Farmers' Mut. Fire Ass'n of Midland v. Smith

• Decision Date: 07 January 1929
• Docket Number: No. 110.,110.
• Citation: 222 N.W. 727,245 Mich. 514
• Parties: FARMERS' MUT. FIRE ASS'N OF MIDLAND, ISABELLA AND GRATIOT COUNTIES et al. v. SMITH et al.
• Court: Michigan Supreme Court

245 Mich. 514

222 N.W. 727

FARMERS' MUT. FIRE ASS'N OF MIDLAND, ISABELLA AND GRATIOT COUNTIES et al.

v.SMITH et al.

No. 110.

Supreme Court of Michigan.

Jan. 7, 1929.

Appeal from Circuit Court, Midland County, in Chancery; Ray Hart, Judge.

Suit by the Farmers' Mutual Fire Association of Midland, Isabella and Gratiot Counties against Nelson S. Smith and another, in which William Woodcock and others intervened as plaintiffs. Decree for plaintiffs, and defendants appeal. Affirmed in part, and reversed in part.

Plaintiff insurance company is a mutual company and was authorized to write insurance in the counties of Midland, Isabella, and Gratiot. In the forepart of 1926, it decided to extend its activities to include Bay, Clare, Saginaw, and Gladwin counties. It caused amendments to its articles of association to be submitted to the insurance commissioner, but the commissioner and the Attorney General both disapproved them as submitted. James A. Reeder, who lived at Clare, desired to there act as its agent when the new territory was taken in any wrote plaintiff. He was looked upon with favor, and sample copies of its policy and of applications for insurance were sent him. Defendant Nelson S. Smith owned a farm in Clare county with extensive buildings. He got in touch with Reeder, and an application for insurance was filled out, and the amount of the premium was paid to Reeder; later this application was sent in to the company. This was in March and before the company had succeeded in getting its matters with insurance department straightened out, although it was expecting daily that it would be authorized to do business in the new territory. On March 30, the house on Smith's farm burned; on April 8, the company issued and sent to Smith its policy of insurance on the farm buildings. It was not then authorized to do business in Clare county; it did not know of the fire. Smith urged the company to pay the loss, but it denied liability.

On June 5, Smith brought suit in the Gratiot circuit against the company, William Woodcock, its president, August Rhode, its secretary, and Mr. Reeder. Before the declaration in that case was filed, the company alone filed this bill in the Midland circuit to cancel the policy and to perpetually restrain the Gratiot county action. When the declaration in the Gratiot county suit was filed, it was found that it counted solely in tort, charging, as basis of recovery, negligence and fraud and deceit, and in no way was it sought to recover on the policy. The individual defendants in the Gratiot county suit later intervened in this suit and were joined as plaintiffs. Upon the hearing of the instant case, counsel for Mr. Smith conceded that the policy was of no force, and stated they were willing that a decree be entered canceling it. They, however, insisted that the Gratiot county action was one in tort, one which they had a right to try to a jury; that was in no way connected with the policy; and that the rule that equity having acquired jurisdiction will retain it to adjust the matters in controversy between the parties does not extend to other causes of action entirely independent and apart from the one involved in the bill. They offered no proof, and here appeal from a decree which not only canceled the policy, but which also determined the facts involved in the Gratiot county case adversely to Mr. Smith's claim and restrained him from further prosecuting that suit.

Argued before the Entire Bench. Charles H. Goggin and William A. Bahlke, both of Alma, for appellants.

Kinnane & Leibrand, of Bay City, for appellees.

FELLOWS, J. (after stating the facts as above).

It cannot be questioned, since John Hancock Mutual Life Insurance Co. v. Dick, 114 Mich. 337, 72 N. W. 179,43 L. R. A. 566, that in this state a court of equity has jurisdiction to cancel an outstanding insurance policy where grounds for equitable relief are present. Appellants' counsel do not question such jurisdiction, nor do they deny the general rule that a court of equity having assumed jurisdiction will retain it to settle the entire controversy, to do justice to the parties. They insist that such rule is not...