Firemen's Mut. Ins. Co. v. Aponaug Mfg. Co., 11270.
| Decision Date | 11 May 1945 |
| Docket Number | No. 11270.,11270. |
| Citation | 149 F.2d 359 |
| Parties | FIREMEN'S MUT. INS. CO. v. APONAUG MFG. CO., Inc., et al. |
| Court | U.S. Court of Appeals — Fifth Circuit |
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Ross R. Barnett, Rufus Creekmore, and H. H. Creekmore, all of Jackson, Miss., for appellants.
Ben F. Cameron and Lester E. Wills, both of Meridian, Miss., Japtha F. Barbour, Sr., of Yazoo City, Miss., and Toxey Hall and Lee D. Hall, both of Columbia, Miss., for appellees.
Before SIBLEY, HUTCHESON, and LEE, Circuit Judges.
This appeal is from a summary judgment for the defendants on a complaint brought by appellants against the appellees for damages as for a tort. The plaintiffs alleged that they were insurers against loss by fire of a cotton mill belonging to Aponaug Mfg. Co., Inc., when on Dec. 21, 1938, R. D. Sanders, its president and treasurer and sole stockholder, and exercising sole control over the corporation, in conspiracy with the mill superintendent, C. D. Kent, and one Noel McMahan, burned the mill to collect the insurance, and that $187,634 was paid on a statement of loss in that amount presented by R. D. Sanders for the Company; and that he fraudulently concealed the fact of the fraudulent fire. Judgment was prayed against all and each of the defendants.
The Company's answer admitted the insurance, the fire and the collection of $187,634 on a statement of loss presented by Sanders, and that he was its president and treasurer, but denied that he was sole stockholder or exercised full control, and denied he had any authority to so conspire, or that any such conspiracy occurred. Kent answered admitting he was superintendent but denying the conspiracy, or knowledge of the insurance. Sanders denied he was sole stockholder or controlled the Company, but admitted he was president, treasurer, and a director of the Company, and a co-trustee of the stock along with two others, and that he was acting as general manager of the Company under bond, but he denied the conspiracy to burn the mill; and otherwise adopted the answer of the Company. McMahan was later made a defendant, but if served, he made no answer. No judgment was entered as to him. A jury trial was duly demanded.
On the face of the pleadings therefore there were issues as to the fraud of the fire, and who were responsible for it; as to the concealment of the non-liability of the insurers when the loss was settled; and a subsidiary issue as to Sanders' ownership and control of the Company. These issues were material to the case or cases alleged. If Sanders, Kent and McMahan wilfully set fire to the mill, without the complicity of the corporation, in order to cause the insurers to pay, they committed a wrong, and would be individually liable for the injury intentionally done. The insurance would remain valid, and the corporation for its innocent stockholders and creditors could collect, and the insurers after paying would ordinarily be subrogated to the corporation's right of action against the burners of its property; and in our judgment, though subrogation is not expressly alleged in the complaint as a ground of recovery, the wilful setting of the fire and intentional injury to the insurers would give them a direct right to sue. 36 C.J.S., Fires, §§ 11, 12. Another, and more prominently stated ground of suit is based on the complicity of the insured corporation. If it set a fraudulent fire to collect its insurance, it would have no better right to the insurance money than an insured individual would; but there is the question whether the fire, even though wilfully set by someone connected with the corporation, was really set by the corporation. It seems that such act of an officer not authorized thereto by the stockholders, or the act of one but not the sole stockholder, will not be charged to the corporation to the prejudice of innocent stockholders; but if he is practically the sole stockholder, the corporate entity will be disregarded, and his fraud be held as that of the corporation. Sec. 29 Am. Jur., Insurance, § 1028, 1029. There is authority too to the effect that if the incendiary is in control of the business policies of the corporation, though not sole stockholder, the insurance is defeated by his fraud, Kimball Ice Co. v. Hartford, 4 Cir., 18 F.2d 563, 52 A.L.R. 799, but we do not at present express an opinion on that point.
The motions for summary judgment of course raised the question whether these issues, though in law material, were "genuine". Rule of Civil Procedure 56(e), 28 U.S.C.A. following section 723c. A pretended issue, one that no substantial evidence can be offered to maintain, is not genuine. The rule provides that the genuineness of an issue made by the pleadings may be promptly tested by summary proceedings before the judge in which ex parte affidavits may be used. In this case the defendants presented affidavits from Sanders, Kent and McMahan that there was no conspiracy, and no fraudulent fire, though it was evidently incendiary; and there was record proof that the stock of the Company was vested in three trustees under the will of J. W. Sanders, R. D. Sanders being a trustee and the beneficial owner of one-eighth of the stock. The trustees elected themselves as directors of the Company, and R. D. Sanders held the offices above stated. One trustee had died at the time of suit, but the third made affidavit that so far as he knew no one connected with the Company had anything to do with the fire or any authority to conspire to cause it. Against this the plaintiffs introduced two sworn statements made by McMahan to local police officers in 1940, that he and Kent had been hired by R. D. Sanders to burn the mill to collect the insurance, and that two efforts had failed but the third succeeded. It was proved that McMahan and Kent were indicted for the arson and McMahan was on his plea of guilty sentenced to the penitentiary. He had reiterated this account of the burning to the plaintiffs in a written statement shortly before the complaint was filed. Before the hearing his deposition was taken by the defendants and his testimony was a repudiation of these three statements, and that he knew nothing of the origin of the fire. The plaintiffs having thus lost their main witness were given time to secure other evidence. That presented included an affidavit that some time after the mill was burned Kent had told one affiant that...
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