Royal Ins. Co. v. Martin, 192 U.S. 149 (1904)

Upon the undisputed evidence in the case the policy was p. 151voided by this change of interest in the stock of goods, a part of the property insured. Germania Fire Ins. Co. v. Home Ins. Co., 144 N. Y. 195, 199; Drennen v. London Assurance Co., 20 Fed. Rep. 657; S.C., 113 U. S. 51; London Assurance Co. v. Drennen, 116 U. S. 461; Card v. Phoenix Ins. Co., 4 Mo. App. 424. Cases in the Supreme Court of Iowa subsequent to the case of Cowan v. State Ins. Co., 40 Iowa, 551, which is relied on by the defendant in error, distinguish that case on the ground that there was no provision in the policy in that case relating to a change of title or interest, but a provision merely in respect to a sale or conveyance which was held to mean a technical sale of the whole property. Hathaway v. State Ins. Co., 64 Iowa, 229; S.C., 20 N. W. Rep. 164; Oldham v. Ins. Co., 90 Iowa, 225; S.C., 57 N.W. Rep. 861; Jones v. Phoenix Ins. Co., 97 Iowa, 275; S.C., 66 N. W. Rep. 169, and see Beggs v. Ins. Co., 88 N. Car. 141; May on Ins. (4th ed.) § 279; 3 Joyce on Ins. §§2293-2295, and note reviewing cases; 1 Biddle on Ins. § 224; Elliott on Ins. § 273; Porter on Ins. (2d ed.) 180.

Nor is the case appealable under § 15 of the act relating to appeals from Territories. As to construction of act of Congress and ascertaining intent of Congress, see United States v. Union Pacific R. R. Co., 91 U. S. 72; 1 Kent’s Com. 162, p. 153cited in People v. Draper, 15 N. Y. 532; McLish n . Roff, 141 U. S. 661, 666. Cases on plaintiff in error’s brief distinguished.

The law and decisions in the States of the Union on this point are very conflicting and the question cannot be decided upon the authority of the decisions of any State or group of fates, but the lex loci contractus, to wit, that of Porto Rico, should be understood. Bank of the United States v. Donnally, et. 361, 372. No Spanish laws or decisions are submitted y counsel for plaintiff in error, so that no opportunity is given Do’ fC0UTi<0 arr^Ve a corrccf conclusion on this important not k 1S Court cann°t decide this question because it can-the e,?resumed know the Spanish laws and decisions on su ject of partnership, fire insurance and construction of p. 154contracts. Waiving, however, this fatal defect for the present, the question will be argued as a question of American law. There was no error in the court below. Ayres v. Hartford Ins. Co., 17 Iowa; 176; 1 Biddell on Ins. 199; Washington Fire Ins. Co. v. Kelley, 32 Maryland, 421, 434; Scanlon v. Union Fire Ins. Co., 4 Biss. 511; Blackwell v. Insurance Co., 48 Ohio St. 533, 540; Cowan v. Iowa State Ins. Co., 40 Iowa, 551, citing May on Insurance, pp. 463, 381, pp. 303, 278; Hitchcock v. N. W. Ins. Co., 26 N. Y. 68; West Branch Ins. Co. v. Helfenr stein, 40 Pa. St. 289; Sherman v. Niagara Fire Ins. Co., 2 Sweeney, 470; Femandey v. Great Western Ins. Co., 3 Robertson, 457; Hoffman v. Place, 32 N. Y. 405, and see the Scotch case of Forbes v. Border Counties Fire Office, 11 Court of Sessions, 3d Series, 278.

In case a loss by fire occur during the existence of an invasion or riot, the board of directors may call for proof that such loss was not occasioned by the invasion, and if such proof be not furnished, or, if furnished, be not reasonably satisfactory, no action on the policy may be maintained. The condition was inserted merely for the protection of the stockholders o the company, in that it placed a check upon the board o directors by providing that they should not pay certain claims without first calling for satisfactory proof that the loss was no due to certain casualties which were not insured aSains ‘ Braunstein v. Accidental Death Insurance Co., 1 Best & mi > p. 155783; Baillie v. Assurance Co., 49 La. Ann. 658, 661. See also La Societe, etc., v. Wm. B. Morris & Co., 24 La. Ann. 347; Monteleone v. Insurance Co., 47 La. Ann. 1563; National Union v. Thomas, 10 App. D. C. 277. It does not throw the burden of proof on the insured. German Ins. Co. v. Frederick, 58 Fed. Rep. 144; forfeitures, as this would be, are not favored in the law. 1 Wood on Fire Insurance (2d ed.), 161, citing Hoffman v. ¿Etna Insurance Co., 32 N. Y. 405; Reynolds v. Commerce Ins. Co., 47 N. Y. 597, and many other cases; and see Insurance Company v. Eggleston, 96 IT. S. 572, 577; Insurance Co. v. Norton, 96 U. S. 234.

Then came the act of March 3, 1891, “to establish Circm Courts of Appeals, and to define and regulate in certain ca the jurisdiction of the courts of the United States, an or purposes.” 26 Stat. 826. The 5th section of that ac p scribes the cases that may be brought directly to from the District Courts or from the existing Circui p. 157the United States, while the 6th section provides that the Circuit Courts of Appeals “shall exercise appellate jurisdiction to review by appeal or by writ of error final decision in the District Court and the existing Circuit Courts in all cases other than those provided for in the preceding section of this act, unless otherwise provided by law”—the judgments or decrees of the Circuit Courts of Appeals to be final “in all cases in which the jurisdiction is dependent entirely upon the opposite parties to the suit or controversy being aliens and citizens of the United States or citizens of different States; also in all cases arising under the patent laws, under the revenue laws, and under the criminal laws and in admiralty cases.” Further, by the same section: “In all cases not hereinbefore, in this [6th] section, made final, there shall be of right an appeal or writ of error or review of the case by the Supreme Court of the United States when the matter in controversy shall exceed one thousand dollars, besides costs.” The 13th section of the act provides: “Appeals and writs of error maybe taken and prosecuted from the decisions of the United States Court in the Indian Territory to the Supreme Court of the United States, or to the Circuit Court of Appeals in the Eighth Circuit, in the same manner and under the same regulations as from the Circuit or District Courts of the United States, under this act. And the 15th section is in these words: “That the Ciruit Court of Appeal in cases in which the judgments of the ircuit Courts of Appeal are made final by this act shall have

US t0 the aCt °f April 12’ 1900’ c* 191> entitled, emporarily to provide revenues and a civil p. 158government for Porto Rico, and for other purposes.” 31 Stat. 77,

The section of the Porto Rico act upon which the question of our jurisdiction mainly depends is the 35th, which is in these words: “That writs of error and appeals from the final decisions of the supreme court of Porto Rico and the district court of the United States shall be allowed and may be taken to the Supreme Court of the United States in the same manner and under the same regulations and in the same cases as from the supreme courts of the Territories of the United States, an such writs of error and appeal shall be allowed in all cases where the Constitution of the United States, or a treaty thereo, or an act of Congress is brought in question and the ng claimed thereunder is denied; and the supreme and rl courts of Porto Rico and the respective judges thereo m y grant writs of habeas corpus in all cases in which the same a grantable by the judges of the district and circuit courts o p. 159United States. All such proceedings in the Supreme Court of the United States shall be conducted in the English language.” 31 Stat. 77, 85, c. 191.

Is this result, so far as the final judgments of the District Court of the United States for Porto Rico are concerned, affected by anything in the Circuit Court of Appeals act of 1891? We think not. That act, no doubt, contemplated a review by the appropriate Circuit Court of Appeals, first, of the final judgments of the United States court in the Indian Territory in all cases covered by section 702 of the Revised Statutes and the act of March 3, 1891; second, of the final judgments of the Supreme Courts of the other Territories of the United States in cases the judgments in which, by that a°t (§6), are made final. No provision is found in the act of 1891 for the review, in a Circuit Court of Appeals of the judgpaent of the Supreme Court of a Territory of the United States ln a case of the class the judgment in which, if rendered in a rcuit Court of Appeals, is not final. So that the jurisdiction p. 160of this court to review the judgments of the Supreme Courts of the several Territories in that class of cases was the same after as before the passage of that act. Shute v. Keyser, 149 U. S. 649. Clearly this case is not of the class the judgment in which, if rendered in the Supreme Court of a Territory of the United States, to use the words of the act of 1891, is reviewable in a Circuit Court of Appeals under that act. It is not a patent, revenue or criminal case, nor one in which the jurisdiction of the court below depended entirely upon the opposite parties to the controversy being aliens and citizens of the United States or citizens of different States. But it is one which, if it had been determined by the Supreme Court of one of such Territories of the United States, could have been brought here directly, upon writ of error, after as well as before the passage of the act of 1891. Our conclusion must, therefore, be that the jurisdiction of this court cannot be denied by reason of any provision in the act of 1891.

These views as to the scope and effect of the Porto Rico ac of 1900 are not at all affected by the provisions in the acts re a ing to the reexamination of the final judgments of the hig es courts of the Indian Territory, Hawaii and Alaska. I Territory, 26 Stat. 826, c. 517, § 13; Hawaii, 31 Stat. 141, , p. 161192 U. 8. Opinion of the Court.

vol . cxcn—11 p. 162was not occasioned by or connected with, but occurred from a cause or causes independent of the existence of such invasion, foreign enemy, rebellion, insurrection, riot, civil commotion, military or usurped power or martial law.”

As the words of the policy are those of the company, they should be taken most strongly against it, and the interpretation should be adopted which is most favorable to the insured, if such interpretation be not inconsistent with the words used. National Bank v. Insurance Company, 95 U. S. 673, 678, 679; Liverpool &c. Ins. Co. v. Kearney, 180 U. S. 132, 136; Texas & Pacific Railway Co. v. Reiss, 183 U. S. 621, 626. In this view the above words should be held to mean that the policy covered loss by fire occurring during the existence of (if not occasioned by nor was connected with) any invasion, foreign enemy, rebellion, insurrection, riot, civil commotion, military or usurped power, or martial law, in the general locality where the property insured was situated. If the loss so occurred, then the company was entitled to demand, before being sued, that proofs be furnished showing that the loss was not occasioned by or connected with, but was from causes independent of, such invasion, foreign enemy, rebellion, insurrection, riot, civil commotion, military or usurped power or martial law. But the company made no demand for proofs on this point. On the contrary, the formal production of such proofs was, m effect, waived; for the company assumed that what occurred, in the locality, at the time of the fire, constituted a riot, which relieved it from all liability. It, therefore, gave notice by its agents that as the fire and the destruction of the goods ‘‘were produced by a riot they were not compelled to pay,” and that “the policy would not be paid.” A general, absolute refusal to pay in any event, or a denial by the company of all liability under its policy, dispensed with such formal proofs as a condition of its liability to be sued, and opened the way for a suit by the assured in order that the rights of the parties could be determined by the courts according to the facts as disclosed by evidence, It was so held by this court in a case of W p. 163insurance, Tayloe v. Fire Insurance Company, 9 How. 390, 403; and the same principle was recognized as applicable in a case of life insurance. Knickerbocker Life Insurance Co. v. Pendleton, 112 U. S. 696, 709. To the same effect are authorities cited by text-writers. 2 May oil Insurance (3d ed.), §469; 2 Biddle on Insurance, § 1139; 2 Wood on Fire Insurance (2d ed.), § 445. Now, whether there was any substantial connection between the fire and military or other disturbance of the kind specified, existing in the locality where the property was situated, was a question of fact, and it was properly left to the jury. The court, referring to the above clause of the policy, charged the jury: “a fair construction of that condition, in the opinion of the court, is that in order to excuse this company from liability in case of loss of property by fire, that invasion by foreign enemy, rebellion, insurrection, riot, civil commotion, military or usurped power or martial law, must have been occurring within the section of the country where this loss occurred, or within the locality and within such radius of country where the loss occurred, that damage arose to property by reason of the existence of that rebellion, invasion, insurrection, civil commotion, military or usurped power, or martial law. And I further tell you, gentlemen, that if you believe from the evidence that this destruction of property did not occur from any of these causes, and occurred from a cause independent of the existence of any foreign enemy, rebellion, insurrection, riot, civil commotion, military or usurped power or martial law, then you should find, so far as this defence was concerned, for the plaintiff in damages whatever you think may have been his loss.”

jury found, upon the whole evidence, that the loss was occasioned by causes independent of the existence of any invasion, oreign enemy, rebellion, insurrection, riot, civil commotion, p. 164military or usurped power, or martial law. The facts under this issue having been fairly submitted to the jury, its finding cannot be disturbed.

Upon the question whether an insurance policy, of t e ge p. 165eral class to which the one in suit belongs, continues in force after a sale or transfer by the assured of his interest in the property insured, the adjudged cases are by no means in accord, and it will serve no useful purpose to make an extended review of them and show wherein they differ. It will be found upon examination that each policy contained language peculiar to itself, and upon that language the particular case turned. Of course, in every case, the fundamental inquiry must be as to the intention of the parties, to be gathered from the words of the policy; always, however, interpreting the policy most favorably for the insured, where it is reasonably susceptible of two constructions.

u in respect , of the goods in question, the case depends the11 ei>- cons^era^OIls- When the goods were insured y were m their entirety the sole property of Francisco p. 166Martin, the assured. He was the legal owner of the whole of them. They were in his custody, and subject to his exclusive control. But at the time of their destruction by fire the ownership of the goods, in their entirety, had, by transfer from the assured, passed to Martin Brothers, and became, without notice to the company, subject to the exclusive control, in their entirety, of that firm. Such a change of ownership and control, it must be held, avoided the policy, unless it was kept alive by the mere fact that the assured although taking no active part in the business of the firm was yet a silent partner, and as such had some interest in the insured property. But that fact cannot be given the weight suggested without ignoring altogether the reasons which, it must be assumed, induced the company to incorporate into its policy the provision that if any property insured passed from the assured to another person without notice to the company, the policy should cease to be in force. It may well be that an insurance company would be willing to insure property owned by a particular person of whose character and habits its agent had knowledge or information, but unwilling to insure the same property if owned by that person in connection with others. Prudence requires that a company, before insuring against fire, should be informed as to the actual ownership of the property proposed to be insured, and know who, in virtue of such ownership, will be entitled to its custody and to control it during the term of the policy. The provision that the policy in this case should cease to be in force from the moment the insured property passed from the assured to others without notice to the company implied not only that the company relied upon the integrity and watchfulness of the assured, but that if he looke to the company for indemnity against loss by fire he must take care not to allow the property to “pass” from him to others, without notice to the insurer. The assured, without notice to the company, did pass the goods in question to a firm, eac member of which thereby acquired an interest in the who oj the goods transferred. The ownership of the firm was in aw p. 167and in fact distinct from the original sole ownership of the assured. Practically, for all purposes of guarding the goods insured against destruction by fire, they passed to the active partners who were strangers to the property at the date of the policy—the assured, as a silent partner, retaining no interest in any particular part of the goods, and being under no obligation as between himself and the active partners, to care for the safety of the property. Its safety, after the transfer, depended altogether upon the watchfulness of the active partners in whose possession the goods were up to the fire. It only remained for the original sole owner, after passing the goods in their entirety to the firm of Martin Brothers, in which he was a silent partner, to receive such profits as accrued to him from their use in the business as conducted by the active partners.