North British & Mercantile Ins. Co. v. Lathrop

• Decision Date: 07 November 1895
• Docket Number: 129.
• Citation: 70 F. 429
• Parties: NORTH BRITISH & MERCANTILE INS. CO. v. LATHROP et al.
• Court: U.S. Court of Appeals — Fourth Circuit

70 F. 429

NORTH BRITISH & MERCANTILE INS. CO. v. LATHROP et al.

No. 129.

United States Court of Appeals, Fourth Circuit.

November 7, 1895

Pegram & Stringfellow, for appellant.

Meredith & Cocke, for appellees.

Before GOFF and SIMONTON, Circuit Judges, and SEYMOUR, District Judge.

GOFF Circuit Judge.

This was a suit in equity by the North British & Mercantile Insurance Company, a corporation organized under the laws of the kingdom of Great Britain and Ireland, and a citizen of said kingdom, against Kate M. Lathrop and George A. Lathrop citizens of the state of Virginia, and residents of the Eastern district thereof. On the 23d day of November, 1891 said insurance company issued its policy of insurance thereby insuring Kate M. Lathrop, trading as K. M. Lathrop &amp Co., against loss or damage by fire, as was in such policy set forth, for the space of one year, and to the amount of $3,500, on certain fixtures, machinery, cheroots, tobacco, etc., contained in a certain building in the city of Richmond, Va. On the 23d day of December, 1891, a fire occurred in said building, and the assured, claiming that certain of the property covered by the policy had been damaged and destroyed by such fire, furnished to said company papers and schedules purporting to be proofs of the loss sustained by her, in which she claimed that the sum of $2,868.08 was due her from the company under said policy. The company insisted that the proofs of loss were incomplete and insufficient, and for that reason rejected them. Thereupon an appraisement of the property was demanded by the assured, as provided for in the policy, and three appraisers were duly selected for that purpose, who, after full investigation of the matters involved, returned an award, by which the amount found due the assured by the company under the policy was the sum of $2,325.77. The company still refused to pay, and filed its bill in equity, charging that the proofs were in several material points false, fraudulent, and untrue, particularly as to the quantity and value of the property damaged and destroyed; and that the appraisement was procured by false, fraudulent, corrupt, and undue practices on the part of the assured, especially by false statements as to the number of cheroots, labels, and molds destroyed by the fire and covered by the policy of insurance. The bill also charged that the assured had notified the company that she would apply to the treasurer of the state of Virginia in order to secure the sale of such portion of the bonds and securities on deposit with him as provided by law would suffice to pay her the amount of such award. The bill claims that for the reasons mentioned the company is entitled to have the award declared void and that, if the assured be permitted to procure a sale of the bonds and securities belonging to the company, so on deposit, irreparable injury will be caused thereby. It is also alleged that by the terms of the policy the company is entitled, because of the fraud and false swearing of the assured, to have the policy declared void; and the prayer is that the said alleged award may be declared void; that the assured be restrained from applying for or in any manner procuring the sale of any bonds or securities belonging to the company for the purpose of satisfying said award, and that she be perpetually enjoined from commencing or prosecuting any proceedings at law to recover the amount claimed by her, either under the award or the policy; and also for general relief. The court granted a restraining order in these words:

'Ordered, that the said Kate M. Lathrop, her agents and servants, be restrained from in any manner enforcing or attempting to enforce the award mentioned in the bill of complaint, and from procuring the sale of any bonds or securities belonging to the complainant, deposited with the treasurer for the state of Virginia, or from receiving the proceeds of any such sale, until the further order of the court.'

The defendants below answered the bill, denying all charges of fraud. Depositions were duly taken, on the issues then existing, as to whether the goods claimed to have been destroyed were in the building at the time of the fire, and if the award had been obtained by fraud. Then the said Kate M. Lathrop, with the permission of the court, filed her cross bill in this suit against the insurance company, in which, after reciting the allegations of the original bill, the substance of the answers thereto, and the restraining order, she claimed that she was entitled to use the award as evidence of the amount of her loss under the policy in a suit at law; that she had been prevented from so suing because the validity of the policy was at issue in the pending suit, and for the reason that she was restrained by order of the court from using the award as evidence; also, that if she then instituted a suit on the policy she would be met with the plea of the contractual limitation contained in the policy, which required that suit should be brought within 12 months after the loss by fire was incurred. The cross bill asked that the assured be decreed the amount found due her from the insurance company by the award. A demurrer to the cross bill filed by the company, was overruled, and this action of the court below is assigned as error. The cross bill was duly answered, replication filed thereto, additional evidence taken, and the cause finally heard, the court below decreeing that the insurance company should pay to the assured the sum of $2,325.77, with interest thereon from January 1, 1892, and costs; and this decree constitutes the second assignment of error made by the appellant.

It is insisted that the demurrer to the cross bill should have been sustained, because the court below had no jurisdiction of either the original or the cross bill, and also because, if it had jurisdiction, the claim asserted in the latter was barred by the contractual limitation of 12 months provided for in the policy. The appellant now insists that the court erred in granting the relief for which it originally asked, and that in fact the court had no jurisdiction to entertain the bill to cancel the award and declare the policy void. We think that the court below had jurisdiction of both the original and the cross bill, and that the demurrer to the last mentioned was properly overruled. The parties to this controversy had, by their own contract,-- the policy of insurance,-- provided that, in case they differed as to certain matters connected with the same, the matter should be determined by a tribunal of their own, which was to ascertain and report the value of the property damaged and destroyed. The report of this tribunal,-- the board of appraisers,-- while not technically an award, presents the essential qualities of an arbitration, and has the force of and is subject to the conditions of an award. Railroad Co. v. Elliott, 56 F. 772; Curry v. Lackey, 35 Mo. 389; Smith v. Railroad Co., 36 N.H. 458; Leonard v. House, 15 Ga. 473; Underhill v. Van Cortlandt, 2 Johns.Ch. 339; Lauman v. Young, 31 Pa.St. 306.

It was charged in the original bill that the award had been obtained by the false and fraudulent acts of the defendants thereto. It is well established that courts of equity will, by virtue of their general grounds of jurisdiction, in cases of fraud mistake, or accident, entertain a bill to set aside an award, where there is no adequate remedy at law. Morse, Arb. 543; Story, Eq. Jur. 1451. And it is also well known that no extrinsic circumstance or matter of fact dehors the award can be pleaded or given in evidence to defeat it in actions at common law. In such cases a resort to equity for relief is still a proper proceeding. In some instances this manner of remedy has been modified by state statutes, but such enactments have not and cannot affect the jurisdiction of the equity courts of the United States. The fact that state laws provide legal remedies for wrongs as to which equitable relief exists does not deprive the federal courts of jurisdiction under their general equity powers. Hay v. Railroad Co., Fed. Cas. No. 6,254; Gordon v. Hobart, Fed. Cas. No. 5,609; Bean v. Smith, Fed. Cas. No. 1,174. The fact that there is also a remedy at law is not of itself sufficient to deprive equity of jurisdiction, unless it is apparent that the former is as effectual as the latter. Bunce v. Gallagher, Fed. Cas. No. 2,133; Crane v. McCoy, Fed. Cas. No. 3,354; Morgan v. Beloit, 7 Wall. 613; Sullivan v. Railroad Co., 94 U.S. 806. The adequate remedy at law referred to as the test of jurisdiction in the equity courts of the United States is that which existed when the judiciary act of 1789 was enacted, subject to such change as c...