Case Name: Joseph Locke versus The North American Insurance Company
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1816-03
Citations: 12 Tyng 61
Docket Number: 
Parties: Joseph Locke versus The North American Insurance Company.
Judges: 
Reporter: Massachusetts Reports
Volume: 13
Pages: 55–60

Head Matter:
Joseph Locke versus The North American Insurance Company.
A., having borrowed money of B. for the purchase of a cargo, assigned the sa:no to B., taking the bill of lading and making the invoice in B.’s name, under an agreement that B. was first to receive his debt from the proceeds of the cargo if it should be sufficient, and should arrive safely, and the surplus, if any, should belong to A.; or, in case of a loss, B. should receive the amount of the insurance, which was effected in A.’s name ; and if in either case B. shoull not be fully paid, A. was to be accountable for the balance ; the assignment and insurance being a pledge or security for the debt;—A. was holden to have an insurable interest in the cargo ; and entitled to recover, although the nature of his interest was not made known to the underwriters at the time of effecting the insurance ; and B. was holden to be a competent witness for him, in an action by A. against the underwriters for the loss.
This was assumpsit upon a policy of insurance, dated the 19th of February, 1813, by which the defendants cause the said “ Joseph Locke, by John Barnard, to be assured $ 2300, on property on the sloop General Greene, at and from Boston to Albany.” A total loss is averred by capture by the public enemy on the 8th of March, 1813.
The cause was tried upon the general issue, November term, 1814, before Jackson, J., when it appeared, that the plaintiff, in February, 1813, was about purchasing a quantity of fish to be sent to Albany for sale, and applied to the said John Barnard for
a loan of money, to enable him #to make the said purchase. It was thereupon agreed between the plaintiff and the said Barnard, that the latter should advance about $ 2300 for that purpose ; that the plaintiff should purchase, in Boston, fish to that value, to be sent to Albany, and that the property should be assigned to Barnard, and shipped in his name, as security for said loan. This sum, with interest, and the amount of the premium upon this policy, and Barnard’s commission, were to be repaid him by the consignees at Albany; and, in case of a loss, he was to receive the sum insured towards the same object.
The assignment and insurance were to be merely a pledge or security for his debt; and, if he did not realize the whole amount from those sources, the plaintiff was to pay him the balance ; if the goods should produce at Albany more than sufficient for that purpose, the plaintiff was to receive the residue for his own use.
In pursuance of this agreement, the plaintiff purchased fish to the amount of $ 2315, and received that sum from Barnard to pay for it. He then shipped it on board the said vessel, and took from the master a bill of lading of the fish, as shipped by Barnard. This bill of lading was dated the 22d of February, 1813. The invoice, also, which accompanied the goods, purported that they were shipped on the account and risk of Barnard. The plaintiff also made a bill of parcels of the fish, purporting to be an absolute sale thereof to Barnard, for the price above mentioned, with a receipt therefor. There was no document or paper accompanying the goods by which it could appear that the plaintiff had any interest in them ; but it was known to the master of the vessel, that he was interested therein, and the agreement above mentioned was known to other persons, at the time when it took place.
After the proof of the facts above stated, the plaintiff offered Barnard as a witness. He was objected to by the defendants, as interested in the cause. In order to prove his interest, the defendants produced the secretary of the * company, who testified that Barnard applied to the defendants to effect this insurance, and that the terms had been agreed on, all parties understanding that the policy was to be made for Barnard, and in his name, in the usual form. When the witness was about to write the policy, he inquired of Barnard, if he was the owner of the goods, who asked, in return, if it made any difference who was the owner. Being answered, that it did, and that the policy must be in the name of the owner, he, after a little consideration, directed the witness to make it in the name of the plaintiff, and it was so done.
After intelligence of the loss arrived, the company was summoned as the trustee of the plaintiff by a creditor. Barnard went to demand the sum insured, and, on hearing of that process, said, that the plaintiff had no interest, except in the profits of the goods insured. .
The judge then overruled the objection, and Barnard was sworn and examined as a witness. He confirmed the testimony of the other witnesses as to the agreement between himself and the plaintiff, as above stated. He confirmed substantially the testimony of the secretary, as to the transactions and conversations at the time of effecting the policy. He further testified, that he had no interest in this suit, and that the plaintiff was equally bound to pay him the amount of his demand, whether he prevailed in this action or not. He also testified, that he had not often had occasion- to make insurance, and did not know, until informed by the said secretary, that it was of any importance in whose name the policy should be made ; that, after that information, he ordered it made in the plaintiff’s name, considering him as the real owner of the goods. But he made no representation or statement whatever, as to the nature of the plaintiff’s interest in, or title to, the goods ; and no inquiry on that subject was made by any of the officers of the company. He expected, when settling the terms of the insurance, that the policy would be made in his own name ; and nothing was said by either * party respecting the plaintiff, or his interest in the transaction, excepting only the direction which he gave, in the manner above mentioned, to have the policy made in the plaintiff’s name.
It appeared, that, on the 17th of March, 1813, Barnard made an offer in writing to the defendants to abandon to them the property insured by the policy, which offer they did not accept.
A verdict was taken by consent for the plaintiff, for $ 2566 88, subject to the opinion of the Court, on the facts appearing at the trial, as reported by the judge. If the Court should be of opinion, that the plaintiff was not entitled to recover, the verdict was to be set aside, and a verdict entered for the defendants. If the opinion of the Court should be, that the plaintiff might recover upon the evidence reported, but that the said Barnard was an incompetent witness, the verdict was to be set aside, and a new trial granted. If the opinion of the Court should be for the plaintiff on both points, the verdict was to stand, and judgment be rendered upon it.
J. T. Austin, for the defendants,
contended, that the plaintiff had no legal matter case is stronger than that of Hibbert & al. vs. Carter. There was a mere indorsement of the bill of lading, while all the other papers remained in the name of the assured. But here all the regular documents were originally in Barnard's name, and so continued to the time of the loss. There can be no explanation of the transaction, without a direct contradiction.- The case of Carroll & al. vs. The Boston Marine Insurance Company shows, also, that, under certain circumstances, variant documents may be explained ; but it is going too far to admit an explanation inconsistent with the purport of all the documents.
If the plaintiff had an insurable interest in the goods, it was a qualified one, which ought to have been * communicated to the underwriters. Here was no chance for a salvage, and nothing to abandon.
Barnard was directly interested in the suit. The money, if recovered, is to go into his pocket. He procured the insurance, he paid the premium, and he made the offer of abandonment in his own name.
Prescott, for the plaintiff.
1 D.& E. 745.
8 Mass. Rep. 515.
Marsh. 361,348. — Toppan vs. Atkinson, 2 Mass. Rep. 365.

Opinion:
Parker, C. J.,
delivered the opinion of the Court. All the facts necessary to be proved, to entitle the plaintiff to recover, appear to have been established at the trial; provided an insurable interest existed in him, and there was no concealment of any material fact at the time the insurance was effected. If these two points are in the plaintiff's favor, judgment is to be rendered upon the verdict; unless Barnard, a witness examined at the trial, was incompetent from interest in the cause, and ought to have been rejected.
As the proof of interest depends in some measure upon the testimony of this witness, it will be proper first to settle the question of his competency. The objection to it rests upon the interest which he had in the property insured, and in the policy which was effected upon it. He advanced the money with which the plaintiff purchased the cargo ; the legal title of it was in the witness ; the bill of lading, and all other documents necessary for the voyage, were in his name. But the witness for the defendants, by whom Barnard's interest is to be proved, testified, that he stated the property to be the plaintiff's. And it may well be, that the title is apparently in one, while another has all the equitable interest ; as, in the case of personal chattels mortgaged, where he who holds the property may have no interest in an insurance upon it, having collateral security upon which he may rely. It does not appear, there • fore, conclusively, from the testimony of the secretary of the company, that Barnard was interested in the event of the suit; and from the testimony of Barnard himself, although it is manifest that he is deeply interested in the question, *yet it does not appear, that he is directly interested in the event of the suit; for his debt will remain against the plaintiff, notwithstanding there tnay be no recovery upon this policy.
On the next question, which respects the insurable interest in the plaintiff, we think there can be no doubt. The property was really his, although the legal control of it was in Barnard ; it was shipped on his account and risk ; and he merely owed a debt to Barnard,. which this property was pledged to secure. His interest is the same as it would have been, had the purchase been made in his own name, and the bill of lading in his favor, and he had then indorsed the bill of lading, and signed other papers necessary to transfer the property as a pledge to Barnard.
It is not now to be disputed, that several persons, having several interests in property, may insure to the full value of that interest. There are numerous cases settling this point. But the great question is, whether one, having an equitable interest in property, the legal title of which is in another, may make insurance upon the property generally, without representing the interest he has, so that the underwriters may know the exact state of the subject-matter of their contract; and whether, if such representation is not made, there is not a concealment of material facts, which will avoid the policy.
It seems to us, that, upon general principles, it wc tld be right- • that such should be the law ; but we are to inquire, what has been settled and practised upon, according to usages and judicial decisions, in order to ascertain the law of mercantile contracts.
As the contingency of damage to property insured, which may justify an abandonment and a claim for a total loss, although the subject-matter of the contract remains entire, is too frequent not to enter into the contemplation of the contracting parties ; it would seem, that, when a man causes insurance upon property in which he has an interest, but not such a title as will authorize him to transfer it * by abandonment, this fact ought to be made known, that the underwriter may determine whether he will take the risk under such circumstances or not. Still, we do not find, that such representation has been deemed essential in England, in the several cases where insurance upon qualified property has been established, nor in this State, although several cases have occurred which seemed necessarily to present such a question to the Court.
Under these circumstances, we do not feel ourselves authorized to introduce what may be deemed a new principle, however useful it might have been, if early introduced into the law of insurance. We are satisfied, as the law stands, that a bond fide equitable interest in property, of which the legal title is in another, may be insured under the general name of property, or by a description of the thing insured ; unless there should be a false affirmation or representation, or a concealment, after inquiry, of the true state of the property.
We are the less disposed to depart from what appears to have been generally understood and received as the law and practice upon this subject, from a persuasion, that underwriters can, in no event, be injured thereby. For the assured, when he cannot, by abandoning, transfer the legal title to the underwriters, will be confined to an actual indemnity. Thus, if there should be salvage, which the person having the legal title to the property, or those who may have insured it for him, shall claim as belonging to them, the underwriter for him, who has the equitable interest, will be holden to pay only what is actually lost; the assured being in that case indemnified for the residue by the salvage, which is in fact received to his use, by the party to whom he is indebted.
The case of Carroll & al. vs. The Boston Marine Insurance Company, which has been cited by the counsel for the defendants, differs materially from the case now before us. For, in that case, the conveyance of the vessel to Waterman was made by deed, and the attempt was to show a property * in Carroll, contrary to the face of the deed ; and it was justly holden, that be should not set up an interest in property so conveyed, contrary to the evidence of title by such documents, in order to charge the underwriters.
In the case at bar, the transaction between the plaintiff and Bar nard was a fair one. Barnard purchased and paid for the property, and held it in his name, with a view to enable the plaintiff to make some profit with it; and the real character of the transaction is • the same as if the plaintiff had borrowed money of Barnard to purchase the property, and had then pledged it to secure the money advanced. In such case, Barnard, having the legal title, might insure his interest ; and the plaintiff, having an equitable interest, might insure that.
We have before observed, that an actual, designed concealment of the nature of the interest insured would avoid the policy. But we think that this cannot be considered as proved, with respect to this particular subject of insurance, without a direct false affirmation as to the nature of the property, or a refusal to answer truly upon inquiry. In most cases it is entirely immaterial to the underwriter ; and, if it is important to him to know, he may always insist upon a satisfactory exhibition of title, or refuse to enter into the contract.
Upon these grounds, we are of opinion that the verdict is right; and judgment must accordingly be entered upon it.
[ 13 Mass. 96; 1 Phil. on Ins. 41; 15 Ves. jun 258; 17 Ves. jun. 67. —Ed.]
Livermore vs. Newburyport Insurance Company, 1 Mass. Rep. 264. — Holbrook adm.vs Brown, 2 Mass. Rep 288. — Toppan vs. Atkinson, Ibid. 365. — Oliver Vs. Green, 3 Mass Rep. 133.— Wolff & al. vs Horncastle, 1 B. & P. 316 — Hill & al. vs. Secretan, Ibid 315—Crawford & al. vs Hunter. 8 D. & E 13 —Boehm & al vs Bell, Ibid. 154.— Hibbert & al. vs. Carter. 1 D. & E. 745. — Thompson vs. Taylor 6 D. & E. 478. — Grant vs Parkinson, Park, 267.