Gantt v. American Cent. Ins. Co.

• Decision Date: 31 October 1878
• Citation: 68 Mo. 503
• Parties: GANTT v. THE AMERICAN CENTRAL INSURANCE COMPANY, Appellant.
• Court: Missouri Supreme Court

68 Mo. 503

GANTT

v.THE AMERICAN CENTRAL INSURANCE COMPANY, Appellant.

Supreme Court of Missouri.

October Term, 1878.

Appeal from St. Louis Court of Appeals.

This was a suit on a contract of re-insurance against loss by fire, brought by the plaintiffs, Gantt and Strong, as trustees for Hening & Pearce, surviving partners of the firm of Hening & Woodruff.

The facts are as follows: On the 9th day of June, 1864, Hening & Woodruff sustained a loss by fire of 700 bales of cotton, valued at $280,000, on the steamer Progress, on a voyage between the mouth of Red river and the mouth of the Ohio. They claimed to be insured with the United States Insurance Company, under an open policy and a supplementary verbal contract of insurance to the extent of $120,000. Several other companies, including the present defendant, had re-insured five-sixths of the risks of the United States Insurance Company, and the latter company claimed that the defendant, the American Central Insurance Company, had re-insured so much of any risk it might have on cotton as exceeded $100,000 and did not exceed $120,000, in other words, the sixth $20,000, of any risk it might have, and it claimed that if it was bound to Hening & Woodruff for $120,000, it had its recourse against the defendant for $20,000, and against each of the other four companies for a like amount. Under these circumstances, notice having been given of the loss, the United States convened the other five companies for the purpose of consultation. The result was that they all joined in a resolution to resist the claim. A contract embodying this resolution was signed on the 18th day of July, 1864. It was in the following terms:

“Whereas, a claim is made upon the United States Insurance Company, under open policy and agreement of Hening & Woodruff with said insurance company, for the sum of $120,000, for cotton burned on the steamer Progress, on the Mississippi river, on or about the 9th day of June, 1864; and whereas, each of the undersigned insurance companies is bound and liable to the said United States Insurance Company to the amount of $20,000 on any loss on cotton for which it is liable, as re-insured to it, to that amount each; and whereas, it is believed both by said United States Insurance Company and the undersigned companies, that said claim is illegal and unjust, and the undersigned desire that the same shall be resisted and defended; now, therefore, for that purpose, in consideration of the premises, we agree with the said United States Insurance Company, that it shall employ and retain such counsel as it may deem proper to consult, and to manage said defense, and that in case said United States Insurance Company shall be successful, and shall not be liable upon or for said claim, then we will each pay our pro rata proportion of said attorneys' fees and costs, if any, and in case said United States Insurance Company shall fail in its defense and shall be made liable by the judgment of the court upon or for said claim, then we will each pay our equal pro rata proportion of such claim and judgment, and of the attorneys' fees and costs.”

In pursuance of this agreement the United States Insurance Company employed counsel who defended the suits that were subsequently brought, and whose fees were paid from time to time by that company, the re-insuring companies reimbursing the latter their pro rata proportions. The United States company had entire control of the suits, the counsel consulting with them alone as to the conduct of them. Suit was at first brought in the State court, and after long litigation, culminated in a decision by the Supreme Court affirming a judgment of non-suit against the plaintiffs, and holding that the United Stated Insurance Company was not liable because the contract of insurance was not in writing. 47. Mo. 525. The plaintiffs, being citizens of New York, in 1871, renewed their suit in the United States Court. At the spring term, 1872, that court, overruling a demurrer to the petition, held that the verbal contract of insurance declared on was valid. 2 Dillon C. C., 27. An answer was then filed and the cause was continued to the fall term for trial.

In the meantime efforts were being made to effect a compromise. The American Central company always opposed that course, insisting on fighting it out to the bitter end. On the 24th day of July, 1872, the following agreement was made between the United States company and Hening & Pearce:

“Whereas, Robert M. Hening and Albert Pearce, as surviving partners of Hening & Woodruff, claim that the United States Insurance Company, of St. Louis, Missouri, was liable to said Hening & Woodruff, and is liable to said survivors for and on account of cotton on the steamer Progress and some barges, in the year 1864, and have sued said insurance company in the circuit court of the United States * * and said claim is denied and resisted, and a settlement of the judgment which may be rendered in said suit upon said claim, and also of any suit, judgment, claim or demand against the said United States Insurance Company on account of said cotton, is hereby made and agreed upon as between said insurance company and said Hening & Pearce, and, therefore, said company this day pays to said Hening & Pearce $22,000, and assigns to them its claim to the proceeds of cotton damaged on the steamer Des Arc, in 1864, which proceeds were in the hands of one D. H. Page, in his life-time, in New York. Now, therefore, in consideration of the premises, the said Hening & Pearce, surviving partners of Hening & Woodruff, agree and bind themselves to release said United States Insurance Company from any judgment which may be recovered in said suit, or in any suit or procedure which may ever be had or made on said claim, or any part thereof against it. But if any judgment shall be finally recovered in said suit, or in any suit or proceeding for or upon said claim against said company, then said company is to assign and transfer to said Hening & Pearce, or the survivors of them or their assigns or representatives all the claim and demand which it may have on the Phœnix Insurance Company, of St. Louis, the American Central Insurance Company, of St. Louis, the Globe Mutual Insurance Company, of St. Louis, and the Security Insurance Company, of New York, in respect of the re-insurance claimed to have been effected by the United States Insurance Company with said companies respectively, on account of the risks taken by the United States Insurance Company on cotton for Hening & Woodruff, which assignments are to be received by Hening & Pearce, their assigns or representatives, in full of any judgment or claim against said United States Insurance Company, and in satisfaction thereof, and said Hening & Pearce shall only pursue any remedy they may elect and as they choose under such assignments, which assignments are to be without liability or recourse on said insurance company, provided, however, that in any action or proceedings under such assignments, said Hening & Pearce may use the name of said United States Insurance Company at their own cost, and protecting the company therefrom, if they elect to do so. But it is agreed and understood that nothing herein is to hinder or prevent the United States Insurance Company from defending or continuing fully and in all things to defend said suit, or any suit or proceeding for or on account of said claim. It is further understood that in case said suit is defeated and no recovery is had therein, yet said Hening & Pearce are to keep said $22,000, and said claims for moneys which were in the hands of Page, and not to refund or re-pay the same.”

The present defendant was no party to this agreement and was not informed of its existence, until a week or more after it was made. Mr. Branch, the assistant secretary of defendant, hearing a rumor, that the United States company had settled, called at the office of the latter company and asked to be allowed to see the contract if it was in writing. Mr. Bodley, the secretary of the United States, replied that it was in writing, but declined to allow Mr. Branch to see it, unless he was specially deputized by his company for that purpose. On the following day, Mr. Branch returned with special authority from his company, and was then permitted to see and examine the contract, but his request to be allowed to take a copy was refused. At these interviews Mr. Branch denounced the action of the United States company as a fraud upon the defendant. On consultation with its attorneys the defendant resolved to hold no further communication with the United States company, and none was held.

The suit of Hening & Pearce came on for trial in the following September, and on the 24th day of that month, resulted in a verdict and judgment for the plaintiffs in the sum of $178,280. The present defendant took no part in the defense of that suit, did not ask to take any part, nor ask for any change of attorneys, and did not, after February, 1872, contribute anything further towards payment of attorneys' fees; nor did it ask to be allowed to take an appeal. No appeal was, in point of fact, taken, and shortly after the judgment was rendered, in accordance with the compromise agreement, the United States company assigned to Gantt & Strong, the present plaintiffs, its claim on the supposed contract of re-insurance against the present defendants. The $22,000 named in the agreement, and the money in the hands of Page amounting to about $5,000, was paid at the time the agreement was made, together with the further sum of $7,000 which was furnished by the Marine, one of the re-insuring companies, in settlement of its liability. Gantt & Strong had been the attorneys of the claimants throughout the litigation, and received the assignment in trust for their benefit. The United States court was not advised of the compromise agreement at the time of the trial.

This suit was brought under the foregoing...