On 22 November 1762, Jeremiah Lee, prominent Marblehead ship owner and merchant, obtained
a policy of marine insurance upon one half the cargo of the schooner
Merrill for a voyage “from Marblehead to any and all the Islands in the West Indies to Windward
of St. Croix, St. Thomas, Havannah and Jamaica until the cargo is sold and delivered.”
The
Merrill was then 79 days out of Marblehead. The eight underwriters, of whom Jonathan Bancroft
was one, did not know that on October 17th, while making for Martinique, she had been
taken by a Spanish privateer. When Lee subsequently presented his claim for the loss
the underwriters refused payment on grounds of fraud. About a year later, the claim
was submitted to arbitration in accordance with a provision of the policy. In November
1763 the arbitrators, Foster Hutchinson, John Rowe, and Melatiah Bourne, returned
their unanimous report that Bancroft and six of his fellow underwriters, who had agreed
to the submission, were liable in the amounts which they had subscribed.
1 These seven made payment
{ 189 } accordingly. The eighth underwriter, William Shillaber, was less tractable. He had
not agreed to the arbitration, and Lee was forced to bring suit against him on the
policy. In June 1767 Shillaber finally prevailed in an action of review in the Superior
Court.
2
Thereafter Bancroft and two other underwriters brought actions against Lee, claiming
that the policy was void and demanding return of the payments made under it.
3 Bancroft's case, in which Adams was of counsel for Lee, provides some useful insights
into the conduct of maritime and mercantile affairs. It also raises an interesting
problem of the effect of an arbitration proceeding upon subsequent litigation between
the same parties and shows bench and bar applying English authority of most recent
date to this question.
4
Bancroft's declaration in an action on the case in deceit alleged that Lee had induced
the underwriting by his deliberate false affirmation that the insurance was a “fair
chance,” and that he had knowingly concealed two circumstances which materially altered
the risk: (1) that the master's sailing orders had directed him to proceed to “the
Island of Martineco (if he could get in there)”; and (2) that Lee, before the policy
was written, “had received certain Intelligence that the said Schooner had not arrived
at Martineco ... when she had been gone from Marblehead ... by the space of thirty
three days.”
5 After Lee prevailed in the Inferior Court on a sham demurrer, Bancroft appealed to
the Superior Court, where at Ipswich in June 1769, upon waiver of the demurrer, the
case was tried to a jury. Document 1 is Adams' memorandum of authorities on the issues
presented by the fact that the vessel was actually lost at the time of the underwriting.
Since Lee's policy included the words “lost or not lost,” the underwriters were liable
unless Lee had sought the insurance with knowledge of the loss. This question was
apparently determined adversely to Lee, because the jury found for Bancroft in the
amount paid out, plus interest.
6
{ 190 } Lee then obtained a writ of review, which was first brought on for trial in November
1770, but was continued on the withdrawal of a juror.
7 In June 1771 at Ipswich the case came on again, but after Bancroft had put in at
least a part of his evidence, it was continued on Lee's motion, the ground not appearing.
8 Adams' minutes of this phase (
Document II) are largely a summary of the testimony. John Lowell, counsel for Bancroft, after
expounding authorities in his favor, produced evidence tending to show that the
Merrill had in fact sailed for Martinique. He then sought to establish his allegations as
to Lee's concealment of knowledge of the vessel's loss and as to his calling the risk
a “fair chance.” The question of knowledge turned on the deposition of one Captain
Howard, who had returned to Marblehead two weeks prior to the writing of the policy,
reporting that he had heard nothing of the
Merrill. Did this report amount to “certain intelligence” of her nonarrival, and was it known
to Lee or to the underwriters?
The case was brought to trial a third time in November 1771. Here Adams' minutes (
Document III) suggest that after Lowell had concluded his case the court on its own motion raised
the problem of the effect of the 1763 arbitration report. In any event the jury was
again dismissed and the action continued, this time by order of court.
9 While Adams may have raised this question himself, it is interesting to note that
this was the first occasion on which Foster Hutchinson, newly appointed to the court,
had sat on the case, that he was one of the referees in 1763, and that he seemed to
take the lead in dealing with the issue.
10
After this continuance Adams and Jonathan Sewall, who with Lowell was of counsel for
Bancroft, entered into a stipulation to the effect that if the court found that the
report (which had not been pleaded) could be admitted in evidence under the general
issue, and found that, if admissible, the report was a bar to Bancroft's action, then
Bancroft would default. In June 1772 the court found the report admissible and once
again ordered a continuance, doubtless for argument on the second point.
11 At Salem in
{ 191 } November 1772, according to William Wetmore's minutes (
Document V), Hutchinson disqualified himself, and, with the other referees, gave evidence concerning
the arbitration proceedings. Their testimony as minuted by Adams (
Document IV) shows that the questions of the
Merrill's actual destination and Lee's knowledge of her apparent non arrival had been raised
at the hearing in 1763. The court had at first held that the award without more was
not a bar, but on this showing they found that the action could not be maintained,
applying the doctrine known today as collateral estoppel.
12 A jury which had been empaneled was dismissed, and Bancroft's default was entered
in accordance with the agreement.
13