Poe v. Munich Reinsurance Co.

• Decision Date: 24 June 1915
• Docket Number: 55.
• Citation: 95 A. 164,126 Md. 520
• Parties: POE et al. v. MUNICH REINSURANCE CO.
• Court: Maryland Court of Appeals

95 A. 164

126 Md. 520

POE et al. v. MUNICH REINSURANCE CO.

No. 55.

Court of Appeals of Maryland

June 24, 1915

Appeal from Circuit Court of Baltimore City; Carroll T. Bond, Judge.

Petition by Edwin W. Poe and another, receivers of the United Surety Company, against the Munich Reinsurance Company, for an accounting. From an order dismissing the petition petitioners appeal. Affirmed.

Argued before BOYD, C.J., and BRISCOE, BURKE, THOMAS, PATTISON URNER, and STOCKBRIDGE, JJ.

Stuart S. Janney and Joseph C. France, both of Baltimore (Ritchie Janney & Griswold, of Baltimore, on the brief), for appellants.

R. E Lee Marshall, of Baltimore, for appellee.

BOYD C.J.

This is an appeal from an order dismissing a petition of the receivers of the United Surety Company praying that the papers in the case be referred back to the auditor to state a final account between that company and the Munich Reinsurance Company, under the terms of a participation contract entered into by the two companies. When the petition was filed an order to show cause was passed and the Munich Company answered, alleging that the court was without jurisdiction in the premises, and that, even if possessed of jurisdiction, it should not exercise it until the United Company shall have rendered to the Munich Company the account called for by the contract between the two companies, and until some dispute or difference in respect to such account shall first have arisen.

Controversies between the two companies in reference to that contract were before this court in Munich Reinsurance Co. v. United Surety Co., 113 Md. 200, 77 A. 579, Munich Reinsurance Co. v. United Surety Co., 121 Md. 479, 88 A. 271. The first was an appeal from a decree which dismissed a bill of complaint of the Munich Company against the United Company, decreed that the defendant was entitled to cross-relief as prayed in its answer, and referred the cause to the auditor to ascertain and report the amount, if any, due by the plaintiff to the defendant under the participation contract. That decree was affirmed, and the cause was remanded for further proceedings. The bill alleged that by reason of what was stated in it that contract was fraudulent and void, but that the defendant had instituted an action against it in the superior court of Baltimore city to recover $53,968.55 alleged and claimed to be due it under said contract. It prayed that a decree be passed declaring the participation contract null and void, and canceling the same; that the defendant "be enjoined from prosecuting any suit against your orator based upon said contract, and from asserting in any court any claims or pretensions by reason of said contract"; that an injunction issue restraining the defendant from prosecuting the said suit in the superior court; and for general relief. The defendant answered, alleging that, in so far as the bill sought to enjoin the suit against the Munich Company, it was brought with the knowledge of that company and with its acquiescence, in that it had voluntarily appeared in said suit by accepting service of summons through its counsel, without which no action could have been maintained against it in this jurisdiction, "and by way of answer to the merits of said bill of complaint, and for cross-relief as though the same were prayed by a cross-bill," the defendant answered at length, concluding, "and for cross-relief defendant shows that, under said contract, a copy of which is filed with plaintiff's bill as 'Plaintiff's Exhibit No. 4,' plaintiff is indebted to the defendant in a large sum of money, for which this defendant prays an accounting and a decree herein in its favor." The case in this court was decided May 6, 1910, and on November 19, 1910, the two companies entered into an agreement by which, after reciting that the court had by its decree of the 30th of October, 1909, ordered that an accounting be had between the two companies under the terms of the contract, and "in order to facilitate said accounting, the parties hereto desire to enter into this agreement," it was agreed as follows:

"First. The said Munich Reinsurance Company and the said United Surety Company do hereby constitute and appoint the American Audit Company their agent to examine the records, books, and accounts of the United Surety Company, and therefrom to state an account in annual periods beginning 2d January, 1906, and ending on January 1, 1911, applying to the share of the Munich Reinsurance Company in the business of the United Surety Company as per their contract above referred to. Second. The Munich Reinsurance Company and the United Surety Company will each delegate one of their employés to assist in such accounting, and all amounts passed by the American Audit Company, and to which no objection has been raised by either of the delegates, shall be deemed to be accepted by both parties, and the fact and amount of any item of receipt or disbursement by said surety company as found by said audit company shall likewise be conclusive upon the parties hereto, the facts and circumstance surrounding such item (unless agreed to) and the relevancy thereof to the accounting between the two said companies being alone left open for future determination. The audit, however, shall not extend to outstanding liabilities for unexpired risks or claims not yet settled; both the outstanding liabilities for unexpired risks and claims not yet settled or reserved for future adjustment beween the parties under the terms of the contract."

Other provisions were made which need not now be referred to. The audit company submitted a report, and the parties then proceeded with the accounting before the auditor, to whom the case had been referred by the decree. An audit was filed, and on January 2, 1913, exceptions to it were overruled, and the audit was ratified and confirmed. Appeals were taken by both parties, and were disposed of by the decision in Munich Reinsurance Co. v. United Surety Co., 121 Md. 479, 88 A. 271. The decree was on June 26, 1913, affirmed in part and reversed in part, and the cause was remanded, to the end that the account be restated in accordance with that opinion. An audit was filed in the lower court, which was ratified on the 26th day of September, 1913, and the amount thus ascertained to be due by the Munich Company, together with interest thereon to September 30, 1913, being in all $77,445.79, was paid by that company to the receivers on October 2, 1913.

The participation contract took effect January 2, 1906, was to continue for a period of five years from that date, and was to be tacitly renewed for further periods of five years thereafter, unless written notice was given by either party one year previous to the expiration of any term of five years. The Munich Company, however, had the right to withdraw--

"after the expiration of the first period of five years from this agreement at the end of any calendar year, by giving one (1) year's notice in writing if the transactions under this agreement result in a loss of the 'Munich'; the 'Munich' continuing to participate in all insurances coming within the terms of this agreement, granted or renewed by the 'United' during the currency of any notice of cancelment, and remaining liable for its share of the claims arising out of such insurances, and out of insurance in force at the time of the notice being given until expiration of the liability thereon." Article 12 of agreement.

The bill of complaint was filed by the Munich Company on May 29, 1907, and the first decree was passed October 30, 1909, and affirmed by this court May 6, 1910. The notice authorized by article 12, was given by the Munich, so as to terminate the agreement at the end of the year 1910, but neither when the bill was filed nor when the decree was passed were such questions as are now sought to be referred to the auditor before the court. It will be remembered that the United had sued at law to recover what it claimed was due for the first year of the contract, and by its cross-bill it alleged that:

"The plaintiff is indebted to the defendant in a large sum of money, for which this defendant prays an accounting and a decree herein in its favor."

There was no other prayer in the cross-bill, not even one for general relief. If the case had been determined at any time before January 1, 1913, nearly five years and a half after the cross-bill was filed, no accounting could have been required of what is now sought to be referred to the auditor, for by the notice the contract was terminated at the end of 1910, and by article 13 it was agreed:

"In case of notice of termination by either party, the accounts shall be made up not later than two years after the expiration of the notice."

And the Munich Company would not have been in default for not accounting, until that time expired. Of course, a new proceeding would then have been necessary, in order to require an accounting.

There was therefore nothing up to the time of the decree in this court in Munich Reinsurance Co. v. United Surety Co., 113 Md. 200, 77 A. 579, which would have authorized the accounting now sought. As will be seen by reference to the agreement between the two companies entered into on the 19th of November, 1910, part of which we have quoted above, the American Audit Company was only authorized to state an account for the five annual periods beginning January 2, 1906, and ending January 1, 1911, and it was expressly stated that:

"The audit, however, shall not extend to outstanding liabilities for unexpired risks or claims not yet settled; both the outstanding liabilities for unexpired risks and claims not yet settled are reserved for future adjustment between the parties, under the terms of the contract."

Therefore it...