Peninsula Ins. Co. v. Houser

• Citation: 248 Md. 714,238 A.2d 95
• Decision Date: 13 February 1968
• Docket Number: No. 93,93
• Parties: PENINSULA INSURANCE COMPANY v. Ralph W. HOUSER. Ralph W. HOUSER v. PENINSULA INSURANCE COMPANY et al.
• Court: Court of Appeals of Maryland

Page 714

248 Md. 714

238 A.2d 95

PENINSULA INSURANCE COMPANY v. Ralph W. HOUSER.

Ralph W. HOUSER v. PENINSULA INSURANCE COMPANY et al.

No. 93.

Court of Appeals of Maryland.

Feb. 13, 1968.

Robert E. Kuczynski, Hagerstown (Edwin H. Miller, Miller, Miller & Kuczynski, Hagerstown, and Dallas & Seidel and Sheldon B. Seidel, Salisbury on the brief), for appellant and cross-appellee, Peninsula Ins. Co.

Ernest V. Wachs, Hagerstown (Wachs & Kreykenbohm, Hagerstown, on the brief), for appellee and cross-appellant, Ralph W. Houser.

J. Louis Boublitz, Hagerstown (Boublitz, Colton & Broadwater, Hagerstown, on the brief), for appellee, Allstate Ins. Co.

Before HAMMOND, C. J., and HORNEY, MARBURY, BARNES, FINAN and SINGLEY, JJ.

SINGLEY, Judge.

This case arises out of an automobile accident which occurred on 5 November 1964. The car involved was owned by Ralph W. Stottlemyer and was being driven by Verdon Francis Tritapoe. Ralph W. Houser, the appellee and cross appellant here (and plaintiff below), was a passenger. Houser, who was injured, obtained a judgment for $10,500.00 against Tritapoe in June of 1966 and in an endeavor to collect, laid an attachment by way of garnishment in the hands of Peninsula Insurance Company (Peninsula) and Allstate Insurance Company (Allstate) on the theory that Peninsula had insured Stottlemyer, the owner, and Allstate had insured Tritapoe, the driver. Peninsula filed a plea of nulla bana, on the ground that it had not insured Tritapoe; Allstate answered, admitting that it had insured Tritapoe, but claiming that its coverage was secondary to that afforded Stottlemyer by Peninsula.

On 14 March 1967, judgment of condemnation absolute was entered by the Circuit Court for Washington County in favor of Houser for $10,000.00 against Peninsula, with interest from 14 June 1966 together with one-half of the court costs in the personal injury case and the attachment case and for $500.00 with interest from 14 June 1966 together with the other half of the same court costs against Allstate. From this judgment, Peninsula and Houser appealed.

Three questions are presented by the appeal: 1. Was an attachment suit the proper proceeding? 2. Was Tritapoe, the driver of the Stottlemyer car, covered by the Peninsula policy? 3. Assuming that attachment lies, has Houser proved his case?

I

Peninsula challenges the propriety of the procedure followed by Houser who, after obtaining his judgment against Tritapoe, laid a writ of attachment in the hands of Peninsula as garnishee of Tritapoe. The parties concede that the practice of determining the existence of insurance coverage in this fashion has been recognized by custom, but Peninsula argues that it has never been sanctioned by this Court.

With this contention we cannot agree. Md.Rule G45 a provides that '(a)ny property, including a credit which has not matured * * * in the hands of another, may be attached' and Rule G47 a provides that '(a) writ of attachment by way of garnishment may be served upon a person having property or credits belonging to the defendant.' The prior decisions of this Court have established that garnishment is, in essence, a suit by the debtor against the garnishee for the use and benefit of the attaching creditor, and that the rights of the creditor against the garnishee cannot rise above those of the debtor. Messall v. Suburban Trust Co., 244 Md. ,502, 224 A.2d 419 (1966); Cole v. Randall Park Holding Co., 201 Md. 616, 95 A.2d 273, 41 A.L.R.2d 1084 (1953). A respectable majority of jurisdictions permit garnishment of an insurer by an injured person to compel payment of his judgment. E. g., Appleman, Insurance Law and Practice (1942), § 4838 and cases cited in footnote 34; Restatement of Judgments, § 111, comment b. (1942). The principle was recognized in United States Fid. & Guaranty Co. v. Williams, 148 Md. 289, 129 A. 660 (1925) where, in a well-considered opinion filed for the court, Judge Digges said at 299-300, 129 A. at 664:

'On the other hand, if the policy was a contract to indemnify against liability, from and after the time the liability of Price to the appellee was fixed and determined by a judgment in her favor, the appellant did owe Price the amount of that judgment to the extent of the sum fixed in the policy, and the amount so due and owing to Price was subject to attachment on the judgment obtained by the appellee. This is the law as determined by the weight of authority, and has been expressly so declared by this court in London & Lancashire Indemnity Co. v. Cosgriff, 144 Md. 660, 125 A. 529, in which the opinion was delivered by the former Chief Judge. That case, like the present one, was an attachment case, and it will be well to remember, as pointed out by Judge Boyd, quoting from Hodge & McLane on Attachment, § 148, that the general rule that the right of the attaching creditor to recover against the garnishee depends upon the subsisting rights between the garnishee and the debtor in the attachment, and the test of the garnishee's liability is that he has funds, property, or credits in his hands belonging to the debtor for which the latter would have the right to sue; the plaintiff is subrogated, as against the garnishee, to the rights of the debtor, and can recover only by the same right and to the same extent as the debtor might recover if he were suing the garnishee. In other words, the appellee's right to recover under the attachment in this case depends upon and is controlled by the question of whether or not her judgment debtor, Price, could successfully maintain a suit against the appellant. If Price could compel payment under the contract to him, the appellee can recover; but if the appellant, under the terms of the contract, has such a defense as would preclude recovery by Price, then and in that event there can be no recovery by the appellee.'

The Williams case turned on another point, since the policy, by its terms, insured 'against loss.' In the case before us, however, the policy language indemnified against liability: 'To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages * * *.'

Under such circumstances, the procedure adopted by Houser to enforce his claim was proper. Cf. De Maio v. Lumbermans Mutual Casualty Co., 247 Md. 30, 230 A.2d 279 (1967).

II

The second question, whether the Peninsula policy covered Tritapoe, the operator of the Stottlemyer car, requires a recital of additional facts. The record shows that Stottlemyer, who was 19 years of age, filed an application for a policy of public liability and property damage insurance with Daly's Insurance Agency (Daly) in Hagerstown, Maryland, on 14 April 1964. Although the application was for a year and the premium was calculated on an annual basis, the Agency divided the coverage into two periods of six months each: the first from 14 April 1964 to 14 October 1964; the second, from 14 October 1964 to 14 April 1965. The application showed that insurance for the first period was to be placed, as in fact it was, with Peninsula, but no company was specified for the second six months. There was testimony that this was Daly's customary procedure; that at the end of six months, the policy would be renewed with the same company, or placed with another; and that this would have been done, had Daly not become insolvent.

On the day when the application was filed, Kenneth E. Work, an employee of Daly, sent to the Commissioner of Motor Vehicles Form JR-11 required by the Motor Vehicle Financial Responsibility Act (the Act), Maryland Code (1966) Repl. Vol.) Art. 66 1/2, § 93, for the licensing of operators under 21 years of age. The JR-11 form was signed in Peninsula's behalf by Work. It referred to Peninsula Policy AC 3984, issued by Daly to Stottlemyer, and included the following paragraph:

'In the event of cancelation or non-renewal of such policy notice of such cancelation or non-renewal will be filed with the Commissioner of Motor Vehicles thirty (30) days in advance of the effective date of such cancelation or non-renewal.'

This paragraph was referred to in Reserve Ins. Co. v. Duckett, 240 Md. 591, 598 & n. 1, 214 A.2d 754, 758 & n. 1 (1965), where this Court pointed out that Maryland Code, Art. 66 1/2, § 142 dealing with proof of financial responsibility, which by its terms applies to notice of cancelation or annulment, has been administratively interpreted to include notice of expiration, with the concurrence of all companies qualified to do business in Maryland.

The application which Stottlemyer filed with Daly fixed the annual premium at $328.00 to which a monthly financing charge of $2.50 was to be added ¹ and provided for an initial payment of $55.00 and 10 monthly payments of $27.30 each, plus the financing charge. Stottlemyer paid $57.50 to Daly at the time he filed the application and made 6 payments of $29.80 each to Daly's Acceptance Corporation,...