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175 U.S. 609
CANADA SUGAR REFINING COMPANY, Limited, Petitioner,
INSURANCE COMPANY OF NORTH AMERICA.
Argued October 26, 1899.
Decided January 8, 1900.
[175 U.S. 609, 610] The Canada Sugar Refining Company, a Canadian corporation, on November 27, 1894, filed a libel and complaint in the district court of the United States for the southern district of New York against the Insurance Company of [175 U.S. 609, 611] North America, a Pennsylvania corporation, to recover insurance effected by the libellant with the respondent in the amount of $15,000 on profits on a cargo of sugar shipped on board the British ship John E. Sayre, at and from Iloilo to Montreal, Canada. The respondent answered, the cause came on to be heard upon the pleadings, proceedings, and proofs, and resulted, June 15, 1897, in a decree in favor of the libellant for the full amount of the insurance, with interest and costs. The case was taken on appeal to the United States circuit court of appeals, where, on April 23, 1893, a final decree was entered reversing the decree of the district court, and ordering that the libel be dismissed, with costs in both courts to the appellant.
On the libellant's petition, on May 10, 1898, a writ of certiorari was granted, under which the cause and the record and proceedings therein were removed into this court.
The material facts of the case were as follows:
On April 29, 1893, the respondent company insured for the libellant's benefit:
At that time the Sayre was at sea prosecuting the voyage. The libellant had 2,462 tons of sugars on board of her, amounting in value to $ 181,000, and had just completed insurance of the sugars to the amount of $ 166,145 in the Atlantic Mutual, of which insurance the respondent was informed before its insurance on profits was made. In July following the Sayre stranded on the coast of Newfoundland, and all the cargo was lost excepting about 300 tons, which was saved by the aid of salvors, of which one half went to them as their agreed compensation. The agreement was originally made by the master soon after the stranding; but a few days afterwards the agent of the Atlantic Mutual appeared, to whom the master turned over the salvage operations. He confirmed the previous agreement with the salvors; reimbursed to the master the expenses already incurred by him, and thenceforward, with the libellant's consent and the defendant's [175 U.S. 609, 612] knowledge and acquiescence, took the complete control and disposition of the cargo. The agent eventually bought from the salvors the moieties of the sugars allotted to them under the agreement, and then shipped all the suger saved to the order of the insurers to Montreal. The value of all the sugar that reached Montreal was about $20,000, and the expenses and salvage charges paid by the Atlantic Mutual thereon, and the additional freight to Montreal, exceeded $11,000, so that out of the whole cargo worth $181,000, less than $9,000 net was saved. The Atlantic Mutual settled with the libellant as for a total loss, under its policy of $166, 145, and it turned over the sugars saved in part settlement of that sum, on about the basis of the average pro rata policy valuation. The respondent contested its liability upon the policy on profits on the ground chiefly that the receipt by the libellant of a portion of the sugars, viz., about $20,000 in value, prevents the loss from being 'total' within the terms of its policy.
Mr. Wilhelmus Mynderse for petitioner.
Mr. Clifford A. Hand for respondent.
Mr. Justice Shiras delivered the opinion of the court:
The district court held that, by the stranding of the vessel John E. Sayre, there had been caused, under the provisions of the contract of insurance between the Canada Sugar Refining Company and the Insurance Company of North America, a total loss of profits, and accordingly entered a decree in favor of the libellant for the full amount of the insurance, with interests and costs. 82 Fed. Rep. 757.
The circuit court of appeals, being of the opinion that there had not been a total loss of profits within the meaning of the contract, reversed the decree of the district court, with directions to dismiss the libel. 58 U. S. App. 22, 87 Fed. Rep. 491, 31 C. C. A. 65.
This difference of opinion arose from opposite views of the legal conclusion to be drawn from the evidence of the facts [175 U.S. 609, 613] attending the loss of the vessel and its cargo. Did those facts disclose a total loss of the cargo, and, consequently, a total loss of profits? Or did they disclose that, within the meaning of the contract, a portion of the cargo was delivered to and received by the insured at the port of destination, and that, therefore, there was not a total loss of profits?
On February 10, 1893, the ship John E. Sayre, having on board a cargo of sugar belonging to the Canada Sugar Refining Company, sailed from Iloilo for Montreal. By several contracts of insurance between the refining company and the Atlantic Mutual Insurance Company the latter had insured the former against the loss of the cargo in the sum of $166,145. On April 29, 1893, the ship being still on her voyage, the refining company entered into a contract with the Insurance Company of North America, of which the material terms were as follows:
It was provided in the policy referred to in the certificate that 'the acts of the insured or assurers, or of their joint or respective agents, in preserving, securing, or saving the property insured, in case of damage or disaster, shall not be considered or held to be a waiver or acceptance of abandonment;' and likewise, 'it is further agreed that if the said assured shall have made any other insurance upon the premises aforesaid, prior in date to this policy, then this insurance company shall be answerable only for so much of the amount as such prior insurance may be deficient towards fully covering the premises hereby insured, without any deduction for the insolvency of all or any of the underwriters, and shall return the premium upon so much of the sum by them insured as they shall be by such prior insurance exonerated from.' [175 U.S. 609, 614] It is admitted that notice of the prior insurance was given to the Insurance Company of North America at the time when it entered into its contract with the refining company; nor does it appear that the insurance company, before the libel was filed, claimed that it was exonerated from any portion of its liability by reason of such prior insurance, or ever tendered a return of any part of the premium by reason of any such alleged exoneration.
On July, 6, 1893, the ship stranded on the coast of Newfoundland, and ultimately became a total wreck. The crew left the vessel, but the master remained, and, in the discharge of his duty as agent of all whom it might concern, made an arrangement with the local fishermen for the saving of cargo by them at one half of what was saved. This resulted in removal from the wreck of a portion of the cargo until July 8, when the work was finally abandoned. On that day an agent of the Atlantic Mutual Insurance Company arrived in the interest of that company. He at once took charge, and relieved the master, who, under instruction of the owner of the vessel, turned over the rescued portion of the cargo to the agent. The previous disbursements made by the master, amounting to $200, were paid to him by the agent of the Atlantic Mutual Insurance Company.
The agent thereupon adjusted the claims of the salvors, in pursuance of the agreement made by the master. The portion saved from the wreck weighed about 320 tons, of which about one half was apportioned and set off to the salvors; but nearly all of the sugars so assigned to the salvors were subsequently purchased from them by the agent.
The agent likewise paid to the shipowner his ocean freight, and reconditioned the sugars saved from the wreck, placed them in new bags, and then shipped them to Montreal on the coasting steamer Tiber. The total expenditures of the Atlantic Mutual Insurance Company, in respect of the salvage, the care, reconditioning, and forwarding of the sugars, amounted to upwards of $10,000-not including the ocean freight, nor the freight from Newfoundland to Montreal.
Thus far, in the history of the transactions, there seems to [175 U.S. 609, 615] be a substantial agreement between the statements of the courts below of the facts upon which they based their respective judgments. But we here meet with a difference, which, in the view we take of the case, is of controlling importance.
The district court, in the opinion by Judge Brown, states that the agent of the Atlantic Mutual Insurance Company, after having settled with the master and with the salvors, 'shipped all the sugar saved to the order of the insurers to Montreal;' and that 'none of the sugar ever came to the libellant in the ordinary course of the voyage, or through any delivery to the libellant as consignee by the carrier; but only through a delivery by the insurer of cargo, after a practical abandonment to the latter, and through a settlement by the insurer as upon a total loss, in which the sugar was received by the libellant upon an equitable basis in part payment, and as the equivalent of its value in cash, as any other property might have been received.'
The circuit court of appeals, in its narration of events, states that 'the master was about to arrange for the transportation to Montreal of the part not going to the salvors, when the Atlantic Mutual Insurance Company, which meantime had been informed of the disaster, intervened and took entire control. That company carried out the agreement made by the master with the salvors, paying them an equivalent in lieu of one half of the sugar saved, and caused the sugar saved to be reconditioned and shipped to Montreal on the steamer Tiber, and delivered upon arrival there to the libellant.'
Referring to the pleadings, we find it averred in the libel that the sugar, after having been brought to Montreal by the Atlantic Mutual Insurance Company, 'was received by the libellant on account of and in part payment for the loss sustained by the said libellant, under its insurance with the Atlantic Mutual Insurance Company, and that credit was given therefor to the said Atlantic Mutual Insurance Company in the amount at which the said 325 tons of [175 U.S. 609, 616] sugar were insured with the said the Atlantic Mutual Insurance Company; and that the market value of the said 325 tons of sugar in Montreal at the time it was received by the libellant was about $20,000.'
The responsive allegations of the answer were as follows: 'This respondent further admits and avers, upon information and belief, that from the wreck of said ship John E. Sayre there were forwarded to Montreal, the place of destination, and there delivered to and received by the libellant, about nine thousand nine hundred mats of the said sugar of about three hundred and twenty-five tons net weight, and of the value of about twenty thousand dollars,' and 'this respondent, upon information and belief, denies that the sugar so delivered to the libellant was a payment by any underwriter on account of a supposed total loss.'
The evidence under this issue, on the part of the libellant, consisted chiefly of the bills of lading, three in number, and dated August 4, 1893, given by the master of the steamer Tiber to Harvey & Co. of St. Johns, N. F., and calling for the delivery of the saved sugar to the Atlantic Mutual Insurance Company at Montreal; and of the testimony of Drummond, of Harvey, and of Pike. Drummond testified that he was president of the Canada Sugar Refining Company; that, as such, he made a settlement with a representative of the Atlantic Mutual Insurance Company at Montreal, whereby about 300 tons of sugar were accepted by the refining company from the Atlantic Insurance Company, at market rates of value, in part payment of the claim of the refining company against the Atlantic Mutual Insurance Company for total loss of cargo; that the sugar was shipped from Newfoundland to the Atlantic Mutual Insurance Company at Montereal, and, in the opinion of the witness, belonged to the insurance company at the time of the settlement.
Harvey testified that he was a member of the firm of Harvey & Co., commission merchants, St. Johns, Newfoundland; that in July and August, 1893, his firm acted for the Atlantic Mutual Mutual Insurance Company, under instructions from that company; that his firm acted through Robert G. Pike as their representative; that the sugar saved from the wreck of the John E. Sayre was forwarded to Montreal to the order of the [175 U.S. 609, 617] Atlantic Mutual Insurance Company; that for expenses incurred by his firm in paying the salvors, the master's expenses, and for storing, weighing, reconditioning, and reshipping the sugar, their firm received payment from the Atlantic Mutual Insurance Company in the sum of $10,066.97; that at no time, either before or after the wreck of the John E. Sayre, did his firm have any connection with or received any instructions from the Canada Sugar Refining Company, or any of its officers or agents, or with the owners of the John E. Sayre.
Pike testified that he was sent by Harvey & Co. to the scene of the wreck; that he there, on July 8, 1893, took entire charge of the sugar that had been saved; that he settled with the master and with the salvors; that he reconditioned the sugar and shipped it to Montreal, to the Atlantic Mutual Insurance Company; that everything he did was in pursuance of instructions from Harvey & Co., as agents of the Atlantic Mutual Insurance Company of New York; that he never at any time had any communication with the Canada Sugar Refining Company, or their officers or agents.
In the absence of any evidence offered under this issue by the Insurance Company of North America we think it clear that the saved remnants of the sugar were taken exclusive possession of by the agents of the Atlantic Mutual Insurance Company, were by them forwarded on account of that company to Montreal, and were finally turned over to the Canadian Sugar Refining Company, at an agreed valuation, in part payment of the claim of the latter for total loss of cargo.
It is also evident, as we think, that the facts disclose an actual abandonment by the Canada Sugar Refining Company to the Atlantic Mutual Insurance Company, and the acceptance by the latter of such abandonment. Owing to the prompt action of the insurance company in taking charge and control of the cargo, and in adopting the agreement of the master with the salvors, it was not necessary for the assured to go through with all the usual forms of an abandonment. Neither of the parties seem to have acted upon the supposition that any other or more formal act of abandonment was necessary. [175 U.S. 609, 618] In Columbian Ins. Co. v. Catlett, 12 Wheat. 394, 6 L. ed. 669, where the effect of actual abandonment, as dispensing, if accepted, with formal notice, was considered, Justice Story said:
As the Canada Sugar Refining Company and the Atlantic Mutual Insurance Company agreed upon an actual abandonment and settled on the basis of a total loss, it is not perceived that, in the absence of any allegation or proof of fraud, the Insurance Company of North America can be heard to raise any question as to the formality of the proceedings.
It was suggested, but apparently was not pressed at the argument, that there ought to have been abandonment to the Insurance Company of North America. In Mumford v. [175 U.S. 609, 619] Hallett, 1 Johns, 433, where there were separate contracts of insurance on cargo and on profits, and where it was contended that the assured, by having abandoned the goods to the underwriter, had disabled himself from recovering the insurance on profit, it was said:
We shall content ourselves in this respect by quoting the conclusion expressed in 2 Phillips on Insurance, 1503:
To briefly rehearse the facts, this is a case where the owners of a cargo of sugar had insured the same in the Atlantic Mutual Insurance Company, on and before April 29, 1893, at and for the sum of $166,145; had, on April 29, 1893, insured the profits on the cargo against total loss only in the sum of $15,000 in the Insurance Company of North America; on July 6, 1893, the ship, while on her voyage, stranded on the cost of Newfoundland, became a total loss, and the voyage came to an end; the master, representing all concerned, contracted with local fishermen to give them one half of the sugar they could save; on July 5, 1893, the insurers of the cargo, having been notified of the disaster, took charge and possession of the remanants of the cargo, and purchased from the salvors the portion which, under the agreement with the master, was theirs; the sugar was then transported by a vessel chartered by the insurers, and on their account, to Montreal; the value of the sugar that reached Montreal was about $20,000, and the expenses, salvage charges, and the additional freight from Newfoundland to Montreal, paid by the Atlantic Mutual Insurance Company, exceeded $11,000; the insurers on the cargo settled with the refining company as for a total loss under its policy for $ 166,145, and the sugar saved was turned over to the refining company in part settlement of that sum on the basis of the average pro rata policy valuation. The value of the entire cargo on April 29, 1893, when the insurance on profits was effected, was alleged in the libel and admitted in the answer to have been about $181,000.
The error of the circuit court of appeals, as we view the case, was in regarding the portion of the cargo that was saved and paid for by the Atlantic Insurance Company as having been carried to Montreal and there delivered to the refining company as the owner thereof, and as respects which, in that state of facts, the refining company should be deemed to have received profits on a part of the cargo. [175 U.S. 609, 621] Without finding it necessary to enter into a discussion of refined distinctions, considered in some of the cases, between an actual and a technical total loss, we think it evident that the refining company would not receive the indemnity for which it bargained and paid unless it is permitted to recover in the present case. By such recovery it will not receive more than will, with what it has received from the Atlantic Mutual Insurance Company, make up its whole loss.
It certainly cannot be successfully claimed that, in order to recover, the refining company was bound, in this suit on a valued policy on profits, to put in evidence to show that it would have received profits if the voyage had been completed, and the entire cargo had arrived safely. Such a contention was considered and determined in Patapsco Ins. Co. v. Coulter, 3 Pet. 222, 7 L. ed. 659. That was a case where the ship Mary was proceeding on a voyage from Philadelphia to Gibraltar and ulterior ports with a cargo of flour. There was an insurance on profits in the sum of $5, 000. While the vessel lay at Gibraltar, before the discharge of her cargo, she and her cargo were totally lost by fire. In an action brought on the policy of insurance on profits in the circuit court of the United States for the district of Maryland, the court was asked to instruct the jury that as the assured had offered no evidence that the flour, if delivered and sold at Gibraltar, would have yielded a profit, they were not entitled to recover. The refusal of the court so to charge was approved in this court, in an opinion by Mr. Justice Johnson, from which we quote, as follows:
The conclusion thus reached has never been disturbed in this court, and is the prevalent doctrine in the United States. The American rule and the reason for it are thus stated in 2 Phillips on Insurance, 30:
Agreeing, as we do, with the view of the evidence taken by the district court, to wit, that none of the sugar ever came to the libellant in the ordinary course of the voyage, or through any delivery to the libellant as consignee by the carrier, but only through a delivery by the insurer of cargo, after a practical abandonment to the latter, and through a settlement by the insurer as upon a total loss, in which the sugar was received by the libellant upon an equitable basis in part payment, and as the equivalent of the value in cash, as any other property might have been received, the legal conclusion that we reach is that the libellant is entitled to recover the amount of the profits as valued in the policy.
The appellees claim that they took no part in the settlement [175 U.S. 609, 626] between the cargo insurers and the libellant, and the doctrine of res inter alios is invoked.
But they had knowledge of the prior insurance, and were bound to know that, in case of disaster, there was the right to abandon. There is evidence that they were informed of what was going on between the other parties concerned. They do not impugn, by allegation or evidence, the fairness and good faith of that transaction, nor do they claim that it was conducted with a view to prejudice them.
They plant their defense solely on the proposition of fact that a sound portion of the cargo reached the port of destination in due course, and was there delivered to the libellant as consignee-a proposition of fact, as we have seen, not sustained but refuted by the evidence.
Accordingly, the decree of the Circuit Court of Appeals must be reversed, with costs, and the decree of the District Court for the Southern District of New York is affirmed.