US SUPREME COURT DECISIONS

A Spanish subject who came to the United Sates in a time of peace between Spain and Great Britain to carry on a trade between this country and the Spanish provinces under a royal Spanish license and who continues to reside here and carry on that trade after the breaking out of war between Great Britain and Spain, is to be considered as an American merchant, although the trade could be lawfully carried on by a Spanish subject only.

To constitute a representation (in making insurance), there should be an affirmation or denial of some fact or an allegation which would plainly lead the mind to the same conclusion. [See note at the end of the case.]

If by the usage of the trade insured it be necessary that certain papers should be on board, the concealment of those papers cannot affect the plaintiff's right to recover upon the policy.

In general, concealment of papers amounts to a breach of warranty.

If the letter submitted to the underwriters ordering the insurance refers to another letter previously laid before them, which letter contained information that the vessel had permission to trade to the Spanish colonies, the underwriters are bound to notice that fact and to know that the vessel would take all the papers necessary to make that voyage legal.

The usage of trade may be proved by parol, although such usage originated in a law or edict of the government of the country.

The question whether the abandonment was made in due time is not a question of fact to be exclusively left to the jury, but to be decided by them under the direction of the court. No acts justifiable by the usage of the trade and done by the plaintiffs to avoid confiscation under the laws of Spain, can avoid the policy.

If the insured does any act which increases the risk of capture and detention according to the common practice of the belligerent, it may avoid the policy. It is not necessary that the risk thus increased should be the risk of rightful capture according to the law of nations.

A false representation, though no breach of the contract, if material, avoids the policy on the ground of fraud or because the insurer has been misled by it.

If a vessel take on board papers which materially enhance the risk, and it be not within the regular usage of the trade insured to take such papers, the nondisclosure of the fact that they would be on board would avoid the policy.

In estimating the materiality of papers on board a vessel in enhancing the risk, their effect taken together should be considered, and not the effect of any one of them taken by itself.

Is it ever necessary for the assured to declare the national character of other distinct interests engaged in the same adventure unless called for by the underwriter? Per STORY, J.

The warranty of neutrality extends not barely to the fact of the property being neutral, but that the conduct of the voyage shall be such as to protect and preserve its neutral character. If the papers be denied to a belligerent, and the property is thereby thrown into jeopardy, such conduct constitutes a breach of warranty. Per STORY, J.

The belligerent right of search draws after it a right to the production and examination of the ship's papers. Per STORY, J.

The question must always be whether there be a concealment of papers material to the preservation of the neutral character. It is not every idle, accidental, or every meditated concealment of papers manifestly unimportant in every view before the prize tribunal which will dissolve the obligation of the policy. If by the usage and course of trade it be necessary or allowable to have on board spurious papers covered with a belligerent character, whatever effects it might have upon the rights of the searching cruiser, the concealment of such papers which, if disclosed, would completely compromit or destroy the neutral character will not amount to a breach of the warranty. Per STORY, J.

Whenever the underwriter has knowledge of and assents to the cover of neutral property under belligerent papers, as he does in all cases where the usage of the trade demands it, he necessarily waives his rights under the warranty -- or, in other words, he authorizes the concealment in all cases in which it is not necessary to assume the belligerent national character for the purpose of protection. Per STORY, J.

The public laws of a country affecting the course of the trade with that country are considered to be equally within the knowledge and notice of all the parties to a policy on a voyage to such country. Per STORY, J.

Error to the circuit court for the District of Maryland, in an action of covenant upon a policy of insurance chanrobles.com-redchanrobles.com-red

Page 11 U. S. 507

(against capture only) upon the cargo of the ship Herkimer "from Guayaquil, or her last port of departure in South America, to New York," "warranted American property, proof of which to be required in the United States only," "and warranted free from seizure for illicit trade." The declaration was on a loss by capture.

The case was stated as follows by MARSHALL, CHIEF JUSTICE, in delivering the opinion of the court:

Julian Hernandez Baruso, a Spanish subject, having obtained from the Crown of Spain a license to import from Boston into the Spanish provinces of Peru and Buenos Ayres in South America in foreign vessels a certain quantity of goods in the license mentioned, and to take back the proceeds in produce on payment of half duties, came to New York, in September, 1803 (Spain being then at peace with Great Britain) for the purpose of carrying on trade under his said license.

On 24 August, 1804, he entered into a contract with a certain Anthony Carroll for the transportation of a certain quantity of goods to Lima, in Peru, under the said license. Carroll died without carrying the contract into full effect.

On 25 January, 1805, war having then broke out between Great Britain and Spain, B. Livingston, who had been bound as Carroll's surety for the performance of the contract, entered into a new contract with Baruso for the transportation of the same goods.

The preamble recites the license and says

"The said Baruso has agreed with the said B. Livingston to make an adventure to Lima on the conditions and stipulations following, to-wit: "

"1. In consideration, &c., he agrees to the following partnership with the said B. L. in virtue of which he transfers to the said firm, all his powers, &c., (under the license) of sending an American vessel belonging to the said L. or chartered, in which vessel shall be embarked goods to the amount of $50,000, the funds and vessel to be furnished and advanced by said I. "

Page 11 U. S. 508

"2. Baruso to obtain the necessary papers from the Spanish consul and B. L. to pay the duties. Baruso answerable for detention or confiscation by the Spanish government or vessels on account of any defect of right to send under said license, &c."

"3. L. agrees in four months to embark the goods on board a vessel to Lima to proceed thither and to return to the United States with a cargo."

"4. L. to choose the supercargo and instruct him; and as the adventure will appear on the face of the papers to belong to B. he shall give the supercargo a power, and recognize him the master of the cargo, so that the consignees at Lima shall follow literally his orders. The consignees, who were partners of B., to receive a commission."

"5. The consignees, who were partners of B., to receive a commission."

"6. The said L. and B. agree to divide equally and part and part alike the profits of the adventure. L. to have commissions on sale."

"7. Optional in L. to sell in United States, or convey the return cargo to Europe. If he sells in the United States, B. may take out, at the price of sales, as much as will be equal to his rights."

"8. If L. sends the cargo to Europe, he is to choose the supercargo, but the consignees to be chosen jointly."

"9. In case of loss B. to claim nothing, as his share in the profits only accrues on the safe return of the vessel to the United States. Optional with L. to insure or not. L. not to be allowed for risk, if no insurance, more than 15 percent. No insurance to be on the risks of the Spanish government."

"10. If any loss accrues from causes not stipulated, B. to lose only his privilege. If loss on sale of return cargo, B. to sustain half."

Livingston soon afterwards chartered the ship Herkimer for the voyage, and entered into a contract with the other plaintiff Gilchrist, one James Baxter, and Edward Griswold, for jointly carrying on with them chanrobles.com-redchanrobles.com-red

Page 11 U. S. 509

the said voyage. The cargo was purchased with their joint funds, and was shipped to Lima, where, and at Guayaquil, a return cargo was received, purchased with the proceeds of the original cargo.

On 25 March, 1806, Mr. Gilchrist addressed to Alexander Webster & Co. at Baltimore a letter containing an order for insurance on the cargo of the ship Herkimer, from Guayaquil, or her last port of departure in South America, to New York, against loss by capture only, warranted American property, and free from all loss on account of seizure for illicit or prohibited trade. It says

"the owners are already insured against the dangers of the seas and all other risks, except that of capture. . . . You have already had a description of the ship from Messrs. Church and Demmill, the agent of Mr. Jackson, and which I presume is correct. . . . I think proper to mention that the insurance will be on account of Mr. Brockholst Livingston and myself. Mr. Baxter and Mr. Griswold are also concerned, but the first gentleman thinks there is so little danger of capture that in his letter from Lima he expressly directs no insurance to be made for him against this risk, and Mr. Griswold is not here to consult. Both these gentlemen, as well as those for whom you are desired to make insurance, are native Americans."

The letter of Church and Demmill was dated 13 Feb.. 1806, and after describing the ship, adds,

"she sailed from Boston 12 May last for Lima with liberty to go to one other port in South America, not west of Guayaquil, and from thence to New York. She has permission to trade there."

This letter was laid before the board of directors and the application at that time rejected.

The letter from Gilchrist to Webster & Co. was afterwards laid before the board, and the company made the insurance for the plaintiffs at 10 percent

The Herkimer, on her return voyage, was captured near the port of New York by the Leander, a British ship of war, and sent to Halifax, where she was condemned. chanrobles.com-redchanrobles.com-red

Page 11 U. S. 510

The plaintiffs gave the underwriters notice of the capture and obtained their permission to prosecute a claim for restoration without prejudice to their right to abandon. On receiving notice of the condemnation, they wrote a letter of abandonment, which was delivered to the underwriters, who refused to pay for the loss, whereupon this suit was brought.

On the return voyage, just after doubling Cape Horn, Baxter, who was supercargo and part owner, gave to Edward Giles, the third mate, a bundle of papers, partly in Spanish, telling him at the same time that in all probability they might fall in with privateers, who might overhaul the trunk in the cabin, and if they found the papers, it was probable the vessel might be detained as the papers were in Spanish, and they might not be able to translate them. Giles put the papers in his trunk.

After the capture, Giles was taken out of the Herkimer into the Leander, and on being asked if he had any objection to have his trunk searched, replied that he had not. The trunk was then searched, and this bundle discovered. It contained papers, covering the cargo as the property of Baruso, mixed with others which showed that in fact it was the property of the plaintiffs and of Baxter and Griswold. Evidence was given to prove that the usage of the trade made these papers necessary. There was also an estimate of the probable value of the cargo if shipped to Europe.

The Herkimer arrived before the Leander, and Baxter, upon his examination on the standing interrogatories, described truly the character of the voyage, and stated correctly the property in the cargo, but denied his knowledge of any papers, other than those which were exhibited, as belonging to the ship.

Issue was joined on the plea that the defendants had not broken their covenant, and the jury found a verdict in their favor.

On the trial, 28 bills of exception were taken, partly by the plaintiffs, and partly by the defendants. Only those taken by the plaintiffs are now before the Court. chanrobles.com-redchanrobles.com-red

Page 11 U. S. 511

The plaintiffs prayed the court below to instruct the jury that the letter ordering the insurance does not contain a representation that no person other than the said Livingston, Gilchrist, Griswold & Baxter was interested in the return cargo of the Herkimer, nor that all the persons interested therein were native Americans. The judges were divided on this point, and the instruction was not given.

The 5th bill of exceptions stated that the plaintiffs prayed the court to instruct the jury that if they believed the testimony offered by them, then there was no such concealment of the said papers as can affect the right of the plaintiffs to recover in this action, which instruction the court refused to give, but directed the jury that if it should be of opinion that from the usage and course of trade it was necessary to have the Spanish and other papers delivered by Baxter to Giles, the 3d mate, as aforesaid, then the delivery by Baxter to Giles, and the finding and taking of the said papers by the officers on the Leander was not such a concealment as affects the right of the plaintiffs to recover.

The 6th bill of exceptions states that the plaintiffs then prayed the court to instruct the jury that Baruso having removed to New York, in the United States, while Spain was neutral for the purpose of carrying on trade, and having continued to reside in New York until after the capture of the Herkimer, the said Baruso could not, at the time of the voyage, be considered as a belligerent. This instruction the court also refused to give, but did instruct the jury that if they should be of opinion that the said Baruso settled in New York before the war between Spain and Great Britain, and remained there domiciliated and carrying on trade generally until the capture of the Herkimer, he is to be considered as a neutral; but if they should be satisfied from the testimony that he went to New York for no other purpose but to carry on trade as a Spanish subject, which he could not engage in as a neutral, and that he was not engaged in any other trade than as a Spanish subject, he cannot be considered as a neutral.

The 7th bill of exceptions states that the court then, on the prayer of the defendant, gave to the jury the following opinion: chanrobles.com-redchanrobles.com-red

Page 11 U. S. 512

"The court having already given an opinion that Baruso was not a joint owner with the plaintiffs and Griswold and Baxter in the return cargo of the Herkimer, do, in compliance with the opinion of the Supreme Court, leave it to the jury to determine whether Baruso had an interest in the return cargo which increased the risk of the said voyage, and if the risk was increased, that the policy was thereby vitiated."

This opinion was given on the prayer of the defendants to instruct the jury that the noncommunication to the underwriters of papers showing Baruso to have an interest and to be a Spanish subject vitiated the policy.

The 8th bill of exceptions stated that the defendants then prayed the court to instruct the jury that if it should be of opinion that the papers which were delivered to Giles by Baxter or any of them increased the risk, and that if any of the papers which did so increase the risk were not necessary by the laws and usages of Spain or the course and usage of trade between the United States and Lima, and that it was not communicated to the defendants that such papers would accompany the cargo, then the plaintiffs were not entitled to recover. The court gave the instruction.

The 9th bill of exceptions stated that the plaintiffs prayed an instruction to the jury that in estimating the increase of risk on the return voyage of the Herkimer, it was to consider it as a voyage which the defendants were informed, in and by the letter of Church and Dommill, was carried on under a license from the Spanish government, and the question for it to decide was whether the risk of such a voyage, carried on under such a license, was increased by any of the circumstances relied on by the defendants to show an increase of risk in this case. This instruction the court refused to give.

The 11th bill of exceptions stated that the plaintiffs produced a witness to prove the usage of the trade, who said that by the laws, regulations, and usages of the trade, it was necessary that the property imported into or exported from the colony by a foreigner should be under a Spanish license, and appear to be Spanish chanrobles.com-redchanrobles.com-red

Page 11 U. S. 513

property. Whereupon the defendants moved the court to instruct the jury that this evidence is not competent to prove the municipal laws of Spain or the usage and custom of trade established by its municipal laws. The opinion of the court was that

"no parol evidence is admissible to the jury, or if given, can be regarded by it, to prove the legislative edicts or acts of the Spanish government or to prove any usage, custom, or course of trade conformable to such edicts or acts, but that such evidence is admissible to prove the general usage and course of trade that may depend on instructions to the government of Peru."

The 13th bill of exceptions stated that the plaintiffs produced witnesses, ignorant of the laws of Spain, to prove their understanding of the usage of the trade, and the defendants produced counter-testimony on the usage, whereupon the defendants moved the court to instruct the jury that the testimony of the plaintiffs, if believed, was not competent to show the usage or course of trade that the Herkimer, on her return voyage, should be accompanied with papers giving the cargo the appearance of Spanish property. The court refused to give this opinion, but instructed the jury that if it was of opinion that the usage or course of trade from or to the province of Peru by foreigners was to have a license from the King of Spain to trade, and to have Spanish papers on board, to show or give color that the cargo was Spanish property, the defendants were bound to take notice of such course of trade; but if the jury should be of opinion that the trade was prohibited by the laws of Spain, the plaintiffs must prove that the defendants had notice or information of such prohibition.

The 20th bill of exceptions is to an opinion of the court that whether the abandonment was in reasonable time or not is not a fact to be exclusively left to the jury, but to be decided by it under the direction of the court.

The 24th bill of exceptions stated that the defendants moved the court to instruct the jury that the insurers are not liable for any increase of risk in consequence of any acts done by the insured to avoid seizure chanrobles.com-redchanrobles.com-red

Page 11 U. S. 514

and confiscation under the laws and regulations of the Spanish government, which instruction the court gave.

The 25th bill of exceptions stated that the counsel for the plaintiffs then moved the court to instruct the jury that the right of the plaintiffs would not be affected by any increase of risk produced by such acts as were stated in the preceding exception if such acts were according to the course and usage of trade on the voyage insured. This instruction the court refused to give.

The 28th bill of exceptions stated that the plaintiffs moved the court to instruct the jury that the increase of risk, by which alone the right of the plaintiffs to recover in this action can be effected, is an increase (by reason of some act or omission of the plaintiffs, or their agents) of the danger of rightful capture or condemnation under the law of nations. The court refused to give this instruction.

The verdict and judgment being against the plaintiffs they sued out their writ of error. chanrobles.com-redchanrobles.com-red

Page 11 U. S. 534