Charles R. Allen, Inc. v. Rhode Island Ins. Co.
| Decision Date | 06 July 1950 |
| Docket Number | 16381. |
| Citation | 60 S.E.2d 609,217 S.C. 296 |
| Parties | CHARLES R. ALLEN, Inc., v. RHODE ISLAND INS. CO. CHARLES R. ALLEN, Inc., v. PAN AMERICAN FOOD PRODUCTS, Inc. |
| Court | South Carolina Supreme Court |
Sinkler, Gibbs & Simons, Charleston, for appellant.
Buist & Buist, Charleston, for respondent.
The parties to this controversy are (1) Charles R. Allen, Inc., a South Carolina corporation engaged in buying and selling food and food products, with its principal place of business at Charleston (2) Pan American Food Products, Inc., a corporation under the laws of Puerto Rico engaged in processing foods at Bayamon Puerto Rico; and (3) Rhode Island Insurance Company, a corporation under the laws of Rhode Island, which does business in South Carolina and has an office and agent at Charleston. Although not a party to this action, there was also involved in the transaction hereinafter mentioned Banco de Ponce, a banking corporation under the laws of Puerto Rico, with its banking house at San Juan. The four corporations mentioned will be hereinafter referred to respectively, as Allen, Pan American, Rhode Island and the Bank.
The questions to be determined on this appeal can better be understood after the facts leading up to this controversy are stated.
On February 1 1948, a fire occurred in Pan American's plant which completely destroyed its machinery, equipment and stock of goods. The machinery was insured under a Rhode Island policy for $35,000.00 and the stock of goods under another Rhode Island policy for $145,000.00, or a total insurance of $180,000.00. Both policies carried a loss payable clause in favor of the Bank to which Pan American was indebted at the time of the fire in the principal sum of approximately $120,000.00, evidenced by a mumber of promissory notes. Shortly thereafter Pan American delivered to the Bank additional notes for about $15,000.00.
Pan American was indebted to Allen in the sum of $5663.80 on account of advances made by Allen under a contract for the purchase of canned pineapple. Immediately after the fire Pan American notified Allen that owing to the complete destruction of its plant and warehouse, it would be unable to make deliveries but there was ample insurance to pay all claims, including Allen's. Allen was also assured by the Bank that its indebtedness would be paid from the proceeds of the insurance.
On April 13, 1948, Pan American filed with Rhode Island sworn proofs of loss under both policies which listed the actual value of the machinery and equipment destroyed as $48,947.57, and the value of the stock of goods destroyed as $163,749.16, making a total loss of $212,696.73. Pan American asserted in these proofs of loss a claim of $180,000.00, the total amount of insurance, and it was stated therein that the interest of the Bank under the machinery policy was $5500.00 and under the policy on the stock of goods $120,534.62, or a total interest on the part of the Bank under both policies of $126,034.62. On the face of the proofs of loss, therefore, Pan American's interest in the insurance was $53,965.38.
During the early part of May, Allen's president telephoned the New York agent of Rhode Island who was handling the loss and advised him of the assurance previously given by Pan American and the Bank that Allen's claim would be paid, and inquired as to the status of the insurance. This agent replied that he was not sure what Rhode Island was going to do as the proofs of loss were not filed within time and the loss was looked upon 'as very ugly'. Allen's president expressed surprise that there was any question about the payment of the insurance. He was then told by this agent that he would be kept in touch with developments and that it would probably be some time before final action was determined. A few weeks later Allen brought suit against Pan American in the Court of Common Pleas for Charleston County, serving it by publication, and on May 31, 1948, procured in that action an attachment against the insurance debt owing to Pan American by Rhode Island. Jurisdiction of Rhode Island was acquired by service upon its Charleston agent and upon the Insurance Commissioner.
On June 30, 1948, Pan American executed two instruments, thereafter delivered to Rhode Island, on forms used in making proofs of loss, but the obvious intent and effect of which was an agreement by Pan American to compromise the machinery loss for $5500.00 and the loss on the stock of goods for $122,282.50. In fact, it was so designated on the instrument relating to the machinery loss. On July 9th, Rhode Island issued two checks to the Bank in the above amounts which were stated to be 'in full satisfaction of all claims and demand' under said policies on account of the loss which occurred on February 1st. These checks were paid in due course. Although not appearing in the record, presumably the insurance policies were surrendered to Rhode Island at the time the settlement was made.
Thus, Pan American's loss, which on April 13th it had declared under oath to be $212,696.73, was compromised six weeks later for $127,782.50. This was done without any notice to Allen, although Rhode Island had definitely promised Allen's president that his company would be kept posted on all developments and the Bank had assured Allen that its claim would be paid from the insurance. The settlement was consummated without any regard whatsoever for the attachment of the debt of Rhode Island to Pan American which had been made four or five weeks previously in the action commenced in the Court of Common Pleas for Charleston County. There is no suggestion in the record that the compromise grew out of any disagreement as to the amount of actual loss. In fact, no explanation whatsoever is given for the basis of this settlement, although the New York agent of Rhode Island had mentioned in the telephone conversation had with Allen's president that the origin of the fire was suspicious and that the proofs of loss were not filed within time. It is a fair inference that the amount of the compromise settlement represented approximately the indebtedness owing by Pan American to the Bank. The policies were not produced, so that it does not appear whether the interest of the Bank in the insurance was or was not affected by any violation of the policy conditions by Pan American.
No appearance was made by Pan American in the action commenced in the Court of Common Pleas for Charleston County and a default judgment was entered against it for $5663.80 and costs on August 19, 1948. Thereafter on petition filed by Allen in said action, the Court directed Rhode Island to show cause before the presiding judge of the Court of Common Pleas at the October term why it should not pay the judgment out of Pan American's interest in the insurance. Rhode Island made an oral return, denying that it was indebted to Pan American. On October 27, 1948, the Court issued an order referring the cause to the Master for Charleston County for the purpose of taking any testimony offered by the parties and reporting his conclusions of law and fact thereon. In this order Rhode Island was required at the hearing to be held before the Master to produce the policies and any documents in its possession relating to a settlement of the loss, and to answer concerning the alleged indebtedness by it to Pan American, with the right at the same time to offer any evidence it wished regarding its liability under said policies.
A reference was held before the Master on February 8, 1949. The insurance company failed to produce the insurance policies or copies thereof, claiming that they could not be located. It produced its daily reports showing the coverage, the proofs of loss filed and various other documents relating to the settlement. These were introduced in evidence by Allen, along with certain correspondence between the parties. Allen's president was sworn and testified. No testimony was offered by Rhode Island. The attorney for Rhode Island contended at the reference (1) that the policies 'were assigned outright to the Bank' which authorized it in dealing solely with the Bank in adjusting the loss; (2) that because 'of the outright assignment of the policies', there was no indebtedness by it to Pan American; and (3) that if there were any such indebtedness, 'it was on an unliquidated debt not subject to attachment.' All these defenses raised legal issues and no substantial issue of fact. At the conclusion of Allen's testimony, the attorney for Rhode Island asked that the reference be continued for the purpose of allowing it to offer testimony. This request was refused by the Master and the reference closed.
A report was duly filed by the Master in which he found that Pan American had an interest in the insurance which was subject to attachment, and that Rhode Island could not defeat the attachment by a subsequent compromise settlement with Pan American. Accordingly, the Master recommended that Rhode Island be required to satisfy the judgment which Allen had obtained against Pan American.
On exceptions by Rhode Island to the report of the Master, the case was heard by the Presiding Judge of the Court of Common Pleas in November, 1949. On November 29, 1949, a decree was filed reversing the Master and dismissing Rhode Island from the suit. The Court held: (1) That the legal effect of the loss payable clauses in the policies was to give the Bank the sole and exclusive right to collect the entire amount of insurance payable even though it exceeded the amount of the indebtedness owing to it by Pan American and, therefore Rhode Island never became indebted to Pan American. (2) That even if the loss payable clauses were construed as conferring no right on the Bank to collect the...
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