Fass v. Liverpool, London & Globe Fire Ins. Co.

• Decision Date: 14 September 1916
• Docket Number: 9509.
• Parties: FASS ET AL. v. LIVERPOOL, LONDON & GLOBE FIRE INS. CO. FASS ET AL. v. NORTH CAROLINA HOME INS. CO. FASS ET AL. v. INSURANCE CO. OF NORTH AMERICA.
• Court: South Carolina Supreme Court

89 S.E. 1040

105 S.C. 364

FASS ET AL. v. LIVERPOOL, LONDON & GLOBE FIRE INS. CO.

FASS ET AL. v. NORTH CAROLINA HOME INS. CO.

FASS ET AL. v. INSURANCE CO. OF NORTH AMERICA.

No. 9509.

Supreme Court of South Carolina

September 14, 1916

Appeal from Common Pleas Circuit Court of Dillon County; Thos. J Mauldin, Judge.

Suit by Frances Fass joining E. Randolph Williams and another, as trustees of the Atlantic Life Insurance Company, as parties plaintiff, against the Liverpool, London & Globe Fire Insurance Company, consolidated with suits by the same plaintiffs against the North Carolina Home Insurance Company and the Insurance Company of North America. Motion by defendant that the entire cause be stricken from calendar 1 and placed on calendar No. 2 for determination by the court without a jury, or, failing that, for an order transferring the issue raised by the answer and reply to calendar No. 2 and if neither of such motions be granted, then that the cause be transferred to calendar No. 2 and be referred to the master to take testimony and report it to the court overruled, and motion that action be dismissed on ground that pleading stated no cause of action overruled, and defendants except and appeal. Affirmed.

Fraser J., dissenting in part.

Smith, Hammond & Smith, of Atlanta, Ga., and Sellers & Moore, of Dillon, for appellants.

Gibson & Muller, of Dillon, for respondents.

FRASER J.

Respondents state their cause as follows:

"The above entitled suits were begun on the 5th day of February, 1915, and sought to recover of the three defendants, the Liverpool, London & Globe Fire Insurance Company, the North Carolina Home Insurance Company, and the Insurance Company of North America, the sum of $6,500. The plaintiff Frances Fass was the owner of a store building on Main street in the town of Dillon, which was insured in the three companies as follows: $2,500 in the Liverpool, London & Globe, $2,000 in the North Carolina Home, and 2,000 in the Insurance Company of North America. The plaintiffs E. Randolph Williams and J. B. Gibson, as trustees, were made parties to the action, for the reason that a mortgage debt had been made against the premises and the loss clause of the policies was made payable to them. On the 31st day of December, 1914, the plaintiffs' building was destroyed by fire. All three of the policies were in full force and effect at the time, and plaintiff claimed reimbursement for her loss from the said companies. The complaint alleges that due notice of the loss was given, and proper proofs of loss were prepared, and defendants sent their adjuster to make an adjustment of said loss. That the plaintiff Frances Fass, fully complied with all the terms of said contracts of insurance and was entitled to be paid her loss under said contracts. In due time an adjustment was attempted to be made between the parties themselves; but, they failing to agree, an attempted arbitration was had in pursuance of the arbitration provision contained in the insurance policies. Each party appointed a representative, and the two so appointed chose an umpire and attempted to make an award, but because of the alleged partiality of the representatives of the defendants and of the umpire, plaintiff refused to abide by the finding of the representative of defendants and the umpire; plaintiffs' representative having refused to sign the award. After the attempted arbitration the defendants refused to consider any further propositions, and notified plaintiffs that they would only settle upon an acceptance of the award as made, and that no further attempts towards a settlement otherwise would be considered. Thereupon these suits were instituted. An an swer was filed to plaintiffs' complaint, setting up as a plea in abatement the fact that the suit had been brought within 60 days of the loss and of the award; that plaintiff had failed to file proper proofs of loss and hence prayed judgment dismissing the suit. Upon motion duly made plaintiffs filed a reply, setting up the refusal to pay the insurance or to negotiate further in connection therewith, and alleged fraud, partiality, and misconduct on the part of the umpire and defendants' representative in the arbitration, and alleged a waiver of the stipulated period of 60 days and of the filing of formal proofs of loss, and that the attempted award, by reason of the alleged fraud, partiality, etc., was a nullity, and prayed for judgment as is asked in their complaint. The cause came on for trial before his honor Judge T. J. Mauldin and a jury at the October, 1915, term of court of Common Pleas for Dillon county. And upon the call of said cause defendants made a motion: (1) That the entire cause be stricken from calendar 1 and placed on calendar No. 2 for determination by the court without a jury; (2) that, failing in that, an order be made, transferring the issue raised by defendants' answer and plaintiffs' reply to calendar No. 2, and, further, that if neither of said motions should be granted, then said cause be transferred to calendar No. 2 and be referred to the master to take testimony and report it to the court. These motions were overruled. Defendants then moved that the action be dismissed, on the ground that the pleadings as they appeared stated no cause of action, for the reason alleged to be set out in defendants' exceptions. This motion was likewise overruled."

There are seven exceptions, but appellant reduces his questions to three.

I. "Are the defendants entitled to have the cause transferred to calendar 2 for trial of the equitable issues on said calendar?" This question I think should be answered in the affirmative. The rule is well stated in Corpus Juris, vol. V, p. 192 et seq.:

"In an action on an award defendant may, of course, avail himself of any defense apparent on the face of the award at common law. Matters extrinsic of the award, such as fraud, mistake, or partiality in the arbitration, cannot be set up in defense to an action on the award. Defendant's redress in such cases is a resort to a court of equity."

Of course, under the present practice, the result would be to transfer to calendar 2 for trial.

If the reply had pleaded fraud, then of course, under the well-settled rule in this state, the plaintiff could have relied upon the petition that the award was a nullity, and proved fraud without pleading it. But the reply did not set up fraud. It set up partiality on the part of the arbitrator and misconduct on the part of an agent of the defendant and the arbitrators. The difference between fraud and partiality is very apparent. When an award by arbitration is pleaded in the answer, the defendant knows that he has pleaded a complete defense, but that the award may be attacked for fraud. The defendant is held to know what he has done, and is held to be prepared to meet that attack. Here the attack is in part upon the conduct of the appraisers. A man may be held to be prepared to defend his own conduct, but not the conduct of another. In this particular case it is alleged that the agent knew of and participated in the conduct complained of, but we are stating general rules, and we have stated it correctly. The plaintiff set up a purely legal cause of action. The defendant set up a bar at law. To that point there was only a question of law; when the plaintiff replied, the issue was changed. The reply practically changed the action into an action to set aside an award of arbitrators for partiality and misconduct. The only issue was an equitable issue to be tried in chancery. There may be both legal and equitable issues in a case. Sometimes an issue is common to both. A purely legal issue, however, must be tried on the law side of the court and a purely equitable issue in equity. Sometimes the settlement of one issue eliminates the other. For instance, a plaintiff brings an action for partition. That is an equitable action. The defendant sets up title in himself to the whole land. That raises a legal issue. It is manifest that the first issue to be determined is the legal issue of defendant's title to the whole land. If the plaintiff prevails, the case then goes to the equity side of the court for partition. If the defendant prevails, that ends the case; for there is nothing to partition. In the case at bar, the question is, Shall this award be set aside for partiality and misconduct? and that issue is in equity. In Adams' Equity, §§ 192, 193, we find:

"In order to resist the enforcement of the award, it is necessary that its validity be impeached. * * * If these objections [fraud, partiality, uncertainty, failure to decide completely, etc.] appear on the face of the award, they invalidate it and preclude its enforcement at law; and, if there be actual fraud, it may be pleaded [in this state proven without pleading] in avoidance at law. If there be a mere miscarriage, not apparent on the face of the award, it cannot be pleaded in avoidance at law, but must be made available by an independent application to set aside the award. And where the submission rests on mere agreement, and not a rule of any court, the jurisdiction for this purpose is exclusively in equity. If the submission is by rule at nisi prius, the jurisdiction is concurrent in law and equity."

The submission was under the policy of insurance; i. e., "mere agreement." The jurisdiction was therefore, according to Adams, exclusively in equity. Adams is high authority, and doubtless states the old rule. The old rule is modified in this State as to fraud, but this is not fraud, but partiality and misconduct.

It is true that this is not an arbitration under the statute, and the statute is not binding, but certainly no great harm can be done by conforming the practice as near as may be to the statute...