in making insurance), there should be an affirmation or denial of some fact or an allegation which would plainly lead the mind to the same conclusion. [See note at the end of the case.]

If by the usage of the trade insured it be necessary that certain papers should be on board, the concealment of those papers cannot affect the plaintiff's right to recover upon the policy.

In general, concealment of papers amounts to a breach of warranty.

If the letter submitted to the underwriters ordering the insurance refers to another letter previously laid before them, which letter contained information that the vessel had permission to trade to the Spanish colonies, the underwriters are bound to notice that fact and to know that the vessel would take all the papers necessary to make that voyage legal.

The usage of trade may be proved by parol, although such usage originated in a law or edict of the government of the country.

The question whether the abandonment was made in due time is not a question of fact to be exclusively left to the jury, but to be decided by them under the direction of the court. No acts justifiable by the usage of the trade and done by the plaintiffs to avoid confiscation under the laws of Spain, can avoid the policy.

If the insured does any act which increases the risk of capture and detention according to the common practice of the belligerent, it may avoid the policy. It is not necessary that the risk thus increased should be the risk of rightful capture according to the law of nations.

A false representation, though no breach of the contract, if material, avoids the policy on the ground of fraud or because the insurer has been misled by it.

If a vessel take on board papers which materially enhance the risk, and it be not within the regular usage of the trade insured to take such papers, the nondisclosure of the fact that they would be on board would avoid the policy.

In estimating the materiality of papers on board a vessel in enhancing the risk, their effect taken together should be considered, and not the effect of any one of them taken by itself.

Is it ever necessary for the assured to declare the national character of other distinct interests engaged in the same adventure unless called for by the underwriter? Per STORY, J.

The warranty of neutrality extends not barely to the fact of the property being neutral, but that the conduct of the voyage shall be such as to protect and preserve its neutral character. If the papers be denied to a belligerent, and the property is thereby thrown into jeopardy, such conduct constitutes a breach of warranty. Per STORY, J.

The belligerent right of search draws after it a right to the production and examination of the ship's papers. Per STORY, J.

The question must always be whether there be a concealment of papers material to the preservation of the neutral character. It is not every idle, accidental, or every meditated concealment of papers manifestly unimportant in every view before the prize tribunal which will dissolve the obligation of the policy. If by the usage and course of trade it be necessary or allowable to have on board spurious papers covered with a belligerent character, whatever effects it might have upon the rights of the searching cruiser, the concealment of such papers which, if disclosed, would completely compromit or destroy the neutral character will not amount to a breach of the warranty. Per STORY, J.

Whenever the underwriter has knowledge of and assents to the cover of neutral property under belligerent papers, as he does in all cases where the usage of the trade demands it, he necessarily waives his rights under the warranty -- or, in other words, he authorizes the concealment in all cases in which it is not necessary to assume the belligerent national character for the purpose of protection. Per STORY, J.

The public laws of a country affecting the course of the trade with that country are considered to be equally within the knowledge and notice of all the parties to a policy on a voyage to such country. Per STORY, J.

Error to the circuit court for the District of Maryland, in an action of covenant upon a policy of insurance

Page 11 U. S. 507

(against capture only) upon the cargo of the ship Herkimer "from Guayaquil, or her last port of departure in South America, to New York," "warranted American property, proof of which to be required in the United States only," "and warranted free from seizure for illicit trade." The declaration was on a loss by capture.

The case was stated as follows by MARSHALL, CHIEF JUSTICE, in delivering the opinion of the court:

Julian Hernandez Baruso, a Spanish subject, having obtained from the Crown of Spain a license to import from Boston into the Spanish provinces of Peru and Buenos Ayres in South America in foreign vessels a certain quantity of goods in the license mentioned, and to take back the proceeds in produce on payment of half duties, came to New York, in September, 1803 (Spain being then at peace with Great Britain) for the purpose of carrying on trade under his said license.

On 24 August, 1804, he entered into a contract with a certain Anthony Carroll for the transportation of a certain quantity of goods to Lima, in Peru, under the said license. Carroll died without carrying the contract into full effect.

On 25 January, 1805, war having then broke out between Great Britain and Spain, B. Livingston, who had been bound as Carroll's surety for the performance of the contract, entered into a new contract with Baruso for the transportation of the same goods.

The preamble recites the license and says

"The said Baruso has agreed with the said B. Livingston to make an adventure to Lima on the conditions and stipulations following, to-wit: "

"1. In consideration, &c., he agrees to the following partnership with the said B. L. in virtue of which he transfers to the said firm, all his powers, &c., (under the license) of sending an American vessel belonging to the said L. or chartered, in which vessel shall be embarked goods to the amount of $50,000, the funds and vessel to be furnished and advanced by said I. "

Page 11 U. S. 508

"2. Baruso to obtain the necessary papers from the Spanish consul and B. L. to pay the duties. Baruso answerable for detention or confiscation by the Spanish government or vessels on account of any defect of right to send under said license, &c."

"3. L. agrees in four months to embark the goods on board a vessel to Lima to proceed thither and to return to the United States with a cargo."

"4. L. to choose the supercargo and instruct him; and as the adventure will appear on the face of the papers to belong to B. he shall give the supercargo a power, and recognize him the master of the cargo, so that the consignees at Lima shall follow literally his orders. The consignees, who were partners of B., to receive a commission."

"5. The consignees, who were partners of B., to receive a commission."

"6. The said L. and B. agree to divide equally and part and part alike the profits of the adventure. L. to have commissions on sale."

"7. Optional in L. to sell in United States, or convey the return cargo to Europe. If he sells in the United States, B. may take out, at the price of sales, as much as will be equal to his rights."

"8. If L. sends the cargo to Europe, he is to choose the supercargo, but the consignees to be chosen jointly."

"9. In case of loss B. to claim nothing, as his share in the profits only accrues on the safe return of the vessel to the United States. Optional with L. to insure or not. L. not to be allowed for risk, if no insurance, more than 15 percent. No insurance to be on the risks of the Spanish government."

"10. If any loss accrues from causes not stipulated, B. to lose only his privilege. If loss on sale of return cargo, B. to sustain half."

Livingston soon afterwards chartered the ship Herkimer for the voyage, and entered into a contract with the other plaintiff Gilchrist, one James Baxter, and Edward Griswold, for jointly carrying on with them

Page 11 U. S. 509

the said voyage. The cargo was purchased with their joint funds, and was shipped to Lima, where, and at Guayaquil, a return cargo was received, purchased with the proceeds of the original cargo.

On 25 March, 1806, Mr. Gilchrist addressed to Alexander Webster & Co. at Baltimore a letter containing an order for insurance on the cargo of the ship Herkimer, from Guayaquil, 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. It says

"the owners are already insured against the dangers of the seas and all other risks, except that of capture. . . . You have already had a description of the ship from Messrs. Church and Demmill, the agent of Mr. Jackson, and which I presume is correct. . . . 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 letter of Church and Demmill was dated 13 Feb.. 1806, and after describing the ship, adds,

"she sailed from Boston 12 May last for Lima with liberty to go to one other port in South America, not west of Guayaquil, and from thence to New York. She has permission to trade there."

This letter was laid before the board of directors and the application at that time rejected.

The letter from Gilchrist to Webster & Co. was afterwards laid before the board, and the company made the insurance for the plaintiffs at 10 percent

The Herkimer, on her return voyage, was captured near the port of New York by the Leander, a British ship of war, and sent to Halifax, where she was condemned.

Page 11 U. S. 510

The plaintiffs gave the underwriters notice of the capture and obtained their permission to prosecute a claim for restoration without prejudice to their right to abandon. On receiving notice of the condemnation, they wrote a letter of abandonment, which was delivered to the underwriters, who refused to pay for the loss, whereupon this suit was brought.

On the return voyage, just after doubling Cape Horn, Baxter, who was supercargo and part owner, gave to Edward Giles, the third mate, a bundle of papers, partly in Spanish, telling him at the same time that in all probability they might fall in with privateers, who might overhaul the trunk in the cabin, and if they found the papers, it was probable the vessel might be detained as the papers were in Spanish, and they might not be able to translate them. Giles put the papers in his trunk.

After the capture, Giles was taken out of the Herkimer into the Leander, and on being asked if he had any objection to have his trunk searched, replied that he had not. The trunk was then searched, and this bundle discovered. It contained papers, covering the cargo as the property of Baruso, mixed with others which showed that in fact it was the property of the plaintiffs and of Baxter and Griswold. Evidence was given to prove that the usage of the trade made these papers necessary. There was also an estimate of the probable value of the cargo if shipped to Europe.

The Herkimer arrived before the Leander, and Baxter, upon his examination on the standing interrogatories, described truly the character of the voyage, and stated correctly the property in the cargo, but denied his knowledge of any papers, other than those which were exhibited, as belonging to the ship.

Issue was joined on the plea that the defendants had not broken their covenant, and the jury found a verdict in their favor.

On the trial, 28 bills of exception were taken, partly by the plaintiffs, and partly by the defendants. Only those taken by the plaintiffs are now before the Court.

Page 11 U. S. 511

The plaintiffs prayed the court below to instruct the jury that the letter ordering the insurance does not contain a representation that no person other than the said Livingston, Gilchrist, Griswold & Baxter was interested in the return cargo of the Herkimer, nor that all the persons interested therein were native Americans. The judges were divided on this point, and the instruction was not given.

The 5th bill of exceptions stated that the plaintiffs prayed the court to instruct the jury that if they believed the testimony offered by them, then there was no such concealment of the said papers as can affect the right of the plaintiffs to recover in this action, which instruction the court refused to give, but directed the jury that if it should be of opinion that from the usage and course of trade it was necessary to have the Spanish and other papers delivered by Baxter to Giles, the 3d mate, as aforesaid, then the delivery by Baxter to Giles, and the finding and taking of the said papers by the officers on the Leander was not such a concealment as affects the right of the plaintiffs to recover.

The 6th bill of exceptions states that the plaintiffs then prayed the court to instruct the jury that Baruso having removed to New York, in the United States, while Spain was neutral for the purpose of carrying on trade, and having continued to reside in New York until after the capture of the Herkimer, the said Baruso could not, at the time of the voyage, be considered as a belligerent. This instruction the court also refused to give, but did instruct the jury that if they should be of opinion that the said Baruso settled in New York before the war between Spain and Great Britain, and remained there domiciliated and carrying on trade generally until the capture of the Herkimer, he is to be considered as a neutral; but if they should be satisfied from the testimony that he went to New York for no other purpose but to carry on trade as a Spanish subject, which he could not engage in as a neutral, and that he was not engaged in any other trade than as a Spanish subject, he cannot be considered as a neutral.

The 7th bill of exceptions states that the court then, on the prayer of the defendant, gave to the jury the following opinion:

Page 11 U. S. 512

"The court having already given an opinion that Baruso was not a joint owner with the plaintiffs and Griswold and Baxter in the return cargo of the Herkimer, do, in compliance with the opinion of the Supreme Court, leave it to the jury to determine whether Baruso had an interest in the return cargo which increased the risk of the said voyage, and if the risk was increased, that the policy was thereby vitiated."

This opinion was given on the prayer of the defendants to instruct the jury that the noncommunication to the underwriters of papers showing Baruso to have an interest and to be a Spanish subject vitiated the policy.

The 8th bill of exceptions stated that the defendants then prayed the court to instruct the jury that if it should be of opinion that the papers which were delivered to Giles by Baxter or any of them increased the risk, and that if any of the papers which did so increase the risk were not necessary by the laws and usages of Spain or the course and usage of trade between the United States and Lima, and that it was not communicated to the defendants that such papers would accompany the cargo, then the plaintiffs were not entitled to recover. The court gave the instruction.

The 9th bill of exceptions stated that the plaintiffs prayed an instruction to the jury that in estimating the increase of risk on the return voyage of the Herkimer, it was to consider it as a voyage which the defendants were informed, in and by the letter of Church and Dommill, was carried on under a license from the Spanish government, and the question for it to decide was whether the risk of such a voyage, carried on under such a license, was increased by any of the circumstances relied on by the defendants to show an increase of risk in this case. This instruction the court refused to give.

The 11th bill of exceptions stated that the plaintiffs produced a witness to prove the usage of the trade, who said that by the laws, regulations, and usages of the trade, it was necessary that the property imported into or exported from the colony by a foreigner should be under a Spanish license, and appear to be Spanish

Page 11 U. S. 513

property. Whereupon the defendants moved the court to instruct the jury that this evidence is not competent to prove the municipal laws of Spain or the usage and custom of trade established by its municipal laws. The opinion of the court was that

"no parol evidence is admissible to the jury, or if given, can be regarded by it, to prove the legislative edicts or acts of the Spanish government or to prove any usage, custom, or course of trade conformable to such edicts or acts, but that such evidence is admissible to prove the general usage and course of trade that may depend on instructions to the government of Peru."

The 13th bill of exceptions stated that the plaintiffs produced witnesses, ignorant of the laws of Spain, to prove their understanding of the usage of the trade, and the defendants produced counter-testimony on the usage, whereupon the defendants moved the court to instruct the jury that the testimony of the plaintiffs, if believed, was not competent to show the usage or course of trade that the Herkimer, on her return voyage, should be accompanied with papers giving the cargo the appearance of Spanish property. The court refused to give this opinion, but instructed the jury that if it was of opinion that the usage or course of trade from or to the province of Peru by foreigners was to have a license from the King of Spain to trade, and to have Spanish papers on board, to show or give color that the cargo was Spanish property, the defendants were bound to take notice of such course of trade; but if the jury should be of opinion that the trade was prohibited by the laws of Spain, the plaintiffs must prove that the defendants had notice or information of such prohibition.

The 20th bill of exceptions is to an opinion of the court that whether the abandonment was in reasonable time or not is not a fact to be exclusively left to the jury, but to be decided by it under the direction of the court.

The 24th bill of exceptions stated that the defendants moved the court to instruct the jury that the insurers are not liable for any increase of risk in consequence of any acts done by the insured to avoid seizure

Page 11 U. S. 514

and confiscation under the laws and regulations of the Spanish government, which instruction the court gave.

The 25th bill of exceptions stated that the counsel for the plaintiffs then moved the court to instruct the jury that the right of the plaintiffs would not be affected by any increase of risk produced by such acts as were stated in the preceding exception if such acts were according to the course and usage of trade on the voyage insured. This instruction the court refused to give.

The 28th bill of exceptions stated that the plaintiffs moved the court to instruct the jury that the increase of risk, by which alone the right of the plaintiffs to recover in this action can be effected, is an increase (by reason of some act or omission of the plaintiffs, or their agents) of the danger of rightful capture or condemnation under the law of nations. The court refused to give this instruction.

The verdict and judgment being against the plaintiffs they sued out their writ of error.

Page 11 U. S. 534

MR. CHIEF JUSTICE MARSHALL, after stating the case, delivered the opinion of the Court as follows:

This perplexed and intricate case, which is rendered still more so by the manner in which it has been conducted at the circuits, has been considered by the Court. Its opinion on the various points it presents will now be given.

If the question on which the court was divided be considered literally, the answer must undoubtedly be that the letter of 25 March, 1806, contains no averment that no person other than Livingston, Gilchrist,

Page 11 U. S. 535

Griswold, and Baxter, was interested in the return cargo of the Herkimer, nor that all the persons interested therein were native Americans. This would be perceived from an inspection of the letter itself, and there would be no occasion for an application to the court concerning its contents. But the real import of the question is this. Is the language of the letter such as to be equivalent to an averment that the owners named in it are the sole persons who were interested in the return cargo? If it does amount to such an averment, then it is a representation, and if it be untrue, its materiality to the risk must determine its influence on the policy. A false representation, though no breach of the contract, if material, avoids the policy on the ground of fraud, or because the insurer has been misled by it.

Upon reading the letter on which this insurance was made, the impression would probably be that the four persons named in it were the sole owners of the return cargo of the Herkimer. The inference may fairly be drawn from the expressions employed. Such was probably the idea of the writer at the time. The writer however might have and probably had other motives for his allusion to other owners than to convey the idea that there were no others. The premium might in his opinion be affected in some measure by stating the little apprehension from capture which was entertained by others, and especially by that owner who was the supercargo. If, however, it was not supposed by Mr. Gilchrist that the persons named in his letter were the sole owners of the cargo, or if in fact they were not the sole owners, he has expressed himself in so careless a manner as to leave his letter open to misconstruction and, in the opinion of some of the judges, to expose his contract to hazard in consequence of it.

But that part of the Court which entertains this opinion is also of opinion that the letter ought not to be construed into a representation of any interest to grow out of the voyage distinct from actual ownership of the cargo. "The owners, says Mr. Gilchrist, are already insured against the dangers of the seas," &c. His application was for the owners, and when he proceeds to state that others were concerned, he must be understood to say that they were concerned as owners. Consequently if the letter implies an averment that he has named all the owners,

Page 11 U. S. 536

it implies nothing further, and ought not to be construed into a representation, that there were no other persons interested in the safe return of the cargo.

Others are of opinion that to constitute a representation, there should be an affirmation or denial of some fact or an allegation which would plainly lead the mind to the same conclusion. If the expressions are ambiguous, the insurer ought to ask an explanation, and not substitute his own conjectures for an alleged representation. In this opinion the majority of the Court is understood to concur. The instruction then applied for by the counsel for the plaintiffs, on which the circuit judges were divided ought to have been given.

5th. A majority of the Court is also of opinion that the instruction prayed for as stated in the 5th exception ought to have been given. If the jury believed the facts offered in evidence by the plaintiffs, which were that by the usage of the trade to Peru from any foreign port, it was necessary for the ship to have on board, on her return voyage, the Spanish and other material papers delivered by Baxter to Giles, then there was no such concealment of said papers as can affect the right of the plaintiff to recover in this action. In general, concealment of papers amounts to a breach of warranty. But when the underwriters know or by the usage and course of the trade insured ought to know that certain papers ought to be on board for the purpose of protection in one event which, in another, might endanger the property, they tacitly consent that the papers shall be so used as to protect the property. The use of the Spanish papers was to give a Spanish character to the property in the Spanish ports, and of the American papers to prove the American character of the property to other belligerents. But to have exhibited the Spanish papers to a British cruiser and thus to induce a suspicion that the property was belligerent would have been not less improper than to have exhibited the proofs of American property in a port of Peru, and thus to defeat the sole object for which Spanish papers were necessarily taken on board.

6th. A majority of the Court is also of opinion that under all the evidence in the cause, Baruso was to be

Page 11 U. S. 537

considered as an American merchant, whether he carried on trade generally or confined himself to a trade from the United States to the Spanish provinces. The circuit court therefore erred in making the neutral character of Baruso to depend on the kind of trade in which he was engaged, instead of its depending on residence and trade, whether general or limited.

7th. The instruction of the circuit court to which the 7th exception was taken, is obviously formed on a plain and total misconstruction of the former opinion of this Court. In no part of that opinion has the idea been indicated, that the interest of Baruso was a question solely for the consideration of the jury unaided by the judge. It is certainly a question on which it was proper for the judge to instruct the jury. The opinion given by this Court was that

"if the jury should be of opinion that the Spanish papers, mentioned in the case, were material to the risk, and that it was not the regular usage of trade to take 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."

The instruction of the circuit court to the jury ought to have conformed to this direction. Instead of doing so, those instructions were to exclude entirely from the consideration of the jury the regular usage of trade. They refuse to allow any influence to a fact, to which this Court attached much importance. It is the unanimous opinion of this Court that in giving this instruction, the circuit court erred.

8th. The circuit court seem also to have varied from the directions formerly given by this Court in the opinion to which the 8th exception is taken. This Court placed the innocence or guilt of having on board the Spanish papers, mentioned in the case, on the regular usage of trade; the circuit court has made their innocence to depend on their being necessary.

The counsel for the defendants contends that this is a distinction without a difference, but it is impossible to say what difference this distinction might make

Page 11 U. S. 538

with the jury. It is also the opinion of this Court that in estimating the materiality of the papers to the risk, their effect, taken together, should be considered, not the effect of any one of them taken by itself.

9th. The opinion which the court refused to give, to which refusal the 9th exception is taken, depends on several distinct propositions which must be separately considered.

The letter on which this insurance was made contains a direct reference to a previous letter written by Church and Demmill, which was laid before the company, for a description of the ship. The first question to be considered is did this reference make it the duty of the directors to see that letter, and are they, without further proof, to be considered as having read it? The letter was addressed to, and it is to be presumed remained in the possession of, the agent who made this insurance.

It is a general rule that a paper which expressly refers to another paper within the power of the party, gives notice of the contents of that other paper. No reason is perceived for excepting this case from the rule. It is fairly to be presumed that on reading the letter of Gilchrist, the board of directors required the agent of the plaintiffs to produce the letter of Church and Demmill unless they retained a recollection of it. In that letter they were informed that the vessel had sailed for Lima, with liberty to go to one other port in South America, and that "she had permission to trade there."

What was the amount of the information communicated by this letter?

The permission to trade was unquestionably a permission granted by the authority of the country. It was a permission from the Spanish government. But whether this permission was evidenced by a license or by other means was to be decided by other testimony; whether it conveyed notice to the underwriters that such a license was on board the ship depends, in the opinion of part of the Court, on the usage of the trade. Those who entertain this opinion think that as this was submitted

Page 11 U. S. 539

to the jury, the court committed no error in refusing to say that the defendants were to be considered as knowing that the Herkimer sailed with a Spanish license on board. In estimating the increase of risk, it was certainly the duty of the jury to consider it as a voyage known to the underwriters to be carried on for the purpose of trading to Lima, and that the Herkimer had such papers on board as were usual in such a trade, but whether the license be such a paper or not, the jury was to judge as of other facts.

A majority of the Court, however, is of a different opinion. The underwriters, having full notice that the voyage was permitted, might fairly infer that it was licensed by the Spanish government, because in no other way would it be permitted. The whole question turned upon the construction of a written document which it belonged to the court to make.

11th & 13th. The 11th & 13th exceptions may properly be considered together, since they are taken to opinions given on the same subject, and do not essentially vary from each other. The circuit court appears to have supposed that the general usage and course of trade could not be given in evidence, or, if given in evidence, ought to be disregarded, if the jury should be of opinion that such usage was founded on the laws or edicts of the government of the country where the usage prevailed. That is not the opinion of this Court. The usage may be proved by parol, and the effect of the usage remains the same, whether it originated in an edict or in instructions given by the government to its officers. Any conjectures which the jury or the witnesses may make on this subject can be of no importance, and ought to have no influence on the case. Neither can it be more necessary to give notice of a usage founded upon statute than of a usage founded on instructions. The circuit court therefore erred in directing the jury that the underwriters were not bound to take notice of the usage of trade if they should be of opinion that the trade was prohibited by the law of Spain.

20th. The instruction of the circuit court to which the 20th exception was taken appears to be entirely correct.

Page 11 U. S. 540

24th & 25th. The 24th & 25th exceptions are to the same instruction somewhat varied in form and rendered more explicit on the application of the plaintiffs than it had been in the instruction given on the motion of the defendants. It is essentially the same with that to which the 7th exception was taken, and appears to have been founded on a total misapprehension of the former opinion given by this Court. In that opinion it was expressly stated that such papers as, conformably to the regular usage of trade, were to be taken on board a vessel would not vitiate the policy. "The acts, done by the insured to avoid seizure and confiscation under the laws and regulations of the Spanish government," which are mentioned in the application made to the court by the counsel for the defendants, comprehend these papers. This question therefore was decided by this Court on the former argument of this cause, and the Court is now unanimously of opinion that the circuit court erred both in granting the prayer of the defendants and refusing that of the plaintiffs.

28th. In the instruction to which the 28th exception was taken, this Court concurs with the circuit court. The direction, asked by the counsel for the plaintiffs, ought not to have been given. It is expressed in terms which, if assented to, might misguide the jury. Rightful capture according to the law of nations might be construed to mean capture for a cause which would justify condemnation according to the law of nations as construed in the United States. But capture will always be made on suspicion of what the belligerent construes to be cause of forfeiture, and capture authorizes abandonment. Such acts or omissions, therefore, of the plaintiffs as would induce a capture and detention according to the common practice of the belligerents are proper for the consideration of the jury in estimating the risk.

This Court is of opinion that there is error in the proceedings of the circuit court in this cause in refusing to give the instruction on which that court was divided, and also in the instructions to which the 5th, 6th, 7th, 8th, 9th, 11th, 13th, 24th and 25th exceptions are taken. This Court doth therefore

Reverse and annual the judgment rendered by the circuit court, and doth remand the cause to the said court that a venire facias

Page 11 U. S. 541

de novo may be awarded, and other proceedings had therein according to law.

STORY, J.

I concur in the judgment of reversal which has just been pronounced. But as in some instances I differ from the opinions expressed by the majority, and in others I concur upon grounds somewhat variant, I have ventured to express my own views at large upon the important points which have been so fully and ably argued.

The first question which presents itself is on the certificate of division. To constitute a representation, there should be an explicit affirmation or denial of a fact or such an allegation as would irresistibly lead the mind to the same conclusion. If the expressions are ambiguous or such as the parties might fairly use without intending to authorize a particular conclusion, the insured ought not to be bound by the conjectures or calculations of probability, of the underwriter. The latter, if in such case he deems the facts material, ought to make further inquiries. In the letter of 26 March, 1806, there are no words negativing the existence of other interests than those of the plaintiff's and Messrs. Griswold and Baxter.

The negative, if any, is to be made out by mere inference or probable conjecture, and as there is no reason to suppose that the statement was made with that intent, I am satisfied that it did not amount to a representation negativing the existence of such interests. The court below ought therefore to have given the direction prayed for by the plaintiffs' counsel.

But even admitting that the letter did contain the representation contended for, I am well satisfied that it was substantially true. It is not pretended that any other person except Baruso had any interest in the cargo, and it is very clear that whatever might be his contingent interest in the possible profits of the voyage, he had no vested interest in the cargo itself. He was not a partner, for he wanted one of the essential characteristics of partnership, a direct vested interest in the joint funds. He possessed a mere possibility which, in

Page 11 U. S. 542

the successful termination of the voyage, might entitle him to a right of action for a proportion of the profits, or, in a specified case of election, to take a proportion of the property itself. But it was not such an interest as was liable to capture or such as could be claimed or condemned in a prize court. It was less certain than even a respondentia or bottomry interest, which have not been allowed to be asserted before the prize jurisdiction. The commissions of a supercargo upon the sales might with as much propriety be deemed a vested interest in the cargo consigned to his care.

I pass over, for the present, the fifth exception.

The sixth exception points to the national character of Baruso. As Baruso emigrated from Spain to the United States during a time of peace, no question arises as to the ability of a belligerent subject to change his national character flagrante bello.

It is clear by the law of nations that the national character of a person for commercial purposes depends upon his domicile. But this must be carefully distinguished from the national character of his trade. For the party may be a belligerent subject and yet engaged in neutral trade, or he may be a neutral subject and yet engaged in hostile trade. Some of the cases respecting the colonial and coasting trade of enemies have turned upon this distinction.

But whenever a person is bona fide domiciled in a particular country, the character of the country irresistibly attaches to him. The rule has been applied with equal impartiality in favor and against neutrals and belligerents. It is perfectly immaterial what is the trade in which the party is engaged, or whether he be engaged in any. If he be settled bona fide in a country with the intention of indefinite residence, he is, as to all foreign countries, to be deemed a subject of that country. Without doubt, in order to ascertain this domicile, it is proper to take into consideration the situation, the employment, and the character of the individual. The trade in which he is engaged, the family that he possesses, and the transitory or fixed character of his business are ingredients which may properly be weighed in deciding on the nature of an equivocal residence or

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domicile. But when once that domicile is fixed and ascertained, all other circumstances become immaterial.

The prayer of the plaintiffs (which was refused by the court) in effect asked that if Baruso was bona fide settled in New York and had no domicile elsewhere, he was not to be considered as a belligerent. The court in effect declared that the character of his trade, and not his mere domicile, fixed his national character. There was therefore error both in the refusal and in the direction of the court.

The seventh exception arose from a misconception of the opinion of the Supreme Court. The court did not mean to intimate that whether an interest increased the risk or not was a mere question of fact for the jury. On the contrary, the court considered that it was a mixed question of law and fact on which the court was bound to direct the jury as to the law. As the court below was of opinion that Baruso was not a joint owner of the cargo (in which opinion I concur), the question ought not to have been left to the jury in the broad and unqualified terms which are used. Strictly and legally speaking, Baruso had no interest in the cargo, and therefore "his interest could not be material to the risk," and if the point meant to have been left to the jury was whether the concealment of the name or the possibility of interest of Baruso increased the risk, it should have been left with proper directions as to the effect of the usage of trade and neutral character of Baruso in settling that question. If the usage of trade allowed or required such cover, or if Baruso were a neutral, I am not prepared to say that in point of law, the risk could thereby have been increased. It would have been a mere inquiry into the possible hazards from the rapacity of belligerents, or the possible effects of one Spanish name instead of another. Men reason differently upon such speculations.

Nor am I prepared to say that it is ever necessary for the assured to declare the national character of other distinct interests engaged in the same adventure, unless called for by the underwriter. If such interests are not warranted or represented to be neutral, the underwriter must be considered as calculating upon the

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possible existence of belligerent interests or as waiving any inquiry.

The fifth and eighth exceptions may be considered together, as they are founded upon the legal effect of the taking on board and the concealment of the papers, by Baxter, from the belligerent cruiser. The prayer of the plaintiffs in the fifth exception was for a direction that under all the circumstances of the case there was no such concealment as would avoid the plaintiff's right to recover. And if, in point of law, the plaintiffs were entitled to such direction, the court erred in their refusal, although the direction afterwards given by the court might, by inference and argument, in the opinion of this Court, be pressed to the same extent. For the party has a right to a direct and positive instruction, and the jury is not to be left to believe in distinctions where none exist or to reconcile propositions by mere argument and inference. It would be a dangerous practice and tend to mislead instead of enlightening a jury.

The opinion of the court in effect was that the concealment of any papers, which were necessary to be on board by the usage and course of the trade, did not affect the plaintiff's right to recover. But (in conformity with the prayer of the defendants in the eighth exception) that if any of the papers increased the risk and were not necessary by the usage and course of trade, and the fact that such papers would accompany the cargo, was not disclosed to the underwriters, the plaintiffs were not entitled to recover.

It is undoubtedly true that the warranty of neutrality extends not barely to the fact of the property being neutral, but that the conduct of the voyage shall be such as to protect and preserve its neutral character. It must also be conceded that the acknowledged belligerent right of search draws after it a right to the production and examination of the ship's papers. And if these be denied and the property is thrown into jeopardy thereby, there can be no reasonable doubt that such conduct constitutes a breach of the warranty.

Concealment and even spoliation of papers do not ordinarily induce a condemnation of the property, but

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they always afford cause of suspicion, and justify capture and detention. In many cases, the penal effects extend in reality, though indirectly, to confiscation. For if the cause labor under heavy doubts, if the conduct be not perfectly fair, or the character of the parties is not fully disclosed upon the papers before the court, the concealment or spoliation of papers is made the ground of refusing further proof to relieve the obscurity of the cause, and all the fatal consequences of a hostile taint follow on the denial.

But the question must always be whether there be a concealment of papers material to the preservation of the neutral character. It would be too much to contend that every idle and accidental, or even meditated, concealment of papers, manifestly unimportant in every view before the prize tribunal, should dissolve the obligation of the policy. And if by the usage and course of trade it be necessary or allowable to have on board spurious papers covered with a belligerent character, whatever effect it may have upon the rights of the searching cruiser, it would be difficult to sustain the position that the concealment of such papers, which if disclosed would completely compromit or destroy the neutral character, would be a breach of the warranty. In such case, the disclosure of the papers produces the same inflamed suspicions, the same legal right of capture and detention, the same claim for further proof, and the same right to deny it as the concealment would. If the concealment would induce the conclusion that the interest was enemy's covered with a fictitious neutral garb, the disclosure would not in such a case less authorize the same conclusion. In such case it would depend upon the sound discretion of the court, under all the circumstances of the case, to allow the veil to be drawn aside and admit or deny the Claimant to assume his real character. Whenever, therefore, the underwriter has knowledge and assents to the cover of neutral property under belligerent papers (as he does in all cases where the usage of the trade demands it), he necessarily waives his rights under the warranty so far as the visiting cruiser may demand the disclosure of such papers. In other words, he authorizes the concealment in all cases where it is not necessary to assume the belligerent national character for the purpose of protection.

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If this view be correct, it is clear that the court ought to have given the direction prayed for by the plaintiffs. Sitting here under a clause in the policy which enables us to look behind the sentence of condemnation, we see that the property was really neutral, and if the jury believed the evidence, the concealment was of papers which were authorized by the course of trade for the voyage, and so far from giving a hostile character, was the only means of preventing a strong presumption of that character. If we but consider the known course of decisions in the British courts on questions of this nature, we shall find that, independent of the question of the neutral or hostile character of the ostensible owner, the trade between the belligerent mother country and its colony affects with condemnation the property engaged in it, although such property be neutral, and there be an interposition of a neutral port in the course of the voyage. On examining the papers in this case, it will be found that they point, though obscurely, to such an ultimate destination. And at all events the existence of contradictory papers, one set American, the other Spanish, would, in a Spanish trade, afford an almost irresistible inference in a prize court that the property was really Spanish -- noscitur ab origine. It would take its character from its origin.

But it is immaterial, in my view, whether a prize court would under such circumstances acquit or condemn. When the cover of a Spanish character was allowed, it was allowed for the purposes of protection, and the disclosure of it was not required elsewhere than in the Spanish dominions. One of the risks against which the insured meant to guard himself was, in my judgment, a loss on account of the use of the Spanish character -- a loss which might have been more plausibly resisted if there had been a disclosure instead of a concealment of it.

The court also erred in declaring (in the eighth exception) that the taking on board of any of the papers which were not necessary by the usage of the trade, if the risk thereby were increased, avoided the plaintiffs' right to recover. The effect of the whole papers should have been taken together. The evidence did not authorize the court to consider and separate the effect of

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each single paper. If one unnecessary paper might have increased the risk if singly considered, and yet, if accompanied by the others it would not have had that effect, certainly the existence of that paper with the others would not have destroyed the right of the plaintiffs. Yet the opinion of the court would have authorized the jury to draw a different conclusion.

The court should have directed the jury that if the papers were authorized by the usage and course of the trade, the concealment of them under the circumstances did not vitiate the policy, and that if some were authorized and others not, yet the possession or concealment of the latter with the former did not vitiate the policy unless the unauthorized, so connected with the authorized, papers increased the risk.

The question presented by the 9th exception is whether the defendants are to be considered as having notice that the voyage insured was to be pursued under a Spanish license. The letter of 26 March, 1806, expressly refers to the letter of 17 February, 1806, which had been laid before the underwriters, and they must therefore be deemed conversant of all the facts therein stated. A party shall be taken to have notice of all facts of which he has the means of knowledge in his own possession, or is put directly upon inquiry by reference to documents submitted to his inspection. In the letter of 17 February, the ship is declared to have a permission for the voyage, which in this trade can be understood in no other sense than a license. The court ought therefore to have given the direction prayed for by the plaintiffs.

The court erred in the opinion expressed in the 11th exception. The course and usage of trade may in all cases be proved by parol, whether such course and usage of trade arise out of the edicts or out of the instructions of the government and whether the trade be allowed or prohibited by such edicts or instructions.

The court erred also in the latter part of their direction to the jury under the 13th exception. It was immaterial whether the trade was or was not prohibited by the laws of Spain. In either case, the underwriters

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were bound to take notice of the usage and course of the trade. The public laws of a country affecting the course of the trade with that country are considered to be equally within the knowledge and notice of all the parties to a policy on a voyage to such country.

The 20th exception cannot be supported. The opinion of the court was entirely correct.

The 24th and 25th exceptions ought to be considered together in order to present the opinion of the court below with its full effect. It is clear that any acts done by the assured in the voyage according to the course and usage of the trade, although such acts may increase the risk, do not vitiate the policy. This opinion was pronounced by this Court on the former argument of this case, in reference to the Spanish papers to which the present application of the defendants obviously pointed. The court therefore erred in granting the prayer of the defendants and in refusing that of the plaintiffs.

The last (the 28th) exception cannot be sustained. The proposition is conceived in too general terms, and might mislead the jury. Any acts or omissions of the insured or his agents which, according to the known edicts or decisions of the belligerents, though not according to the law of nations, would enhance the danger of capture or condemnation might, if such acts or omissions were unreasonable, unnecessary, or wanton, form a sound objection to the right of recovery. The insured can have no right to jeopardize the property by any conduct which the fair objects of the voyage or the usage of the trade do not justify.

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