City of Detroit v. Grummond

SEVERENS, Circuit Judge, having made the foregoing statement of the case, delivered the opinion of the court. A question in its nature preliminary should first receive attention. It is contended for the defendant in error that by the failure of the city to file an affidavit denying the execution of the contract set out in the declaration it admits the execution and the authority of those signing it in behalf of the city, and reference is made to rule 28 of the court in which the trial was had, and which is also a rule of the circuit courts of the state, by which it is provided that, “upon the plea of the general issue in an action upon any written instrument, under seal or without seal, the plaintiff shall not be put to the proof of the execution of the instrument or the handwriting of the defendant, unless the defendant, or some one in his behalf, shall file and serve a copy of an affidavit denying the same.” This rule has been given a broad construction by the Supreme Court of the state, and has been held to require an affidavit when the contract in suit purports to be executed in behalf of the defendant by attorney, if the defendant proposes to deny that the instrument was duly executed as its contract. Peoria Ins. Co. v. Perkins, 16 Mich. 384; Inglish v. Ayer, 92 Mich. 370, 52 N. W. 639. And, notwithstanding such a construction may not be due in all circumstances, we were, upon the argument, much impressed by this objection to that part of the defense upon which the plaintiff in error relies. But upon more careful examination of the record we do not find that this objection was made in the court below, and it is quite clear that the trial proceeded without regard to the rule, as if the question of authority was an open one; and the case was submitted to the jury upon the assumption that the contract derived its validity from the ratification of the city. In these circumstances we ought to deal with the case in accordance with the position taken by the parties and the action of the court upon the trial. The course pursued amounted to a waiver by the plaintiff of the affidavit required by the rule. If the plaintiff or the court had stood upon the rule, it would have been competent for the defendant to have then applied for leave to file an affidavit, and the court might have granted it; for it is held by the state Supreme Court that the affidavit may be filed at any time before the trial is ended. In Freeman v. Ellison, 37 Mich. 459, the Supreme Court, Judge Campbell delivering the opinion, reversing the — 968 — judgment in a case where the defendant had neglected to file an affidavit denying the execution of the contract in suit, said: “We take occasion to repeat what we have said before, that there is no reason whatever why a circuit court should not allow an affidavit to be filed at any stage of the case, and that such leave ought not to be declined where it will work manifest injustice to decline it.” It is apparent from the record that it was material to ascertain whether the hiring of the steamer in behalf of the city was by the contract with U. Grant Grummond of November 30th, or was by a contract with Stephen B. Grummond, made previous to the bill of sale of September 14th, and with respect to which U. Grant Grummond, in consequence of the transfer, succeeded his father as lessor. It was material in more ways than one. First, because, if the latter was the fact, Stephen B. Grummond being a member of the board of health, it vitiated the contract of hiring — a consequence which would follow the transaction into the hands of the transferee, and no recovery could be had upon it in any condition of the pleadings which the court might permit (Dillon on Municipal Corp. § 444); and, secondly, because, as the sequel shows, the case was put to the jury as one in which the plaintiff was entitled to recover upon the ground that the contract of hiring, although not shown to have been originally authorized either by the common council or the board of health, had yet been ratified by the city by taking and keeping the possession of the vessel during the two years, and paying the $5,000 “in hand paid.” In order to show the intention and the effect of the supposed ratification, it was necessary to understand to what the action of the city was referable. There was nothing in its records, either of the common council or of the board of health, to show that the city had a contract with U. Grant Grummond. On the other hand, it was known to the city that the health officer, who was one of those charged with the execution of the authority given by the common council, had reported a proposition which had been made to the board of health for the letting of the steamer, and its acceptance by the board, before the 14th of September. It also knew that, contemporaneously with that transaction, possession of the steamer had been delivered to the city. There was a record in the office of the board of health, of which the city might be charged with notice, especially as the common council committed full power and authority to act in the matter, 'and which showed that on the 8th of September the board of health had hired the steamer upon terms there stated. It was the only record of the city offices expressly showing that any contract had been made for the steamer. This was read in evidence, but subsequently excluded by the court, as already stated. We tlunk this was error. It is not advisable that we should express any opinion upon the weight of the facts recited as evidence, but we are constrained to say that they had a direct bearing upon the subject of the ratification, by which the court held the city bound; and none of the matter referred to seems to us more persuasive than that which’was excluded. While upon this subject, we will refer to the payment of the $5,000 by the city on November 22, 1892, upon which much reliance is placed as showing a ratification. Certainly, it is impossible to say that as matter of law it had any such — 969 — consequence. To begin with, it was made eight days before the contract of November 30th. There is nothing to show that there had been any negotiations with U. Grant Grummond prior to the date of this last contract. The only contract in evidence when the payment was made, so far as appears, was the one made with Stephen B. Grummond. Whether U. Grant Grummond had made known to the city the transfer to him does not appear; but from the fact that no contract had been made with him, it is probable that he had made known the transfer. At all events, there is room for saying that the payment of the $5,000 was quite as easily referable to the contract which the city knew had been made as to one which did not exist, and of which it had no contemplation; and it was a question for the jury to determine what inference should be drawn from the circumstances in respect to the question what contract the common council intended to ratify by the payment. Another thing which the jury might regard was the improbability that the steamer should have been delivered to the city, and devoted to its use for more than two months, without any contract between the owner and the city. Similar considerations apply to. the facts that the city continued to possess the boat, and paid for taking care of it. It was at least an open question of fact to what contract such action referred. But it is urged by counsel for defendant in error that the entry in the records of the board of health was incompetent to. contradict or impeach the contract sued upon, because it only showed negotiations with Stephen B. Grummond, or possibly another contract with him. But neither of the parties contended or admitted at the trial that there was more than one contract for the hiring of the boat, and there is no room for any such contention now. The question upon this branch of the case was, what was the agreement upon which the partiés acted, or, more precisely, which the city acted upon in its supposed ratification ? A similar question was presented to us in the recent case of Stoll v. Loving, 120 Fed. 805, where we were compelled to reverse the judgment of the Circuit Court, for the reason that the court had refused to submit to the jury the question as to which of two possible contracts the plaintiff had for performing the services for which he sought to recover. It is further urged that the entry does not amount to an agreement with Stephen B: Grummond. But we think that it is evidence tending to show that such an agreement as is therein stated was made; and that, followed up as it was almost immediately by delivery of the vessel to the city, the jury might have found, if they were satisfied of the fact, that an agreement for the hiring of the boat was made in behalf of the city with Stephen B. Grummond. Again, it is said that it does not appear what boat was referred to, or what were the terms of the contract. But the earmarks are amply sufficient to show prima facie, at least, the identity of the vessel referred to with the vessel which was employed. The similarity of the terms of the contract with those of the contract of November 30th, though they are not identical, tends to show that they related to the same subject. Nothing appears to suggest an inference that some other «vessel was intended. It is pointed out, however, that the bill of exceptions does not purport to con — 970 — tain all the evidence, which is true. But when that which is shown by the bill points distinctly to a definite result, the defendant in error should see to it that enough is stated to show that the conclusion from what does appear is not the necessary one, if he proposes to rebut or deny the inference which should be drawn from it. It should at least be made to appear that there was other evr' mce upon that point which might affect the conclusion. In the instructions to the jury, the court, waiving all question as to whether the contract in suit was authorized in its execution by either the common council or the board of health, put the case to them upon the assumption that, although it might not have been so authorized, it had been distinctly ratified by the city, and was thereby made valid. The only question left to the jury was with reference to the measure of damages. The general proposition of law involved that a municipality may, by ratification, make valid a contract made in its behalf by an unauthorized agent, which the municipality had authority to make, may be conceded. For the reasons we have stated, we think it was a question of fact whether the city had ratified the contract on which the suit was founded, and that the error of the court was in excluding material testimony bearing upon that question. Other rulings relating to the admission of evidence touching that subject are assigned as error, but, as the judgment must be reversed, and they may not be again presented, we do not pass upon them. Another matter is this: No insurance was effected upon the vessel, and under the ruling of the court as given to the jury the only question of. fact submitted was upon the measure of damages. There was a difference between the contract sued on and the contract represented by the health officer to the common council to have been made and in the excluded record of the board of’health in respect to the matter of insurance. By the former the city was to effect the insurance in the sum of $12,000. By the latter it was to pay the insurance, a stipulation which would devolve taking the initiative step upon the owner, who would effect the insurance, and have recourse to the city for the premium. The plaintiff was permitted, under the charge of the court, to recover the whole amount of the contemplated insurance, upon the ground that by neglecting to insure the vessel the city became insurer in that sum — a result which could not have been permissible unless the contract of November 30th had become the contract of the city. It is suggested by counsel for defendant in error that the stipulations in the respective agreements, if there were two, were of the same legal effect; and the case of The Barnstable, 36 C. C. A. 199, 94 Fed. 213, is cited to sustain that proposition. The case cited was one where the owner of the vessel stipulated with the charterer to pay insurance upon the vessel. The ship became liable for the consequences of a collision, and the owner sought to establish the ultimate liability against the charterer. The owner had not effected insurance, and it was held that he could not prevail, for the reason that the risk contemplated by the stipulation was a risk of his own property, and the stipulation must, therefore, be interpreted as meaning an insurance which he would attend to; and, .having failed to do what would have protected him against loss, he could not fix the liability on the — 971 — charterer. Here the situation is reversed, and, if the construction be doubtful, the case cited would tend to support the presumption that the owner would be expected to attend to his own insurance. The court, in charging the jury upon the subject of damages, after referring to the testimony in respect to the condition of the vessel after the fire, told them that, while she was not physically consumed, she was, as claimed by the plaintiff, practically destroyed; that “the result would entitle the plaintiff to a recovery of the insured [insurer?] of that amount if you find that testimony is true, and you approve it, namely, that the damage to the vessel was to such an extent that it would cost more to repair her than she would be worth when repaired. If you think that was the extent and amount of the damage, then you-would be entitled to give the plaintiff damages for the stipulated sum here of twelve thousand dollars, and interest from the 1st of October, 1894.” We think this was erroneous and misleading. Apparently the learned judge had in mind a rule of marine insurance applicable in cases of abandonment. But some of the rules of marine insurance are founded on reasons not applicable to ordinary insurance, and we doubt whether the rule stated would be applied in marine insurance to circumstances such as these. But this contract was not maritime. It did not relate to navigation, but only to a vessel which was to- lie moored in the Detroit river for two years as a hospital. 19 Am. & Eng. Encycl. of Law, 940; Insurance Co. v. Dunham, 11 Wall. 1, 20 L. Ed. 90; The Richard Winslow, 18 C. C. A. 344, 71 Fed. 426; The Pulaski (D. C.) 33 Fed. 383. It is, therefore, to be construed and given effect, so far as it may be, by the rules of the common law. It involved insurance against loss by fire. Insurance against “marine risks” was also included. To what extent insurance against marine risks other than fire, on such a subject, was possible, we need not inquire. The vessel was undoubtedly the subject of insurance against loss by fire. If we assume that the city, by its failure to insure, was put in the place of an insurer against-fire, then we are to inquire what would have been the measure of the recovery in a suit brought by the owner against an insurer on such a loss. It must be answered that it would have the extent to which the value of the property had been depreciated by the fire, not exceeding the sum mentioned in the policy. The sum mentioned in the policy would serve only as the limit of the recovery. The vessel was an old one. It might be bad policy to spend much money in repairing her. Quite possibly it would be more profitable to dismantle her, or cast her away, than to repair her at all. She might not have been worth $12,000 before the fire, or after it, if she had been repaired. To tell the jury that, if they thought she would not be worth the cost of repairs when repaired, they “would be entitled to give the plaintiff damages for the stipulated sum of twelve thousand dollars and interest,” was a dangerous suggestion to come to a conclusion not warranted by the premises. The “stipulated sum” was not stipulated for any purpose here, but only stood as the limit of recovery in case of insurance. Our attention is called by the brief for the defendant in error to that clause in the contract upon which the suit is brought, which reads as follows: — 972 — “Said insurance to be for the benefit of the said party of the first part and the payment of the insurance in case of loss shall be taken in lieu of return of the vessel, provided that if said vessel be lost or destroyed by reason of any peril, risks or cause not insured against and by the fault of the said party of the second part, said party of the second part shall pay to the said party of the first part the sum of twelve thousand dollars ($12,000) as the value of said vessel.” And it is claimed that by this the city, in case the vessel was lost or destroyed in the circumstances stated, was bound to pay the sum of $12,000. It is manifest, however, that a total loss or destruction was intended; for it cannot be supposed that if some partial loss should happen, and the damages recovered from the insurer for that should be paid to the owner, the parties intended that the title to the vessel should pass to the city. And the instruction of the court which we are considering does not require that the jury should find the destruction was total, but only that they should find that she was damaged to the extent that it would cost more to repair her than she would be worth when repaired. Moreover, it is open to question whether the loss or destruction intended by this clause was one falling within the scope of the insurance which was stipulated for in the preceding clause. It would seem rather that the parties were supplementing those stipulations by providing for losses which would not be covered by the insurance before mentioned. But upon this we express no definite opinion, the question not having been raised or passed upon in the court below nor directly involved in the rulings we are reviewing. It is contended for the defendant in error, and this seems to have been his theory when he refused the tender of the vessel at the expiration of the lease, that the city had no right to return the vessel unless she was returned in as good condition as she was at the time she was leased. But is this the proper construction of the contract? We do not think it was intended that the title to. the vessel would pass to the city in consequence of a breach of the stipulation referred to. It was the common case of the hiring of property for a specific term. The hirer would, by implication, be bound to return the thing hired, and the gist of the stipulation is that when returned she should be in as good condition as when received. For a breach of this stipulation the lessor would have his remedy for the damages arising from the depreciation in the value of the thing hired in consequence of the breach. But the lessor cannot treat the thing hired as sold, and recover its value of the lessee. We think, therefore, that this contention of the defendant in error cannot be maintained, and that it did not follow that, because of the damaged condition of the vessel, he was entitled to refuse to accept her, and thereupon to demand the $12,000 as her value. For the reasons stated, the judgment must be reversed, and the cause remanded, with directions to award a new trial. Note. Judge DAY participated in the decision of this case, although not now a member of the court.