Hyperlawhypertext legal database Read & Hoppock v. Mutual Safety Insurance 5 N.Y. Super. Ct. 54

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Read & Hoppock v. Mutual Safety Insurance

5 N.Y. Super. Ct. 54 3 Sandf. 54 Court N.Y. Super. Ct. Decision date 1849-06-30 English

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p. 54
Read & Hoppock v. the Mutual Safety Insurance Company.

Headnote

It is no defence to an action for a partial loss on a policy of marine insurance, that the expense of the repairs made, (for the amount of which the loss is claimed,) was defrayed by a loan made by the correspondent of the owner, on a bottomry of the vessel, and that the bottomry loan was realized by such correspondent after the subsequent total loss of the vessel, out of an insurance effected by him • on his bottomry interest, and no part of the loan was ever paid by the owner.
To the extent of a bottomry outstanding on a vessel, (there being no personal liability of the owner for such bottomry,) the owner has not an insurable interest.
After the making of a time policy of insurance on a brig, in which she was valued, the master executed a valid bottomry bond, which was outstanding when the brig was lost. Held, that by the bottomry, the interest of the insured to that extent ceased ; and that in an action for the loss, the valuation must be opened and reduced accordingly.
Where a defendant pays money into court, applying a specified portion to one count, and another portion to another count, each count claiming a distinct cause of action, and the plaintiff takes the sums paid, though not in satisfaction ; the court, on its subsequently appearing that the defendant paid more on the second countthan he was liable to pay, cannot change its application, and apply the surplus on the other count.
(Before Oakeey, Ch. J., and Vanderpoel and Sandford, J. J.)
January 25; and re-argued May 25, 26, 1849.
Decided June 30, 1849.
Assumpsit on a policy of marine insurance, by which the defendants insured the brig Joseph Atkins, for one year from October 24, 1845, valued in the policy at the sum insured, viz. $4500. The brig sailed from Hew York for Matanzas in July, 1846, struck on a reef of rocks near Cardenas, and reached Matanzas in a damaged state. On a survey regularly had, it was decided to be necessary to repair her there. Repairs were accordingly made, at' an expense of $3461 53. Drake, Brothers '& Co., merchants, at Matanzas, the correspondents of the plaintiffs, paid for these repairs, and applied towards them $1743 97, belonging to the plaintiffs, which was in their hands. For the residue of their advance, $1717 56, the master, on the 18th of September, 1846, executed to them a bottomry bond on the brig, at ten per cent, interest, payable in 'ten days after her safe arrival in the port of Hew York. There was no personal liability
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for the money advanced, assumed in the bond by the master or owners.
The brig sailed from Matanzas for New York, September 20th, 1846, with a cargo. She was compelled by bad weather to put into Savannah on the 29th of September, to repair, and was there repaired at an expense of $86 33. She sailed from Savannah on the 5th of October, in good condition, but was totally lost in a severe storm, on the beach just south of Gape Hatteras, on the 13th of October. The plaintiffs abandoned the brig, and claimed for a total loss November 5th, 1846. A statement of the partial loss at Matanzas was made up and presented to the insurers on the 12th November, 1846, amounting, after the deduction of one third new for old, to $2014 13. The first count of the declaration claimed for this partial loss ; the second count set forth the disaster and repairs at Savannah, and the total loss, and claimed the entire sum insured. The defendants pleaded the general issue and payment. The suit was commenced in December, 1846. Before pleading, and in June, 1847, the defendants paid into court on the first count, $1180; and on the second count, $4,100. The plaintiffs declined to accept these sums in full of their claim.
It appeared on the trial that the plaintiffs claimed, under their first count, $2,014 13, as the partial loss; and under their second count they claimed $86, partial loss at Savannah; and $4,388 2J for the total loss of the vessel, being the balance, after crediting a trifling sum realized by the master from the wreck.
It also appeared that Drake, Brothers & Go. insured in a company at Havana their bottomry interest in the brig, and in February, 184'i, the plaintiffs, at then request, furnished to them the proper preliminary proofs and documents to claim from that company the amount of the insurance. The plaintiffs have never paid to Drake, Brothers & Co. any part of the bottomry bond: A verdict was taken for the plaintiffs, subject to the opinion of the court.
Upon the argument of the case in January term, 1849, by F. B. Gutting and G. W. Scmdford, for the plaintiffs, and T. Sedgwick, for the defendants, the defendants’ principal reliance
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was on the point that the moneys paid by Drake, Brothers & Co. towards the repairs, having been re-paid to them by the insurers at Havana, and never paid by the plaintiffs, the latter had no claim for that amount; and the sums paid into court were a complete and full indemnity for all their actual loss and damage.
The court, on considering the subject, directed a re-argument on the question, whether to the extent of the bottomry bond placed on the vessel at Matanzas, the plaintiffs continued to have an insurable interest, or could recover as for a total loss for so much of the value of the vessel as was represented by that bond. The cause was accordingly heard a second time.
F. B. Cutting, for the plaintiffs.
The whole controversy in the case has been in regard to the partial loss, in respect to which the bottomry was given, and the insurers contended they were liable only for the balance paid for the repairs, less the amount raised by the bottomry. They brought into court what they supposed was the whole total loss. It has been taken out of court by the plaintiffs, and there is no question left. The money has been paid, and they must sue for it if they claim to have it back.
T. Sedgwick, for the defendants,
said the court can make such order as may be just under the circumstances. It may apply the money paid into court to either count of the declaration. BTeither of the counts was satisfied by the payment. It is a technical matter altogether, and wholly under' the control of the court.
The Court said they could not change the application of the money paid into court on the respective counts, and received by the plaintiffs. That matter had passed beyond their control. But the question was open on the second count, as to the sum claimed by the plaintiffs beyond the four thousand one hundred dollars paid into court on that count.
F. B. Cutting proceeded to the question ordered to be argued.
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This is a valued policy, and no partial loss or average is payable, which amounts to less than five per cent. Can value agreed upon be opened ? If so, the operation of the rule must be mutual. If opened to show a less value, why may not the assured show an increased value ?
The object of valuing the interest is to shut out all questions as to actual value, in the absence of fraud. Suppose there were a mortgage on this brig, and then five per cent, loss on the balance of value beyond the mortgage, could the mortgage be shown so as to enable the insured to recover for a partial loss ?
There are liens on ships for repairs, wages, port-charges, and the like. Are they to be deducted on a valued policy ? The case mentioned by the court in 2 Caines 10 in the supreme court holds no such doctrine. There the bottomry was on the vessel when the plaintiff bought her. It was not decided there that there was no insurable interest, but the contrary. (S. C. 2 C. C. in E. 110.) We cannot avoid investigating all liens, if the doctrine be admitted; and it will produce embarrassments and inexplicable confusion.
The silence of the books, as to liens being deducted, is a strong argument against such a principle. In 3 Mason 429, 436-7, Humphrey v. Union Insurance Co., Story, J., assumes there would be an insurable interest in such a case by way of illustration.
What effect will a subsequent lien have on such an agreed valuation ?
(Chief Justice.—What, if after the valuation, the insured sell half the vessel?)
That would take away half his insurable interest, because the policy requires proof of interest. It would not affect the case if the purchase money were unpaid.
The plaintiffs were owners of the brig, as much as they ever were, notwithstanding the bottomry. A second insurance is very analogous in principle. The first insurer derives no benefit from it, unless he stipulates for it in his contract or policy. We could not obtain any diminution of premium by reason of the bottomry. Such a doctrine could not be carried out.
As to the effect of the valuation in the policy, I refer to Alsop
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v. Commercial Insurance Co., 1 Sumner 451, 463, 469; Coolidge v. Gloucester Insurance Co., 15 Mass. 341 ; Patapsco Insurance Co. v. Colton, 3 Peters 232 , 238; Watson v. Insurance Co. of North America, 3 Wash. C. C. R. 1, in which the valuation was opened entirely; and Bonsfield v. Barnes, 4 Campb. 228. So goods entered subject to drawback, Gahn v. Broome, 1 John. Cas. 122; Minturn v. Columbian Insurance Co., 10 Johns. 75 , 78. Kenny v. Clarkson, 1 John. R. 386, is an authority directly in our favor. And see 2 Phill. on Insurance 43. Also 1 E. S. 662, as to wagering policies. Except for the statute in England, the owner would recover there the full value, although the ship were bottomed. 2 Park on Insurance 869, 871; 2 Phill. on Insurance 625.
T. Sedgwick, for the defendants.
I. The plaintiffs can only have indemnity for actual damage sustained. This is the general rule in all actions at law, and is eminently true in cases of insurance. (Sedgwick on Damages, 53, 232, 311.)
The money paid into court, has reimbursed the plaintiffs their entire loss, with the exception of the one third new for old, which one third, in judgment of law, is not a loss.
II. The moneys paid by Drake, Brothers & Co., towards the repairs of the brig, have been repaid to them by the Havana Insurance Company, on settling the bottomry policy. Consequently they can have no claim on the plaintiffs for that sum; and the effort here is to make the defendants in this suit pay what the plaintiffs have not lost, and what they cannot by possibility be obliged to pay. It does not therefore come within the principle of those cases where the plaintiff has been allowed to recover for losses which he had not in fact sustained, but for which he was legally liable. (Wolfe v. Howard Insurance Co., 1 Sand. S. C. R. 124; Hone v. Mutual Safety Co., Ibid. 137 .)
IH. The facts present a case of recoupment, in the original sense of the term. The plaintiff does not prove the loss that he alleges. (Sedgw. on Damages, 457 et seq.; Shannon v. Comstock, 21 Wend. 457 ; Hecksher v. McCrea, 24 Ibid. 304; Godsall v. Boldero, 9 East 72, which is perfectly decisive in prin
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ciple; Pullen v. Stamforth, 11 East 232; Ætna Ins. Co. v. Tyler, 16 Wend. 385 .)
As to the plaintiff’s interest.
IV. It is settled, as well in Europe as here, that the borrower on bottomry has no insurable interest, except for the surplus over his loan. (1 Phill. on Ins. 113; 1 Arnould on Ins. 244; Williams v. Smith, 2 C. Cas. in E. 110.)
V. This is so on principle. An interest at the time of the loss is indispensable. It is here expressly averred. But it is wholly immaterial to the bottomry borrower, so far as his loan goes, whether the vessel be lost or not. If she is lost, the debt is can-celled. If she arrives, she must pay the debt. Either way he has no interest in the object assured. (1 Phill. on Ins. 67, 72; 2 Ibid. 601; 1 Rev. Stat. 662; 2 Duer on Ins. 6.)
YI. This has nothing to do with the question of valuation. . Whether a policy is valued or not, the plaintiff must prove his interest at risk, and the defendants are at liberty to show that the actual interest was in any way reduced subsequent to the valuation. (2 Phill. on Ins. 12, 601; 1 Ibid. 67, 72, 75, 77; Watson v. Ins. Co. of N. A., 3 Wash. C. C. R. 1; Wolcott v. Eagle Ins. Co., 4 Pick. 429 ; Forbes v. Aspinwall, 13 East 328; Alsop v. Comm. Ins. Co., 1 Sumn. 451 .)
VII. There is no analogy in regard to the question of interest, between a bottomry bond and a mortgage or other liens. The nature of the incumbrance is entirely different.
VIH. The case comes within the equity of the clauses as to double insurance. Here there has been in fact a second assurance and payment by the second assu/rers. It is not possible that the first insurers, are still to be held liable. All the analogies of the doctrine of recoupment forbid it. (2 Phill. on Ins., 59, 60; 3 Wash. C. C. R. 1; Godies v. London Ass. Co., 1 Burr. 489; Thurston v. Koch, 4 Dallas 348 , and App.; Park on Ins. 374, 375.)
By the bottomry, the plaintiffs have obtained the thing insured. Shall they have a second satisfaction? If interest is to be shown, and actual damages proved, they cannot recover upon either count.
p. 60
Guttí/ng, in reply.
The deduction claimed, cannot be on the principle that the plaintiff’s interest was divested by the bottomry.
If they had put a mortgage with a bond on the vessel, and then she had been lost, that would not have divested the insurable interest, and we could recover the whole amount.
So the lien of sailors’ wages does not divest the interest.
So a bottomry to redeem from capture, which was a peril not insured against, and then the vessel was lost. So of a lien for collision.
The defence can only be maintained on the ground that the underwriters are to have the benefit of the annihilation of the debt; thus making the saving by the money received on the bottomry lost, equivalent to a salvage to the assurers on the vessel.
How can there be a recoupment out of a contract to which the defendants were neither a party nor privy ?
To recoup they should be able to sue or maintain an action for what is sought to be recouped.
1 A mould 207, on bottomry, &c., shows that in the passage cited he had reference to the Stat. Geo. H.

The court have considered this case with some care, and now proceed briefly to state their views. The case was argued on one question, which was presented at that time as the only one of any materiality involved in the case, and it was fully discussed by the counsel on that point, and considered by the court. In the course of our examination, it occurred to us there was a point involved which had not been presented, and we directed the matter to be spoken to again. It was re-argued, and it now comes up for final judgment.

The case was this: It was a time policy of insurance for one year on the brig Joseph Atkins, owned by Bead & Hoppock. The brig was valued at $4500. She proceeded from this port, and in the vicinity of the island of Cuba met with some disaster and put into Matanzas, arriving there in a disabled condition. A survey was called, it was deemed proper to repair the vessel,

p. 61
and the captain proceeded to repair. The house of Drake, Brothers & Co. of that place, were the correspondents of the owners, and had a certain amount of funds in their hands belonging to the plaintiffs, which were applied by the captain towards the repairs of the ship. The funds were not sufficient; and in order to raise the necessary amount, the captain borrowed of this house §1700, and in security therefor executed a bottomry bond on the brig, payable ten days after the arrival of the vessel at New York. She took on board a cargo and set sail for New York. On the passage she received some damage, and put into Savannah, where she had some repairs, but to a small amount, in regard to which there is no question. Being refitted, she proceeded for New York, but off Cape Hatteras was totally lost. Drake, Brothers & Co. insured at Havana them bottomry interest. It was admitted on the argument, that the house of Drake, Brothers & Co. received the amount of their bottomry interest, from the insurance company at Havana, some months after the suit was brought.

The plaintiffs in them declaration have two counts; one for the partial loss at Matanzas, and the second for a total loss, arising out of the final destruction of the vessel.

The defendants paid into court on the first count $1180, which was the sum remaining due for the partial loss after applying the proceeds received by plaintiffs on the bottomry bond; and on the second count §4100, for the total loss. The latter sum fell short between $400 and $500 of the actual amount of loss ; and in that state of the case the matter was brought to trial.

Two questions have arisen in the case. First, have the plaintiffs a right to recover on the first count, on the ground of a pa/rUal loss ; and, second, what sum are they entitled to recover on the ground of a total loss ?

On the part of the defendants it is attempted to avail themselves of the money received through the loan on the bottomry bond by Drake, Brothers & Co., because, as the vessel was totally lost, and Read & Hoppock discharged from their personal responsibility for the debt of the vessel, they had not lost the money, and had no right to claim of the defendants for that amount.

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On the other hand, it is contended that the insurers have no connexion whatever with any account of Read & Hoppock as respects the raising of funds for repairing the vessel, and it was no matter to them how that money was acquired, whether by mortgaging the ship, or in any other way; that the obligation of the company is to pay the loss, and they cannot avail themselves of the state of facts set up in respect of the insurance on the bottomry.

We think the views of the defendants in this particular are not correct. They cannot avail themselves of this as a defence to the payment for a partial loss.

The defendants’ counsel pressed very much on the court, in the argument, the case of Godsall v. Boldero (9 East 72), as containing, what he says is a principle which goes the whole length of sustaining his views. We have examined that case, (as it was the only case much relied on as to this point,) with some care, to see in what manner the question arose and what principle was established by it. That was an insurance on the life of Mr. Pitt, formerly prime minister of England, who was indebted to the plaintiff; the plaintiff having thereby an interest in the life of Mr. Pitt, of course had a right to insure it, and did so. Mr. Pitt died. The Parliament of England determined to pay his debts, and made a large appropriation for that purpose, which was placed in the hands of his executors. They paid the plaintiff’s debt, notwithstanding which he brought the action against the insurance company on the life policy, under the idea that his interest in the life of Mi'. Pitt was something distinct and separate from the debt, and did not depend upon the debt; that the contract was with the insurance company, and that they must pay him accordingly. On looking at the pleadings, it appears that the plea on which the verdict was entered, expressly set up the fact that the debt was the interest which the plaintiff had in the life of Mr. Pitt, and that the debt was paid by the executors before the suit. On that plea the parties went to trial. It was agreed the court should enter judgment as they might find the facts to be. The court ordered judgment for the defendant on the plea setting up the payment

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of the debt by the debtor, or which was the same thing, by his executors. The court said the whole object of the insurance was to indemnify the plaintiff; that he had been paid the debt by the executors of Mi1. Pitt, and it was immaterial from what quarter the fund came, whether from parliament or any other way, for in either event the contingency had been answered.[1]

Now we do not consider that any principle is established by that case which will entitle these defendants to set up that the funds which had been appropriated for repairs, came from any quarter except from the plaintiffs themselves, or from funds furnished by their agent, and by them reimbursed. The liability on the bottomry bond remained as to the vessel, and had she arrived, nobody contends that there would have been any question on the partial loss, because the borrowing of the money with or without security, could make no difference. We think the claim of the defendants, setting up this receipt of the money borrowed on the bottomry bond as discharging the company from paying the amount of the partial loss, cannot be sustained, and that the plaintiff is entitled to judgment on the first count for the entire partial loss.

The next question is whether in respect of the total loss there can be any reduction made on the ground of the bottomry. That was the question which the court directed to be argued on the second occasion. The result of our deliberations is, that under the circumstances, the bottomry bond must go in diminution of the plaintiffs’ claim on the policy for the total loss of the vessel. The principle is well established in this state, by a decision in the court of errors, that where a vessel is under bottomry at the time of the insurance, the owners have to that extent no insurable interest in the vessel. (Smith v. Williams, 2 Caines’ Cas. in Error 110; 1 Phill. on Ins. 113.) The reason is obvious. The vessel was under bottomry for its full value.

(a.) (a.) Although the insurers thus succeeded in Godsall v. Boldero, they paid to the plaintiff the amount of the insurance before they left the court; probably not from any d,oubt as to sustaining the decision, but to maintain their reputation with the public. Ellis on Ins., 126, note e; 1 Phill. on Ins. 149.

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In case of loss, the insured, if paid, would receive the value, and yet had nothing at hazard. In such a case, if she arrive safe, he has the vessel and has to pay the bottomry bond; if the vessel is lost, he is discharged from the bottomry bond, and has received the money advanced upon it. The party, in such a case, has no interest that he can insure. In Watson v. Insurance Co. of North America, 3 Wash. C. C. R. I., the same principle was applied. The bottomry bond was for part of the value of the vessel. There was a valued policy, the vessel was lost, and the question was, could the valuation be opened to let in the claim of the insurance company, so that the bottomry bond previously made on the vessel, though without the knowledge of the party, could be deducted from the amount. Judge Washington held that it could be done. He opened the policy, and said it was proper under the circumstances, because the party ought to have no more than a just indemnity. The case is not fully stated, but it is evident that such was the principle.

The case in our own courts is decisive. Assuming the principle to be established that where there is a bottomry bond at the time of the insurance, the bottomry shall be in diminution of the value of the interest of the assured, to the extent of the bottomry, thus extinguishing the interest wholly or in part, we think it necessarily follows that the execution of the bottomry bond after insurance is effected, operates on the interest of the assured in the same way. If a loss take place, the borrower is discharged, and his interest is extinguished to that extent. It is admitted that after effecting insurance to the value of the ship, if the owner should sell part of the vessel he cannot recover beyond his actual interest. We see no reason why this conditional transfer should not operate in the same way. It is exact justice, and prevents more than a just indemnity. It is an act of the plaintiffs, by which their interest in the vessel is in that way paid for and extinguished. They no longer owned anything in that ship except what remained beyond the bottomry bond.

We think, therefore, on the last count of the declaration, the plaintiffs could not have recovered anything except what remained over the value of the bottomry bond. The defendants

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having paid money into court, by which they have admitted the right of the plaintiffs to recover to that extent, we consider we cannot interfere with that proceeding; but they cannot have judgment beyond the amount so paid in.

These are the general views we have taken of the case. We are not aware that the question has ever been raised before, but adopting the principle established in Smith v. Williams, we think there is no doubt on the subject.

Judgment for the plaintiff for the partial loss, less the sum paid into court on the first count. The plaintiffs are not entitled to recover for the total loss beyond the sum paid into court therefor.

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