Globe Nat. Fire Ins. Co. v. American Bonding & Casualty Co.

• Decision Date: 25 October 1927
• Docket Number: 38156
• Parties: GLOBE NATIONAL FIRE INSURANCE COMPANY, Appellee, v. AMERICAN BONDING & CASUALTY COMPANY, Appellee, et al., Appellants. W. F. GRANDY, Receiver, Appellee, v. IOWA BONDING & CASUALTY COMPANY et al., Appellants
• Court: Iowa Supreme Court

217 N.W. 268

205 Iowa 1085

GLOBE NATIONAL FIRE INSURANCE COMPANY, Appellee, v. AMERICAN BONDING & CASUALTY COMPANY, Appellee, et al., Appellants.

W. F. GRANDY, Receiver, Appellee, v. IOWA BONDING & CASUALTY COMPANY et al., Appellants

No. 38156

Supreme Court of Iowa, Des Moines

October 25, 1927

OPINION ON REHEARING JANUARY 10, 1928.

REHEARING DENIED APRIL 5, 1928.

Appeal from Woodbury District Court.--C. C. HAMILTON, Judge.

Suit in equity, to recover upon a surety bond against an insolvent obligor and certain reinsurers of such obligor. The case has been before us in some of its phases on two former appeals. This appeal was taken by the reinsurers, as appellants, from the final decree of the district court.--Reversed in part affirmed in part.

Reversed in part; affirmed in part.

Kindig McGill, Stewart & Hatfield, Miller, Kelly, Shuttleworth & McManus, and W. M. McLaughlin, for appellants.

Burgess & Gill, for Globe National Fire Insurance Company, appellee.

Kass Bros., for American Bonding & Casualty Company and W. F. Grandy, Receiver, appellees.

EVANS, J. FAVILLE, DE GRAFF, ALBERT, and WAGNER, JJ., concur.

OPINION

EVANS, J.

I.

The plaintiff herein was a depositor in the Union Trust & Savings Bank of Sioux City. The American Bonding & Casualty Company issued to it its two insurance policies, or bonds, for $ 50,000 each, to insure such deposits. These policies are known in the record as A and B, respectively. The American Bonding & Casualty Company reinsured its risk in part with the following named companies, defendants herein: Iowa Bonding & Casualty Company, Southern Surety Company, National Surety Company, and American Surety Company. The division of the risk on Policy A was as follows: Iowa Bonding & Casualty Company, 35 per cent thereof ($ 17,500); Southern Surety Company, 30 per cent thereof ($ 15,000); American Bonding & Casualty Company (retained) 35 per cent thereof ($ 17,500).

The division of risk on the second $ 50,000 policy, B, was as follows: Iowa Bonding & Casualty Company 20 per cent thereof ($ 10,000); Southern Surety Company, 20 per cent thereof ($ 10,000); American Surety Company, 20 per cent thereof ($ 10,000); National Surety Company 30 per cent thereof ($ 15,000); American Bonding & Casualty Company (retained) 10 per cent thereof ($ 5,000).

The principal bond of the American Bonding & Casualty Company contained the standard pro-rata clause, which purported to limit liability to the same proportionate share of the net liability in case of loss as the amount of its insurance bore to the whole amount of valid and collectible insurance covering such property. The policies of the reinsuring companies each contained a standard pro-rata clause which purported to limit liability of each reinsuring company to the same proportionate share of the net liability, in case of loss, as the amount of its insurance bore to the face of the policy. While the insurance was in force, the American Bonding & Casualty Company went into the hands of a receiver. Shortly thereafter, and on February 14, 1921, the plaintiff procured an additional policy of insurance for $ 25,000 from the Fidelity & Deposit Company of Maryland. On February 16, 1921, the Union Trust & Savings Bank closed its doors, the policies of the American Bonding & Casualty Company and that of the Fidelity & Deposit Company being, at the time, in force. The plaintiff brought this action on the policies of the American Bonding & Casualty Company, and named the reinsuring companies as party defendants. There was no privity of contract between the plaintiff and the reinsuring companies, and it could not have maintained an action at law against them. Their legal liability was to the American Bonding & Casualty Company. The receiver of the American Bonding & Casualty Company filed a cross-petition against the reinsuring companies, asking to recover against them for the benefit of the plaintiff. We held on the first appeal that, notwithstanding the lack of privity between plaintiff and the reinsuring companies, equity would protect the plaintiff in its equitable right to the proceeds of the reinsurance policies, and, in view of the insolvency of the principal obligor, would permit it to recover directly from the reinsurers, without the intervention of the receiver; and we affirmed the order of the district court awarding judgment to plaintiff accordingly. (198 Iowa 1072x). In the original decree entered by the district court, no account had been taken of possible future dividends from the Union Trust & Savings Bank, then in course of liquidation; nor had any account been taken of the reduction of liability to which the American Bonding & Casualty Company was entitled by reason of the existence of other valid and collectible insurance,--to wit, that of the Fidelity & Deposit Company, nor of the pro-rata clauses of the reinsuring policies. These matters being urged in a petition for rehearing before us, we filed a supplemental opinion, reserving these matters from the adjudication, and directed the district court to take these matters into account, and to enter appropriate pro-rata credits upon the several judgments entered against the defendants. (198 Iowa 1080). A dispute has arisen between the parties as to the scope of our affirming adjudication on that appeal. The contention of the appellants is that that reservation opened up the whole question of the pro-rata liability of the respective defendants; that in the original decree the district court erroneously failed to award to the respective defendants the benefit of the pro-rata clauses of their contract, in that the judgments were entered for the maximum amounts named, without regard to the proportions of the loss; that the appellants, therefore, were entitled, not only to appropriate credits, by reason of future liquidating dividends of the Union Trust & Savings Bank and by reason of coinsurance of the Fidelity & Deposit Company, but, independent of these, to relitigate the basic measure of liability adopted in the original decree. It is claimed also by them that the original decree contained an error of computation of interest, amounting to more than $ 2,500, against the appellants, and that our supplemental opinion opened the decree to a correction of such error. On the other hand, it is contended by appellee that, upon the second appeal (200 Iowa 847), we put a construction upon our former supplemental opinion (198 Iowa 1080), and that we therein limited the scope of the supplemental opinion to the first two subjects above named, and that its reservations did not save to the appellants the right to insist upon the pro-rata provisions of their reinsuring policies, nor the right to a correction of the decree for alleged errors in computation. Some expressions contained in our opinion on the second appeal give a color of support to this contention of the appellee's. Our first consideration thereof disposed us to the sustaining of the contention of appellee at this point. A further consideration, however, satisfies us that it is not tenable. The language of that opinion should be construed in the light of the issue then and there under consideration. That was an appeal from an order by the district court striking a counterclaim or offset filed by the reinsuring companies as against the reinsured, the American Bonding & Casualty Company. This offset was predicated upon matters foreign to the reinsuring policies. The question presented to us was whether this offset was within the permission of our supplemental opinion; and we held to the negative, and affirmed the order of the district court. The question now considered was in no manner involved on that appeal. We must, therefore, still look to the supplemental opinion itself to determine its reservations from the adjudication. It was, in part, as follows:

"It is claimed by appellants in their petition for rehearing that the Globe National Fire Insurance Company, plaintiff, in addition to the policies in controversy, held an additional policy in the Fidelity & Deposit Company of Maryland; that certain dividends have been paid by the receiver of the insolvent bank; and that the various policies contained provisions for the pro-rating of the loss sustained, which requires further hearing by the court. For the purpose of avoiding any uncertainty in the court below, we desire to say that the opinion filed herein should not be construed as finally adjudicating the above matters, but that same are left open for the further hearing and adjustment by the court in which the receivership is pending and the judgment was entered * * *."

It appears from the record that the Union Trust & Savings Bank was in course of liquidation, and that large dividends had been declared therein, which should have been applied upon the plaintiff's loss and in reduction of the liability of the American Bonding & Casualty Company; that the effect of the coinsurance by the Fidelity & Deposit Company had been ignored in the original decree; that no account had been taken of the pro-rata clause contained in the reinsuring policies which purported to limit the liability of each reinsurer to the same percentage of the net loss as the amount of its insurance bore to the face of the policy. We think the effect of the supplemental opinion was to reserve these three subjects from the adjudication, and that, therefore, the judgments as entered are subject to such modification as is required by a proper consideration of these factors. We do not think, however, that the supplemental opinion saved to the appellants the right to claim an alleged error in the original computation of plaintiff's loss.

As to the dividends realized in the liquidation of the Union Trust & Savings Bank, full...