Hoxie v. Home Insurance

Butler, J.

1. The first point made by the defendants is, that the questions and answers specified in the deposition of Capt. Lane should have been excluded from the consideration of the jury. We are satisfied they were inadmissible, and should have been erased. But they were retained in consequence of the laches of' the defendants, and neither the plaintiff nor the court committed any error. The defendants agreed that the objection might be reserved to the argument of the case, to be then pursued by them if they saw fit to pursue it. They did not then pursue it. Doubtless they agreed to the reservation under the impression that the surveys would be offered and might be admissible. But when-' they were offered, objected to and withdrawn, we think it was the duty of the defendants to pursue the objection, and that unless they did so the court and the plaintiffs might presume that the objection was waived.

2. In connection with evidence tending to show a fraudulent loss of the vessel by the direct misconduct of the master, the defendants offered to inquire respecting what they claimed to be an extraordinary series of losses under suspicious circumstances, of other vessels owned by one of the same parties, and mortgaged in like manner to the plaintiff, and insured, as tending to show a fraudulent combination to insure and lose vessels, and therefore to procure the insurance from the defendants and others on this vessel with intent she should also be fraudulently lost. Whether the evidence was rightly excluded or not involves a two-fold inquiry; viz., 1st. Was the evidence relevant ? and 2d., Was it admissible under the pleadings ?

We are satisfied that the evidence was relevant. Upon questions of knowledge, good faith or intent, any other transactions from which airy inference respecting the quo animo may be drawn are admissible. And where fraud is imputed and within the issue, and provable by various circumstances, a considerable latitude must be indulged in the admission of evidence. Benham v. Cary, 11 Wend., 83. These principles would justify the admission of the evidence offered. It has sometimes been thought that the other transactions should be cotemporaneous, or nearly so, but that is not essential. A fraudulent combination and fraudulent motive may be inferrible from a series of successive transactions of a fraudulent or suspicious character and in respect to such a subject matter. In this case, if there had been a considerable number of vessels cotemporaneously purchased, mortgaged, insured heavily, both vessel and freight, and by both owner and mortgagee, and lost suspiciously in moderate weather, some inference of fraudulent combination and intent as to all would be unavoidable. But a series of similar transactions effected in the same way by the same parties with the same result, would excite the same suspicion and induce the same-inference. Indeed the latter might be equally suspicious because such a method of perpetrating such frauds is the most feasible, requiring less capital, a less number of conspiring captains to be trusted, is less likely to be generally suspected, known or remembered, and therefore as likely to be adopted. The authorities more or less applicable on this subdivision of the point are numerous, and may be found collected (including Gardner v. Preston, 2 Day, 205, and Treat v. Barker, 7 Conn., 274,) in note 333 of Oowen & Hills’ edition of Phillipps on Evidence.

But we are not satisfied that the evidence was admissible under the notice. It does not allege either an original fraudulent combination of the owners and of the plaintiff before the insurance was obtained, nor any connection with or assent to an intended loss by the fraud and evil practice of the master after the insurance was effected. The fraud of the master was barratry, (notwithstanding he was part owner,) and a peril insured against, unless the other owner or the plaintiff assented to it. It was essential to the intended defence therefore, that either the original combination or the subsequent assent should be proved. The one goes to show that the contract, although prima facie valid, was void ; the other, that the evil practice of the master, which was prima facie barratry, was not such, but the fraud of the other owner and the plaintiff also. And both were matter of avoidance, and should have been inserted in the notice. The action is assumpsit on an express contract, and doubtless under the rules of the common law as gradually relaxed from their original strictness, and existing prior to the statute of 1848, would be admissible under the general issue alone. But that statute changed the common law in that respect, and since its passage fraud, if relied upon, must be set up. If there is an apparent distinction between fraud which goes to the original validity of the contract, and fraud which operates in avoidance of it after its execution, that distinction is not real, and seems to be practically disregarded in the recent rules incorporated into the English practice ; for those rules provide that “ all matters of confession and avoidance, including not only those by way of discharge, but those which show the transaction to be void or voidable in point of law on the ground of fraud or otherwise, shall be specially pleaded,” &c. So it is provided in the Irish act of 16 and 17 of Victoria, that “ every defense which admits a contract in fact, but relies on matter of avoidance or discharge, or illegality on the ground of fraud,” &c., shall be pleaded. The English rules and the Irish act therefore, make no distinction between fraud before and after the execution of the contract. Here there was a contract in fact, and the evidence offered was of a fraudulent conspiracy which affected the legality of a contract prima facie valid, and if not strictly matter of avoidance, it was clearly “ consistent with the truth ” in fact “ of the material allegations of the declaration,” and therefore within the statute. And so, according to the construction given by us to the statute in the recent case of Mahaiwe Bank v. Douglass, 31 Conn., 170, the evidence of fraud was clearly matter of avoidance also, and within it. There we held the evidence admissible under the general issue, because it showed that the contract set up never was in fact executed by the defendant. Here the execution of the contract is conceded, and the defense should have been set up in the notice; and for that reason the testimony was rightfully excluded.

3. The court having charged in conformity to the claim of the defendants, that there was an implied warranty of seaworthiness incident to a time policy, the plaintiff requested the court to charge in substance, that if, after the partial loss, the defendants, with knowledge or reasonable means and opportunity of ascertaining the facts, on consideration thereof elected to treat the policy as in force and continue the risk, and retain or appropriate the entire premium for the entire period, and the plaintiff had thereby been induced to rely on the policies as in force, the defendants would be estopped from claiming that the policy did not attach because of the unseaworthiness of the vessel. Irrespective of the alternative of “ reasonable means and opportunity of ascertaining the facts,” that request was a legal and proper one. If the defendants knowing her to have been unseaworthy at the inception of the risk, elected to continue the risk and take the entire premium and thereby induce the plaintiff to rely on the policies as in force, they would have been as matter of law and justly estopped. Such is the doctrine of the case of Frost v. Saratoga Mutual Ins. Co., 5 Denio, 154, and the other cases cited by the plaintiff. And if by the introduction of the alternative “ or after reasonable means and opportunity of ascertaining the facts,” the eminent and lamented counsel who tried the case for the plaintiff in the court below* meant nothing more than that when the information contained in the surveys was offered to the defendants, they deeming the vessel then fully repaired and seaworthy chose to waive inquiry and continue the risk whatever the fact respecting seaworthiness may have been at the inception of the risk, and acted and induced the plaintiff to act accordingly, perhaps the request might be sustained. But the charge of the judge embodies a very different proposition. The import of it is, that, an injury having been sustained confessedly by her unseaworthiness or the perils of the sea, if the defendants had means and opportunity for ascertaining whether by reason of unseaworthiness or not, they were bound then to inquire; and if they did not, and paid the damage and took the benefit of the premium note— or in other words, acted without inquiry, as if there had been no breach of warranty—they waived all right to the benefit of such warranty, if they should afterwards learn that the vessel was unseawofthy at the inception of the risk, and was ultimately lost in consequence of it. That proposition can not be sustained.

A waiver is the intentional relinquishment of a known right, and there must be both knowledge of the existence of the right and an intention to relinquish it. These defendants were entitled to presume, and rely on the presumption, that the plaintiff knew the condition of his vessel when .lie applied for the insurance, and that he concealed nothing, but made an honest contract. “ And where there is no proof either way, seaworthiness is to be presumed;” (per Shaw, C.J., 12 Cush., 535.) They were not therefore bound to inquire, and having no actual knowledge they waived nothing. Besides, the plaintiff claimed that the injury resulted from the peril of the seas. If it resulted from unseaworthiness which existed at the inception of the risk, he must be presumed to have known it, and therefore to have been guilty of fraud in concealing the fact and making the claim for the loss, and should be estopped from settingup that claim of waiver. We know of no authorities or analogies to sustain this part of the charge of the court.

The plaintiff seeks to avoid the effect of this error by claiming that there is in the law no implied warranty of seaworthiness incident to a time policy, and that therefore there was none in this- case ; that the ruling of the court on that point was erroneous ; and that the defendants were not therefore prejudiced by the subsequent error in the charge, and substantial justice has been done. This claim of the plaintiff involves a question which has been quite recently raised and very much discussed in England, and also in the case of Capen v. Washington Ins. Co., 12 Cush., 517, and is of very considerable practical interest.

That there is such an implied warranty in respect to voyage policies is conceded. It must also be conceded that such a warranty has been implied in respect to time policies, both in England and this country, from the time when they came in use until the question was raised in the recent case of Gibson v. Small, in the year 1848. In that case it was liolden in the Queen’s Bench, in accordance with what' had been universally received as law, that there was an implied warranty of seaT worthiness in a time policy. The case was carried to the Exchequer Chamber, where the decision of the Queen’s Bench was reversed; and was subsequently taken to the House of Lords, where the decision of the Exchequer Chamber was affirmed. By that decision it was settled as the law of England that a warranty could not be implied in respect to a time policy unless under special circumstances, but without indicating what the special circumstances were which would constitute any particular case an exception to the general rule thus established. Some of the judges intimated that if the ship'was in the home port of the owner, and was bound upon a known voyage, and the policy covered a time extending beyond the contemplated voyage, the warranty should be implied. But when that precise case was subsequently presented in the Queen’s Bench, in the case of Thompson v. Hopper, 34 Eng. L. & Eq., 266, that coui't refused to imply the warranty, (Earle, J., dissenting) for the reason mainly, that the House of Lords had lioldeu that there was no such warranty as a rule, and that it was “ expedient ” that there should be none as an exception, and that the rule should be uniform and “ inelastic.”

When the case of Gibson v. Small was before the House of Lords, the opinions of all the judges upon the question were called for and given ; and we have deemed it important to look to those opinions, as well as to the opinions expressed by the Lords and in the court of Queen’s Bench and Exchequer Chamber, upon the propriety of making such an innovation upon the law. A careful examination of them has failed to satisfy us that the change, if a correct one for that country, should be adopted here.

The warranty of seaworthiness is a necessary incident to the contract of marine insurance, for it involves a condition of the subject matter absolutely essential to its fairness and honesty. The contract is one of indemnity against extraordinary perils, and it is necessarily implied that the vessel is or shall be able to endure the ordinary perils to which it may be exposed, and that ability constitutes seaworthiness. If it were not so, if it were not in the contemplation of the parties that the ship was or should be capable of performing her voyage, the earning of the premium by the underwriter could not be contemplated, there would be no consideration for the contract, and the obligation would fail. Such was substantially the language of Lawrence, J., in Christie v. Secretan, 8 T. R., 198, and it was also said by Lord Mansfield that “ the ship being capable of performing the voyage was the substratum of the contract of assurance.” The doctrine involved in these dicta has frequently been recognized in England, and was expressly admitted by several of the judges in Gibson v. Small. One of them however, Talfourd, J., did say, “ It will be found on an examination of all the text-writers that the doctrine (of implied warranty) is generally based on the more limited consideration of the power of the owner to render his vessel seaworthy at the commencement of the adventure insured, and on the means of knowledge fairly attributable to him at the time of the contract.” If such are the deductions of the English text-writers, they are clearly imperfect. Upon the question whether the rule should be a general one or not, and in determining its reasonableness, the fact that a knowledge of the condition of the vessel may fairly be attributed to the owner, and that it will be in his power to make her seaworthy in most cases, were undoubtedly taken into consideration. But the cause, “ the substratum,” which induced that consideration and the establishment of the rule, was the necessary implication that both parties must have contemplated the state of the ship when the risk was to begin as a seaworthy one. And that such is the nature of the contract and the 'foundation of the rule has always been recognized by the courts of this country. In Paddock v. Franklin Ins. Co., 11 Pick, 232, Judge Shaw cites approvingly the dicta of Lord Mansfield and Mr. Justice Lawrence before referred to, and says that “ the rule that the ship must be seaworthy at the inception of the risk is a necessary incident of the contract.” Other similar citations might be made, and it would seem to be beyond dispute that the warranty of seaworthiness implied in a voyage policy is founded on the nature of the contract and the subject matter of it and the necessity of the ease, and that it is implied in the law because it is as essential to any valuable right of the insurer under it that the vessel should be seaworthy, as that she should be in existence at all.

Now if such be the nature of the contract and the necessity for implying the warranty, why should it not be implied as a rule in time policies ? or at least when a knowledge of the condition of the vessel and an ability to repair her can be fairly attributed to the insured ? We have looked through the opinions of the English judges for a satisfactory answer to tliis question, but we have looked in vain. Many of the judges and some of the peers admitted that in the latter case the analogy was perfect and the warranty should be implied. But a majority were of opinion that the analogy would not hold in most cases, and several reasons were given by one or another of them. Two of these reasons only seem to require serious consideration. One of them was that in most cases of time policies the condition and situation of the vessel could not be known to the parties at the time of making the contract. This seems to have been assumed and not controverted by the other judges, and it may be true in the commerce of that country, but if so it must result from the fact that England has many and distant colonies, and very much of her commerce is to, from, and among them, and time policies are taken with a view to contingent deviations from one colony to another which work a forfeiture in voyage policies. But it is not found or suggested that such a state of things exists here; nor have we any reason to believe that it is, or will be so. We have no colonies, very much of our commerce is coastwise and internal, or direct from some port of our extended seaboard to and from some foreign port, communication by rail or telegraph with most of our ports is direct and speedy and is not difficult by steamer directly or indirectly with the principal foreign ports, and it may well be assumed that in a large majority of cases where time policies are taken here the ability to repair and knowledge of the condition of the vessel may fairly be attributed and the analogy exist.

The other reason given is, that the analogy does not hold because in a voyage policy the precise adventure insured is set out in the contract, and the degree of seaworthiness required may be definitely and clearly understood by the parties ; whereas in a time policy no course of employment is set forth, and a warranty of seaworthiness would require the vessel to be fitted and equipped for any employment, and in any port of the world, and therefore that it is unreasonable to imply the warranty. This argument evidently had weight with the court in Capen v. Washington Ins. Co., 12 Cush., 517, but it is clearly unsound. The insured solicits the insurance and selects his policy. As matter of fact in most cases, the intended course of employment is known and represented to tlie insurers, to enable them to fix the rate of premium. If that is the case there can be no difficulty. The insurers contemplate that course of employment and insure against its extraordinary perils, and it is just and reasonable that the insured should be held' to a warranty of seaworthiness adapted to the employment. And if the course of employment is not known or stated, the insurers insure against all extraordinary perils, and it is equally just and reasonable that the insured should adapt his vessel to all ordinary perils, or adapt the course of employment to the capacity of the vessel. It is at his option that the time policy is taken, the course of employment is under his control, and justice requires that he should be held by warranty to that degree of seaworthiness which the time and course of employment he desires and selects may demand. Indeed, it seems to us that the implication of the warranty is not only as just and reasonable in such a case as in that of a timé policy, but that the option in respect to employment absolutely requires it for the protection of the underwriter.

The other objections urged do not deserve consideration. There are difficulties attending the implication of the warranty as a rule in both descriptions of policy, but they are not materially greater in respect to one than the other, nor are they greater than attend other general rules deemed essential in the law.

And there is another controlling reason why the warranty should be implied in this case. The commerce of this country is national in character and to some extent in its regulations, but the principles of commercial law governing it may be different in the different states. It is desirable that they be kept as uniform as possible. In respect to the question involved here they are uniform, and we are unwilling to follow an adverse English decision and disturb that uniformity. The plaintiff indeed says that it has already been disturbed by the case of Capen v. Washington Ins. Co., and relies on that case as an authority, but we do not so understand that case, and we should hesitate to follow it if we did. The action was on a time policy, on a vessel which was at sea when the contract was made, which returned and landed her cargo safely and was burnt at sea on a subsequent voyage. No question was seriously made in respect to the seaworthiness of the vessel at the inception of the risk, and the counsel declined going to the jury on that question of fact, and the case went up on the questions of law raised by instructions which the court proposed to give the jury on the other issues. Those questions were, 1st, whether in any contract of insurance on time there is an implied warranty of seaworthiness at the inception of the risk; 2d, whether, if she was seaworthy, and the policy became operative and attached, the warranty requited the vessel to be kept in a seaworthy state during the entire period covered by the policy. In discussing the question whether there was such a warranty O. J. Shaw laid out of the case the question involved here. He said :—“ We have thought it sufficient to state the ground of our present decision, leaving similar and analogous cases, varied and qualified perhaps by different circumstances, to be decided as they arise.” And he then went on to say:—■ “ In the first place it is distinguishable from the case of a time policy, when the vessel is in port at the time the policy is made to take effect at the inception of the risk, and first sails after the policy has attached—whether it be from a home port, a neighboring, or a foreign port,” &o. Other qualifying circumstances are stated, not material here, and also the fact that seaworthiness at the inception of the risk must be presumed in the case inasmuch as there was no evidence to the contrary. He then states the real question to be decided in the case thus:—“ Recurring then to the general question as above stated, divested of any qualifying circumstances, the court is of opinion that in the contract of insurance on which this action is brought, there was no implied warranty on the part of the assured that the vessel was seaworthy at the inception of the risk.” All that we find determined in that case therefore is, that if the ship is at sea when the risk is to commence there is no implied warranty of seaworthiness, but it may be otherwise if as in this case she is at “ a home port, a neighboring or a foreign port; ” and although the case is an exception to the otherwise unbroken current of decision in this country, recognizing an implied warranty of seaworthiness in a time policy in all cases, it is not an authority for overruling the decision of the court below.

The objection to the use of the words “ amount of premium,” in that part of the charge which is descriptive of the term seaworthiness, is also well taken.

For these reasons a new trial is advised.

In this opinion the other judges concurred; except Mc-Curdy, J., who having tried the case in the court below did npt sit.

Note.—The foregoing case was argued and decided at the September term of the court in New Haven county, but the opinion was not delivered to the reporter in season for the report of the case in the last volume among the cases of that term. The judges who then held the court were the same with the present with the addition of Judge Sanford. Since the decision the case of Hoxie v. Pacific Mutual Ins. Co., 7 Allen, 211, has appeared, in which the supreme court of Massachusetts, all the judges concurring, has holden that there is an implied warranty of seaworthiness in a lime policy. The question is elaborately and most ably discussed by Chief Justice Bigelow. R,

* Hon. Roger S, Baldwin, who died during the pendency of the case.