Rhinelander v. Insurance Co. of Pennsylvania

Majority

p. 18

Rhinelander v. Insurance Company of Pennsylvania.

Syllabus

Marine insurance. — Loss by capture. — Aba/ndonmemb.

A capture of a neutral as prize, by a belligerent, is a total loss, and entitles the insured to abandon.

The state of the loss, at the time of the offer to abandon, fixes the rights of the parties.^[1]

This was a case certified from the Circuit Court for the district of Pennsylvania, in which the opinions of the judges of that court were opposed to each other upon the question, whether the plaintiff was entitled to recover, upon a case stated, the material facts of which were as follows :

The defendants insured $12,500, on the freight of the plaintiff’s American ship The Manhattan, which had been chartered by Mintum & Champlin, for a voyage from New York to Batavia, and back to New York. The freight was valued in the policy at $50,000. The charter-party contained a covenant, that if any dispute should arise between the plaintiff and Minturn & Champlin, respecting the freight, the cargo should not be detained by the plaintiff, provided they *should give good security to abide by the -* award of arbitrators, who were to be appointed to settle such dispute. On her homeward voyage, on the 10th of February 1805, the ship was taken

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and detained, on the high seas, by a British armed vessel, and the second mate and twenty-one of the seamen taken out, and two British officers and fifteen seamen put on board, with orders to take her into a British port. The second mate was put on board another vessel, and arrived in New York on the 26th of February, when he gave the above information to the plaintiff, who, on the 28th of February, communicated it, by his letter of abandonment of that date, to the defendants.

The Manhattan, with her cargo, was carried into Bermuda, on the 12th of February, and libelled as prize of war. On the 20th of April 1805, both vessel and cargo were acquitted. From this sentence, so far as it respected the cargo only, an appeal was prayed, which did not appear to have been decided ; but on the 8th of May, the cargo was delivered to its owners, on their giving security, and on the 8th of July, the vessel and cargo arrived in New York ; but before their arrival, the defendants having refused to give counter-security, so as to relieve the owners of the cargo from the effect of the security which they had given upon getting possession of their goods, the plaintiff, on the 6th of June 1805, after the vessel was liberated, brought the present suit. Upon the arrival of the vessel and cargo, Minturn & Champlin gave security to abide the award of the arbitrators concerning the freight, according to the covenant in the charter-party, and obtained possession of the cargo.

Hopkinson, for the plaintiff, contended

: 1. That there had been a total loss of the property insured, occasioned by a peril within the terms of the policy. 2. That the abandonment was made in due time.

* Whenever a vessel is captured by a belligerent as prize, whether pi..„. the belligerent be a friend or an enemy, the loss is total, so long L as the detention exists ; and vests a complete right of abandonment. It is not the state of the information received, but the actual state of the fact, which justifies the abandonment, and gives the right to recover as for a total loss. The vessel was actually libelled as prize, at the time of the abandonment, although no information of such libel had been received by the plaintiff ; and therefore, the ease is clearly within the doctrine established by the supreme court of Pennsylvania, in the case of Dutilh v. Gatliff, decided a few days ago ;^[3] that if the vessel be libelled by the *captors prize, it is such a capture as gives the insured a complete right to [*32

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abandon ; and to recover as for a total loss. Although the Manhattan and cargo *were acquitted by the vice-admiralty court before the return -^[1] of the writ in the present case, yet the acquittal, as to the cargo, was suspended by the appeal; and the *property was not, in fact, put in to the possession of the freighters, until they had given security to its

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full value, to return it to the captors in case the sentence of acquittal *should be reversed. As to them, therefore, the property was not restored. It never arrived in safety. Its trial was still pending, and if it should finally be condemned, the freighters would never be liable to the plaintiff for the freight. As to the plaintiff, therefore, it still continues a

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total loss of the freight. He cannot, in any event, recover it from the freighters, until the appeal is decided, and if that decision should be against the latter, his only chance would be, in the hope of j ustice from the courts of the captors, who, upon condemnation of the cargo, sometimes order the freight to be paid to the owner of the ship, if he is a fair neutral, and has no interest in the cargo. Nothing but relieving the freighters from the security they had given for the cargo, could entitle the plaintiff to recover against them. The underwriters, therefore, were bound either to pay to the plaintiff the amount they had insured, or, by giving such counter-security as should indemnify the freighters, give the plaintiff a right of action against them. The latter part of the alternative the defendants have refused. The case of Da Costa v. Newnham, 2 T. R. 407, shows that the underwriters were bound to give such counter-security, or to pay the amount insured. The property never came free into the hands of the freighters. The right of action depends upon the facts existing at the time of abandonment. In the case of Mumford v. Church, decided by the supreme court of New York, at July term 1799 ( 1 Johns. Cas. 147 ), the assured recovered, notwithstanding a restoration, before abandanment. But the assured cannot retract his abandonment, and it is not just, that one party should be bound, and the other at liberty. If the plaintiff had a right to abandon, the defendants were bound to accept.

For the defendants, Rawle and Lewis contended:

1. That there never was a total loss ; and consequently, the plaintiff never had a right to abandon. *2. That before the action was brought, the vessel was acquitted, and therefore, no right of action existed. 3. That before the return of the writ, the vessel and cargo had arrived in safety at the port of destination, and the freight was earned, and that the plaintiff might recover it from the freighters. 4. That the plaintiff had voluntarily suffered the cargo to be delivered, without payment of the freight, and had lost his lien

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on the goods, by his own folly, and therefore, had no right to recover from the underwriters.

They admitted, that the defendants were liable for a partial loss to the amount of the charges, expenses, &c., in consequence of the capture ; but denied, that the plaintiff could claim for a total loss. The information received, at the time of the offer to abandon, was only of an arrest and detention ; which, as the Manhattan was a neutral vessel, must be presumed to be only for the purpose of exercising the belligerent right of search; and such a detention has never been holden to give a right to abandon. But a capture by a friend differs from a capture by an enemy. Park 66. It is presumed, that the courts of our friend will do us justice, and restore our property without delay. Hence, no salvage was allowed for the re-capture of a neutral from the power of one of the belligerents, unless under very particular circumstances. If the capture of a neutral be not followed by condemnation, it is not a total loss, unless the voyage be wholly broken up. Saloucci v. Johnson, Park 79. The right of search (admitted by our treaty) gives a right to send the neutral into port for examination, and for that purpose the belligerent may put a force on board, and take out part of the original crew. The mere capture, ordering her into port, taking out part of the crew and putting other men on board, gave no right to abandon, and yet the abandonment is founded upon those facts only. The defendants were not obliged to accept the abandonment. It ought to have been accompanied by a cession. No subsequent event can make it valid. It was not accepted and therefore, *did not bind either party. The information ought to rx.oh be such, at the time of abandonment, that the underwriter may know *- whether he ought to accept it or not. He should be able to decide, whether he ought to undertake the defence of the property. The assured cannot abandon, unless upon information of facts which show a total loss. Subsequent events cannot be coupled with a prior offer to abandon. Suppose, the assured should say, I heard of a gale of wind ; I offer to abandon, although I have heard of no loss ; could that avail him ? In the case of Suydam & Wyckoff v. The Marine Insurance Company, 1 Johns. 181 , the supreme court of the state of New York decided, that the assured cannot avail himself of a subsequent event, without a new abandonment. It is admitted, that the facts, and not the information, decide the right to abandon, but there must be information of sufficient facts, at the time of abandonment. A detention for examination does not necessarily destroy the voyage, nor even render it probable that the voyage will be broken up. Whenever the fact appears, that the voyage is destroyed, and the jury finds the fact to be so (for it is not a matter of law), it is a total loss. There is no printed report of the case of Mumford v. Church, and therefore, we cannot examine its principles,^[3]

But the restitution of the cargo, although on security, is a legal restitu-. tion. The freight never was in danger. If it has been, it was in consequence of facts which would have discharged the underwriters. If the

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voyage was lawful, freight would have been allowed, even upon enemies’ goods, and although the voyage was not ended. Whether the cargo be condemned or not, the ship-owner is entitled to his freight. The only ground upon which a British court of admiralty will refuse to allow freight, is a ground which would also discharge the underwriters, viz., that the shipowner was not a fair neutral. The Copenhagen, 1 Rob. 245 (Am. Ed.); The Rebecca, 2 Ibid. 84; The *Racehorse, 3 Ibid. 88; The Atlas, *38] Ibid. 245; 4 Rob. 279 , 282; The Vrow Henrica, 4 Ibid. 279, 282 ; Touteng v. Hubbard, 3 Bos. & Pul. 291. It is only a delay in receiving the freight. If the plaintiff is to be considered as a fair neutral ship-owner, he must eventually recover the freight, either from the owners of the cargo or the captors ; and if he is not such a fair neutral ship-owner, the warranty in the policy is falsified, and the defendants are not liable. Suppose, the delay had been caused by any of the other perils insured against, such as a violent storm driving the ship off from the coast, or a long course of contrary winds, &c., the inconvenience to the plaintiff would have been the same, and yet he would have no right to abandon. The defendants did not undertake that the voyage should be performed in any given time, nor to be liable for the wear and tear of the ship, tackle, &c., in consequence of such protracted voyage. The defendants have a right to avail themselves, in their defence, of the very evidence produced on the trial of the libel, and even of the sentence of condemnation, if it proceed upon grounds inconsistent with the warranty. The defendants were not bound to give the counter-security; because the plaintiff’s vessel had been restored to him, without security; and it cannot be right, that the defendants, who are not underwriters upon the cargo, should give security to its whole amount, in order to enable the plaintiff to recover the freight from the freighters.

But the freight was earned, and the freighters were liable to the plaintiff, before the defendants were bound to plead. The vessel and cargo had arrived, and the defendants may now set up that fact as a defence. If a vessel, supposed to be lost, be abandoned to the underwriters, and a suit brought upon the policy,but before plea pleaded, the vessel arrive in safety; the underwriters may plead this fact, or give it in evidence, and it will be a good defence. In Hamilton v. Mendes, 2 Burr. 1214, Lord Mansfield says, “We give no opinion how it would be, in case the ship or goods be restored in safety,” “ between the commencement of the action and the verdict.” And in Sullivan v. Montague, Doug. 112, he says, “ actio non goes, in every case, to *the time of pleading, not to the commencement of the action,” The declaration is the beginning of the action. Co. Litt. 126 a. And even after plea pleaded, if any matter of defence arise, the defendant may, and indeed, if he would not for ever lose the benefit of it, he must, plead it as a plea puis darrein continuance. Ewer v. Moile, Yelv. 141.

But the plaintiff has never made a cession to the underwriters of his right to the freight, and of the means of obtaining it. He had, by a covenant in the charter-party, given up his lien upon the cargo ; a fact unknown to the defendants, and which ought to have been disclosed. He had also, without the defendants’ consent, left the question of freight to arbitrators, who have not yet decided.

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Ingersoll, in reply.

The question whether the cargo shall he restored to its owners, is still pending in the court of admiralty, and if the plaintiff had, at any time, a right to recover the freight from the underwriters, that right still continues. On the first intelligence of the capture, the plaintiff offered to abandon ; and according to the true state of the facts, he had then a complete right to abandon. Although the property was neutral, yet it was captured as prize. It was treated by the captors as enemy-property. It was, in fact, taken jure belli, and therefore, it can make no difference, in principle, whether the nation of the captors be at peace or at war with the nation of the captured vessel and cargo. It was seized as prize of war, and the question of neutrality is still to be decided. The delivery of possession, upon security, is no more a restitution of the cargo, than if the owners had purchased it under a decree of condemnation. It has not arrived safe ; it is burdened with an incumbrance to its full value. The circumstances detailed by the second mate, in his first information to the plaintiff, clearly showed that the seizure was made of the property as prize of war. It is said, the abandonment was made too soon. In Fuller v. McCall, 2 Dall. 219 , the plaintiff was holden to be too late, because he did not abandon upon receipt of the first intelligence, although the information came from a *stran- [*40 ger. But here, the information was given by an officer of the ship, *- an eye-witness, and the vessel was, in fact, libelled as prize of war. The insured is bound to abandon in a reasonable time after receiving the intelligence, so that the underwriter may take measures to save what he can, to indemnify himself; and no objection can be made, that the assured abandoned too soon, if subsequent information prove that he had then a right to abandon.

Whether this be strictly a capture or not, is immaterial, as one of the risks insured against is taking at sea; and as this taking was with the view of seizure as prize, on suspicion of its being enemy-property, it is within the principle of belligerent capture. The right of search gives no right to dispossess the owner of his vessel, either according to the law of nations, or to ■our treaty with .Great Britain. But if such right did exist, an unreasonable detention gives a right to abandon; and whenever a vessel is libelled, if the insured means to claim for a total loss, he ought to abandon, in order to give the underwriters a right to defend the property in the court of admiralty. The assured, after an offer to abandon, is not bound to defend the property. The libel was filed eight days before the abandonment, but that fact was not necessary to give the right to abandon.

It has been said, that the books furnish no case in which the capture by a friend has been decided to be a total loss. But Marshall, in p. 422 and 435, considers the law as settled, that a capture by a friend, under pretence of enemy’s goods, must be considered as a capture, because it is done as an act of hostility. The uncertainty of the duration of the detention, puts it upon the same principle as the case of an embargo. A capture is a total loss, although a condemnation never takes place. Goss v. Withers, 2 Burr. 694, 697.

An actual deed of cession was not necessary, because the offer to abandon was not absolutely accepted. The offer to cede the plaintiff’s right was sufficient. The covenant in the charter-party to relinquish the lien on the

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cargo for freight, upon other security being given, did not affect the interests of the underwriters. The security stood in the place of the cargo, and was abundantly sufficient.

delivered the opinion of the court, as follows:— The Manhattan, a neutral ship, while prosecuting the voyage insured, was captured by a belligerent cruiser, the second mate and twenty-one of the hands were taken out, and two British officers and fifteen seamen put on board, and she was ordered into a British port. The mate soon afterwards arrived in the United States, in another vessel. On the 26th of February 1805, he gave information of these facts to the owner of the Manhattan, who, on the 28th of the same month, communicated it to the insurers, and offered to abandon to them. On the 2d of April, payment of the freight was demanded and refused. The Manhattan was carried into Bermuda, and libelled as prize of war. On the 20th of April, in the same year, both vessel and cargo were acquitted. From this sentence, so far as respected the cargo only, an appeal was prayed, which does not appear to have been decided. The cargo was delivered to the owners, on their giving security, and on the 8th of July, the vessel and cargo arrived at the port of destination. The underwriters having refused to give counter-security, this action was brought, on the 6th of June, after the vessel was liberated, and before her arrival at the port of destination. The policy is on the freight.

The question referred to this court is, whether the facts stated entitle the insured to recover against the underwriters for a total loss. In examining this question, the material points to be determined are : 1st. Had the insured a right to abandon when the offer was made ? 2d. Have any circumstances

since occurred which affect this right ? These are important questions to the commercial interest of the United States, and ought to be settled with as much clearness as the case admits.

*It is universally agreed, that to constitute a right to abandon, there must have existed a total loss, occasioned by one of the perils insured against; but this total loss may be real or legal. Where the loss is real, a controversy can only respect the fact; but the circumstances which constitute a legal, or technical loss, yet remain, in many cases, open for consideration. It has been decided, that a capture, by one belligerent from another, constitutes, in the technical sense of the word, a total loss, and gives an immediate right to the assured to abandon to the insurers, although the vessel may afterwards be recaptured and restored. It has also been decided, that an embargo or detention by a foreign friendly power, constitutes a total loss, and warrants an immediate abandonment. But the capture, or taking at sea of a neutral vessel by a belligerent, is a case on which the courts of England do not appear to have expressly decided, and which must depend on general principles, on analogy, and on a reasonable construction of the contract between the parties.

A capture by an enemy is a total loss, although the property be not changed, because the taking is with an intent to deprive the owner of it, and because the hope of recovery is too small, and too remote, to suspend the right of the assured, in expectation of that event. If a neutral ship be captured as enemy-property, the taking is, unquestionably, with a design to deprive the owner of it; and the hope of recovery is, in many cases, remote, since it

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may often depend on an appellate court; and though not equally improbable as in the case of capture by an enemy, is not so certain, as is stated in argument by the counsel for the defendants. The distinction between a capture by an enemy and by a belligerent, not an enemy, has not been taken in the cases adjudged in England, so far as those cases have been laid before the court, and the best general writers seem to arrange them in the same class. 2 Marshall 422, 435. *It has been also determined, that a total loss p . existed in the case of an embargo, or the detention of a foreign *- prince.

In one case cited at the bar (Saloucci v. Johnson), the court of king’s bench determined, that an illegal arrest at sea, amounted to a detention by a foreign prince, and although that case has since been overruled in England, so far as it decided, that to resist a search did not justify a seizure, yet the principle that an arrest at sea was to be resolved into a detention by a foreign power, has not been denied. Marshall (p. 435), after noticing the contrary decisions respecting the right of a neutral to resist a search, adds, “ yet the above case of Saloucci v. Johnson may, nevertheless, I conceive, be considered as an authority to prove, that if a neutral ship be unlawfully arrested and detained by a belligerent cruiser, for any pretended offence against the law of nations, this would be a detention of princes.” That a detention of a foreign power by embargo, or otherwise, warrants an abandonment, is well settled. 2 Marshall 483.

The opinion given by the court of king’s bench in the case of Saloucci v. Johnson, goes no further than to establish that an unlawful arrest at sea is to be considered as the detention of a foreign prince. Whether the arrest can only be considered as unlawful, when the cause alleged, if true, is not in itself sufficient to justify a seizure, or when, if true, it would be sufficient, but is in reality contrary to the fact, is not stated. In point of reason, however, it would seem, that when an arrest is made at sea, by a person acting under the authority of a prince, the detention is as much the detention of princes in the one case as in the other.

In the case of an embargo, the detention is lawful. The right of any power to lay an embargo has not been questioned. Yet it is universally admitted, that an embargo constitutes a detention, which amounts, at the time, to a total loss, and warrants an abandonment. *In what consists the p.. difference between a detention occasioned by an embargo, and a de- [*44 tention occasioned by an arrest at sea, of a neutral, by a belligerent power ? An embargo is not laid with a view to deprive the owner of his property, but the arrest is made with that view. In the first case, therefore, the property detained is not in hazard ; in the last, it always is in hazard. So far the claim to abandon on an arrest is supported by stronger reason than the claim to abandon, when detained by an embargo.

But it is argued, that the duration of an embargo has no definite limitation, while a neutral vessel may count on being instantly discharged. Such is the rapidity of proeeeeding in a court of admirality, that its mandate of restoration is figuratively said to be “borne on the wings of the wind.” Commercial contracts have but little connection with figurative language, and are seldom rightly expounded by a course of artificial reasoning. Merchants generally regard the fact itself ; and if the fact be attended to, an embargo seldom continues as long as the trial of a prize cause, where an ap

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peal is interposed. The history of modern Europe, it is believed, does not furnish an instance of an embargo of equal duration with the question whether the cargo of the Manhattan be or be not lawful prize. The reasoning of the books in the case of a capture by an enemy, and of an embargo, applies in terms, but certainly in reason, to an arrest by a belligerent, not-an enemy. 2 Marshall 483.

The reasoning of the English judges, in all the cases which have been read at bar, and their decisions on the question of abandonment, have received the attention of the court. To go through those cases, would protract this opinion to a length unnecessarily tedious. With respect to them, therefore, it will only be observed, that the principles laid down appear to be applicable to an arrest, as well as to a capture or detention of foreign powers; and that a distinction between an arrest and such capture or detention, has never been taken.

*The contract of insurance is said to be a contract of indemnity, and therefore (it is urged by the underwriters, and has been repeatedly urged by them), the assured can only recover according to the damage he has sustained. This is true, and has uniformly been admitted. But if full compensation could only be demanded, where there was an actual total loss, an abandonment could only take place where there was nothing to abandon.

There are situations in which the delay of the voyage, the deprivation of the right to conduct it, produce inconveniences to the assured, for the calculation of which, the law affords, and can afford, no standard. In such cases, there is, for the time, a total loss : and in this state of things, the assured may abandon to the underwriter, who stands in his place, and to whom justice is done, by enabling him to receive all that the assured might receive. A capture by an enemy, and an embargo by a foreign power, are admitted to be within this rule, and a complete arrest by a belligerent, not an enemy, seems, in reason, to be equally within it.

It is, therefore, the unanimous opinion of the court, that where, as in this case, there is a complete taking at sea, by a belligerent, who has taken full possession of the vessel as prize, and continues that possession to the time of the abandonment, there exists, in point of law, a total loss, and the act of abandonment vests the right to the thing abandoned, in the underwriters, and the amount of insurance, in the assured.

2. Have any circumstances occurred, since the abandonment, which have converted this total into a partial loss ? Without reviewing the conduct of the assured, subsequent to that period, it will be sufficient to observe, that he has performed no act which can be construed into a relinquishment of the right which was vested in him by the offer to abandon.

It only remains, then, to inquire, whether the release and return of the *46] Manhattan deprives the assured of *the right to resort to the underwriters for a total loss, which was given by the abandonment ? This point has never been decided in the courts of England. In the case of Hamilton v. Mendes, Lord Mansfield leaves it completely undetermined, whether the state of loss, at the time the abandonment is made, or at the time of action brought, or at the time of the verdict rendered, shall fix the right to recover for a partial or a total loss.

A majority of the judges are of opinion, that the state of loss, at the time of the abandonment, must fix the rights of the parties to recover on an

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action afterwards brought; and the judge who doubts respecting it, is of opinion, that, in this case, counter-security having been refused by the underwriters, the question of freight is yet suspended. It is to be certified to the circuit court of Pennsylvania, that in the case stated for the opinion of this court, the plaintiff is entitled to recover for a total loss.

Cases cited

2 Dall. 219 2 Dall. 219 p. 25