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U.S. Supreme Court

Graves & Barnewall v. Boston Marine Insurance Company, 6 U.S. 2 Cranch 419 419 (1805)

Graves & Barnewall v. Boston Marine Insurance Company

6 U.S. (2 Cranch) 419




A policy of insurance in the name of one joint owner "as property may appear" does not cover the interest of the other owner, there being no clause in the policy stating the insurance to be for the benefit of all concerned.

The interest of a co-partnership cannot be given in evidence on an averment of individual interest, nor an averment of the interest of a company be supported by a special contract relating to the interest of an individual.

Evidence of the knowledge of the underwriters of the intention of the insured at the time of making the policy ought to be very clear to justify a court of equity in conforming the policy to the alleged intention.

It is a good general principle that written agreements ought to be expounded by themselves.

Page 6 U. S. 420

Appeal from the Circuit Court for the District of Massachusetts in which was dismissed a bill filed by the appellants seeking to charge the appellees upon a policy of insurance effected by them and to obtain relief against an alleged mistake by omitting to insert the name of Barnewall in the policy, the interest and property insured being that of Graves & Barnewall, and so intended to be insured.

Graves & Barnewall were equally and jointly interested in the ship Northern Liberties and her cargo, and they had various insurances effected in different places upon the ship and cargo from New York to Teneriffe as well as from thence to La Vera Cruz, always for their joint and equal benefit.

On 24 April, 1800, Graves wrote to Elisha Sigourney & Sons of Boston, inquiring the rate of insurance on the risk and describing himself as "one of the parties interested in the property to be insured." On receiving a reply, he wrote, 5 May, 1800:

"Your office asks too high a premium for the risk I was inquiring after; the vessel cannot be out of time as she sailed from hence for Teneriffe in February, where we have not learned that she had arrived; less so that she had sailed; but as it is my principle to run no risks where I can help it, I have prevailed upon my co-partner to anticipate her arrival and sailing again to Vera Cruz. To give you a perfect idea of the nature of the risk to be insured, you will find a copy on the other side of the application to our offices, who took a good deal at seventeen and a half percent; we may be induced to give one or two percent more to complete the business, and wish you to say whether it could not be effected with you at seventeen and a half percent or near that; if so, and we have not insured elsewhere before a return of your answer, I may likely give you an order to effect $20,000 to $25,000.420"

The copy of the application annexed to the letter stated that

"On 20 February last, the ship Northern Liberties sailed from this for Teneriffe commanded by Frederick King, a man of courage and good conduct; she mounted sixteen six-pounders, and had a crew of thirty in number. No vessel could have been more completely fitted, is copper sheathed, and by the report of the pilot who carried her out to sea, sails remarkably fast. Upon this vessel's cargo we want insurance at and from Teneriffe to La Vera Cruz. The ship and cargo really and truly belong to American citizens."

This communication was laid before the appellees, and offer was made by them to insure the property, which was communicated to Graves by Sigourney & Sons, and on 15 May, 1800, he directed the insurance to be made upon the cargo to the amount of $16,000, upon the best terms and within certain limits. Upon these orders, they made insurance with the Boston Marine Insurance Company, the appellees, in the sum of $10,000 upon the cargo of the ship, for the voyage mentioned in the letter of 5 May, 1800.

The printed forms of policies used by the appellees did not contain the ordinary clause importing the insurance to be made as well for the benefit of the persons named in the policy as for the benefit of all concerned. Of this fact Graves and Sigourney & Sons were ignorant.

The complainants alleged in their bill that the letter of Graves of 5 May, 1800, and the copy of the application were shown to the president and directors of the company as the order for the insurance, and were received and acted upon by them as the basis upon which such insurance was made and that it was well understood.

Page 6 U. S. 421

The answer of the company its by their president under the corporate seal admitted the execution of the policy and that Graves had some interest in the property insured, but it did not know to what amount -- that upon due proof of loss, it was bound and are ready to pay him the amount of loss which he had sustained. It admits that E. Sigourney, in the beginning of May, applied for insurance, but denies that either of the letters of 24 April or 5 May was shown to him or left with the president or secretary of the company or any other person for their use. It admits that the copy of the application to the New York offices was left with the president, but avers that the premium required was higher than E. Sigourney & Sons would give, and that no bargain or contract was at that time made, but the application was withdrawn. That no insurance was made by it in pursuance of the letter of 15 May or any other letter from Graves, and no further application was made until 14 June, when Andrew Sigourney applied for the insurance of $10,000 on the cargo of the ship Northern Liberties, whereupon the policy was made for and on account of John Boonen Graves and for account of no other person whatsoever. It denies that before or at the time of making and subscribing the policy, it was mentioned by the said Sigourney & Sons or either of them or known or understood or suspected by the defendant that the property

Page 6 U. S. 422

proposed to be insured was the joint property of Graves & Barnewall or of any company or co-partnership of which Graves was a member, or that it was the object and intent of the said insurance to cover the interest of the concerned therein in general, but only the separate and particular interest of Graves.

It denies all mistake or misunderstanding in inserting the name of Graves alone, but insists that his name alone was inserted, because the interest of no other person was intended to be insured.

It avers that after the policy was prepared and filled up, it was delivered to Andrew Sigourney, of the house of E. Sigourney & Sons, and by him read and approved, and that he thereupon gave his promissory note for the premium.

It denies that any alteration or omission in the form of policies had been made or adopted by the president and directors subsequent to the form first adopted and agreed upon by them after their incorporation, and avers that the form in the present case is the same which was then adopted, and which was settled by the president and directors upon mature advice and deliberation and with the express intent that the president and directors might know the nature, character, quality, and condition of every person whose interest they might insure, and to protect themselves from all responsibility and hazard on account of the interest of any person or persons not named in the policy, and that the said printed form had been openly and continually used by the company, of which all persons procuring insurance to be done at their office had notice, and that a like form had been used at the other offices in Boston for more than a year before 14 June, 1800.

Elisha Sigourney stated in evidence that about 12 May, 1800, he showed Graves' letter of 5 May to a person writing as clerk in the office of the defendants, and left it with him till the next morning, when the clerk informed him the terms on which the president and directors would insure.

That at the time of effecting the insurance, he did not know that the form adopted by that insurance company

Page 6 U. S. 423

differed from the usual form, but supposed the interest of all concerned was insured.

The deposition of Andrew Sigourney stated that on 14 June, when he made application for insurance, he showed to Mr. May, the secretary of the company, only the instructions on the back of the letter of 15 May and a memorandum to insert the words "as property may appear." That he did not read any but the written part of the policy before he took it from the office. That at the time of making the application, he did not mention the name of any person as interested in that insurance except the name of John Boonen Graves. He only showed the instructions.

That he knew by the letter of Graves that he had partners, but he did not know the name of any of them; he supposed that the policy covered the interest of all concerned, and had no notice of any variation from the customary form of policies.

The deposition of Mr. May, the secretary of the company, stated that the only paper which A. Sigourney showed him on 14 June, when he applied for insurance, was a copy of a proposal made to some other offices for insurance on the same risk, and that he did not leave it, but only showed it to the deponent. That he, the secretary, filled the policy, and understood the insurance was for Graves and for no one else, as the policy purports. That he is not sensible of any error in the filling it; that he filled it as he understood the intention of the parties in the contract. That A. Sigourney read it over deliberately before he gave the premium note, and after reading, it went away. He afterwards returned and requested the secretary to add to it the words "as property may appear," which by permission of the president were interlined.

The first policy written by the company was dated 3 April, 1799. The president and directors had made no alteration in the printed form of policies from their first commencing business until 14 June, 1800.

On 9 May, E. Sigourney & Sons, in answer to Graves' letter of the 5th, say that the gentlemen will not insure under 20 percent premium.

Page 6 U. S. 424

On 15 May, Graves requested insurance to be made

"for $21,000 on the ship valued at that sum, and $16,000 on the cargo as interest shall appear. The latter completes the sum intended to insure on the cargo. Your policy therefore being the last dated, it is understood that short interest (if any should appear) is to be settled with your underwriters."

On 3 June, E. Sigourney & Sons wrote to Graves that "$5,900 is done on your policy on the cargo. It goes on very heavily."

Graves, in answer, on 10 June, said,

"With much reluctance do I learn the little progress you have made in insuring the cargo. I hope by offering two and a half percent more you may induce the companies or solid individuals to fill up the remainder. At any rate, it will not answer my purpose to have the risk uncovered; you therefore, on receiving these presents, will please to ascertain whether there is a prospect of succeeding. If not, give me immediate notice in order to propose it elsewhere."

The material words of the policy are

"This policy of assurance witnesseth that the president and directors of the Boston Marine Insurance Company do by these presents cause John Boonen Graves to be assured, lost or not lost, $10,000 on property on board the ship Northern Liberties, as property may appear, at and from Teneriffe to Vera Cruz."

"And it is hereby agreed that if the assured shall have made any other assurance upon the property aforesaid prior in date to this policy, then the said insurance company shall be answerable only for so much as the amount of such prior assurance may be deficient towards fully covering the property at risk. And the said insurance company shall receive the premium (excepting half percent) upon so much of the sum by them assured as they shall be exonerated from by such prior assurance. And in case of any assurance upon said property subsequent in date to this policy, the said insurance company shall nevertheless be answerable to the full extent of the sum by them herein assured, without right to claim contribution from such subsequent

Page 6 U. S. 425

assurers, and shall accordingly be entitled to retain the premium by them received in the same manner as if no such subsequent assurance had been made."

It was fully proved that Graves & Barnewall were jointly and equally interested in the ship and cargo, and the representation to the New York offices stated that fact. Four other policies upon the same ship and cargo and for the same voyage were exhibited by the complainants, all of which had the usual clause,

"as well in his own name, as for and in the name and names of every other person or persons to whom the same doth, may, or shall appertain in part or in whole."

Three of them were in the name of Graves, and one in the name of Barnewall.

There was full proof of a total loss of ship and cargo.

A suit at law had been brought by Graves & Barnewall upon the present policy in which judgment was rendered against them, which judgment was affirmed in this Court at December term, 1801.

Page 6 U. S. 438

MR. CHIEF JUSTICE MARSHALL delivered the opinion of the Court.

The points made by the plaintiffs in this case are

1. That the policy does really insure their joint property on board the ship Northern Liberties so far as the same was at the time uncovered by prior assurances.

2. That if the property be not insured at law, yet it was intended to be insured, and this Court will relieve against the mistake in the agreement.

1. That the policy does really insure the joint property of Graves & Barnewall.

The words are

"The president and directors of the Boston Marine Insurance Company, do by these presents cause John Boonen Graves to be assured $10,000 on property on board the ship Northern Liberties as property may appear."

These words, it is contended by the counsel for the plaintiffs, insure the joint property of Graves & Barnewall so as to cover the interest of each.

The operation of the words themselves, taken in their ordinary sense, would certainly not extend beyond the interest held by Graves in the cargo. The words "as property

Page 6 U. S. 439

may appear" seem to restrict the general terms of the policy to the interest of the person named in it. Admitting this to be true, it is still contended that the interest of each partner in the whole partnership stock, is an insurable interest, and as it was obviously the intention of Graves to insure for his partner as well as for himself, the policy ought to receive a construction which will effect this intent. The reasoning in support of the power of each partner to insure the joint property is certainly strong and well founded. But the doubt in this case is not whether Graves could have insured the interest of his partner, but whether he has insured it.

It is true that Barnewall need not have been named in the policy, but the contract ought to have been so expressed (since it is an open policy) as to show that the interest of some other person than Graves was secured if such was to be the effect of the instrument.

It is a good general principle that written agreements ought to be expounded by themselves. But if the same words are to be considered as insuring the interest of Graves only or the interest of Graves & Barnewall, according to extrinsic circumstances, the certainty expected from a written agreement will be very much impaired.

The interest of Barnewall therefore cannot be considered as insured by this policy under the power of one partner to insure the share of his co-partner. If it is insured, it must be as the interest of Graves.

Several cases have been stated in which Graves might sustain a loss by the loss of Barnewall's part of the cargo, and therefore it has been contended that he may be indemnified against that risk, in a policy professing to cover only his own interest.

The case put is that Graves might have paid for the whole cargo and have retained a lien upon it for his reimbursement. But in that case his interest would not be the result of his character as a partner, but would be in the nature of a mortgage. The question would not be generally whether the interest of a co-partner may be said to comprehend all the partnership effects, but whether a mortgagee or other person having a lien upon property may be said to have an interest in the whole of it. As a claim so

Page 6 U. S. 440

founded would rest not on the general principles of partnership, but on the particular circumstances of the case, those circumstances ought to be made out in order to entitle the plaintiffs to avail themselves of the argument. Not being made out, they do not belong to the case.

If a suit at law had been brought on this policy, it would only have been brought in the name of Graves, and he must have averred property on board the vessel. He could only have been entitled to recover to the amount of property uninsured. Would it have been sufficient under such an averment to have shown that the interest of his partners and himself amounted to the sum he claimed, or if he had averred property in himself and another to the amount of $10,000, would such an averment have entitled him to a judgment for the whole sum? In ordinary transactions the plaintiff would certainly fail in an attempt founded on similar principles.

A policy, though construed liberally, is still a special contract, and under no rule for proceedings on a special contract could the interest of a co-partnership be given in evidence on an averment of individual interest or an averment of the interest of a company be supported by a special contract relating in its terms to the interest of an individual.

But it is contended that an insurable interest is distinct from interest in the ordinary acceptation of the word, and several cases have been cited in support of this doctrine. Those cases generally appear to be answered by a distinction taken by the defendants' counsel between the interest and the power of a co-partner. But the case of Page v. Fry, reported in 2 Bos. & Pul. 240, certainly countenances the doctrine maintained by the plaintiffs, and ought to be particularly considered. But before that case is adverted to it may be proper to mention what appeared to be the opinion of Judge Buller in the case of Perchard v. Whitmore, reported in the same book in page 155. In that case it appears to have been considered as a clear principle that if in an action on a policy and on an averment of interest in the plaintiffs, it should appear that the plaintiffs and another were interested, the action would not be maintainable. That opinion would apply to the case at bar, but as the question

Page 6 U. S. 441

was not directly decided, and was the opinion of a single judge, it may be supposed to yield to the case of Page v. Fry, where it is said that question came directly before the court.

The case of Page v. Fry was an action brought by an agent on a policy signed by himself, and in the declaration he averred an interest in the whole cargo insured in Messrs. Hyde & Hobbs. It appeared in evidence that after the purchase of the cargo and before the insurance was made, a house by the name of Hacks had taken an interest in it, and for this variance between the averment and the proof the defendants moved for a nonsuit.

It is worthy of remark that no doubt was entertained of the right of the plaintiffs to recover the whole sum had the declaration stated the truth of the case. And that the counsel in support of the action did not allege that the interest of Hacks was insured as the interest of Hyde & Hobbs, or that on an averment of a particular interest a joint interest might be given in evidence, but that the averment was immaterial under the acts of Parliament, and being alleged under a scilicet, would not vitiate. The invoices having been made out in the name of Hyde & Hobbs, who paid for the cargo, he also contended that the prima facie right was in them, and that Hacks had only an equitable interest.

The argument goes upon the admission that the variance under the circumstances which attend the case at bar would be fatal.

The same remark applies to the argument in support of the nonsuit.

This deserves consideration, since it certainly warrants an opinion that previous to that case, the law was generally understood to require that the averment of interest in an action on a policy should be supported by testimony corresponding with that interest according to the general acceptation of the term.

Lord Eldon certainly states his opinion in favor of the action to be founded on the interest of the plaintiffs in the entirety of the cargo. But in examining that opinion,

Page 6 U. S. 442

it does not appear to be supported by the authorities he cites, and the words he uses in the conclusion would seem to imply that, contrary to his reasoning, he paid some respect to the circumstances under which Hacks had become concerned. "I think," says his lordship, "the plaintiff had a sufficient interest in the entirety of this cargo, notwithstanding other persons had a beneficial interest in a part." The word "beneficial" seems to imply something distinct from a legal interest, and to correspond with the terms "equitable interest," which had been used by the plaintiffs' counsel. The opinions of justices Heath and Chambre seem to be founded on this being a valued policy and on the plaintiff's having such an interest as would entitle him to insure under the act of Parliament, and that the substance of the averment was nothing more than that the plaintiffs had an interest in the cargo which would satisfy the act. The opinion of judge Rooke is accompanied with no explanation whatever.

This case, even were the decision an authority, is too imperfectly reported to be permitted to overthrow a system which was previously established.

It is the opinion of the Court that on the legal construction of this policy, John Boonen Graves is insured to the extent of his own interest in the cargo, but that the interest of his co-partner is not insured.

Were it otherwise, the remedy would be complete at law, and of consequence the plaintiffs could not maintain their bill in a court of equity.

2. It remains to inquire whether, under the circumstances of the case, a court of equity will relieve the plaintiffs against the mistake alleged to exist in the contract and extend the insurance to the whole partnership interest.

That Graves intended to insure the whole is proved in a manner which is perfectly satisfactory.

That the company believed themselves to be insuring the property of Graves only is probable. Certainly such is the evidence in the cause. There is no ground for imputing to the company a knowledge that the policy did not correspond with the intentions of the insured.

Page 6 U. S. 443

If then the relief which they ask should be granted to the plaintiffs, it must be on the principle that the information laid before the insurance company was sufficient to apprise them of the fact and to require that on the principles of good faith, they should suggest to the agent of the plaintiffs the departure of their policy from the ancient form.

This information is in writing, and is contained in the letter of 5 May and in the representation of the risk which accompanied it.

The letter must be considered as having been seen by the officers of the company, but as it was shown not for the purpose of commencing a contract, but of inquiring into the terms on which a contract might probably be made, it is reasonable to suppose that the nature of the risk was the only subject of consideration, and that the question whether the property belonged to one or more persons never occurred. A month elapsed before a second application was made, and as the description of the risk was again laid before the president, it could not be required from him to retain in his mind a circumstance casually suggested in a letter seen so long before, to which circumstance there was nothing to direct his particular attention.

It is then on the representation of the risk, and on the verbal communications of Andrew Sigourney, that the case must depend.

The representation contains an averment that "the ship and cargo really and truly belong to citizens of the United States." But as only a small part of the cargo was insured by the Boston company, this averment contains no information that any other than John Boonen Graves was interested in the particular policy then to be entered into.

In the letter there is another expression which has been much relied on. It is "on this vessel's cargo we want insurance." This expression has been considered as sufficiently indicating that the application was made in behalf of more than one person, and this expression has produced the principal difficulty of the case,

Page 6 U. S. 444

but on reflection it has been thought too ambiguous to authorize a change in the legal import of a written contract.

The description obviously relates to the whole cargo, but the application for insurance was only for a part of it. If that application was made in the name of Graves only, it was no unreasonable supposition that the other parties concerned might be separately insured, and that the policy then required was designed to cover Graves only. That the application was so made must be inferred from the circumstance that the policy was so framed at a time when there could be no motive for varying it from the insurance applied for, and that Sigourney does not allege himself to have made any communications to the president indicating a wish to insure others than Graves.

These grounds are too equivocal to warrant the Court in varying a written contract in a case attended with the circumstances which appear in the present.

The policy was in the possession of the agent for the plaintiffs, and ought to have been understood by him before it was executed; he retained it in his possession for several months before a mistake was alleged. Under such circumstances, the information given to the insurance company ought to be very clear to justify a court of equity in conforming the policy to the intention of one of the parties, which was not communicated to the other till the loss had happened.

Under the circumstances of the case, a court of equity cannot relieve against the mistake which has been committed, and as the remedy of the plaintiff Graves on the policy, to the extent of his interest, is complete at law, the decree of the circuit court dismissing his bill must be affirmed.

Judgment affirmed.

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