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Stuyvesant Ins. Co. v. Sussex Fire Ins. Co.

March 13, 1937


Appeal from the District Court of the United States for the District of New Jersey; William Clark, Judge.

Author: Avis

Before BUFFINGTON and DAVIS, Circuit Judges, and AVIS, District Judge.

AVIS, District Judge.

The general facts developed in this case show that Essex Fire Insurance Company, a corporation (hereinafter called Essex), conducting a general fire insurance business, issued a number of policies to persons in North Carolina. These policies were issued through a general or state agent, one P. Lester Hawks, or P. Lester Hawks, a corporation (either of which will be hereinafter referred to as Hawks), having offices in Richmond, Va. In 1931, Essex, being desirous of discontinuing its business and liability in North Carolina, directed Hawks to secure reinsurance as to all of said outstanding policies. Hawks, who was also agent for Stuyvesant Insurance Company (hereinafter called Stuyvesant), arranged with that company for such reinsurance, and there was issued to Essex three certain policies; Nos. 220, 221, and 222. The respective premiums charged for said policies were $2480.68, $343.53, and $8653. Policies Nos. 220 and 221 bore date on or about September 29, 1931, and policy No. 222 was issued and dated October 17, 1931. The total premium on the three reinsurance policies was $11,477.21. At that time, because of some other items of premium owed by Essex to Hawks, the total amount due from Essex to Hawks was $11,993.89, and Hawks owed Essex for premiums on policies issued the total sum of $8883.52.

At the end of October, 1931, business, Hawks reported to Stuyvesant the issuance of the above-numbered policies of reinsurance, at a total premium of $11,477.21, and the evidence apparently shows that this amount, less commissions, was charged on the books of Stuyvesant against Hawks, and never charged by that company on its books against Essex.

From the testimony it does not appear that anything affecting the issues involved occurred with relation to the business relations of the parties to the action, until December, 1931.

Sussex Insurance Company, the plaintiff-appellee (hereinafter called Sussex), at the time the above transactions took place, was also issuing policies of insurance through Hawks, as its general or state agent, and around December first there was owing to Sussex from Hawks the sum of $5,497 for premiums on policies issued by Hawks.

At that time Essex and Sussex were separate and distinct corporations, although the greater part of the stock of Essex was owned by Sussex, and the same persons were respectively president and secretary of both companies.

Some time early in December, 1931, some representative of both Essex and Sussex visited the Hawks agency in Richmond to investigate and consult with relation to the settlement of accounts. At that time it was apparently agreed that Hawks owed Sussex $5,497; and that Essex owed Hawks $3,110.37, the difference between the items $11,993.89 (which included the premium charge for reinsurance) and the item $8,883.52 (the amount due from Essex to Hawks).

On December 12, 1931, Hawks gave to the representative of Sussex a check for $5,497 upon the understanding that the check would not be presented for payment until Essex forwarded to Hawks a check for $3,110.37, the balance due to Hawks on its account. This arrangement was made apparently in full ll settlement of all matters on that date, and the check for $5,497 was to be held, because Hawks' account in the bank would not be good for the full amount, until the $3,110.37 check was deposited therein. This settlement agreement was consummated on or about December 14, 1931.

On December 31, 1931, Essex merged with Sussex under the title Sussex Insurance Company, and the latter company took over all assets, and assumed all liabilities, of Essex.

On or about March 1, 1932, Hawks forwarded to Stuyvesant his check for $4,500, stated to be "Part Payment on October Account." Something is said in the brief of appellee that this remittance was accompanied by a letter in which Hawks requested that the check be applied in payment of his account on the reinsurance premiums in question, and that Stuyvesant replied it would apply the proceeds thereof to such portion of the general agency indebtedness as it saw fit, and refers to Exhibit D-11. Neither of these exhibits appears in the record, and probably have no effect upon the result.

Each of the reinsurance policies contained the following clause as to cancellation: "This policy may be cancelled at any time by the company by giving to the insured a five days written notice of cancellation with or without tender of the excess of paid premium above the pro rata premium for the expired time, which excess, if not tendered, shall be refunded on demand. Notice of cancellation shall state that said excess premium (if not tendered) will be refunded on demand."

The evidence shows that on March 29, 1932, Stuyvesant sent a letter to Sussex canceling all three of the policies of reinsurance, effective five days from the receipt thereof, alleging nonpayment of premium. This letter was received by Sussex on March 30, 1932, and it is claimed by Stuyvesant that the policies were null and void after April 5, 1932. Sussex, on the other hand, claims that the premium was paid, in the manner hereinbefore set out, and that Stuyvesant could not so cancel the policies without tendering the excess of said premium above the pro rata premium for the expired time. The provision of the policy as to cancellation, relating to notice of ...

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