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
Page 11 U. S. 543
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
Page 11 U. S. 544
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
Page 11 U. S. 545
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.
Page 11 U. S. 546
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
Page 11 U. S. 547
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
Page 11 U. S. 548
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.
