Duncan v. New York Mutual Insurance

Earl, J. The policy of insurance in this case was contemporaneous with the policy issued upon the 'same vessel which was under consideration in the case of Duncan v. China Mutual Insurance Co. (129 N. Y. 237). The two policies were quite similar and the questions of law and fact involved in the two cases were nearly the same, except the facts growing out of the cancellation of the policy in this case, which will now be stated. It was agreed in this policy that the defendant would “ return ¡pro rata premium for every thirty days of unexpired time, if the policy be canceled on arrival.” The policy by its terms was to run and cover the vessel from August 3, 1888, at noon, until August 3, 1889, at noon. The vessel sailed from New York for Aux Cayes in Hayti, November 22, 1888. On the 28th day of November it was arranged between the plaintiff and the Samana Steamship Company, then owning the vessel, that the policies which were then held upon the vessel should be canceled at and from noon of the 3d day of December, 1888, and that new policies should be procured to take effect at that time. Pursuant to that arrangement the plaintiff applied to the defendant to cancel the policy in question at and from December 3d, and to return ¡pro rata premium for the unexpired time, eight months, amounting to the sum of $233.33, and the defendant agreed so to cancel the policy, and accordingly wrote across the face thereof the following: “ Canceled at request of insured, E. P., for eight months, December 3, 1888. T. B. B., Jr., Pt.: ” and also indorsed on the policy the following: “ Pay $233.33 return premium, and cancel policy. December 3d, 1888. T. B. B., Jr., Pt.” And the defendant paid to the plaintiff the amount of the return premium. At the time of the application for the cancellation of the policy the plaintiff supposed that the vessel had arrived at the port of Aux Cayes, and the defendant at that time was ignorant *92 whether or not she had reached that port, and did not in accepting the proposition to cancel the policy consider whether or not she had reached that port. From the time of the sailing of the vessel from Hew York to the third day of December, no information had been received by either party as to her arrival or non-arrival at the port of destination, and at that time it was not possible that such information could be received, as there was no telegraphic communication between this country and that island, and neither party then had any knowledge of the safety or loss of the vessel. The ordinary length of a voyage from Hew York to Aux Cayes for such a vessel was seven days. The vessel never reached her port of destination. Ho traces of her were ever seen or found, and she became a total loss during a violent hurricane prior to the 3d day of December. The claim of the defendant is that it was absolved from any liability upon its policy because of the cancellation thereof on the tim’d day of December. To this claim, we think there are three satisfactory answers: (1) The cancellation of the policy looked to the future and not to the past. It was the pro rata unearned premium which was returned. The parties did not bargain for the entire destruction of the policy, as the defendant kept the premium, for the first four months. That was its indemnity for the risk it took during that time, and the policy was canceled only for the remaining eight months. The cancellation was not intended to reach back and absolve the defendant from any liability which it had already incurred. If, therefore, we assume, as claimed by the defendant, that the cancellation was valid and binding upon both parties, we do not think that it exempted the defendant from liability for the loss which occurred during the four months when the policy was in force. (2) At the time of this cancellation, the loss had occurred, and the defendant was under an absolute obligation to pay the $5,000 insured. If the parties had known of the loss and had come together and formally agreed by an oral or written agreement, not under seal, that the defendant should be *93 absolved from liability by the payment of the sum of $233.33, it would not have been discharged from liability for the balance. An absolute, undisputed liability to pay $5,000 could not be discharged by the simple payment of $233.33. (Bunge v. Koop, 48 N. Y. 225; Coe v. Hobby, 72 id. 141; Smith v. Kerr, 108 id. 31.) The fact that the discharge was given by mistake cannot give it greater effect, or place the defendant in a better position than it would occupy if the discharge had been purposely given with knowledge of all the facts. The plaintiff could have recovered the balance of the $5,000 upon either of these two grounds in an action at law, without setting aside the cancellation written upon the policy; and as this judgment is for the precise sum to which the plaintiff would have been entitled in an action at law, it should not be reversed because the plaintiff also asked for equitable relief. (3) The plaintiff in his complaint alleged all the facts and prayed for relief that the cancellation of the policy should be rescinded and set aside and that he should recover $5,000, less the sum of $233.33 returned to him for the unearned premium. The trial court found, what was absolutely true, that the cancellation was made by mistake. The insured could demand the return of unearned premium only upon the arrival of the steamship at her destination, and it was only upon her arrival that the defendant was bound to make the cancellation and return the premium. Both parties manifestly supposed on the 3d day of December that the vessel had reached her destination. Both parties were mistaken as to that fact, and both were ignorant of the loss of the vessel prior to that time. So it is entirely clear that the cancellation was made under a mistake of fact. It was at least made under a mistake of fact by the plaintiff, and, therefore, upon the return of the money paid to him he was entitled, under familiar principles of law, to have the cancellation rescinded. The learned counsel for the defendant claims that we 'decided something in conflict with these views in Dambmann v. Schulting (75 N. Y. 55) and Whittemore v. Farrington (76 id. 457). In the former case we held that ignorance of a fact extrinsic and not essen *94 tial to a contract, "but which, if known, might have influenced the action of a party to the contract, is not such a mistake as will authorize equitable relief; that as to such facts the party must rely upon his own vigilance, and that if not imposed upon or defrauded he will he held to his contract. Here the essential facts in reference to which the parties were mistaken Were not extrinsic but they were intrinsic and essential to the contract of cancellation and were involved therein. The parties were dealing with the policy which both supposed to be in force covering the risk insured on the 3d day of December, with premiums which both parties believed were unearned, in reference to a vessel which both parties believed to be in existence. As to all of these facts they were mistaken. The vessel was lost. The policy had matured, and all the premiums had been earned. Without commenting upon the case of Whittemore v. Farrington, it is sufficient to say of it that a discriminating examination of it shows that it is not an authority for the defendant in this case. Upon the facts appearing in this record we see no reason to doubt that the court had the power to relieve the plaintiff from the mistake alleged. The vessel was lost in ¡November, 1888. The proofs of loss were furnished April 8,1889, and the plaintiff did not offer to repay the $233.33 until May, 1890, and the defendant now claims that by retaining this sum so long the plaintiff was guilty of laches and so ratified the cancellation, and that he was not entitled thereafter to have it rescinded. There is no explanation contained in this record of this long delay. We may assume that it was explainable in such a manner as not to prejudice the plaintiff’s right of recovery in this action, as no defense based upon that delay was alleged in the answer, nor in any way alluded to or insisted upon at the trial, and there is no finding of fact or of law in reference thereto. All that we have in the record on this subject is that the money was paid to the plaintiff and was not tendered to the defendant until May, 1890. Upon such a state of the record it is manifest that the defendant cannot now insist upon the *95 alleged laches as a defense. If the point had been made in the answer, or upon the trial, it is possible that the delay Would have been explained. There are no other exceptions in the record requiring attention, and the judgment should he affirmed, with costs. All concur. Judgment affirmed.