Carrington v. Commercial Fire & Marine Insurance of Jersey City

Majority

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Carrington & Dougherty v. The Commercial Fire and Marine Insurance Company of Jersey City.

Headnote

The American Mutual Insurance Company of Amsterdam, having insured the plaintiffs against loss or damage by fire, and having issued some nineteen other policies insuring the like number of other persons or firms, its agent, while such policies were in force, entered into an agreement with the defendants, The Commercial Fire and Marine Insurance Company, of Jersey City, by which agreement the latter “reinsure the.American Mutual Insurance Company of Amsterdam, upon the following policies issued by them,” (specifying the said twenty policies,) “loss, if any, payable to the assured upon the same terms and conditions, and at same time, as contained in the original policies. Reinsured from November 30th, ISBA 12 o’clock, at noon, to the expiration of the policy.”

Seld, that such agreement was a contract of reinsurance, and that the plaintiffs could not sue upon it. That any moneys recoverable under it, for a breach of it, would be the property and assets of the Company so reinsured. That the plaintiffs had no right to such moneys, nor any lien upon them to satisfy a loss under the policy issued to them, notwithstanding the Company which insured them had failed before such loss occurred. That the word “ assured” in such agreement meant the Company re-insured, and not the assured in the original policies, and that it could not be shown by parol that it was the understanding between the defendant and such agent at the time the agreement was executed that the word, “assured,” as used therein, was intended to apply to, and designate the persons insured by the original policies.

(Before Dues and Bosworth, J. J.)

Argued March 2nd;

decided April 25, 1857

This action was tried before Chief Justice Oakley, and a jury, on the 9th of December, 1856. The defendants moved for a non-suit, when the evidence was closed. The court directed a verdict for the plaintiffs, for $2,203.44, the amount claimed, subject to the opinion of the court, at general term, upon the questions of law, arising in the case, with liberty to the court at general term, to dismiss the complaint, and reserved the right, to either party, to turn the case into a bill of exceptions.

The complaint set forth the contract of insurance between the plaintiffs, and the Amsterdam Company, and the terms of the policy. It then alleged, “ that on or about the thirtieth day of ¡November, in the year 1854, the said defendants, at the request of the said American Mutual Insurance Company, and for a valu

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able consideration to them in hand paid by the said company, by an instrument in writing made by the said defendants, and by them delivered to the said company, agreed in substance to assume, and did thereby assume the liabilities, contracts, and agreements of the said American Mutual Insurance Company in the said policy created and contained, and promised and agreed to pay the loss, if any, under the said policy to the plaintiffs) upon the same terms and conditions and at the same time as were stipulated for in the said policy, and did then and thereby become liable to the plaintiffs for any loss happening under the said policy:’*

It then alleged a loss by fire, the fact of damage exceeding the sum insured, notice to the defendants and service on them of the preliminary proofs, a refusal to pay, and prayed judgment. The answer put at issue the allegations of the complaint above quoted. On the trial, the following facts were established, and proceedings were had.

The American Mutual Insurance Company, by a policy dated the 10th of June, 1854, and numbered, 4755, insured the plaintiffs against loss or damage by fire, to the amount of $2,500. This company was located at Amsterdam, Montgomery County, New York, and had an agent in the city of New York.

This Company had issued other policies to other parties) amounting in the aggregate, including the one held by the plaintiffs, to $26,680.

These policies being in force, their agent in New York, on the 30th of November, 1854, effected a reinsurance with the defendants, by an instrument in writing, in these words:

“ Agreement of Reinsurance.

No. 754. $26,680.

The Commercial Fire and Marine Insurance Company of Jersey City, for and in consideration of the premiums set opposite to each memorandum of policy, the receipt whereof is hereby acknowledged, do, by this instrument, reinsure the American Mutual Insurance Company of Amsterdam, upon the following policies issued by them, loss, if any, payable to the assured, upon the same terms, and conditions, and at same time, as are contained in the original policies. Reinsured from Nov. 30, 1854, 12 o’clock at noon, to the expiration of the policy, viz—

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(The memorandum, among other descriptions of policies, read thus):

No. I I 1855. 4755 Carrington & Dougherty, 59 Henry Street, 2500 UP 16.48 June 10th,

Jersey City, N. J. Nov. 30th, 1854.

J. M. Chapman, President.”

John L. Cbbw, Secretary.”

On the 19th of March, 1855, the property insured by the original policy, was destroyed by fire: The plaintiffs prepared preliminary proofs of the loss, and served them on the defendants. Proof of the loss was waived, at the trial.

By an order of the Supreme Court, dated the 27th of November, 1854, upon notice to, and the written consent of the American Mutual Insurance Company, the latter Company was declared to be insolvent, and that Company, and every of its agents and officers were enjoined and restrained, “from exercising any of its corporate rights, privileges or franchises,” and the property and effects of the corporation were sequestrated, and a receiver ordered to be appointed, and a referee was designated to appoint a receiver. . Such order also declared that “ the said Corporation is to continue in existence, so far only as may be necessary, to enable the receiver to be appointed as above directed, to collect the debts and demands, and distribute the property and effects, belonging to said corporation, in the names thereof, and for no other purpose whatever, and that for all other purposes, and when the above specified objects shall be attained, the said corporation be, and is hereby dissolved.”

The appointment of receiver was perfected on the 2d of December, 1854.

The agent, in New York, was wholly ignorant of the order of the 27th of November, 1854, at the time he obtained the agreement of reinsurance. He paid the reinsurance premium out of his own funds.

The plaintiffs offered in evidence a letter from the receiver to the defendants, dated the 10th of July, 1855, consenting that they settle and adjust, with the plaintiffs, the loss they had sustained,

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and to relinquish all claims, as receiver, (“ i. e. if he should have any).”

This evidence was excluded.

The plaintiffe also offered to show, that it was understood between the witness .and the defendants at the time of the execution of the agreement of reinsurance, that the word, “ assured,” used in said agreement, was intended to apply to the persons named in the list therein contained.

This evidence was also excluded. The plaintiffs excepted to each of these decisions.

The testimony being closed, the defendants moved for a non-suit on the grounds,

1. That on the 30th day of November, 1854, the American Mutual Insurance Company of Amsterdam were dissolved by order of the Supreme Court, and were incapable in law of contracting.

2. That the plaintiffs in this action, were not the proper parties to sue.

3. That the court had no jurisdiction of the subject of the action.

The court ordered a verdict in favor of the plaintiffs, subject, &c., as before stated, and liberty was reserved, in the case, to either party to turn it into a bill of exceptions.

H. Ketchum, for plaintiffs.

E. P. Cowles, for defendants.

By the terms of the contract of November 30, 1854, the defendants “re-insure the .American Mutual Insurance Company, of Amsterdam, upon the following policies issued by them,” (a detailed statement of which policies is embodied in and forms part of the contract,) “ loss, if any, payable to the assured upon the same terms and conditions, and at same time, as contained in the original policies. Re-insured, from November 30, 1854, twelve o’clock at noon, to the expiration of the policy.”

If the word “ assured, ” as used in this contract, means the party re-insured, the present plaintiffs have no interest in the contract, and no right to maintain an action upon it.

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Assuming the word “ assured,” as there used, to have that meaning, and the contract to be valid, the plaintiffs must look to the American Mutual Insurance Company alone, and to its assets which have and may come to the hands of its receiver, for indemnity.

They have no lien upon the contract in question, nor right to the moneys which the defendants may pay under it. Such moneys, when paid, will form part of the assets of the company which insured them, and the plaintiffs must be paid pro rata with its other creditors.

These propositions are so well settled, that it is unnecessary to do more than refer to the cases which have determined them: Hone et al., Receivers, &c., v. The Mu. Safety Ins. Co., 1 Sand. 137; affirmed by the Court of Appeals, 2 Coms. 235; 1 Arnould on Ins. 288, § 119; Parsons on Mercantile Law, 514, § iv.

The contract of the 30th of November, according to the view taken of it by the complaint, is one, by which the defendants “ agreed, in substance, to assume, and did thereby assume, the liabilities, contracts, and agreements of the said American Mutual Insurance Company, in the said policy created and contained; and promised and agreed to pay the loss, if any, under the said policy, to the plaintiffs,” &c.

The complaint, however, also avers, that on or about the 30th of July, 1855, the said American Insurance Company released and assigned to the said plaintiffs all the claim and demand of the said American Insurance Company against the said defendants, by reason of the premises, of which the said defendants had notice: These allegations are put in issue by the answer.

There is no evidence in support of the fact of such an assignment, and there could not well be any, as such corporation had been dissolved long prior to the 30th of July, 1855.

If the word “ assured” does not mean the party “ re-insured,” and that party only, then it includes and embraces not only the plaintiffs, but also nineteen other individuals and firms. By the contract of re-insurance, the defendants took upon themselves the risks, which the corporation re-insured, had incurred, by issuing twenty separate and distinct policies.

The Chief-Justice must have supposed that the word “assured,” as used in the contract in question, was a word of clear

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import and obvious application, and, for that reason, excluded evidence offered to show, that by it the defendants and the agent of the other contracting party, understood and intended it to apply to the persons named as the assured in the original policies. The contract is one of re-insurance.

The risks incurred by the American Mutual Insurance Company, by the particular policies which it had previously issued, were the subjects of the contract. By the very terms of the contract, the latter Company were re-insured “ upon the following policies issued by them,” and were properly and truly named in it, as the “ assured.” They were as truly, in fact and in law, the “ assured,” within the meaning of that word, as used in that contract, as were the plaintiffs, in the policy issued to them by the American Mutual Insurance Company.

To treat it as made for the benefit of the original assured, and providing that the loss, if any, should be paid to them, so as to give them a right to recover the amount of the loss, and retain the money for their own indemnity, is in effect making it a double insurance, rather than a contract of re-insurance.

If a contract of re-insurance, the fruits of the contract belong solely to the party re-insured, and must be distributed by the receiver, as part of its general assets, and in the same manner, as the other assets of the insolvent corporation.

If it is a contract, by virtue of which the original assured may recover in their own names, and retain for their exclusive indemnity, the moneys which the defendants are liable to pay, then it possesses none of the elements of a contract of re-insurance.

To give it such a construction, is not only varying its clear legal import, but, in our opinion, its express terms.

Any parol evidence offered to produce that result, should be excluded; 1 Sand. S. C. R. 151, 152.

In the case of Hone et al, Receivers, v. The Mu. Safety Ins. Co., 1 Sand. 138-9, the contract of re-insurance “was the usual printed form of a fire policy, with no change, except the insertion in writing of the prefix re, before the word insure, in the commencement of the instrument.” By it, citing its words, “the said company do hereby promise and agree to make good unto the said insured, their executors, administrators and assigns,” &c.

That contract, being by its terms one of re-insurance, the

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Court refused to receive parol evidence, varying its legal import as such.

We think it quite clear, that even assuming the contract to be valid, it is one in which the plaintiffs have no interest, and therefore one, upon which no action can be maintained, in their names, as plaintiffs.

This presents a case of an entire failure to prove, in substance, or legal effect, the averments contained in the complaint, as the basis of a cause of action in favor of the present plaintiffs. Code, § 171; Mann v. Morewood et al., 5 Sand. 557.

These views, if sound, render it unnecessary to determine the question whether the contract is obligatory upon the defendants.

The contract by its terms, and in legal effect, is one between two corporations. One of them, the party re-insured, was disabled from contracting, by an order of the Supreme Court, made prior to the date of the contract. That order enjoined and restrained that corporation, and each and every of its officers “ from exercising any of its corporate franchises,” and sequestrated its effects, and continued it “ in existence so far only as” might (“ may) be necessary to enable the receiver to be appointed,” &c., “ and for no other purpose whatever,” and declared that for all other purposes, “ when the above specified objects shall be attained, the said corporation be, and is hereby dissolved.”

Whether the receiver, at his election, with or without an order of the Court, is competent to adopt and ratify the contract, and enforce it against the defendants, is a question which does not now arise.

We think it quite evident, that neither the Corporation, nor any of its officers, subsequent to the order of the 27th of November, could make any contract, which would bind the Corporation as such, or on which any claim could be established, creating a right to have it satisfied out of its assets.

The contract was made by its agent, and the defendants, upon a mutual mistake, as to the continuing capacity of the re-insured Corporation to make a contract. Whether the defendants, after having received the whole consideration of the contract, and continuing to retain it, can be made liable to any party by reason of, and upon the contract, we are not disposed to discuss, having come to the conclusion, that the plaintiffs have given no

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evidence in support of the allegations, that by the terms of the contract, the loss, if any, was to be paid to them, and that all the interest of the American Mutual Insurance Company in it, as a competent and actual contracting party, had been assigned to the plaintiffs. The verdict must be set aside, and a judgment entered dismissing the complaint—under the stipulation, giving that power to the Court, and contained in the printed case.