Syracuse Lighting Co. v. Maryland Cas. Co.

• Decision Date: 04 March 1919
• Citation: 226 N.Y. 25,122 N.E. 723
• Parties: SYRACUSE LIGHTING CO. v. MARYLAND CASUALTY CO.
• Court: New York Court of Appeals Court of Appeals

226 N.Y. 25

122 N.E. 723

SYRACUSE LIGHTING CO.

v.MARYLAND CASUALTY CO.

Court of Appeals of New York.

March 4, 1919.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by the Syracuse Lighting Company against the Maryland Casualty Company. From a judgment of the Appellate Division of the Supreme Court in the Fourth Judicial Department (178 App. Div. 908,164 N. Y. Supp. 1116), affirming a judgment entered upon a directed verdict by the trial justice in favor of the plaintiff, the defendant appeals. Affirmed.Wm. H. Harding, of Syracuse, for appellant.

Jerome L. Cheney, of Syracuse, for respondent.

HOGAN, J.

March 30, 1900, the defendant issued a policy of insurance to Electric Light & Power Company of Syracuse, hereinafter denominated power company, whereby defendant agreed to indemnify the power company for one year against loss from commonlaw or statutory liability for damages on account of bodily injuries fatal or nonfatal suffered by any person or persons not employed by the assured and occurring within the factory, shop, or yards described in the application, or upon the ways immediately adjacent thereto, provided for the use of employés, or the public, and caused by the negligence of the assured and resulting from the operation of the trade or business described in the said application. The liability of defendant thereunder for an accident resulting in injuries to or in the death of one person was limited to $5,000.

The policy, contained the usual conditions as to notice, and agreement to defend the power company in any suit brought against it, and reserved to defendant exclusive authority to settle any claims, etc. Additional conditions were embodied in the policy which will be later considered.

On April 27, 1900, one James Hughes sustained injuries which resulted in his death. On June 27, 1900, the administratrix, etc., of James Hughes, commenced an action against the power company to recover damages due to his death from injuries sustained. Defendant thereupon duly assumed the control and defense of the action under the terms of its policy contract. Before the trial of the action and on July 1, 1901, the plaintiff, then being the owner of the entire capital stock of the power company and a third corporation, pursuant to the provisions of the Stock Corporation Law (Consol. Laws, c. 59, present section 15), duly filed the necessary certificate to merge the power company and the third corporation. The action brought by the administratrix against the power company was not tried until October, 1907. The trial resulted in a verdict for the plaintiff therein against the power company upon which judgment was entered for $8,886.34. The defendant here, in charge of the action for the power company, took an appeal therefrom to the Appellate Division, and the latter court in January, 1909, affirmed the judgment Subsequently it appealed to this court from the decision of the Appellate Division, and the judgment was affirmed February 10, 1910. Executions were issued against the power company and returned unsatisfied.

In April, 1910, the administratrix of the Hughes estate commenced an action against plaintiff to collect the judgment obtained by her against the power company. Notice of said action together with the summons and complaint therein was forwarded to the defendant by plaintiff on or about April 23, 1910. Defendant declined to have anything to do with the action for the reason that a defense of the same did not come within the terms of the policy issued to the power company. Thereupon the plaintiff without waiving any of its rights defended the action which resulted in a judgment against the plaintiff June 20, 1910, for $10,534.10, upon which execution was issued and satisfied by plaintiff on June 23, 1910.

On October 13, 1910, the present action was commenced by plaintiff to recover the amount of indemnity provided for in the policy, $5,000, and interest thereon from October 30, 1907, the date of the judgment entered in thr first Hughes case. At the close of the trial, counsel for defendant moved that the trial justice direct a verdict for defendant. Counsel for plaintiff asked that a verdict be directed for plaintiff. The justice denied the motion of defendant, and granted the application of plaintiff. From the judgment entered, defendant took an appeal to the Appellate Division. The judgment was there affirmed, one justice dissenting. Defendant appeals to this court.

On behalf of appellant it is submitted that the plaintiff never acquired any rights under the policy issued by defendant to the power company which entitled it to recover thereon against defendant in this action. In support of that proposition, reliance is placed upon two provisions annexed to the policy, viz.:

‘Any assignment of interest in this policy shall be void unless the written consent of the company is endorsed hereon by one of its officers.’ Paragraph 7.

‘No action shall lie against the company as respects any loss under this policy unless it be brought by the assured himself to reimburse him for loss actually sustained and paid by him in satisfaction of a judgment after trial of the issue.’ Paragraph 8.

The judgment in the first action determined that during the term that the policy was in force the death of Mr. Hughes was due to the negligence of the power company and damages therefor were recoverable. The policy issued by defendant to the power company provided that the defendant would indemnify the power company against such damage to the extent of $5,000, and to discharge such indemnity after payment by the power company of the judgment recovered against it. Defendant having been vouched in the first Hughes action was bound thereby as to the amount of the damages recoverable against the power company, and the same being in excess of $5,000, upon a satisfaction of the judgment by the power company, the defendant would be liable to it to the extent of $5,000. The record does not disclose, neither was it asserted on the argument, that any formal assignment of the policy was made by the power company to plaintiff. The alleged violation of paragraph 7 of the conditions annexed to the policy, above quoted, is asserted for the reason that the power company merged with the plaintiff and thereby transferred its interests in the policy to plaintiff without a written consent of defendant indorsed thereon; hence plaintiff has no enforceable interest therein. And secondly that, as the plaintiff was not named as the assured in the policy, no contractual relation existed between it and defendant, therefore payment of the judgment in the Hughes action by plaintiff was not a payment made by the power company, the assured named in the policy, and liability against defendant thereunder does not exist.

The questions presented necessitate a reference to the merger agreement and the effect of the same upon the rights of the parties. The plaintiff, pursuant to section 15, Stock Corporation Law, merged the power company and an additional corporation. Thereupon, as provided in the statute, it became possessed of all of the estate, property rights, privileges, and franchises of such other corporations with the right in its name and by its board of directors to control the smae. The power company did not by reason of such merger become dissolved as a corporate entity, nor did the statute under which the merger was authorized create a liability on the part of plaintiff for debts due or claims existing against the power company. The statute does provide that the merger shall be without prejudice to the liabilities of the corporations merged, or the rights of creditors thereof, thereby preserving the corporate existence of the power company for the sole purpose of protecting creditors of such corporation as well as any person in whose favor a liability against it existed, to proceed by suit against it and to permit said company to defend against the same. Irvine v. New York Edison Co., 207 N. Y. 425, 101 N. E. 358, Ann. Cas. 1914C, 441.

[1][2] At the time of the merger a liability existed against the power company in favor of the administratrix of the deceased Mr. Hughes. An action to establish the same and to recover thereon was pending. The defendant under its policy contract was in control of the defense of the action which was properly continued in the name of the power company. The action having terminated adversely to the power company, the plaintiff therein sought by the process of execution to collect the judgment recovered by her, but was unable to do so as the property of the power company had been transferred to plaintiff under the merger agreement. The judgment creditor was not remediless; her rights had been protected as against such transfer by the statute which authorized the merger. As against her, plaintiff did not acquire an absolute title to the property, estate, and franchises of the power company. She was the person in whose favor a liability existed against the power company at the time of the merger, and, as to her, the property, etc., of the power company in the custody of plaintiff or any avails of the same if disposed of, constituted a trust fund and as such was held by plaintiff as trustee for her benefit as well as others similarly situated and for the protection and benefit of creditors of the power company. To enforce her rights the judgment creditor, Mrs. Hughes, by a subsequent action against this plaintiff, of which defendant had notice and refused to defend, recovered judgment against plaintiff for the amount of the judgment she...