Ezekiel Barlow & another vs. The Ocean Insurance Company, 4 Met. 270

Hubbard, J. (After stating the facts, and the ruling of the judge at the trial.) The defendants object to the ruling of the court; and while they rely, as they allege, on the general proposition, that fraud vitiates all contracts, they maintain the position, that where a party makes a compromise of one suspected fraud, he may afterwards resist such compromise, when it is attempted to be legally enforced, by proving the existence of another fraud, which, if known, wmuld also have vitiated the original contract, and which was not discovered till after making the compromise ; and that the evidence upon which such proof rests should have been submitted to a jury.

If the facts, which were offered to be proved in this case, had been of an entirely different character from those which gave rise to the compromise, and would have constituted a substantial and independent defence to the claim ; or if the facts now newly discovered by the defendants had been known to the plaintiffs, ai the time of the compromise, and had been designedly concealed by them ; or if they had been personally implicated in relation to them ; a case might have been presented by the defendants, requiring very careful consideration.

But in the present instance, the evidence which is" offered consists of facts of the same nature with those, the alleged existence of which led to the compromise. They do not constitute an independent ground of defence. They alike go to prove that the vessel was designedly cast away by the master ; and no suggestion was made, on the trial of this case, against the integrity and good faith of the plaintiffs, or of their agents in Boston, or that they had any knowledge of the manner in which the vessel is believed by the defendants to have been destroyed.

Nor was any attempt made to prove that they were guilty of any misrepresentation or fraudulent or designed concealment of material facts, at the time of making the compromise ; nor is it pretended that they were not interested in the subject of the insurance, to the amount insured. So far as appears, both plaintiffs and defendants were alike ignorant at the time of effecting the settlement.

The case, therefore, is simply this : A party effects a policy of insurance, and upon the happening of a loss, the underwriters refuse to pay, on the ground that the master, who was interested in the vessel, and had a separate insurance upon such interest, made a fraudulent loss of the vessel by casting her away ; and in consequence of such alleged defence, the plaintiffs, in good faith on their part, submit to compromise their claim, and take three fourths for the whole.

Shall such compromise be set aside, by reason of the subsequent discovery, by the defendants, of other and distinct facts going still more clearly to prove that the master bored and scuttled the vessel, and so occasioned the loss ? And to the question thus stated, and which presents the defendants’ case, we have no hesitation in answering that the compromise ought not to be disturbed. No adequate cause exists for disturbing it. No fraud is imputed to the party making it, and there is no such mistake of facts as led the defendants to an improvident settlement, and which good faith might requ.re should be revised.

T" e parties stood in the same position as to information. One believed a fraud had been committed, which if proved would establish his defence. The other feared that it might be so. Under these circumstances, they came together, and without misrepresentation or fraud on either part, they entered into a compromise by which one party rece ved less than the amount of his contract, which, if free from the taint of fraud, would be wholly due, and the other saved a part of what he was bound to pay, unless he should succeed in establishing the existence of such fraud.

Each party understood the law of his case ; each understood the bearing of the facts ; and with such knowledge the agreement was made. An agreement so made is upon a substantial consideration ; and why should it not be enforced ? No new fraud is discovered ; no new ground of defence to the original contract has arisen ; nothing to show that it was originally void.

But the defendants, on further investigation and search, have now put themselves in possession of facts, by which they ascertain more accurately the manner, as they believe, of the commission of the fraud which was the subject of the negotiation and compromise ; and they are now satisfied, that if no compromise had been made, and more time had been taken by them, the fraud could have been distinctly proved, and the plaintiffs’ right of action defeated.

But the apprehension of the plaintiffs, that such might be the case, and the fear of the defendants, that it could not be established, led to the settlement ; and each party sat down and agreed to share the loss, though in different proportions. To disturb a settlement made under such circumstances, instead of promoting the ends of justice, would enlarge the field of discord, and would raise new obstacles to compromises between parties, and thus create a just cause of regret; as such agreements are usually founded upon mutual concessions, and generally with advantage to each party.

The defendants’ counsel has cited sundry authorities to maintain the position, that adjustments will be set aside when agreed to under a mistake of facts not known at the time. The cases referred to principally relate to adjustments of losses made at the time of offering the preliminary proof, and before any suit brought, and where there is no new consideration between the parties ; and the cases go to establish the doctrine, that such adjustments are not conclusive, but only prima facie evidence of the plaintiffs’ claim.

Without entering into an analysis of those authorities, it is sufficient to say, that admitting their correctness, they do not affect the decision made in the present case. This is not an adjustment grounded on the pAintiffs’ representation of the facts, but a bond fide settlement of a disputed claim, after action brought, upon a valid consideration, without fraud, and with equal knowledge on either part. The case finds that the plaintiffs were mortgagees or pledgees of the vessel, for moneys actually due, to an amount greater than the sum insured, and that Fields was the master and general owner of the vessel.

And it was argued by the counsel for the defendant, that the plaintiffs must be treated as the owners of a part of the vessel; in which case Fields, the master, was their servant or agent, for whose acts they are responsible ; or they take their interest under him, and consequently have no higher or greater rights than if Fields were the insured. But we consider this merely varying the form of presenting the argument in favor of opening the compromise, and not an independent position.

For if a mortgagee out of possession is not affected by the fraudulent act of the master who is the general owner, then the defence, if it had been proved in this case, would not have availed the defendants. And on the other hand, if such fraudulent acts would, if proved, have barred the plaintiffs’ recovery, then this ground of defence was the very subject which led to the compromise, and which, for the reasons given, is conclusive upon the defendants.

The suggestion also made at the argument, that the settlement of the master’s suit, at the same time with the plaintiffs’, tends to establish the fact that they were one and the same transaction, and therefore the plaintiffs in this suit must be considered in the same manner as thdugh captain Fields himself were the plaintiff—is not warranted by the circumstances under which the settlement was made.

And in justice to the master, who is a stranger, it is but proper to say, that the alleged facts, which the defendants proposed to offer in evidence, being excluded by the decision of the court, we do not intend, by any thing in this opinion, to impute a gross fraud to him, of which he may have been entirely innocent. Judgment on the verdict.