Case Name: Beatty against The Marine Insurance Company
Court: New York Supreme Court of Judicature
Jurisdiction: New York
Decision Date: 1807-02
Citations: 2 Johns. 110
Docket Number: 
Parties: Beatty against The Marine Insurance Company.
Judges: 
Reporter: Johnson's Reports
Volume: 2
Pages: 108–115

Head Matter:
Beatty against The Marine Insurance Company.
This was an action on a policy of insurance on the brigantine Elgalgo, from Wilmington, N. C. to Guadalo-upe or St. Thomas. The cause ivas tried at the New-York sittings, the 24th April, 1806, before Mr. Justice Spencer. The jury found a verdict for the plaintiff, sub- . » . . « , it . , . ject to the opinion of the court, whether the plaintiff was entitled to recover for a total or a partial loss. The defendants admitted, that the plaintiff was entitled to recover a partial loss; and the plaintiff admitted, that, according to a judgment of this court, on a policy on the same risk, he was not entitled to recover as for a total loss, (the vessel being liberated before abandonment made, unless the defendants had accepted the abandonment previous to the suit brought. The only.question at the trial was, whether the defendants had accepted the abandonment.
Where’theact incorporating an insurance company pro-tossra^haHba se.tfled ol; Pal(1 approbation of the directors, déntortwoas" sistants, or a plurality of them, the acceptance of an abandonment by the assured for a total loss will not be va. lid or binding on the compa. ny, unless it appear to hare been done at a board of di. rectors, consti. tuted accord, ing to the act, and by n ma. jority of them present. A, body corpo. rate can act only in the mode prescri. bed by the law creating such corporation. The declara, tions, there, fore, of the se. cretary, that the president and assistants had agreed to accept the abandonment, and to pay the loss, was held not to behind, ing on the company.
It appeared in evidence, that the agent of the plaintiff as soon as he heard of the capture of the Elgalgo, duly abandoned. The papers relative to the capture-were' afterwards delivered by him to the defendants at their office. These papers consisted, of the protest, the proceedings of the admiralty court of "Antigua, and the account of sales and expenditures. These documents remained several weeks at the office' of the defendants, and no positive answer was given whether the defendants would pay a total loss or not. The agent called several times to obtain an answer. At one time the agent of the plaintiff inquired of the secretary of the defendants, who went into another room, (where the president and assistants were convened,) and when he returned, told the agent that the president and assistants had agreed to pay a total loss, and requested the agent of the plaintiff to state the amount claimed. The agent delivered the statement to the secretary, who carried it into the other room in-his hand, and returned and said, that the loss was passed, and requested the agent to take a note for the amount, payable in 60 days with interest; to which he consented. The secretary requested the agent of the plaintiff to call at another time for the note, as he had not leisure then to make it out. The agent accordingly called in a few days, and was then told by the secretary that the company would not pay a total loss.
The jury found that the president and assistants had authorized the secretary to inform the agent of the plaintiff, that the company had agreed to pay a total loss as aforesaid, and if that be an acceptance, and the defendants be bound by it, the jury assessed the damages at 2,666 dollars and 24 cents; if not, then they assessed the damages as for a partial loss, at 415 dollars and 75 cents.
.Riggs, f°r Ik® plaintiff.
Three questions are made in this cause. 1. Whether the acts of the secretary are binding on idle company. 2. Whether there was sufficient evidence to support the finding of the jury, that the secretary was authorized to make the declaration, that the defendants had agreed to pay for a total loss. 3. Whether an acceptance of an abandonment be binding, if made under a mistaken idea of legal liability.
The secretary in this ease, in the ordinary course of the business at the office of the defendants, makes a communication to them while sitting in a different room, receives their answer, and declares it to the plaintiff. There is no good reason why his acts and declarations, made under these circumstances, should not be binding on the defendants. It, may, perhaps, be objected, that a corporation can act only by writing under the corporate seal. But tfiis rule does not operate universally, nor is it applicable to the present case. The usage and general course of the transactions of these companies are different; and acts and'declarations of this nature, though not in writing, under seal, ought to bind them. The acceptance of the abandonment, which is a mere cession by the assured to the assurer, required no positive act on the part of the defendants, but a mere assent or acquiescence, signified by a parol declaration. The evidence of the plaintiff’s agent shows a positive agreement to accept, on the part of the defendants, at least so far as a body corporate can assent or agree to any thing without writing. No inconvenience can result from considering the defendants so far as natural persons acting by their authorized agent. 2. It cannot be denied, that all the circumstances státed were sufficient to justify the inference drawn by the jury, that the secretary was authorized to make the declai-ations which he did. 3. The acceptance having once been made, it cannot be retracted by the defendants, on the ground of any mistake as to the law, or ignorance of.their rights.
Golden and Sampson, contra.
It- does not appear that the secretary had any authority from the defendants to ací; jn aj]y manner so as to bind the company. It Would bé a very inconvenient, as well as a dangerous principle, tQ that the defendants could be bound by the acts or declarations of their secretary, without an express authority for that purpose. Indeed, it is not pretended but that such authority is necessary; and the question is, what is sufficient evidence of that authority ? To confer authority is an act; a body corporate can act only in the manner prescribed by the charter by which it is created, and made an artificial person.- Now, the 8th section of the act for incorporating this company, provides, that. “ no moneyon losses, arising on any policy, shall be paid without the approbation of at least four of the directors, with the president and his assistants, or a majority of them and for this purpose, the act requires, that “ the president, or two assistants, shall, together with four of the directors, in rotation, Sec. and by a plurality of voices, pay, settle and adjust all such losses as may come before them.” This provision was, no doubt, intended to guard the property of the stockholders. The jury ought therefore to have found, that the declarations made by the secretary were authorized by the president, two assistants, and four directors, or a plurality of them ; otherwise they cannot be binding on the company. The language of the act is strong and conclusive ; the authority must be shown to be clear and express, and to be the act of a board of directors, constituted according to the provisions of the charter of incorporation. No usage Here can avail; there is,however, no evidence whatever of any usage. The plaintiff claims to recover on the ground of an acceptance of the abandonment, or a contract by the defendant to pay for a total loss. In making ■ this contract, the defendants must be considered as active, and being so, their acts must appear to have been done in conformity with the law by which they were ere ..¡ated a body corporate, and by which they have acquired |he capacity to act as a legal person.
Again, if this acceptance be made under a mistake or misapprehension of facts, it ought not to be binding. An adjustment of a loss on a policy is not conclusive on the insurer, if there has been any misconception of the law, or the fact. It is only prima fade evidence, and may be impeached by the other evidence.
jRiggc, in reply.
The provisions in the act con-* ■cern only the company and the stockholders; they do not relate to the assured. If the assured apply in the usual course of business, and receive the money or a note for the amount ofthe loss, it is conclusive. Suppose the president had drawn a check on the bank, which should be paid, could the company recover it back, on the ground that the president was not authorized to sign the chock ? If the company, in transacting their affairs, do not conform to the law by which they are incorporated, it ought not to prevent third persons from recovering their rights. Persons transacting business with the defendants are not bound to inquire whether the president and secretary act precisely according to the statute. If these officers ex„ ceed their powers they must be accountable to the com-pany. After the abandonment was accepted, the right of the plaintiff to recover, and the obligation of the defendants to pay, for a total loss, became perfect. The-8th section of the act speaks only of settling and paying-losses, not ofthe acceptance of abandonments. Thede-' fondants were not obliged to accept the abandonment.When they did accept, it was, no doubt, on a calculation that it wasfor their interest. An agreement to pay aloss, made with a full knowledge of all .the facts, cannot be-rescinded, on the ground of a mistake as to the law. If there had been any misapprehension or error, as to the facts, it might be otherwise. If a party pay money, under a full knowledge of all the facts, though he declare at the time, that he does not mean it as binding; he cannot recover it back. The true and only question then, for the court to decide, recurs was the act of the secretary valid, and are his acts and declarations binding on the company ?
The secretary died before, the trial of the cauf c, so that the only evidence of • what took place came from the agent of the plaintiff.
^Marshall, 544.
&East, 4f>Sb' but see contra, livanU translation of JPolkier on obligations, Appendix, v. 11. p¡>. 387,407. ■where'the authorities on this subir ct are stated & examined.

Opinion:
Thompson, J'.
delivered the opinion of the court.— The only question in dispute between the parties is, whether there was a valid and binding acceptance of the abandonment made tot be underwriters. To determine this point, recurrence must be had, in the first place, to-the act incorporating the Marine Insurance Company, in order to ascertain who were empowered to- accept an abandonment, and adjust the loss. It will there be-found, that the authority of the president and assistants-' extends to making insurances,, subscribing policies, fixing premiums, and taking notes-for the- same ; but, that no money or losses shall be paid, unless with the approbation of at least four of the directors, with the president find his assistants,, or a majority of them, having first made a board for that purposewhich board, by a plurality of voices, may pay, settle and adjust all such-losses, or other moneyed transactions as may come before them, and the same shall be binding oh the corporation. The defendants being a body corporate, the general and invariable- rule is,, that such body can act only in the mode prescribed, by the law creating it. To enable its agents to bind the company, they must act pursuant to the requisites of the incorporating act. 2 Cranch, 166. It only remains to inquire, whether in the present case, the abandonment was accepted by the authorized agents of the company. I think it was. not. No- part of the ease will warrant an inference that any of the directors were present, at the time of the alleged acceptance. When the plaintiff's- agent called to know the determination of the company, in relation to the payment of the loss, he says, the secretary went into- the-room where the president and assistants- were convened, and the answer re turned was, that the president and assistants had agreed to L o pay a total loss; but no mention is made of any of the directors being present, or assenting to it. When the testimony is positive, as to the persons by whom the acceptance was made, there is no room left for presumption ; if any of the directors were present, so as to make the act binding on the company, the plaintiff ought to have •shown it affirmatively. We are of opinion, therefore, that the acceptance not having been made by the agents constituted by the act of incorporation, cannot be binding on the company. The plaintiff must have judgment for the amount of the partial loss only; which, according to the finding of the jury, as stated in the case, is 415 dollars and 75 cents,
Judgment for the plaintiff.
Corporations may be bound by a promissory note without a special clause in the act. of incorporation, giving- them power to'issue notes such as are found in bank charters. Mot v. Hicks, 1 Cow. 513.May it not be presumed in the above case that the presidents and assistants in the office of the company were the four directors according to the statute, or the agents of all'the directors ? and a corporation may make an agent, in the same manner as.an individual. Perkins v. the Washington Ins.. Co. 4 Cow. 645.