Quality Bedding Co. v. American Credit Indem. Co. of New York

• Decision Date: 14 December 1965
• Docket Number: No. 12380,12380
• Citation: 145 S.E.2d 468,150 W.Va. 352
• Parties: QUALITY BEDDING CO., a W. Va. Corp. v. AMERICAN CREDIT INDEMNITY CO. OF N. Y., etc.
• Court: West Virginia Supreme Court

Page 468

145 S.E.2d 468

150 W.Va. 352

QUALITY BEDDING CO., a W. Va. Corp. v. AMERICAN CREDIT INDEMNITY CO. OF N. Y., etc.

No. 12380.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 21, 1965.

Decided Dec. 14, 1965.

Syllaus by the Court

1. 'It is error to give inconsistent instructions, inasmuch as the jury are left to determine which theory of the law, as thus presented, is correct, and renders it impossible for the court to determine upon what legal principle the verdict is founded.' Syl. Pt. 5, Penix v. Grafton, 86 W.Va. 278 .

2. 'Fraud is never presumed and when alleged it must be established by clear and distinct proof.' Syl. Pt. 5, Bennett v. Neff, 130 W.Va. 121 .

3. A verdict of a jury based upon insufficient evidence or which is against the preponderance of the evidence will be set aside by this Court.

Lewis A. Staker, Huntington, for appellant.

E. Henry Broh, Huntington, for appellee.

BROWNING, President.

Plaintiff, Quality Bedding Company, a corporation, was the assured in a policy of insurance issued by the defendant, American Credit Indemnity Company of New York, whereby the defendant agreed to indemnify plaintiff against loss due to the insolvency of its debtors to a certain amount, and particularly against loss due to the insolvency of the Huntington Chair Corporation to the extend of ten thousand dollars, occurring during the calendar year 1961. The policy, in brief, provided twelve specific instances determinative of when insolvency had occurred within the meaning of the policy and also provided that the insured could file with the defendant for collection any claim against a debtor not more than three months past due even though such debtor was not insolvent as defined by the policy.

On December 19, 1962, plaintiff instituted this action against the defendant for the sum of ten thousand dollars plus interest and costs alleging that the defendant through misrepresentation and fraud had delayed establishing, and caused plaintiff to delay establishing, its rights under the policy and thereby deprived plaintiff of its right to collect the sum of ten thousand dollars under the terms of the policy. The defendant answered denying any fraud or misrepresentation and asserting that it was plaintiff's duty to establish the insolvency of the debtor, Huntington Chair Corporation, within the policy period. The Huntington Chair Corporation is sometimes referred to in the exhibits and testimony as Huntington Furniture Corporation.

Upon trial of the case, plaintiff adduced the testimony of Mr. Budd Moser, its president. Mr. Moser testified that he first purchased a policy from the defendant covering the year 1960, and, at the time settlement was made by the defendant for losses incurred during that period, he renewed the policy for the calendar year 1961. At the time of renewal the defendant was unwilling to cover the account of the Huntington Chair Corporation, which had incurred an indebtedness to plaintiff in the amount of fifteen thousand dollars during 1960, for the year 1961, but agreed, by so denominated 'Extraordinary Coverage' and 'Back Sales' endorsements, to insure the 1960 account to the amount of ten thousand dollars during 1961. Thereafter plaintiff continued to deal with Huntington Chair on a cash before delivery basis, but received no payment on the arrearage. Mr. Moser discussed the situation on several occasions with defendant's representative, Mr. Schillinger, and on August 7, 1961, Mr. Moser directed a letter to the defendant, reciting substantially the above facts and continuing:

'We hesitate to turn this account over to you for collection because undue collection pressures might result in embarrassment to Huntington Furniture Corporation. In light of our insurance coverage, we agreed to carry them for a while on the $15,000 as they were not in a position to pick up any of the past due indebtedness.

'* * *

'If your coverage was extended through 1962 and would be part of our general renewal insurance policy, we would not exert serious collection pressures now. The thought occurs to us that we might be able to procure 15 post-dated checks in the amount of $1000 each for deposit at monthly intervals. Obviously, this would carry the account into 1962. We would not want to follow such procedure unless we had your assurance that the $10,000 coverage would be extended into 1962. Therefore, before submitting such a proposition to this debtor, we would like to know your position. * * *

'Frankly, we are deeply concerned over this particular account. We have discussed this from time to time with Mr. Schillinger. After talking to him on Wednesday and going over some of this detial, we concluded that our best procedure would be to explain the situation to you and then follow a course, predicated upon your recommendations.

'After you have had an opportunity to analyze the picture, we would like to hear from you. Thanking you in advance for your instructions. * * *'

No reply was received to this letter and on October 25, 1961, Mr. Moser wrote Mr. Schillinger stating, '* * * As you know, we are not willing to accept the responsibility for this account without insurance coverage. Since * * * [defendant] is not willing to carry this account beyond 1961, a course of action will have to be determined. * * *', and requested that Mr. Schillinger see him before November 8. On November 9, 1961, plaintiff wrote to Mr. Kliment, Service Manager of defendant, enclosing notification of its claim against Huntington Chair and the necessary certifications and other requirements. This letter informed Mr. Kliment that numerous unsuccessful attempts to obtain reduction of the balance owing from Huntington Chair had been made and a recent discussion with company officials disclosed that the company was not in a position to make any payments at that time and continued:

'* * * As you know, * * * [defendant] has elected to discontinue coverage on this account after 1961. Since we are not willing to relieve you of this responsibility, we are now obligated to turn this account over to you.

'We suggest that a direct contact be made immediately for the purpose of determining whether the account is collectible without suit. If after the ten day period following your first demand it becomes you judgment that suit is necessary, this is your authorization to proceed with what ever action you deem advisable. If you follow the procedure of suit, please keep us posted. As a matter of fact, we would like to have your opinion following the first demand. * * *'

Under date of November 17, plaintiff received a reply from Mr. Koch, to whom plaintiff's letter of November 9 had been referred by Mr. Kliment, advising that the matter had been discussed with the debtor and the debot had originally promised chacks in the amount of $1,000 on a monthly basis beginning December 11, but that defendant, unsatisfied with that arrangement, had secured the further promise that after three months the amount of the checks would be increased to $2,000 each and submitted this proposal to plaintiff for its acceptance. The letter added:

'Should you feel that a liquidation of this type along with the continued prospects of future business to your concern is to your advantage, we believe that should be accepted.

'Should you wish immediate suit, we will forward this to our attorneys with instructions to institute suit immediately. * * *' On November 22, Mr. Moser replied to this letter stating:

'* * *

'I have read your report on the above captioned debtor. All of your observations and conclusions * * * confirm my previous appraisals of this situation.

'I quite agree that the immediate institution of a suit would not serve any particular purpose. The method of liquidation * * * for three monthly checks of $1000 commencing on December 11 and checks in the amount of $2000 each month thereafter until the balance is satisfied is entirely acceptable to us. Notwithstanding, there is one important proviso to which we must be mutually agreed. This arrangement does not relieve your responsibility under the terms of our insurance policy.

'For further clarification, it is my understanding that * * * [defendant] is not willing to stay on the risk beyond 1961. If the acceptance of the payment arrangement as outlined above constitutes an action on our part to relieve your company of any further responsibility, we are not willing to accept your recommendation. However, if we have the assurance that the coverage will continue during the agreed liquidation period, we are entirely satisfied with this arrangement. * * *'

Defendant replied, under date of December 12, advising that it was definitely unwilling to extend any coverage beyond the current policy and that plaintiff was aware thereof as evidenced by his letter of August 7, adding '* * * I feel that I should add that I believe collection can be effected if you will permit our Service Department to continue with the settlement method on which we have obtained agreement by the debtor.' On December 19, Mr. Koch worte plaintiff stating that the debtor was unable to meet the December 11 payment and, when a 'strong demand' was made, an official stated that '* * * should they be pressed to any great degree they may consider Chapter XI of the Federal Bankruptcy Act.' The letter continued '* * * before sending this to our attorneys, which would only entail additional costs to your firm, we believe it would be to your interest to review the possibilities of granting the debtor an additional extension until the first of March. * * *' and asked for plaintiff's comments and decision on this proposal. The policy period for establishing insolvency expried on December 31, 1961, and it is to be noted that one of the definitions of insolvency under the policy is where a voluntary or involuntary proceeding in bankruptcy shall have been instituted. Huntington Chair Corporation, the debtor, later...