Carwile v. Metropolitan Life Ins. Co.

• Decision Date: 08 February 1926
• Docket Number: 11722.
• Citation: 134 S.E. 275,136 S.C. 111
• Parties: CARWILE v. METROPOLITAN LIFE INS. CO.
• Court: South Carolina Supreme Court

134 S.E. 275

136 S.C. 111

CARWILE v. METROPOLITAN LIFE INS. CO.

No. 11722.

Supreme Court of South Carolina

February 8, 1926

Appeal from Richland County Court; M. S. Whaley, Judge.

Action by R. E. Carwile, as receiver of the Carolina Bond & Mortgage Company, against the Metropolitan Life Insurance Company. Judgment for plaintiff, and defendant appeals. Reversed and remanded.

Watts J., dissenting.

The decree of Judge Whaley is as follows:

"This case was heard by me without a jury, by consent of counsel, upon the pleadings and documentary evidence submitted, including the testimony of F. L. Bashore, taken by the master for Richland county, in the case of Metropolitan Life Insurance Company v. John D. Frost. There is no material dispute about the facts out of which this case has arisen and those were substantially as hereinafter set forth.

"In October, 1918, the Carolina Bond & Mortgage Company a South Carolina corporation, entered into a contract with the Metropolitan Life Insurance Company, whereby the bond and mortgage company became the financial correspondent of the life insurance company for the purpose of making loans on farm lands in the states of South Carolina and North Carolina. The plan of lending contemplated by the contract and which was subsequently pursued, was that the bond and mortgage company should take from borrowers in those states notes or bonds in its own name, secured by mortgage upon real estate, which evidences of indebtedness were thereafter to be assigned to the life insurance company. However, among other provisions of this contract, it was provided that the bond and mortgage company should attend to the collection and remittance of the interest and principal of the loans purchased by the life insurance company, and further that, if the bond and mortgage company should advance interest or principal of any of the mortgages before collecting the same from the borrower, the right or interest which the bond and mortgage company should have in such bonds or notes and mortgages should be subordinate to the interest therein of the life insurance company.

"Pursuant to the terms of this contract, the bond and mortgage company made a loan on the 20th of March, 1919, in the sum of $18,000 to Dr. Larkin H. Jennings of Bishopville S. C.; the said loan being evidenced by a series of bonds or notes of Dr. Jennings, payable to the order of the bond and mortgage company, with interest before maturity at 6 per cent. and thereafter at 8 per cent. in annual installments of $1,800, on the 1st of March of each year, beginning on March 1, 1921, and for 5 years consecutively thereafter, and the balance of $9,000 payable March 1, 1926, the obligation being secured by mortgage covering land in Lee county. These notes or bonds and mortgage were thereafter, in pursuance with the terms of the contract, regularly assigned to the defendant life insurance company.

"Following the deflation in the fall of 1920, Dr. Jennings, along with a great many other borrowers from the Carolina Bond & Mortgage Company, was unable, or for some reason failed, to pay the interest and installment of principal due on March 1, 1921. Under these conditions there ensued considerable correspondence and discussion between the bond and mortgage company and the life insurance company relative to the adjustment of this situation under the contract; these discussions finally terminating in a letter from the life insurance company, dated January 5, 1921, which contained the following, among other provisions:

"'Seventh. The financial correspondent by letter to us to purchase and take over and hold as junior lien all unpaid items coming within the scope of this arrangement on December 20, 1921.'

"This proposition the bond and mortgage company accepted by letter of February 24, 1921, saying as to the seventh proposition:

"' We hereby agree to purchase and take over and hold as junior lien all unpaid items coming within the scope of this arrangement on December 20, 1921.'

"This arrangement was formally confirmed by the life insurance company by letter dated February 26, 1921. Subsequently, and pursuant to this arrangement, on December 20, 1921, the bond and mortgage company paid to the life insurance company the installment of principal which was due by Dr. L. H. Jennings on March 1, 1921. The life insurance company, however, retained possession of the installment of principal note or bond for $1,800, advanced by the bond and mortgage company, but there was no definite understanding or agreement as to the right of the life insurance company to hold such notes, but on October 17, 1922, the life insurance company wrote the bond and mortgage company a letter in reference to such notes, saying, among other things: 'We have a number of installment notes on file in this office for which payment has been advanced by you. These will be canceled and promptly returned to your office if you will notify us of date of payment by the borrower, using the inclosed form of notice'-to which letter the bond and mortgage company made no reply. It is admitted that the life insurance company was properly advised of the advancement by the bond and mortgage company of the amount of the $1,800 note due by Dr. Jennings.

"Subsequently, owing to the death of Charles H. Barron, president of the bond and mortgage company, on November 14, 1922, and the embarrassed financial condition of the bond and mortgage company, the plaintiff, R. E. Carwile, was on November 27, 1922, duly appointed receiver of all the assets of the bond and mortgage company, with the usual powers granted to receivers for the administration of the estates of insolvent corporations for the benefit of creditors. This order appointed the plaintiff 'receiver of all and singular the moneys, choses in action, property, and assets and effects of the said company whatsoever and wheresoever situate,' and gave him authority to collect the assets and effects of the said company and properly administer and settle its affairs.

"The receiver thereafter, being informed that Dr. Jennings was prepared to pay up his mortgage, wrote and requested the defendant insurance company on December 8, 1922, in collecting the amount due on the mortgage, to collect and remit to him also the amount of $1,800 with interest which was payable to him as receiver of the Carolina Bond & Mortgage Company. To this letter no reply was received.

"On December 30, 1922, the insurance company returned to Mr. E. L. Craig, an attorney of Columbia, who had been temporarily employed prior to the appointment of the receiver to represent the directors of the Carolina Bond & Mortgage Company, the sum of $204.37, which was the interest of the bond and mortgage company in certain checks which had been received at the office of the bond and mortgage company and turned over by Mr. Craig to the insurance company. This sum of $204.37 Mr. Craig thereafter duly turned over to the receiver by letter dated January 2, 1923.

"On January 11, 1923, the receiver again wrote to the defendant insurance company, giving a list of the mortgages in which the bond and mortgage company had an interest by reason of certain advancements, and requesting the insurance company to collect the amounts for him and remit to him, to which letter no reply was received.

"The receiver thereafter wrote a similar letter on February 7, 1923, to the defendant insurance company, inclosing another list of papers in which the bond and mortgage company had made advancements, showing the advancement to Dr. L. H. Jennings. On this date also the receiver wrote a letter, particularly with reference to the loan to Dr. Jennings. To all of these letters the defendant insurance company sent a reply, dated February 21, 1923, signed by its general attorney, stating that, as soon as convenient, he would advise the receiver what he intended to do. However, no other letter was ever received from the insurance company. Meanwhile the defendant collected from Dr. Jennings, or his representative, the full amount due on his bonds or notes and mortgage, totaling the sum of $19,500.04, by draft on the 20th of February, 1923, including the installment note of $1,800 due on March 1, 1921, with interest on that amount from March 1, 1921, to February 23, 1923, amounting to $281.66. On March 5, 1923, the receiver again wrote the insurance company, advising he was aware of the collection of the above amount from Dr. Jennings, and requesting that the sum of $1,800, together with the interest, be remitted to him promptly. The insurance company never replied to this letter, but subsequently, through its attorneys, advised the receiver that they expected to retain this amount to apply on a shortage account due by the bond and mortgage company to it.

"This action was thereafter regularly commenced by the receiver for the recovery of the amount collected by the insurance company on February 23, 1923, to wit, $2,081.60, together with interest thereon at the legal rate from date of collection, and for $750 as punitive damages for the wrongful conversion of the plaintiff's property.

"The defendant by its answer admits the substantial correctness of all essential facts set forth in the complaint, but sets up as a defense that the bond and mortgage company was indebted to the defendant in a sum exceeding $16,000 on account of collections made by the bond and mortgage company in behalf of the insurance company, which it had failed to pay over or account for. It appears from the testimony submitted on behalf of the defendant, and is admitted by the receiver, that, prior to the appointment of the receiver, the bond and mortgage company collected from the borrowers on the bonds or notes and mortgages assigned to the insurance company the sum of

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