Felder v. Great American Insurance Company

• Citation: 260 F. Supp. 575
• Decision Date: 16 November 1966
• Docket Number: Civ. A. No. CO-65-26.
• Court: U.S. District Court — District of South Carolina
• Parties: Jestine FELDER and Herbert Felder, Plaintiffs, v. GREAT AMERICAN INSURANCE COMPANY, Defendant.

260 F. Supp. 575

Jestine FELDER and Herbert Felder, Plaintiffs, v. GREAT AMERICAN INSURANCE COMPANY, Defendant.

Civ. A. No. CO-65-26.

United States District Court D. South Carolina, Columbia Division.

November 16, 1966.

R. K. Wise and John Sloan, Columbia, S. C., for plaintiffs.

Edward M. Woodward, of Edens, Woodward & Butler, Columbia, S. C., for defendant.

HEMPHILL, District Judge.

Defendant moves for judgment on the pleadings of three causes of action as set forth in the complaint, and, in the event that the motion fail as to less than all causes of action, that the action be dismissed for lack of jurisdiction in that the required amount will not be involved in the controversy.

It is alleged that Jestine Felder gave a note and a mortgage on her home to Home Federal Savings and Loan in the amount of $1,500.00. Shortly after the loan Herbert and Jestine purchased a health and accident policy from the defendant insurance company through Home Federal as the soliciting agent. The policy was for the same amount as the mortgage loan and the monthly policy benefits were the same as, or closely approximated, the monthly mortgage installments of $26.83. In December of 1962, it is alleged, Herbert Felder became disabled. A claim blank was obtained from Home Federal and sent to the defendant each month for three months and the claims were paid each time. On the fourth month, when they requested a claim blank, they were told that the insurer was not going to pay any more; that it was useless to pick up claim blank and to submit it. This is an important allegation for it is labeled a fraudulent misrepresentation and is the basis for at least two of the causes of action. In connection with this point it is notable that the complaint alleges that submission of a claim blank was a "prerequisite" for payment. The policy is attached to the complaint and made a part of it: the clear language of the policy states that submission of a claim blank is not a condition precedent to claiming under the policy and alternate methods are simply and clearly set forth.

The complaint continues that Herbert Felder continued to be disabled and could not meet the mortgage installments, and that in March of 1964 foreclosure was threatened. In the imminence of a forced sale the Felders attempted to make the most of the situation and sold the house and lot at half its value. The reason for taking this alternative is not apparent. Along with anxiety and anguish, damages are also demanded for damaged credit and reputation. On these allegations the complaint is intended to state three causes of action, each separate and independent in the alternative. The first is based on fraud and deceit for the allegedly fraudulent misrepresentation that they would not pay. The second is for breach of contract accompanied by a fraudulent act—failure to pay on time, being fully aware that time was critical along with the other representations, failure to file a claim, failure to give a claim blank. Thirdly, there is intended to be set forth a claim for negligence, gross, wilful, reckless and wanton, in that the entire course of conduct of the agent Home Federal was a breach of a duty proximately resulting in the loss of the plaintiffs' home. For each there is claimed actual and punitive damages.

The first cause of action is based on the allegedly fraudulent misrepresentation by Home Federal that it would be useless to submit a claim blank for the company was not paying any further payments. The company is said to have had knowledge that the statement was false; that the plaintiffs were ignorant of its falsity and had a right to rely on the statement. There is the further allegation that the submission of a claim blank was a prerequisite to a payment and that the agent Home Federal knew that failure to submit the blank would stop payment on the policy. This is essentially the basis for the claim for fraud and deceit.

On the motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) on the grounds of Rule 12(b) (6), failure to state a claim upon which relief can be granted, the allegations of the complaint must be viewed in the light most favorable to the plaintiff, admitting and accepting as true all facts well pleaded. E. g. National Metropolitan Bank v. United States, 323 U.S. 454, 65 S.Ct. 354, 89 L.Ed. 383 (1945). "The accepted rule is that a complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); 1A Barron & Holtzoff, Federal Practice & Procedure section 356 at 361 (Wright ed. 1960).

The South Carolina Supreme Court has many times accepted the analysis of an actionable fraud as consisting of nine elements: (1) A representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity; (5) his intent that it should be acted upon by the person; (6) the hearer's ignorance of its falsity; (7) his reliance on its truth; (8) his right to rely thereon; (9) and his consequent and proximate injury. E. g., Jones v. Cooper, 234 S.C. 477, 109 S.E.2d 5 (1959); Mishoe v. General Motors Acceptance Corp., 234 S.C. 182, 107 S.E.2d 43 (1958); Tallevast v. Herzog, 225 S.C. 563, 83 S.E.2d 204 (1954); Weatherford v. Home Finance Co., 225 S.C. 313, 82 S.E.2d 196 (1954); Flowers v. Price, 190 S.C. 392, 3 S.E.2d 38 (1939). See Parks v. Morris Homes Corp., 245 S.C. 461, 141 S.E.2d 129 (1965); Gomillion v. Forsythe, 218 S.C. 211, 62 S.E.2d 297, 53 A.L.R.2d 169 (1950).

The failure to prove any one of these elements is fatal to recovery. Jones v. Cooper, 234 S.C. 477, 109 S.E.2d 5 (1959); Mishoe v. General Motors Acceptance Corp., 234 S.C. 182, 107 S.E.2d 43 (1958); Able v. Equitable Life Assur. Society of United States, 186 S.C. 381, 195 S.E. 652. (1938). The absence of any of these elements from the most favorable view of the plaintiff's case must likewise be a fatal defect. Ordinarily the mere failure of an insurer or contractor to pay sums of money under the contract does not support actions for fraud and deceit or breach of contract accompanied by a fraudulent act. E. g., Corley v. Coastal States Life Ins. Co., 244 S.C. 1, 135 S.E.2d 316 (1964); Blackmon v. United Ins. Co., 235 S.C. 335, 111 S.E.2d 552 (1959) (former appeal construing complaint 233 S.C. 424, 105 S.E. 2d 521 (1958)); Williams v. Metropolitan Life Ins. Co., 173 S.C. 448, 176 S.E. 340 (1934). See also Patterson v. Capitol Life & Health Ins. Co., 228 S.C. 297, 89 S.E.2d 723 (1955); Yarborough v. Bankers Life & Cas. Co., 225 S.C. 236, 81 S.E.2d 359 (1954); Hall v. General Exchange Ins. Co., 169 S.C. 384, 169 S.E. 78 (1933). However the allegations here go further. The plaintiff's view of the case is that the insurer through its agent represented falsely that no more payments would be made. The statement was false, it is alleged, because payments were made in a lump sum some months later,¹ after the plaintiff had been damaged. If this representation was made with fraudulent intent and if the occurrence bore the other requisite elements then it would support an action in fraud. At least, in testing the sufficiency of the complaint there can be no speculation as to the difficulty of proving this fraudulent intent. E. g. Walker Distributing Co. v. Lucky Lager Brewing Co., 323 F. 2d 1 (...