General Ins. Co. of America v. Palmetto Bank
| Citation | 268 S.C. 355,233 S.E.2d 699 |
| Decision Date | 28 March 1977 |
| Docket Number | No. 20392,20392 |
| Court | United States State Supreme Court of South Carolina |
| Parties | GENERAL INSURANCE COMPANY OF AMERICA, Plaintiff-Respondent, v. PALMETTO BANK et al., Defendants, of whom Home Wholesale, Inc., and Edgar O. R. Sadler are, Appellants. HOME WHOLESALE, INC., Plaintiff-Appellant, v. GENERAL INSURANCE COMPANY OF AMERICA et al., Defendants, of whom General Insurance Company of America is, Respondent. |
W. Paul Culbertson, Culbertson & Whitesides, Laurens, for appellants.
William M. Grant, Jr., Haynsworth, Perry, Bryant, Marion & Johnstone, Greenville, for respondent.
Home Wholesale and General brought declaratory judgment actions to determine their rights under a liability insurance policy issued to Home Wholesale by General. Home Wholesale appeals from the grant of summary judgment to General. The issue is whether General is under a duty to defend Home Wholesale against two actions arising out of a distraint of property by Home Wholesale. We find no reversible error in the lower court's judgment and affirm.
Home Wholesale sublet a warehouse to Booth. Booth borrowed $20,000.00 from Palmetto Bank to finance the purchase of a number of carbonated "slush" machines. The bank took a security interest on the machines and filed a financing statement with the Clerk of Court for the county in which the warehouse was situated. Booth then stored the machines in the warehouse.
Booth defaulted on the rent. After sending two letters to Booth, which were received by him but never replied to, Home Wholesale began proceedings for distraint of rent pursuant to § 41-151 et seq., S.C.Code, 1962, as amended. Apparently the only written notice of the proceedings given to Booth were documents posted on the warehouse. A public sale was held at which Home Wholesale bought the machines for the amount of rent due. Home Wholesale later sold the machines for a higher amount.
Sometime after renting the warehouse (the record does not disclose when), Booth defaulted on his payments to Palmetto Bank. The bank obtained a judgment against him (sometime after the distress sale) and then brought suit against Booth and Home Wholesale, asking for an accounting and judgment against Home Wholesale for the amount of payments still due. A few months later Booth brought suit against Home Wholesale for an illegal and unreasonable distress.
General's duty to defend these suits is the issue. The lower court held that both suits were actions for "conversion", and that conversion of goods by an insured did not constitute "property damage" or an "occurrence" under the policy. The court relied on two decisions from other jurisdictions 1 that placed conversion actions outside the coverage of policies like Home Wholesale's.
The "Blanket Liability Insurance" policy issued to Home Wholesale said General would pay "all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence." 2 The policy further said General must defend any suit seeking damages "on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false, or fraudulent."
Home Wholesale argues on appeal that the lower court erred in (1) calling the suits actions for conversion, and (2) ruling there was no "occurrence" or "property damage." Home Wholesale contends that the distraint was in the nature of a legal process and was not therefore "conversion," which is an unlawful assertion of ownership over property; further, the distraint was an "occurrence" and the loss of use of the machines by Booth was "property damage."
We do not agree with these contentions. We think that the suits, whether characterized as for "conversion" or not, did not allege an "occurrence" which caused "property damage."
General's duty to defend against these suits depends on whether the facts alleged in the complaints would bring Home Wholesale within coverage of the policy. Allstate Ins. Co. v. Wilson, 259 S.C. 586, 193 S.E.2d 527 (1972). Even if the allegations of the complaints are groundless or fraudulent, General must defend; but if the allegations do not state facts that would afford coverage, General would be excused. Plaxco v. U. S. Fidelity and Guaranty, 252 S.C. 437, 166 S.E.2d 799 (1969); 44...
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