Fire Ass'n v. Allesina

• Citation: 45 Or. 154,77 P. 123
• Parties: FIRE ASS'N v. ALLESINA.
• Decision Date: 27 June 1904
• Court: Supreme Court of Oregon

77 P. 123

45 Or. 154

FIRE ASS'N v. ALLESINA.

Supreme Court of Oregon

June 27, 1904

Appeal from Circuit Court, Multnomah County; John B. Cleland, Judge.

Action by John Allesina against the Fire Association of Philadelphia. From a decree dismissing the cross-bill defendant appeals. Reversed.

In 1903, the defendant, Allesina, brought an action at law against the plaintiff to recover on a policy of insurance for $2,000, covering loss or damage by fire to a stock of umbrellas and parasols belonging to him in the city of Portland. The complaint, after alleging the incorporation of the plaintiff and the issuance of the policy, averred that on the 28th of April, 1903, the property covered thereby was destroyed and damaged by fire; that at the time there was $11,500 concurrent insurance thereon; that soon after the fire and within the time named in the policy Allesina made due proof of loss as required, but that, as he and the plaintiff were unable to agree as to the amount thereof, an agreement for an appraisement was entered into as provided in the policy, an appraiser duly selected by each of the parties, and an umpire thereafter chosen by the two appraisers; that the appraisers, with the assistance of the umpire, determined the amount of the loss and damage sustained by Allesina on account of the fire to be $13,562.18; that the plaintiff company refused to pay its portion of the loss, and denied liability under its contract. The plaintiff answered the complaint, denying the validity of the policy and the amount of the loss, and for an affirmative defense alleging that the policy was void (1) because of a chattel mortgage on the property at the time it was issued and (2) the fraud and false swearing of the assured after the loss. At the same time plaintiff filed a complaint in equity in the nature of a cross-bill to set aside and cancel the award. The bill alleges, in brief, that in and by the policy it is provided that the entire policy shall be void in case of fraud or false swearing by the assured concerning any matter regarding the property or the nature thereof; that after the fire the insurance company by its agent entered upon an investigation of the circumstances of the fire and the amount of the defendant's loss, with a view to determining, in accordance with the terms of the policy, the extent of its liability; that for the purpose of such investigation the agent requested the defendant to furnish him all the information he possessed regarding the amount kind, and quality of the goods insured and destroyed together with his books, bills, invoices, and other vouchers that there were lost and destroyed by the fire 3,351 umbrellas, 505 parasols, and other goods in stock, amounting in value in the aggregate not to exceed $7,109.26, notwithstanding which the assured stated under oath, as part of his proof of loss, and on his examination in reference thereto, that the actual cash value of the property in the store at the time of the fire was between $18,000 and $19,000, and at various times during the investigation repeated such claims and demands; that for the purpose of inducing the company to believe his statements to be true he exhibited to it false and fraudulent inventories, and false entries in his books; that such statements, inventories, and entries were made and exhibited by the assured for the purpose of causing the company to believe the amount of the loss to be much greater than the true amount thereof; that by reason of such excessive claims the assured and the company were unable to agree as to the amount of the defendant's loss, and the company, because of its ignorance concerning such false and fraudulent claims and demands, was induced to enter into the agreement for submission to the appraisers; that by such submission it was agreed that the amount of the loss should be ascertained by Grant Phegley and H.R. Ramsdall, who should first select a competent and disinterested umpire to act with them in matters of difference only, and that the award of any two should be binding upon the parties; that the appraisers were unable to agree upon a mode of procedure, and referred the books and papers in their hands to the umpire, without having agreed upon any point, and without having made any investigation or taken into consideration any evidence, except the sworn statement of the assured and his inventories, books, and invoices; that the appraisers explained their differences to the umpire and then withdrew, and thereupon the umpire, without hearing any evidence or making any investigation, excepting an inspection of the sworn statements and inventories of the assured, made and signed an award, which was subsequently agreed to by Phegley; that after the selection of Phegley as an appraiser, and before the award, the assured falsely and fraudulently stated and represented to him, without the knowledge, presence, or consent of the other appraiser, or the umpire, or of any representative of the company, that there were 810 parasols on hand in the store on January 1, 1903, that none of them had been sold since that date, but that all of them were lost and destroyed by the fire; that such statement was considered by Phegley and influenced his award, but plaintiff had no notice thereof, nor any opportunity to refute it; that the statements and alleged inventories of the assured were false and fraudulent, and were exhibited by the assured to the appraisers and umpire as evidence of the amount of his loss, with the purpose and intent thereby to cause them to make an award greatly in excess of his actual loss; that the appraisers and umpire were thereby deceived and misled, and based their award upon such false and fraudulent evidence; that the insurance company did not know, and could not with reasonable diligence until after the award was made have ascertained, that the statements and inventories so exhibited were false and fraudulent, but that, immediately after discovering such fraud, it notified the assured that it would not be bound by the award, or pay any sum whatever on account of the loss. On motion of the defendant, the cross-bill was stricken out and the suit in equity dismissed. From this decree the insurance company appeals.

J. Clarence Veazie and Wm. T. Muir, for appellant.

Henry E. McGinn, for respondent.

BEAN J. (after stating the facts).

It is conceded that the cross-bill states facts sufficient to entitle the plaintiff in an independent suit to a decree setting aside and annulling the award of the appraisers selected by the company and the assured to determine the amount of the loss; but the contention is that, because the company answered in the law action brought against it by Allesina on the policy of insurance, setting up facts which, if true, would avoid the policy, it is not entitled to file a cross-bill to cancel the award. There are two issues presented in the action at law: (1) The validity of the policy and the liability of the insurance company thereunder, and (2) the amount of the loss. The insurance company has a defense to the first at law, but as to the second it has no defense which it can make in the law action. The award of the appraisers cannot be impeached or set aside for fraud in a court of law. 1 Bigelow, Fraud, 96; 2 Story, Equity (13th Ed.) § 1452; Robertson v. Scottish Union, etc., Ins. Co. (C.C.) 68 F. 173; North British, etc., Ins. Co. v. Lathrop, 70 F. 429, 17 C.C.A. 175. The only remedy of the company, so far as the amount of the loss is concerned, is in equity, and we think it had a right to file a complaint in the law action in the nature of a cross-bill to set aside and annul the award, so that it might be permitted to litigate the amount of the loss, if it failed to establish its defense against the policy.

The statute provides that in an action at law, if the defendant is entitled to relief arising out of facts requiring the interposition of a court of equity and material to his defense, he may, upon filing his answer therein, also file a complaint in equity in the nature of a cross-bill which shall stay the proceedings at law, and the cause thereafter shall proceed as a suit in equity, in which the law action may be perpetually enjoined, or allowed to proceed in accordance with the final decree. B. & C. Comp. § 391. It is sometimes urged that the approved practice under the statute denies a defendant in a law action the right to file a cross-bill if his answer sets up a defense, even though he may be entitled to relief arising out of facts requiring the interposition of a court of equity and material to his defense. But we do not so interpret the provision of the statute authorizing a defendant in a law action to file a cross-bill. It was incorporated in the Code of Civil Procedure by the amendment of October 22, 1870 (Laws Or.1870, p. 30), and was thought necessary because the distinction between law and equity had been retained, so that a defendant in a law action could not assert an equitable defense, but, if entitled to relief in equity, was compelled to resort to an independent suit. The purpose of the amendment was to obviate this inconvenience, and to enable a defendant in a law action to make a defense, either entire or partial, not cognizable at law. The only condition to the exercise of the right is that he is entitled to relief arising out of facts requiring the interposition of a court of equity and material to his defense. The right to file a cross-bill is not made to depend upon whether he had a defense at law, but whether such defense is as full, complete, and adequate as that in equity. The law provides that upon filing his answer a defendant may, as plaintiff, file a complaint in equity in the nature of a cross-bill whenever he is entitled to...