Norwich Union Fire Insurance Society v. Stang

Haynes, J. The petition in error is filed for the purpose of reversing the judgment of the court of common pleas,and the grounds set forth are that the court of common pleas erred in sustaining the demurrer of the defendant in error tc the petition of the plaintiff in error, and that said court erred in giving judgment for said defendant in error, when by the law cf the state it ought tc have been given for said plaintiff in error. The case is one of some importance,and one that does not frequently arise in our courts. Perhaps a brief statement of the case will be in order. — 466 — The oase is entitled “The Norwich Union Fire Insurance Society of England, plaintiff v. Frank Stang, defendant.” The plaintiff in its petition sets forth, in substance, that it had insured with other companies the property of Frank Stang in the oity of Sandusky and county of Erie, the property consisting of certain buildings, a brewery and its appurtenances, and that the total amount of the insurance upon the property by itself and other companies [amounted to $51,100. It sets up that the property was wholly destroyed by fire, and that the fire was caused by the negligence of the Big Four Railroad Company, in that it had a locomotive which was imperfect and not properly furnished with a spark arrester, and that in using that locomotive the sparks from the same caused the burning of the buildings owned by John MoKelvey and others, being certain, ice houses, and that the fire from the ice houses communicated to the brewery which was near by the premises of MoKelvey, and that the property was destroyed. It further avers that the defendant Stang commenced an action on September 2, 1891, in the court of common pleas of Erie county against the railway company, claiming that his loss amounted to about $125,000 and alleging that his property had been destroyed by the negligence of the railway company, its agents and servants, and praying for judgment for that amount. Subsequently he amended his petition, but before that amendment was made an agreement was entered into between the plaintiff and the defendant Stang, in reference to the prosecution of the suit that had already been commenced, and thereupon the plaintiff filed his amended petition in which he set forth that he proseouted the case on behalf of himself and the insurance companies, naming them, and stating the amounts that had been paid by each insurance company, the total being over $40,352, this being the amount of the various companies that had entered into the arrangement. The contraot that was entered into by Stang and the plaintiff company was as follows: “This memorandum of agreement,made and subscribed by the undersigned the day and year hereinafter written; Wit — 467 — nesseth: That whereas, The Norwich Union Fire Insurance Society of England did insure Frank Stang, of Sandusky, Ohio, under its Policy No. —■—■ issued at its Sandusky Agency upon the property and terms set forth in said policy, for one year, commencing January 8, 1891, and continuing until January 8, 1892.. And, Whereas, on the 15th day of July, 1891, said property so insured was damaged or destroyed by a fire,and the damage and loss upon said property, together with other property at the same time damaged or destroyed, belonging to the said Stang, amounted to the sum of $125,000.00, and the fire so damaging said property having been caused by the negligence of the C„ C. C. &. St. L. Railway Company, or some other party or company ;and, Whereas, the said Frank Stang did, on the 2nd day of September, 1891, commence an aotion against the railway company above named, in the court of common pleas of Erie county, Ohio, asking to recover from it the full value of his loss, namely; $125,000.00. Now, therefore, I, Frank Stang, in consideration cf the sum of twenty-two hundred and twenty-two and 22-100 dollars, to me in hand paid by said Norwich Union Fire Insurance Society, in full settlement of my claim against said company by reason of said loss, damage and policy of insurance, do hereby agree to assign, set over and tranfsr to the said Norwich Union Fire Insurance Society all my right, claim or interest to the extent cf twenty-two hundred and twenty-two and 22-100 dol■ooverpaid me as aforesaid, in the judgment which I may recover, or secure in said action against said railway company •or any other party or company who may be liable cr hereafter .adjudged liable for the burning of said property, and I hereby authorize and empower the said Norwich Union Fire Insurance Society to collect and reoeipt for the same. Provided, that if the judgment so secured, is less than $51,100, that being the total amount so paid me on account of said .insurance by all companies interested, then this assigment shall not inure to the benefit of said Norwich Union Fire Insurance Society to any greater extent than WxW cf the -total amount of the judgment so secured. It being express — 468 — ly stipulated that said Norwich Union Fire Insurance Society shall be liable for and shall pay such proportion of the expense and costs of prosecuting said action to a final judgment in any court of this state or of the United States, and the collection of the judgment had in my favor, as the amount aforesaid paid me by the said Norwich Union Fire Insurance Company bears to the amount collected from said railway company, or other party or company, for the loss and damage to said property: Provided, that if the amount so reocvered shall not exceed the sum of $51,100, that said insurance company shall pay such proportion of all the costs and expenses of said litigation as the sum so paid by it bears to said sum of $51,100; and, provided further, that if said final judgment be against said Stang, and he recover nothing from said railway company, that said Norwich Union Fire Insurance Society shall then pay such proportion of the costs and expenses of said litigation as the amount so as aforesaid paid to said Stang by said Norwich Union Fire Insurance Company bears to the sum of $100,000.00. "Provided further, that said Norwich Union Fire Insurance Society, for itself and for such other insurance companies as may elect to join it, shall have the right and privilege of employing an attorney to assist said Stang and his attorneys in prosecuting said action, the expenses so incurred to be deemed a part of the general expense for the apportionment of which provision is above made. “In witness whereof, the said parties hereto have affixed their hands and seals this nineteenth day of September, 1891.” It then avers that in April, 1893, the said Stang filed in said court of common pleas in said action against said railway company an amendment in which he alleges: “That he brings this action for himself and for the benefit or the persons and corporations hereinafter named. That at the time of the happening of the grievances complained of in this action, seme of the property described in said amended petition was insured for a part cf its aotual value by certain insurance companies hereinafter named, and the — 469 — losses sustained were by the assurers and this plaintiff adjusted and settled, and this plaintiff was paid by said assurers the sum of fifty one thousand one hundred dollars as the total loss and the amount of liability of said assurers under and upon their several contracts of insurance, which amount was about one half of the actual value of the property destroyed. That after such payment of insurance, the following named insurance companies having paid the several amounts herein set forth to-wit: The National Fire............................. $2222 23 Norwich Union Fire Insurance Society, London England................................. 2222 22 Lancashire Insurance Company England....... 2222 22 German Insurance Company, Freeport, 111...... 2222 22 Liverpool London and Globe Insurance Company 878 14 American Fire Insurance Company............ 2222 22 Connecticut Fire Insurance Company.......... 2222 22 Liberty Fire Insurance Company.............. 2222 22 Cooper of Dayton............................ 888 82 Northern Assurance of London................ 1333 34 Concordia Insurance Company............... 2222 22 Western Assurance Toronto Canada............ 2222 22 Providence Washington Insurance Company.. .. 1344 03 Security Insurance Company, New Haven...... 1334 34 Norwich Union Fire Insurance Society......... 1000 00 Royal Insurance Company, London............ 1000 00 New Yurk Bowery Fire Insurance ............. 2222 22 German Fire Insurance Company, Pittsburg. . . . 2222 22 German Fire Insurance Company, Pittsburg.... 600 00 North western National Fire Insurance Company. 2500 00 New Hamphire of Manchester, New Hampshire.. 2500 00 American Insurance Company, Newark, N. J.. . . 2500 00 Total...................................$40,322 21 agreed to and with the plaintiff, that he should and might bring an action in his own name against the defendant rail — 470 — way company for the benefit of himself and said contract-in' I!'8018006 c°mpanies, as well such other companies as e lüíereeíed, and that in case oí a recovery not ex-mg the total amount cf insurance so paid, each of said and* ofTh8 S^°U^ be entitled to receive from the plaintiff share*” 68111080 rec°vered its proper and proportionate It then alleges that the railway company made a motion to strike out this amendment, and it was overruled; that whirdi1150!1 a° aoswer was filed by the railway company to trial To !epJy Was :ma(le> and the case regularly stood for to • Urtber avers that the plaintiff had hired counsel thesuto t¿e C°UOsel of Mr- Slang in the prosecution of th U1 ’ ari(l that they were in frequent consultation with fo/trial ^ fr0m titte Í0 time’ aod were preparing the case It further avers: “On the eighth day of June, 1895, an x Wa8 made In said cause in this court by the said to-wit*a55‘°P°* the journals thereof as follows,, can 1 ' .s day oanie tbe Parties, and by consent this tfris^t'18 Ooribli:itle(^ at the cost of the defendant.’ Up to 8 1100 sa^ Stang and his attorneys were in consultation om ime to time with this plaintiff and the other insurance aver^on68 ^ ^eir a£enis and attorneys. But plaintiff , ,S’ at notwithstanding said continuance,and after court 18958P^arerit;^ a^lonrrieci)ori the seventh day of September, ant ¿8 ¶61?6 sPecial session of said court, the said defend-this T*" ao<^ ^8 attorneys, without any notice to as f aiDtiff or any of said insurance companies, their 0 60 8 01 attorneys, and without its or their knowledge, <rp, 86 ,ao er|try to be made in said case as fellows, to-wit: tb 8^ 0Sme *be Plaintiff, Frank Stang, and dismissed eotj'^e<l action,costs paid, no record to be made,’ 10 entry was entered by said court and journalized upon the journats; thereof. "And said Frank Stang, the defendant aforesaid, in violation of his said agreement as aforesaid, and in violation of rjgfits cf ijjjg entered into an airangtment — 471 — with said railway company, the defendant in said action, and fcr a consideration to him paid by said railway company to have said dismissal occur after the cause of action against said railway company for the negligence and tort aforesaid was barred by the statute .of limitatiens, so that this plaintiff could not maintain an aotion upon its subrogated rights as aforesaid against said company. “And plaintiff further avers that said Frank Stang, the defendant herein, did in faot recover and receive from said railway company, defendant in said action, in payment for the damages and tort aforesaid, and in settlement thereof, and as the result of the aotion aforesaid, and upon the liability of the said railway company aforesaid,a large amount of money, the exact amount of which plaintiffs are not informed, but is informed and believes, exceeds the sum of fifteen thousand dollars, and that he in faot settled said action so by him brought fcr the said sum; but instead of entering said cause as settled and showing the terms thereof, or having judgment rendered for the amount so by him agreed upon and received, caused said suit to be entered as dismissed by him as aforesaid, for the purpose of defrauding this plaintiff and the other insurance companies interested cut of the amount to which they were entitled under the facts herein stated.” “W-herefore it prays judgment against the defendant for $8,2251.” (There were two policies, one of which was for 2,222 and one for $1,000, making $3,222.) It would appear that the contract referred to therein was entered into with reference to the decision in Newcomb v. Cincinnati Ins. Co., 22 Ohio St., 382. In that case the suit was brought by the Cincinnati Insurance Company against Newcomb & Co., who had recovered $11,086 and the expenses of the suit, say $5,000, in an aotion against a certain vessel owner for causing the destruction of a vessel of New-comb & Co. A finding of fact was made in the superior court in which the case was tried, and the case went up and was heard upon the pleadings and findings in the case. The insurance company claimed to recover a proportion of the — 472 — amount that had been recovered by Newcomb & Co. from the other party, it having paid a certain amount cf the insurance on the property destroyed or lost. The Supreme Court say: “The defendant in error founds its claim on the doctrine of subrogation. This may be stated as follows: Where a loss,covered by insurance, is occasioned by a wrong-doer, the underwriter, after reimbursing it in specie, or making compensation in money, is, in a proper case, entitled to be subrogated, quoad hoc, to the right of the assured against the wrong-doer. This is of the highest equity, for whereas the loss is, in the first instance, that of the assured, after reimbursement or compensation, it becomes the loss of the insurer. “The plaintiffs in error insist that the doctrine, if ever recognized, has been doubted by modern decisions. We do not so think. It was fully rmognized by Lord Hardwick in the early case of Randall v. Cochren, 1 Ves. Sen., 98, with which the American oases are in nearly universal accord. The loss of mortgaged premises, insured at the instance of the mortgagee, presents a case sui generis, for rejection of the application cf the doctrine. “There are two classes of cases for its application; first, where the total loss sustained is covered by insurance, and reimbursed or compensated by the underwriters: Second, when the loss sustained is but partially covered by insurance, and is reimbursed or compensated accordingly. These may be respectively denominated full insurance and partial insurance. “In case of partial insurance, of which class is the one at bar, the assured and underwriter have each a substantive interest in the claim against the wrong-doer; whereas, in a case of full insurance and compensation, the interest of the former is but nominal. ‘Where the assured, as in case of partial insurance, sustains a los3, in excess of the reimbursement or compensation by the underwriter, he has an undoubted right to have it satisfied by aotion against the wrong-dcer. But if, by such action, there comes into his — 473 — hands, any sum for which, in equity and good conscience, he ought to aocount to the underwriter, reimbursement will, to that extent, be compelled in an action by the latter, based on his right in equity to subrogation. But the assured will not, in. the forum of conscience, be required to account for more than the surplus, which may remain in iris hands, after satisfying his own excess of loss in full, andi his reasonable expenses inourred in its recovery, unless the underwriter shall, on notice and opportunity given, have contributed to, and made common cause with him, in the prosecution. “In this case, the losses of the plaintiffs in error, in excess of insurance, exceeded $9,000; their recovery was $11,086. The costs of prosecuting the action exceeded $6,000. The amount applicable to their excess of loss, after payment of expenses, was insufficient to satisfy it. It is not unconscionable that they retain this: It would be to award any part of if to the defendant in error, who refused to hazard the costs of its recovery. ” It will be seen by the pcrtions„of the petition read that the plaintiff insurance company had entered into a contract with Stang whereby it had undertaken to sustain a portion or contribute to the cost and the expenses of this suit against the railroad company. The counsel who opened the case on behalf of the defendant in error, admitting the general doctrine as claimed by counsel on behalf of plaintiff in error,said nevertheless that this action could not be maintained for the reason that the proper and the only remedy of the plaintiff in error was to. have made application in the court of common pleas to set aside the entry of dismissal on the ground of irregularity and fraud, proceeding under section 5854, Revised Statutes. Conceding that this is a proper case for a party to proceed under section 5854, Revised Statutes, nevertheless under the decisions of the supreme court of the state of Ohio it is not his only remedy, and for this holding of the supreme court I refer as the latest case,at least that I know of, to the oase — 474 — of Darst v. Phillips, 41 Ohio St., 514. The syllabus of the case reads: “The special proceeding provided by section 5854, Revised Statutes, authorizing courts to vacate their own judgments rendered at a previous term, for fraud practiced by the suooessful party, is a cumulative remedy and does not exolude or limit the right of a party hy original action to impeach a judgment or enjoin its collection for such fraud. ” I shall not read from the decision of the oase,which fully sustains the position; but the judge in deoiding the case cites Long v. Mulford, 17 Ohio St., 484, and Coates v. Chillicothe Bank, 23 Ohio St., 415. So that the contention that the plaintiff’s only remedy is the setting aside of this judgment in this case under this seotion is not sustained by the authorities. But in our opinion this case is not a suit for the purpose of setting aside that judgment. The petition nowhere claims that the judgment of dismissal should be set aside. It proceeds upon the theory that the plaintiff has unlawfully dismissed a suit, and given a final judgment in favor of the railroad company to the injury of the plaintiff without the plaintiff’s knowledge or consent, and in violation, first, of his agreement in writing entered into with the insurance company, and second, of his obligations as a trustee to commence and prosecute the suit for the interest of all concerned. It is contended by oounsel who succeeded the first counsel in this case, first, that there was no consideration for that contract; and second, that there was no trust. It was claimed and contended that Stang in settling this case had settled only his interest, his claim for damages, without any reference whatever to" a claim for damages, if any, that the insurance companies might have and for which they might maintain a suit. Counsel for plaintiff in error have cited a great many cases in regard to the rights of these parties, in regard to the dootrine of subrogation and upon the question as to in whose name the suit must be prosecuted. It is claimed the — 475 — suit must in all cases be proseouted in the name of the party who owned the building, the original owner — in this case it was Stang — 4o protect and obtain the rights and remedies that the plaintiff insurance companies may be entitled to. Of course, some of those oases are under the old system of practice, but there are cases which have been cited under the laws of states that have a code which is substantially like the code of the state of Ohio. One case of that kind, which is found in 8 U. S. Circuit Court of Appeals, 438, was a case in which a suit had been brought by this same insurance society against the Standard Oil Company,and that was brought for the purpose of recovering from the Standard Oil Company the amount of moneys that had been paid by the insurance oompany to the original party who had lost the property. The suit was brought in the name of the Norwich Union Fire Insurance Society against the Standard Oil Company, and the Standard Oil Company demurred to the complaint on the ground that the plaintiff could not maintain the action in its own name, and the court deciding the case said “the correctness of the ruling is the only question we find it necessary to consider.” The demurrer had been sustained by the circuit court upon the oircuit, and in the court of appeals the judgment of the.circuit court was affirmed. The result of that was that the suit could not be brought in the name of the Norwich Union Fire Insurance Sooiety, but in the name of the original owner of the property, the assured, but of course, for the benefit, at least to a certain extent, of the insurance society. I will read from what the judge says in that case, because it states the general doctrine: “When an-insurance oompany pays to the assured the amount of a loss of the property insured, it is subrogated, in a corresponding amount, to the assured’s right of action against any other person responsible for the loss. This right of the insurer against such other person is derived from the assured alone, and can be enforced in his right only. At common law it must be asserted in the name of the assured. — 476 — In a court of equity or of admiralty, or under the modern codes of practice, it may be asserted by the insurance company in its own name, when it has paid the insured the full value of the property destroyed. St. Louis, J. M. & S. Ry. Co. v. Commercial Union Ins. Co., 139 U. S., 223, 235, 11 Sup. Ct., 554, and cases cited; Marine Ins. Co. v. St. Louis, I. M. & S. Ry. Co., 41 Fed., 643. But the rule seems to be well settled that, when the value of the property exceeds the insurance money paid, the suit must be brought in the name of the assured. Aetna Ins. Co. v. Hannibal & St. J. R. Co., 3 Dill. 1, Fed. Cas. No. 96; Assurance Co. v. Sainsbury, 3 Doug., 245; Insurance Co. v. Bosher, 39 Me., 253; Hart v. Railroad Corp., 13 Metc., (Mass.) 99; Connecticut, etc., Ins. Co. v. New York, etc., R. Co., 22 Conn., 265, 278; Insurance Co. v. Frost, 37 Ill., 333; Fland Ins., pp. 360, 481, 591; Marine Ins. Co. v. St. Louis, I. M. & S. Ry. C., supra. In such an action the assured may recover the full value of the property from the wrongdoer, but as to the amount paid him by the insurance company he becomes a trustee; and the defendant will not be permitted to plead a release of the cause of action from the assured, or to set up as a defense the insurance company’s payment of its part of the loss. Hart v. Railroad Corp., supra; Hall v. Railroad Co., 13 Wall., 367. In support of this rule it is commonly said that the wrongful act is single and indivisible and gives rise to but one liability. “If, ” says Judge Dillon in Aetna Ins. Co. v. Hannibal & St. J. R. Co., supra, “one insurer may sue, then if there are a dozen, each may sue; and, if the aggregate amount of all the policies fallís short of the actual loss, the owner could sue for the balance. This is not permitted, and so it was held nearly a hundred years ago, in a case whose authority has been recognized ever since, both in Great Britain and in this country.” There is a case cited here and found in 23 Am. St. Rep., 151. It, also, is to be found in 20 Oregon, 569. I refer to it because it has a full discussion of the authorities on this subject,and a large number of authorities aro cited. I read the syllabus cf the case: — 477 — “Where the value of property insured, and destroyed through the negligence of a third person, exceeds the amount of insurance paid, the insurer by making such payment, only acquires a joint interest with the owner to th,e extent of the payment in the cause of action against the wrongdoer to recover the whole loss, and in bringing such action, both the insurer and the owner musr be joined as co-plaintiffs. ” In the case here involved, while the insurance companies were not named as co-plaintiffs in that they were named distinctly as plaintiffs, yet under the statute of the state of Ohio the suit was prosecuted by Frank Stang,as stated in his petition, for the benefit of himself and all those insurance companies, and no question was made, or if made it was overruled, that that was not the proper method. Therefore the case stood in that position on the petition itself°and the action of Mr. Stang. The question is as to the rights of Mr. Stang in this condition cf affairs. First, he says there is no consideration for this written agreement. We think that proposition -cannot be sustained. We find there is adequate consideration for the agreement, and the agreement is a valid and binding agreement between Stang and the insurance companies. There was about tobe a payment made by the plaintiff of the amounts for which it had insured the property. There was a question as to whether the railroad company was liable for the whole of this loss, and the plaintiff company, desiring to have the benefits of any recovery that might be had against the railway company and in pursuance of the decision in Newcomb v. Cincinnati Ins. Co., supra, entered into an agreement whereby they agreed to contribute towards the expenses of the prosecution, and wherein they were to receive a portion of the benefits of any moneys that were to be obtained from the railroad company. That ol itself is clearly a sufficient consideration. There is also a claim made that there was no trust, but there are a large number of authorities, perhaps the' universal body of authorities is that Mr. Stang stood in the position of a trustee in bringing this suit for the benefit of — 478 — •all persons who may be interested, and he was charged with the duties of a trustee. In order to settle their respective rights arising out of that relation, he entered into this contract. That of itself would no doubt be a sufficient condition, for it states the rights of the parties,and the insurance oompany proceeded to pay the amount it had agreed to pay apon the loss; so that Stang stands here before this court in the position of a party who has agreed to prosecute that suit to final judgment for the benefit of himself and these insurance companies. It is said in making this settlement that Stang only settled his own suit. That cannot be in this state of affairs, if it were possible that it might be while there was no agreement made,and that under the decision in Newcomb v. Cincinnati Ins. Co., supra, he would be suing for and recovering •only his own amount, still the position could not be maintained. The suit is brought by him to recover the whole •amount, and under that decision he would be called upon only to pay over to the insurance companies what might remain after he himself had been compensated for his loss ■over and above the amount received from the insurance ■aompanies. So he stands, then, in the relation of trustee, and under those duties to these insurance companies. But under this agreement,and under the decision in Newcomb v. Cincinnati Ins. Co., supra, he was suing for, and whatever he recovered was for the joint benefit of these respective parties, so that he could not, as a matter of law, settle his own interests •and leave the interests of the insurance companies to be prosecuted by them. Whatever action he takes in that matter, he takes for the benefit of both parties; and in making a settlement he settles the whole suit, dismisses the action, and leaves these parties without any further remedy apparently. Without discussing the matter further, we have no quesiiion' but that the petition here states a good cause of action as against Mr. Stang,and that the court erred in sustaining the demurrer to that petition; and it follows the judgment — 479 — of the court of common pleas will be reverted, and the case will be remanded to that court for further proceedings according to law. ■ , Doyle & Lewis, Attorneys for Plaintiff in Error. Wickham, Guerin & Colver, Attorneys for Defendant in Error. Defendant in error excepts.