Mahr v. Norwich Union Fire Ins. Soc.

• Decision Date: 06 October 1891
• Citation: 28 N.E. 391,127 N.Y. 452
• Parties: MAHR et al. v. NORWICH UNION FIRE INS. SOC. et al.
• Court: New York Court of Appeals Court of Appeals

127 N.Y. 452

28 N.E. 391

MAHR et al.

v.NORWICH UNION FIRE INS. SOC. et al.

Court of Appeals of New York,

Second Division.

Oct. 6, 1891.

Appeal by defendants from a judgment of the general term of the supreme court in the first judicial department, affirming a judgment entered upon the decision of the court at special term. Reversed.

Action by the plaintiffs, claiming to be the equitable owners of a policy of fire insurance to restrain the insurer from paying the amount of a loss to the insured or to his alleged assignee. On the 21st of April, 1886, the Norwich Union Fire Insurance Society, a corporation organized under the laws of Great Britain, with agencies in New York, Iowa, and other states, issued the policy in question to one Bartlett on his stock of goods at Muscatine, Iowa. The policy was countersigned by the agent of the company at that place. Three days later Bartlett, who resided at Muscatine, sent the policy by mail to the plaintiffs, who resided in the city of New York, as collateral security to a loan of $2,000, concurrently made to him by them. The policy, as written, was payable to Bartlett only, and it was never assigned to the plaintiffs. July 3, 1886, the property insured was destroyed by fire; and on the 16th of August following, Bartlett made an absolute assignment of the policy to one Kelly, of Muscatine, aforesaid. This action was commenced against the insurance company and Bartlett by the due service of process in this state upon the former, August 12, 1886, and on the latter about one month later. The company answered, alleging, among other defenses, a defect of parties defendant, in that said Kelly, although a necessary party to the action, had not been joined. March 12, 1887, Kelly commenced an action at law in a court of the state of Iowa to recover from the insurance company the sum of $2,000, the amount of the policy, with interest from July 3, 1886. March 15, 1887. on motion of the company, an order was made by the supreme court of this state in this action requiring said Kelly to be made a defendant therein, and that he be brought into court by a supplemental summons. A supplemental summons and complaint were issued accordingly, and the same were served on Kelly in the state of Iowa, pursuant to an order of publication based upon an affidavit alleging that ‘the defendant S. C. Kelly claims to have property in the state of New York, to-wit, an interest in the insurance policy’ in question. No service was made upon Kelly within this state, and he did not appear in the action. The insurance company, by its answer to the supplemental complaint, pleaded the pendency of the action in the Iowa court; that Kelly was a necessary part; and that the supreme court had by its order directed that he be brought in as a party defendant, and demanded judgment that the complaint be dismissed, ‘unless said S. C. Kelly be brought in so as to be bound by any judgment herein.’ These facts appeared upon the trial of this action, where Kelly's default was noted, and were, in substance, found by the trial judge, who also found that Kelly had no interest in the policy ‘superior to that of the plaintiffs; * * * and that the alleged assignment * * * by the defendant Bartlett to said S. C. Kelly of the date August 16, 1886, * * * was void, and in no wise affected the prior interest obtained by the plaintiffs in said poliey on or about the 24th day of April, 1886.’ Judgment was directed restraining the insurance company from paying any money under said policy to Bartlett or Kelly; and although there was neither allegation nor evidence of any proof of loss, as required by the terms of said policy, the defendant company was ordered ‘to pay to the plaintiffs such moneys as shall be found to by payable under and by virtue of’ said policy of insurance.

David Welch, for plaintiffs.

William Allen Butler, for defendant.

VANN, J., ( after stating the facts.)

Upon the argument of this appeal the learned counsel for the plaintiffs, with great fairness, admitted that the supreme court never acquired jurisdiction over Kelly, the alleged assignee of the insurance policy that is the subject of this action. The main question left for decision is whether Kelly was a necessary party, as the defendant company alleged in its answers and urged upon the trial. It is not claimed that he should have been joined as a plaintiff, but his presence as a defendant is insisted upon as essential to ‘the complete determination or settlement’ of the questions involved. The Code of Civil Procedure provides that ‘the court may determine the controversy, as between the parties before it, where it can do so without prejudice to the rights of others, or by saving their rights; but, when a complete determination of the controversy cannot be had without the presence of other parties, the court must direct them to be brought in.’ Code Civil Proc. § 452. While the statute does not in terms prohibit the court from determining the controversy unless all the necessary parties are brought in, that is impliedly commanded, and is the established practice in all equitable actions. Peyser v. Wendt, 87 N. Y. 322;Sherman v. Parish, 53 N. Y. 483; Webster v. Bond, 9 Hun, 437; Shaver v. Brainard, 29 Barb. 25; Sturtevant v. Caldwell, 4 Bosw. 628; Van Epps v. Van Deusen, 4 Paige, 64. It is not enough for the court to direct that the necessary parties be brought in, but it should refuse to proceed to a determination of the controversy so as to affect their rights until they are in fact brought in. Peyser v. Wendt, supra; Sherman v. Parish, supra; Powell v. Finch, 5 Duer, 666. The plaintiffs did not appeal from the order of the court requiring Kelly to be brought in, and as long as it remained in force it was an adjudication, establishing as the practice, if not the law, of the case that Kelly was a necessary party. Riggs v. Pursell, 74 N. Y. 370.

Moreover, the object of this action was to establish the equitable title of the plaintiffs to the policy, and to prevent the company from paying the proceeds to any one except themselves. The proceeds, however, were also claimed by Kelly, who not only held the legal title to the policy, but had actually commenced an action upon it against the company in another state. Clearly, the company should not be required to pay the entire amount of the policy both to the plaintiffs and to Kelly, or, without fault on its part, to be placed in a position where it would run any reasonable risk of being compelled to make a double payment. But how is such a result to be prevented when an action...