Flanagan v. Harder , 270 Mich. 288 ( 1935 )

Flanagan secured a judgment of $10,500 because of injuries suffered when struck by an automobile driven by Harder. This judgment was affirmed in Flanagan v. Harder, 268 Mich. 564. After judgment in the circuit court Flanagan obtained a writ of garnishment against defendant insurance company, which filed a disclosure denying liability and alleging that although it had issued a policy of insurance to Harder prior to the accident, it was not on the automobile involved, which fact was not discovered until after it had entered upon the defense of Harder's suit. Defendant company further denied any indebtedness because of a release executed by Harder on November 28, 1933, being the day before the judgment was rendered.

Plaintiff then filed a bill in equity in which he prayed (1) that the automobile involved in the accident be decreed to be the same automobile covered by the policy; (2) that the release be set aside as fraudulent and without consideration; (3) that defendant company be required to amend its disclosure and admit liability; (4) that a money decree be entered and execution issue forthwith.

Defendant company answered and moved to dismiss the bill, which motion was denied. With the exception of certain exhibits, the record contains only the uncontradicted testimony of defendant Harder. Defendants appeal from a final decree in which plaintiff is granted the relief for which he prayed, and contend that the trial court erred in that (1) plaintiff's bill should have been dismissed because of the adequacy of the law remedy and the failure to state a cause requiring equitable relief; (2) equity does not possess jurisdiction to reform the insurance contract upon the complaint of one not a party thereto, nor to reform a pleading at law.

That such a release may, and in this instance should be set aside, follows from the reasoning of Mr. Justice POTTER inIden v. Huber, 259 Mich. 3, which case is controlling. Having determined this, we may modify the decree and permit the law court to proceed with the garnishment action. But neither may the release be canceled nor the policy reformed in the law action. However, "it is not a matter of course to deny relief in equity when the decision at law cannot cover the whole controversy." Eaton v. Trowbridge, 38 Mich. 454, 456. And a court of equity having taken jurisdiction of the subject matter and the parties for one purpose, will retain it to settle all disputes relating to the same subject matter between the parties. Rickle v. Dow, 39 Mich. 91, and Chase v.Boughton, 93 Mich. 285. But before this rule can be applied, some ground of equitable jurisdiction must first be asserted and established, Sharon v. Fee,203 Mich. 152. Plaintiff asserts that under the provisions of the uniform fraudulent conveyance act, 3 Comp. Laws 1929, §§ 13392-13405, equity should set aside the release. The IdenCase, supra, sustains that contention.

Proofs were taken as to the identity of the car insured, from which it appears that the policy in question as written by defendant company's agent covered a second-hand, six-cylinder Studebaker roadster, 1930 model, engine No. 480622, factory No. 78449, which the secretary of State avers was not registered in Michigan. The car which struck plaintiff, and the only one owned by Harder, was a Studebaker Royal Roadster, motor No. 11736, serial No. 8011183. Equity will reform erroneous descriptions in contracts of insurance where occasioned by mutual mistakes, or where the mistake was made by the company's agent. Ovavez v. Patrons' Mutual Fire Ins. Co., 233 Mich. 305.

"Where through fault of the insurer an insurance policy does not cover the person or property intended, it may be reformed."Heath Delivery Service v. Michigan Mutual Liability Co.,257 Mich. 482.

See, also, Wilson v. Livingston County Mutual Fire Ins. Co.,259 Mich. 25.

Harder, had he not released his interest, could have filed a bill to reform the policy. The proofs show the insolvency of Harder, a situation contemplated by 3 Comp. Laws 1929, § 12460, which reads in part:

"No policy of insurance against loss or damage resulting from accident to or injury suffered by an employee or other person and for which the person insured is liable, or against loss or damage to property caused by draft animals or by any vehicle drawn, propelled or operated by any motive power, and for which loss or damage the person insured is liable, shall be issued or delivered in this State by any corporation or other insurer authorized to do business in this State, unless there shall be contained within such policy a provision that the insolvency or bankruptcy of the person insured shall not release the insurance carrier from the payment of damages for injury sustained or loss occasioned during the life of such policy, and stating that in case execution against the insured is returned unsatisfied in an action brought by the injured person, or his or her personal representative in case death results from the accident, because of such insolvency or bankruptcy, then an action in the nature of a writ of garnishment may be maintained by the injured person, or his or her personal representative, against such corporation or other insurer under the terms of the policy for the amount of the judgment in the said action not exceeding the amount of the policy."

The injured person, after judgment and the return of an unsatisfied execution, has a substantial interest in the insolvent's policy, and should be able to have the policy reformed if necessary, especially where the insurer attempts to deprive the injured party of legal rights by means of a fraudulent release.

We are satisfied from the record that the car which struck Flanagan was the one insured by defendant company, and that the erroneous description in the policy was caused by either the mistake of defendant's agent, or the mutual mistake of the parties. It would be idle and circuitous to hold the release bad, set aside the remainder of the decree and leave the parties to the trial of the garnishment action, when we can determine the entire controversy by disposing of the equity appeal. Such action does not require a determination of the question of the reformation of the garnishment disclosure. The Iden Case is sufficient authority to affirm the decree, with costs to appellees. It is so affirmed.

POTTER, C.J., and NELSON SHARPE, NORTH, BUTZEL, and EDWARD M. SHARPE, JJ., concurred with BUSHNELL, J.