Source: https://supreme.justia.com/cases/federal/us/107/485/
Timestamp: 2019-04-19 11:15:00+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 107 › Sun Mutual Ins. Co. v. Ocean Ins. Co.
6. January 30, while the ship was in New York, loading under her San Francisco charter and advertised for that voyage, her master chartered her again to the Peruvian government. By the terms of this charter, she was to sail from New York on or before June 1, 1864, to San Francisco, and thence proceed with all convenient dispatch to Callao, Peru, and from thence, if on inspection she should be found to be well conditioned for the voyage, to the Chincha Islands for a cargo of guano to be taken to Hamburg or Rotterdam. The freight to be paid was at the rate of £4 per ton of 20 cwt. British net weight of guano, subject, however, to a deduction of five shillings per ton if the vessel was not ready in Callao to proceed to Chinchas by December 15. This charter will be referred to as the Rotterdam charter.
"The facts as found and stated by the court below are conclusive. The case stands here precisely as though they had been found by the verdict of a jury."
"that the special verdict must contain all the facts from which the law is to arise; that whatever is not found therein is, for the purposes of a decision, to be considered as not existing; that it must present in substance the whole matter upon which the court is asked to determine the legal rights of the parties, and cannot therefore be aided by intendment or by extrinsic facts, although such facts may appear elsewhere in the record,"
"Although in the opinion of the court there was sufficient evidence in the special verdict from which the jury might have found the fact, yet they have not found it, and the court could not, upon a special verdict, intend it. The special verdict was defective in stating the evidence of the fact instead of the fact itself. It is impossible, therefore, that a judgment could be pronounced for the plaintiff. This was approved in Hodges v. Easton, 106 U. S. 408. And see 49 U. S. Zane's Adm'r, 8 How. 470, and Norris v. Jackson, 9 Wall. 125."
These observations have a material and important application in this case.
not whether that might be true as a conclusion of fact from the circumstances stated in the findings of fact, but whether, upon the facts found, it must be true as matter of law.
"Where a presumption of law is disregarded by a jury, a new trial will be granted ex debito justitiae; but where the presumption disregarded is only one of fact, however strong or obvious, the granting a new trial is at the discretion of the court in banc."
the original mass of evidence. It involves only a consideration of the facts as found in their relation to each other, in view of fixed legal presumptions, in order to determine and declare the effect to be given to them as a connected whole.
"Confessedly the court has found all the facts which have been directly established by the evidence. These facts are not evidence in the sense that evidence means the statements of witnesses or documents produced in court for inspection. They are the results of evidence, and whether they establish the ultimate fact to be reached is, if a question of fact at all, to say the least, in the nature of a question of law. If what has been found is, in the absence of anything to the contrary, the legal equivalent of a direct finding that the proceeds of this claimant's property have been paid into the Treasury, the judgment is right; otherwise it is wrong. The inquiry thus presented is as to the legal effect of facts proved, not of the evidence given to make the proof, . . . The rule relieves us from the necessity of considering the evidence at all, and confines our attention to the legal effect upon the rights of the parties of the facts proven as they have been sent up from the court below. In this way, the weight of the evidence is left for the sole consideration of the court below, but the ultimate effect of the facts, which the direct evidence has established, is left open for review here on appeal."
Tried according to this standard, we are quite clear that the conclusion under examination cannot be sustained.
The language of the policy sued on descriptive of the risk assumed is "$6,550 on charter, $2,650 on primage, and $1,500 on property on board ship C. S. Pennell at and from New York to San Francisco." The proposal for this insurance was made March 23, 1864, by letter. The vessel at that time lying at New York, had been previously chartered to her full capacity for a voyage from New York to San Francisco, of which both companies had knowledge, and on January 30, 1864, was chartered by Melcher, her master, to the Peruvian government, by the terms of which charter she was to sail from New York on or before June 1, 1864, to San Francisco, and thence proceed with all convenient dispatch to Callao, Peru, and from thence, if on inspection she should be found well conditioned for the voyage, to the Chincha Islands for a cargo of guano to be taken to Hamburg or Rotterdam. Of this second charter the Ocean Company had full knowledge, having, on February 5, 1864, insured to Pennell, a part owner, his interest in both the ship and this charter on the voyage described as "at and from New York to, at, and from San Francisco, Callao and the Chinchas." And on March 20, 1864, Melcher, one-eighth owner and master, by letter to his agent Sawyer, directed the latter to insure his interest in the ship and both charters, specifically describing them, and primage and personal effects on board. Sawyer exhibiting this letter to the Ocean Company and explaining fully the circumstances, that company issued one policy to Melcher, describing the risk in the same words as those used in the policy sued, and by a separate policy insured $3,000 on his interest in the ship during the whole voyage, described as "at and from New York to, at, and from San Francisco and Chinchas, with usual liberties at Callao, to her port of advice and discharge in Europe."
on the ship, on voyage described in the same words. The correspondence between the companies on the subject at the time these risks were assumed undoubtedly contains a reference to a voyage from New York to San Francisco and thence to Callao and Chinchas, and of two insurances on charter, in one of which the voyage is described as including New York and Chinchas via San Francisco and Callao and in the other, from New York to San Francisco, but there is nothing which indicates with any conclusive force that there were two distinct charters, and certainly nothing to indicate that there was one which included the return voyage from the Clinchas to Rotterdam. And in respect to the latter it is found as a fact that "the Sun Company had no other knowledge of the existence of the Rotterdam charter than such as is to be inferred from the correspondence," which, as we have just stated and as must appear from the full text of the letters set out in the findings, communicated no knowledge of such a charter whatever.
under an insurance upon a charter during a voyage described as at and from New York to San Francisco.
It is admitted that the language of the policy does not of itself import an insurance of a charter beyond one during the voyage described. Prima facie, indeed, it describes a charter terminating with that voyage, and not beyond. In the action brought by Melcher against the Ocean Company in Maine and determined in the Supreme Court of that state, it was claimed by the defendant that the language of the policy conclusively described a charter party limited to the description of the voyage, and that proof was not admissible to show that any other existed, and was the one meant. And it was held in that case in substance that without such proof there could be no recovery, but that inasmuch as a description of the voyage during which the risk was insured did not necessarily determine the extent of the charter party under which the freight was to be earned, it appearing from extrinsic evidence that two charter- parties existed to which the insurance might apply, a latent ambiguity was disclosed which was susceptible of explanation by parol evidence. And accordingly, upon proof of the communications between Melcher and the Ocean Company, not made known at Rotterdam charter. Without that, the former was adjudged to have insured by its policy his interest in the Rotterdam charter. Without that proof, he must have failed in his litigation. It cannot be claimed that such proof is admissible to explain the contract of the appellant. Nor is the liability of the latter affected by the fact that its policy is one of reinsurance in fact, nor by the circumstance that it aided in the maintenance of the defense in the suit against the Ocean Company, nor by the result and judgment in that action.
changed claim of the Ocean Company which the latter now asserts, with the advantage that its defense cannot be overcome by proof of explanations outside of the policy itself such as defeated the libellant in its contest with Melcher. And the judgment rendered in favor of the latter upon the point in question, as to what was in fact the contract made with him by the Ocean Company, is no adjudication against the appellant as to what is the contract between the parties to this suit, for it is only upon the presupposition of the identity of the subject matter of the two contracts that it could be pretended that the judgment against the Ocean Company would be admissible in evidence, for any purpose material here, against the Sun Company. To admit it as evidence of that identity is a pure petito principii. Accordingly, it was an additional and substantive error in the circuit court to find as a conclusion of law, as it did, that "the judgment in the Maine court against the Ocean Company is conclusive upon the issues there made, and decided and binds the Sun." It was, of course, conclusive upon the Ocean Company, but was not ever admissible in evidence against the Sun Company, without prior proof that the policy of the latter company was intended to cover the Rotterdam charter.
"the loss under the risk taken in favor of Charles S. Pennell, both on the ship and Rotterdam charter, was paid by the Sun Company without objection October 23, 1865, and May 5, 1866."
York to San Francisco; much less can it be said that any admission can be implied, from such payment that the risk, described as upon ship and charter during the extended voyage to Callao and the Chinchas, although described as commencing at New York was identical, so far as the charter was concerned, with that in the policy sued on, in which the voyage is described as from New York to San Francisco. In any aspect, the circumstance relied on is merely argumentative. The Sun Company may have made the payment inadvertently, without consideration of its strict rights. It certainly is not conclusive as an admission of liability in this case, for it has no element of estoppel, and to justify the conclusion of law sought to be drawn from it would be to give it that effect.
The fact that the Sun Company participated in the defense of the Ocean Company in the action brought by Melcher, and the communications between the companies in respect to it, so far as they are set out in the findings of fact, are, in our opinion, equally without effect, and do not amount either to an admission of liability or to an agreement to be bound by the result of that litigation, and having carefully considered all the circumstances found and relied on, without further special mention of them, we are constrained to say that they do not, either singly or together, sustain the conclusion that "the Sun Company's policy covers the Rotterdam charter." This conclusion is, in our opinion, greatly strengthened by the consideration of other facts set out in the finding, which, while they tend to show that as a matter of fact the Sun Company did not intend to reinsure Melcher's interest in the Rotterdam charter, furnish also a distinct ground of defense, as matter of law, if the fact had been otherwise, and negative the second conclusion of law announced by the circuit court, that "the policy is not void because of any concealment by the Ocean Company."
be on board till after the voyage under the first charter had been completed. In case of loss during that voyage, consequently, there could be no salvage of freight applicable to the second charter. Melcher was master and owner of one-eighth of the ship. On March 20, 1864, he instructed his agent, Sawyer, by letter shown to the Ocean Company, to effect insurance on his behalf against war risk on ship, and generally on his interest in both charters specifically, besides primage, and on his personal effects, amounting in all to $19,425, and in the same letter said: "I think you had better put $5,000 or $6,000 more marine risk in case I should lose the ship." The Ocean Company accepted the risk on the Rotterdam charter, primage, and personal effects to San Francisco, and on the same day insured the master for $3,000 on his interest in the ship during the whole of her voyage, describing the duration and locality of the risk as "at and from New York to, at, and from San Francisco and Chinchas, with usual liberties at Callao, to her port of advice and discharge in Europe." This latter insurance was not made known to the Sun Company, nor was it informed of any of the communications that had taken place between the Ocean Company and Melcher, including the contents of the letter to Sawyer.
reasonable to believe that a prudent underwriter would not have accepted the proposal as made, and, where the fact of the contract is in dispute, as here, corroborates the denial of the appellants. The concealment, whether intentional or inadvertent, we have no hesitation in saying, avoids the policy if actually intended to cover the risk for which the claim is made.
In respect to the duty of disclosing all material facts, the case of reinsurance does not differ from that of an original insurance. The obligation in both cases is one uberrimae fidei. The duty of communication, indeed, is independent of the intention, and is violated by the fact of concealment even where there is no design to deceive. The exaction of information in some instances may be greater in a case of reinsurance than as between the parties to an original insurance. In the former, the party seeking to shift the risk he has taken is bound to communicate his knowledge of the character of the original insured, where such information would be likely to influence the judgment of an underwriter, while in the latter, the party, in the language of Bronson, J., in the case of the New York Bowery Fire Ins. Co. v. New York Fire Ins. Co., 17 Wend. 359, 367, is "not bound, nor could it be expected that he should speak evil of himself."
it may have seemed to himself, that, if disclosed, would probably have influenced the terms of the insurance, the concealment vitiates the policy."
This statement is sustained by the authorities cited -- Ely v. Hallett, 2 Caines, 57; Moses v. Delaware Ins. Co., 1 Wash. C.C. 385 -- and in our opinion is a necessary deduction from the nature and spirit of the contract of insurance. It applies with peculiar force in the present case, as every sentence of the rule is a condemnation of the Ocean Insurance Company in imposing upon the appellant the whole risk of the insurance without communicating its knowledge of the circumstances which might have made the latter as unwilling to assume it as they seem to have made the former unwilling to retain even a share of it.
MILLER, J., with whom concurred MR. CHIEF JUSTICE WAITE and MR. JUSTICE BRADLEY, dissenting.
I do not concur in the opinion of the Court. It proceeds, as I think, upon an erroneous view of the principles of reinsurance. It places the reinsurer in the exact condition of a joint insurer, or of an original insurer of the risk of the party first insured. In point of fact, the Sun Company insured the Ocean Company against the risk which the latter incurred by its policies, and unless there was misrepresentation, fraud, or intentional concealment by the Ocean Company, the Sun Company should pay the loss which the other sustained and against the hazard of which it agreed to insure the Ocean Company. The long course of dealing between the two companies showed that the Sun Company was in the habit of reinsuring for the Ocean Company without inquiry into the particulars of the risk, and in this case, there was no reason for any special communication of the circumstances of the risk by the Ocean to the Sun Company.
I am authorized to say that THE CHIEF JUSTICE and MR. JUSTICE BRADLEY concur with me in this dissent.

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