Court Opinion

ID: 5263636
Source: CourtListenerOpinion
Date Created: 2022-01-06 18:50:49.118018+00
Date Added: 2024-06-11T08:28:07.003029
License: Public Domain

Greenbaum, J. (dissenting):
The grounds of the demurrer are insufficiency of the facts in the complaint; that plaintiffs have no legal capacity to sue; and finally, that there is a defect of parties plaintiff.
The allegations of the complaint pertinent to this appeal are that the defendant is a domestic fire insurance corporation; that the Green River Distilling Company, Incorporated, is a foreign corporation which, prior to the 24th day of August, 1918, for a valuable consideration, “ issued and delivered to divers *566persons certain warehouse receipts for and representing certain barrels of whisky, which whiskies had been purchased from said Green River Distilling Company, Incorporated, by the holders of said receipts and were thereupon left for storage in the distillery warehouses of said company to be held by it as a warehouseman for the holders and owners of said warehouse receipts and their successors and assigns; ” that prior to the commencement of this action plaintiffs became the holders and owners for value “ of said warehouse receipts ” and of the whiskies represented thereby; that for a valuable consideration the Green River Distilling Company, Incorporated, agreed with the holders of the aforesaid warehouse receipts to keep the whiskies so purchased and stored with it by the holders thereof insured “ against loss or damage by fire to the full value thereof during the time it remained in its warehouses; ” that said distilling company “ did insure said whiskies against loss or damage by fire in and by policies of insurance issued by defendant, among others, to it, and containing among other stipulations an agreement that said insurance covered not only the property and interest of said company [italics ours], but the property of others held by it in trust or on commission, sold and not delivered, or sold but not removed, or held for account of others, or provisions of similar import, which provisions were intended to and did cover and insure the property of the said holders of said warehouse receipts, of all of which defendant had notice; ” that the said holders of said warehouse receipts, as well as the plaintiff's, have ratified and adopted the insurance so taken out by the distilling company for their benefit; that on or about the 24th day of August, 1918, the whiskies represented by the aforesaid warehouse receipts and then being in the warehouse of the said Green River Distilling Company, Incorporated, situated in the city of Owensboro, in the State of Kentucky, were totally destroyed by fire; “ that the policies so issued by the defendant and other solvent insurers to said Company were on or about said August 24th, 1918, outstanding and unexpired and were for an amount sufficient to pay in full the value of the property of the holders of said warehouse receipts owned by the plaintiffs and also all other property covered thereby.”
It is also alleged in the complaint that subsequent to the *567said fire “ said Green River Distilling Company, Incorporated, served upon defendant its proofs of loss within the time required by the terms of said policies, which proofs covered the property of the holders of said warehouse receipts, and the plaintiffs held by said Company as warehousemen;” and that on or about the 5th day of April, 1919, the plaintiffs " served upon the defendant notice in writing that said policies of insurance covered whiskies owned by the plaintiffs and that the plaintiffs claimed the right to receive or recover from defendant for value of said whiskies and that plaintiffs forbade payment thereof to the said Green River Distilling Company, Incorporated, the insured named in said policies.”
It thus appears that the policies were issued to and in the name of the Green River Distilling Company, Incorporated (hereafter referred to as the distilling company), whose property was covered by the policies together with that of unnamed third parties, who at the time of the alleged fire were the owners of whiskies stored in its warehouses.
It is not disputed that under such policies the owners of the warehouse receipts were beneficiaries as though they were specifically named therein. Nor is there any difference between the parties that circumstances may arise when an unnamed beneficiary may maintain a .separate action under a policy issued by an insurance company to recover his loss, without joining therein the party to whom the policy was issued. Thus, where the only interest left in a policy is that of the beneficiary, other interests therein having been adjusted or released, a separate action may be maintained by the beneficiary under the policy.
It seems also to be the settled law that where the person to whom such policies are issued, occupying as he does a trust relationship to others whose property is therein insured, refuses or neglects to assert the rights of the beneficiary, or where the interests of justice would require that the trustee be not permitted to collect or prosecute, then an action is maintainable by the beneficiary by joining the trustee as a party to the action. Illustrations of the rules above mentioned will be found in Utica Canning Co. v. Home Ins. Co. (132 App. Div. 420) and Wilson & Co., Inc., v. Hartford Fire Ins. Co. (190 id. 506; affd., 229 N. Y. 612).
*568In the instant case, however, it appears that the distilling company had served timely proofs of loss upon the defendant, which covered both its property and that of the holders of the warehouse receipts, who were entitled "to the benefits of the insurance; but that the plaintiffs served notice upon the defendant forbidding it to make payments of losses to the distilling company, although no allegations are made that the interests of the plaintiff will be jeopardized or in any manner injuriously affected if the distilling company be permitted to collect the losses payable under the policies for its own benefit and as trustee of holders of warehouse receipts.
The situation that confronts us here is that the distilling company not only is a trustee for the holders of whisky receipts, but is itself interested in the subject-matter of the insurance to the extent of its ownership of property covered therein.
In repudiating the acts of-the distilling company looking to the collection of the insurance claims, plaintiffs have assumed the position that they alone are entitled to collect the full amount of the policies in suit to the exclusion of the distilling company. They have ignored the interests of that company under the policies, and arbitrarily relegated it to outstanding policies other than those in suit, upon allegations that the remaining policies are sufficient to cover the losses of the distilling company, and that the insurance companies which issued said policies are abundantly solvent to meet their obligations.
The plea of solvency has scant merit, since it might happen that an insurance company solvent to-day may become insolvent before the day when judgment is entered against it. In Wilson & Co., Inc., v. Hartford Fire Ins. Co. (190 App. Div. 506) the court clearly recognized the rule in actions upon policies of insurance of the general character of those outlined herein, that the person to whom the policy is issued stands in the relation of a trustee to others whose property rights are insured therein and is the one who is primarily obligated to bring an action under the policy for all the parties concerned. The court there stated: “ It was clearly the intention of the parties to the policy that the loss should be adjusted by and paid to the president to avoid a *569multiplicity of claims and actions. It would only be in the case of the refusal of the president to adjust the loss or, having collected, to fail to pay over, that a right of action might arise in the plaintiff. There are no facts stated in this complaint that tend to support such a cause of action. It is alleged that the proofs of loss were presented by the Exchange and that it performed all the terms and conditions of the policy. It does not state whether the defendant paid the president of the Exchange, or refused payment. It does not allege any demand made upon the Exchange or its president, either for payment or that it bring an action. If plaintiff has any right of action, it would be one in equity in which the Exchange and possibly the president would be necessary parties.” In that case the policies provided that the loss was payable to the president of the Kansas City Live Stock Exchange, which had no financial interest whatever in the subject-matter of the policies.
In the instant case the distilling company is not only acting in a capacity similar to that of the president of the Kansas City Live Stock Exchange, but in addition has an actual financial interest in the policies of insurance. It seems to me that, in principle, the rule above quoted is peculiarly applicable to the facts in this case.
Each policy is the basis of a single action. This has been expressly held in Lewis v. Guardian Fire & Life Assurance Co. (181 N. Y. 392) and 0’ Neil v. Franklin Fire Ins. Co. (159 App. Div. 313, 317). In the latter case the court said: “ Separate actions could not have been maintained by plaintiff and defendant Crimmins to recover separately the amounts payable to each under this' policy.” (Citing Lewis v. Guardian Fire & Life Assurance Co., supra.)
It is quite evident that the rule announced in the Lewis Case (supra) is appropriate here since the plaintiffs and the distilling company have common interests in the enforcement of the policies of insurance.
It is difficult to understand under what rule of law plaintiffs may arbitrarily oust the distilling company from its rights under the policies in suit and compel it to resort to other outstanding policies. If plaintiffs have the right to select the policies upon which they alone can bring suit, then the same *570privilege must be accorded the distilling company or any other interest that may be covered by the policies. If such a practice were permitted, it would lead to increased litigation and in many cases to injustice and hopeless confusion.
It is clear that the distilling company is a necessary party. It only remains to determine whether it is a necessary party defendant, or whether it should have been made a party-plaintiff. As already pointed out, the plaintiffs in their complaint repudiated the acts of the distilling company in its capacity as trustee, and also ignored that company’s financial interests in the policies in suit. The distilling company, having performed its duty as trustee, and no fact being alleged that tends to show that it should not be permitted to act as such trustee, and it not having refused to join with the plaintiffs in its action against the defendant, it cannot now be claimed by plaintiffs that the distilling company is a necessary party defendant.
Section 448 of the Code of Civil Procedure provides: “if the consent of any one, who ought to be joined as a plaintiff, cannot be obtained, he may be made a defendant, the reason therefor being stated in the complaint.”
But the distilling company was not asked to consent to join the plaintiffs, hence it follows that it cannot be joined as party defendant. It also necessarily follows from the facts alleged that, since the distilling company has direct interests in the policies in suit, they are necessary parties plaintiff, and hence that the omission to join them as such is a fatal defect in the prosecution of this action.
The order of the Special Term should be reversed, with ten dollars costs- and disbursements to' appellant, and plaintiffs’ motion for judgment on the pleadings should be denied, with ten dollars costs, and defendant’s counter-motion for judgment on the pleadings should be granted, with leave to plaintiffs to serve an amended complaint upon payment of taxable costs and disbursements to date.
Order affirmed, with ten dollars costs and disbursements, with leave to defendant within ten days to withdraw demurrer and to answer on payment of said costs and the costs awarded to plaintiffs by the order appealed from.