Merchants Ins. Co. v. Lilgeomont

• Decision Date: 10 July 1936
• Docket Number: No. 7980-7982.,7980-7982.
• Citation: Merchants Ins. Co. v. Lilgeomont, 84 F.2d 685 (5th Cir. 1936)
• Parties: MERCHANTS INS. CO. v. LILGEOMONT, INC. FIREMAN'S FUND INS. CO. v. SAME. NEW BRUNSWICK FIRE INS. CO. v. SAME.
• Court: U.S. Court of Appeals — Fifth Circuit

84 F.2d 685 (1936)

MERCHANTS INS. CO. v. LILGEOMONT, INC.

FIREMAN'S FUND INS. CO. v. SAME.

NEW BRUNSWICK FIRE INS. CO. v. SAME.

Nos. 7980-7982.

Circuit Court of Appeals, Fifth Circuit.

July 10, 1936.

Alex W. Smith, Jr., of Atlanta, Ga., for appellant.

B. P. Gambrell and Reuben R. Arnold, both of Atlanta, Ga., for appellees.

Before FOSTER, SIBLEY, and HOLMES, Circuit Judges.

SIBLEY, Circuit Judge.

On August 7, 1932, a fire destroyed a residence and its contents allegedly owned by Lilgeomont, Inc., and separate suits on three policies of insurance were brought by the corporation in a state court of Georgia. After removal to the District Court they were tried together, resulting in verdicts for the plaintiff. The three appeals and cross-appeals involve the same questions, and will be disposed of by one opinion.

Each policy contains these provisions: "The insured as often as required shall exhibit to any person designated by the Company all that remains of any property herein described, and submit to examination under oath by any person named by this Company, and subscribe the same; and as often as required shall produce for examination all books of account, etc." "No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity until after full compliance by the insured with all the foregoing requirements." Pleas styling themselves pleas in abatement set up these provisions, and that Mrs. Burnise W. Morris as president of insured was required to submit to examination and to produce insured's books of accounts, but produced no such books and refused to answer numerous questions alleged to be material. The pleas conclude that "No suit or action on said policy of insurance for the recovery of any claim on account of any loss or damage to the subject of insurance is sustainable, and this suit should be abated." A jury trial was had on these pleas in which Mrs. Morris explained that the corporation, owned by herself alone, had no books of account, not even a bank account, except a memorandum book of cash transactions which was destroyed by the fire, and that her refusals to answer in each instance were because she did not know or remember the facts inquired about or believed them not material. She in the trial answered fully as far as her knowledge or memory went on all these matters ruled relevant by the court. The jury under the court's instructions found that there had been no breach of the policy provision and found against the pleas.

The answers admitted a total loss, but denied that the value of the property equaled the insurance. They specially set up that L. M. Morris, the husband of Burnise W. Morris, was the equitable owner of the property and in complete control of Lilgemont, Inc., and had hired one Shirley to burn it. They repleaded the policy provision first above quoted and its breach as a bar to recovery, and also pleaded this further provision: "This entire policy shall be void if the insured has concealed or misrepresented in writing or otherwise any matter, fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after a loss"; and claimed its breach by the same refusals of Mrs. Morris to produce books of account and to answer questions. On the trial of the answers before another jury, the evidence being in substance the same as on the trial of the pleas in abatement touching the refusal to produce books and to answer questions, the court withdrew from the jury as being already adjudicated the question of a breach of the first quoted provision of the policy, but let the jury pass on the question under all the evidence whether there was fraud by concealment or false swearing under the last quoted provision. The remaining issues were also submitted. The jury found for the plaintiff.

In the trial of the pleas in abatement error is assigned on the refusal to direct a verdict for the insurer and because of a ruling on evidence and a charge given. It is urged by appellee that these assignments cannot be considered because of 28 U.S.C. A. § 879: "There shall be no reversal in the Supreme Court or in a circuit court of appeals upon a writ of error, for error in ruling any plea in abatement, other than a plea to the jurisdiction of the court, or for any error in fact." The authorities construing and applying the section were recently reviewed in McHie v. McHie (C.C. A.) 78 F.(2d) 351, and it was held that a judgment sustaining a plea of another suit pending was not reviewable. One of the cases cited is Stephens v. Monongahela Bank, 111 U.S. 197, 4 S.Ct. 336, 28 L.Ed. 399, in which such a plea was overruled, the merits decided and a judgment given for the plaintiffs as in the present case. The Supreme Court because of the quoted section refused to consider the ruling on the plea in abatement, saying: "The defense is one which merely defeats the present proceeding, and does not conclude the plaintiff forever, either as to his right to sue in the circuit court of the United States or as to the merits of the matter in dispute." On the other hand, in Fitzpatrick v. Flannagan, 106 U.S. 648, 1 S.Ct. 369, 27 L.Ed. 211, a ruling on a plea in abatement was, without allusion to the section, passed on and reversed. The plea, however, dealt with the sufficiency of the affidavit on which the attachment issued which began the suit, and seems to have involved not only the getting of the defendant properly into court but the validity of certain garnishments and perhaps of an attachment lien, and thus to have been more than a pure plea in abatement. In the present case, while the prayers of the pleas are to abate the suit, there is the allegation of an unfulfilled condition precedent and a claim in the pleas that no recovery is sustainable. The failure to perform a condition precedent may sometimes be made a cause for abatement and it may sometimes go to the extinction of the cause of action 1 Corpus Juris Secundum, Abatement, § 86 On the trial of the merits the court gave conclusive effect to the verdict on the pleas in abatement and we think that we should look into its correctness. The statute indeed prohibits only a reversal, and we shall not reverse.

The contractual provision for discovery of books and papers and of material facts known to the insured is reasonable and valid. Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76; Firemen's Fund Ins. Co. v. Sims, 115 Ga. 939, 42 S.E. 269. The result of a refusal is another question. When the parties do not agree what the result shall be, provisions looking to the ascertainment of the truth after a loss have sometimes been treated as promissory warranties whose breach invalidates the insurance, and sometimes only as agreements to be appropriately specifically enforced. See Travelers Ins. Co. v. Welch (C.C.A.) 82 F.(2d) 799, and cases cited. In the Claflin Case, supra, the agreement which was enforced was that an attempt at false swearing or fraud should forfeit all claim and bar recovery. In the Firemen's Fund Ins. Company Case, supra, the agreement was like that now before us, that no suit shall be maintained until compliance. Likewise in Southern Home Ins. Co. v. Putnal, 57 Fla. 199, 49 So. 922. Under such an agreement there is no avoidance of the policy on a failure to comply. The fair construction is that the suspension of the right to sue is for the enforcement of the right to a discovery, and when the latter right is secured the...