Southeastern Life Ins. Co. v. Palmer

• Decision Date: 05 July 1922
• Docket Number: 10950.
• Parties: SOUTHEASTERN LIFE INS. CO. v. PALMER.
• Court: South Carolina Supreme Court

113 S.E. 310

120 S.C. 490

SOUTHEASTERN LIFE INS. CO. v. PALMER.

No. 10950.

Supreme Court of South Carolina

July 5, 1922

Appeal from Common Pleas Circuit Court of Florence County; S.W. G Shipp, Judge.

Suit by the Southeastern Life Insurance Company against Mary Keith Palmer, individually and as administratrix of George D Palmer, deceased. From an order refusing to strike out defendant's counterclaim and refusing to grant an order of reference, plaintiff appeals. Affirmed.

Haynsworth & Haynsworth, of Greenville, and P. H. Arrowsmith, of Florence, for appellant.

Willcox & Willcox, of Florence, for respondent.

WATTS J.

This action is brought by Southeastern Life Insurance Company against Mary Keith Palmer, individually and as administratrix of the estate of George D. Palmer, deceased. The plaintiff seeks cancellation of two policies of insurance issued by it upon the life of George D. Palmer, upon the ground that in his application therefor the deceased made certain false and fraudulent representations as to his health, as a result of which plaintiff was misled into issuing the policies. The defendant answered, denying the fraud, and, further answering, interposed counterclaims for the amounts due on the policies.

Plaintiff moved before his honor Judge S.W. G. Shipp for an order striking out the counterclaim set up in the answer and for a further order referring the case to the judge of probate acting master of Florence county, to take and report the testimony, together with his findings of fact and law thereupon. This motion came on to be heard before Judge Shipp, and he passed an order in which he refused to strike out the defendant's counterclaim, and further refused to grant an order of reference; it appearing that defendant was entitled, as a matter of right, to a trial by jury. From this order of Judge Shipp the plaintiff has appealed upon five exceptions.

The exceptions raise two questions: First. Could the defendant's counterclaim for amount due on the policies be interposed in an action for the cancellation of the policies? Second. Was the defendant entitled, as a matter of right, to a trial by jury?

Section 200 of the Code of Civil Procedure, relating to counterclaims, is:

"The counterclaim mentioned in the last section must be one existing in favor of a defendant, and against a plaintiff, between whom a several judgment might be had in the action, and arising out of one of the following causes of action:

1. A cause of action arising out of the contract or transaction set forth in the complaint as the foundation of the plaintiff's claim, or connected with the subject of the action.

2. In an action arising on contract, any other cause of action arising also on contract, and existing at the commencement of the action. The defendant may set forth by answer as many defenses and counterclaims as he may have, whether they be such as have been heretofore denominated legal or equitable, or both. They must each be separately stated, and refer to the causes of action which they are intended to answer, in such manner that they may be intelligibly distinguished."

The counterclaim in this action conforms to the requirements of the first subdivision of the section, in that, as contained in the answer, it is a perfect and complete cause of action in favor of the defendant against the plaintiff, and is one on which a several judgment might be had. It remains, therefore, to determine whether or not this cause of action falls within either of the two classes of cases in which, under the section, counterclaims may be interposed.

After a careful analysis of the meaning of the section and of the facts in this case, it appears to us that the counterclaim which was interposed in the answer of the defendant falls under the class of actions in which counterclaims are allowable, in that it arises out of the transaction set forth in the complaint as the foundation of plaintiff's claim, and in that it is also connected with the subject of the action.

The word "transaction" in the sense as used in the section means all of the negotiations leading up to the contract in the case. The business between Palmer and appellant consisted in the making of application by Palmer to the insurance company for the issuance of a policy, and in answering the inquiries propounded in the application, and the acceptance of the application and issuance of a policy thereupon, and the payment by Palmer of the required premium to the company. The acts of Palmer, the answers of Palmer in the application the appellant alleges are untrue, all parts and parcels thereof, were of one transaction, which commenced when Palmer made application for insurance and ended when the policy was issued, premiums paid, and policy delivered. This is the transaction which gives rise to the plaintiff's action. These same facts and same transactions gave to the defendant the counterclaim interposed.

This is a case that comes under the section when it says that the counterclaim must arise out of the same transaction which forms the foundation for the plaintiff's claim. It follows, therefore, that the defendant was entitled to interpose the counterclaim, on the ground that it arose out of the same transaction which forms the foundation of the plaintiff's claim.

The plaintiff's action is formed on a contract, not a tort. A court of equity can declare a contract void for fraud; the court of equity has no jurisdiction in a case of tort except by injunction.

As to the second group of exceptions: The defendant had the right to interpose the answer she did. It sets up a purely legal demand for the recovery of money only. The appellant in this case has a complete and adequate remedy at law in defending the counterclaim contained in defendant's answer....