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June 27, 1935


The opinion of the court was delivered by: AVIS

AVIS, District Judge.

On Rehearing.

This matter came before the court on petition of Genevieve Hernig for an order directing the receivers to pay to her the sum of $1,200 collected from Excess Insurance Company on a policy issued to defendant, to indemnify the defendant against loss by reason of being required to pay to any one injured by its negligence any sum of money in excess of $10,000. Genevieve Hernig recovered against defendant, prior to receivership, a judgment in the sum of $37,500, and was paid $10,000 interest and costs by Indemnity Insurance Company, on a policy issued by it to defendant. Pending a hearing on a rule to show cause in the state court as to why the verdict should not be set aside, a settlement was effected between the defendant and Genevieve Hernig by which she ultimately received the payment of the aforesaid amount from Indemnity Insurance Company and the additional sum of $10,000 from the defendant. At the time of settlement the defendant, believing that no recovery could be had on the policy of Excess Insurance Company, failed to make disclosure of the fact that such a policy was in existence. The receivers, subsequent to their appointment, instituted suit against Excess Insurance Company on the policy, claiming a right to reimbursement for the amount of $10,000 paid to Genevieve Hernig, and ultimately effected a compromise settlement with this company in the amount of $1,200. This is the sum which Genevieve Hernig claims she is entitled to have paid to her.

 Subssequently, Genevieve Hernig filed her bill of complaint in the Court of Chancery of New Jersey, making the receivers in this cause defendants with the leave of this court, and obtained a decree setting aside the agreement of settlement herein referred to, whereby the defendant was released from liability upon the payment of the additional sum of $10,000. This decree was based upon the fraud of defendant in not disclosing the fact that it had the policy of insurance of Excess Insurance Company.

 The facts found and the conclusions of this court are more fully set out in a memorandum decision filed June 27, 1935.

 After the filing of this memorandum, counsel for Genevieve Hernig made a motion for reargument which was allowed, and argument has been had and briefs submitted.

 The main reason advanced for reopening the case was because the court in the memorandum stated as a fact that the "policy insured the company in any sum in excess of $10,000." Counsel for petitioner contends that the limit of insurance under the Excess policy was $10,000, and not unlimited as stated in the memorandum. This appears to be a fact, but, in my opinion, does not affect the result stated in the aforesaid memorandum.

 This is essentially an equity case, and all of the principles of equity must necessarily apply. It is the duty of an equity court to see that its orders and decrees are in accordance with equity and good conscience.

 The petitioner has received from defendant, in excess of the amount paid by Indemnity Insurance Company, the sum of $10,000, the full amount she would have received if the policy of Excess Insurance Company had been disclosed, a suit had been instituted thereon, and judgment rendered for the maximum amount of liability.

 It is apparent that the defendant was insolvent at the time settlement was made with petitioner. The amount of $10,000 was apparently paid to her in installments out of the earnings of the company to the detriment of creditors.

 In the opinion of the Vice Chancellor, submitted by the attorney for petitioner and annexed to his brief, the following paragraph appears:

 "Mr. Harris desiring the good will of the motor coach company, consisting of busses, franchises, name, etc., he and his attorney induced the settlement by truthful representation that the company itself was insolvent, and by his willingness to secure, by his own indorsement, coupled with that of his wife, and a chattel mortgage, a further sum of $10,000."

 It is apparent that petitioner received the full sum of the indemnity provided by the Excess policy; that such payment was made by a then insolvent corporation. The creditors are entitled to the benefit of the payment of the $1,200 as part reimbursement of the moneys paid to petitioner.

 The court adheres to the conclusions stated in memorandum filed June 27, 1935.


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