Heinz v. Twenty-Sixth German-American Building Ass'n

The allegations of the bill of complaint in this case are admitted by the demurrer to be true, and the questions which arise upon the record are presented by a demurrer to the plaintiff's bill.

One of the defendants, the Twenty Sixth German American Building Association of Baltimore City, demurred to the bill and alleged two causes of demurrer. The other defendant, the German Fire Insurance Company of Baltimore City, was by an election, filed on the 13th of May, 1901, as will hereafter more fully appear, stricken from the bill as one of the parties to the bill.

The grounds of the demurrer are: First, because the German Fire Insurance Company of Baltimore City is a necessary party to these proceedings; and second, because the plaintiff has not in her bill of complaint stated such a case as entitles her to any relief in equity against the defendant.

On the 10th day of December, 1901, the Circuit Court No. 2, of Baltimore City, passed the following decree:

"Ordered upon the bill, petition for an election and proceedings in this case, that the demurrer be sustained and the plaintiff not desiring to amend, it is further ordered and decreed that the bill be dismissed with costs." The appeal is taken from this decree.

The bill of complaint was filed on the 25th of July, 1900, in the Circuit Court No. 2, of Baltimore City, by the plaintiff against the German Fire Insurance Company and the Twenty Sixth German American Building Association, two corporations doing business in the city of Baltimore, and duly incorporated under the laws of the State.

The bill is quite a long one, and being set out at length in the record, we shall only refer to such parts of it, as may be necessary for a proper understanding of the case.

The object of the bill, and the relief sought under it, according to the prayer, was:

1. That the defendants should be required to bring into Court a sum of money amounting to $1,520.00, with interest, to be paid to the plaintiff.

2. That the defendant, the Building Association, should discover under oath the possession of a certain policy of insurance issued by the German Fire Insurance Company to the appellant, and assigned by her to the Building Association, and also to produce the policy and discover all endorsements or assignments thereon.

3. That the Fire Insurance Company should discover in full the terms and conditions of the policy, together with all the endorsements and assignments thereon, and furnish a copy of the policy to the appellant, and that it be restrained from setting up, in a certain suit in the Superior Court of Baltimore City, brought by the appellant against it, certain defenses against a recovery thereon.

4. And that it may be declared that it was the duty of the defendant, the Building Association, to collect the proceeds of the policy from the defendant, the Fire Insurance Company, upon the incurring of the loss aforesaid under the policy and to apply the same according to the trusts and terms set out in the mortgage and that it may be decreed accordingly.

Both of the defendants answered the bill but subsequently upon the election of the appellant to strike out the German Fire Insurance Company as a party to the suit the Building Association obtained leave to plead over to the bill and filed the demurrer heretofore set out.

It will be thus seen that the principal objection raised by the demurrer in this case is that the appellant has not stated such a case as entitles her to any relief whatever, and that under the pleadings she has no standing in a Court of equity. To determine this we must look to the allegations of the bill and the facts stated therein, as they are admitted, by the demurrer, for the purposes of the case, to be true.

The bill charges that the German Fire Insurance Company by a certain policy of insurance insured the plaintiff against loss by fire in the sum of sixteen hundred dollars on two buildings situate in Baltimore County, on the south side of Philadelphia road; that the plaintiff being indebted to the Twenty-Sixth German American Building Association of Baltimore, by way of mortgage, with the knowledge and consent of the Fire Insurance Company, assigned to and delivered to the Building Association the policy of fire insurance, to secure it against loss it may sustain by reason of the depreciation of the property mortgaged by fire, and in trust, furthermore, for the benefit of the plaintiff or of whomsoever might become entitled upon a final ratification of a sale under the mortgage to a distribution of any surplus accruing over and above the mortgage indebtedness and arising from a collection by the Building Association of any moneys by reason of the policy of insurance.

The bill further avers that on the 30th of November, 1898, the property was sold under foreclosure proceedings and the plaintiff became the purchaser thereof; that prior to the ratification of the sale, and while the insurance was in existence, a part of the property was totally destroyed by fire, and notice of the loss was given to the Fire Insurance Company. The bill also charges that the Building Association has since the fire detained and withheld the policy in combination and with the consent and knowledge of the Fire Insurance Company or else has surrendered it to the German Fire Insurance Company, with intent to obstruct and defeat the remedy of the plaintiff against the Fire Insurance Company or against the Building Association, for its negligence in not collecting the proceeds of the policy.

The bill also avers that the plaintiff has instituted suit at law against the Insurance Company to recover on the policy, but that the appellee by collusion and fraud with the Fire Insurance Company refused to produce the policy or to collect or to attempt to collect the money due thereunder, or to reassign the policy and that the two defendants have by fraud and collusion prevented the plaintiff from recovering the proceeds of the policy.

The bill further alleges that the Building Association held the policy as trustee, and that it was its duty to have collected the proceeds, but that it neglected by fraud or collusion with the Fire Insurance Company to do so, and that both companies have refused to disclose to the appellant the contents of the policy or any information relating thereto.

Now under this state of case, thus made by the bill and the allegations of the bill admitted by the demurrer to be true, we cannot agree with the Court below that the plaintiff is without relief in a Court of equity. On the contrary, we are of the opinion that the demurrer should have been overruled and the case heard on its merits, after proof taken, to support the allegations of the bill. The whole current of authorities fromWolf v. Wolf, 2 H. G. 382, to Union Passenger Railway Co. v. Mayor, c., of Balto., 71 Md. 240, is to the effect that a discovery may be had not only to support an action but as auxiliary to the maintenance of a suit then contemplated to be brought. In the latter case CHIEF JUDGE McSHERRY in delivering the opinion of the Court said: "The bill in this case is designed to compel the railway company to divulge information possessed by it, which is absolutely necessary to the plaintiff's case, and material to the relief prayed for by it, and we do not see how upon principle independent of authority, it could be denied." It would be against every principle of equity to hold, that the two defendants, the Building Association and the Fire Insurance Company could by fraud and colcusion, as charged in the bill, defeat the plaintiff from recovering the proceeds of the policy of insurance.

In Smith v. Packard, 19 N.H. 575, it is said that if a policy of insurance upon mortgaged property be assigned to the mortgagee as collateral security any sum of money, to which, as such assignee, he may become entitled by the destruction of the insured property before the foreclosure of the mortgage, is applicable to the payment of the debt and as to the remainder he is the trustee of the mortgagor.

If therefore, in the case now under consideration, the mortgage debt has been paid and the money has been paid or collected on the insurance policy, the party who holds the fund, holds it as trustee for the appellant, and she is clearly entitled to recover it. In such a case the mortgagee is a trustee of the policy, and would be liable in a Court of equity for the money received from it. Callahan v. Linthicum, 43 Md. 97; Ricketts v.Montgomery, 15 Md. 46.

The second objection raised by the demurrer is that the German Fire Insurance Company is a necessary party to the bill of complaint. Much that we have said, as to the first cause of demurrer will apply to the second ground relied upon by the appellee. The defendant, the Fire Insurance Company was an original party to the suit, but the appellant was enjoined from prosecuting either the suit at law or this suit, until an election was made, as to which of said proceedings she would prosecute, and which she would dismiss. By reason of this order the appellant on the 20th of May, 1901, signified her election by striking out the German Fire Insurance Company as a party to this suit. The Court below was in error in requiring this election. Under the allegations of fact contained in the bill and admitted by the demurrer to be true, the Fire Insurance Company was a proper party to this suit.

We are, therefore, of the opinion that the appellant is entitled to the equitable relief sought by the bill, if she can support the allegations of the bill by the proof required in such cases. For the reasons we have given the decree of the Circuit Court of Baltimore City dated the 10th of December, 1901, sustaining the demurrer and dismissing the bill will be reversed, and the cause remanded that further proceedings may be had in accordance with this opinion.

Decree reversed and cause remanded with costs.

(Decided April 2d 1902.)