Stokes v. Liverpool & London & Globe Ins. Co.

• Decision Date: 12 February 1925
• Docket Number: 11683.
• Citation: 126 S.E. 649,130 S.C. 521
• Parties: STOKES ET AL. v. LIVERPOOL & LONDON & GLOBE INS. CO.
• Court: South Carolina Supreme Court

126 S.E. 649

130 S.C. 521

STOKES ET AL. v. LIVERPOOL & LONDON & GLOBE INS. CO.

No. 11683.

Supreme Court of South Carolina

February 12, 1925

Appeal from Common Pleas Circuit Court of Darlington County; N. G Evans, Special Judge.

Action by M. L. Stokes and M. D. Stokes, copartners, against Liverpool & London & Globe Insurance Company. Judgment for defendant, and plaintiffs appeal. Reversed, and new trial granted.

The answer and amended answer follow:

Answer (caption omitted):

The defendant above named, answering the complaint herein, on information and belief, for a first defense (1) denies the material allegations of the complaint.

For a second defense (2) alleges that the policy of insurance in this case contains a provision that: "This entire policy shall be void, unless otherwise provided by agreement in writing added hereto * * * if this policy be assigned before a loss."

(3) That without the knowledge or permission of this defendant the plaintiff fraudulently assigned the policy to the Bank of Oates, on September 24, 1921, and this defendant learned of this assignment after the fire, denied liability under the policy and tendered to the plaintiffs a return of the premium thereon which the plaintiffs refused.

(4) Denies all allegations of the complaint which are inconsistent with this statement.

Wherefore the defendant prays that the complaint be dismissed.

Amended answer (caption omitted):

For a third defense (5) alleges that the policy of insurance in this case contains a provision that: "This entire policy shall be void, unless otherwise provided by agreement in writing added thereto * * * if with the knowledge of the insured foreclosure proceedings be commenced * * * of any property insured hereunder * * * or if any change * * * take place in the interest, title, or possession of the subject of insurance.

(6) That before the fire the interpleader, W. H Steele, with the knowledge of the plaintiffs and without the knowledge or agreement of this defendant, commenced foreclosure proceedings upon property covered by the policy and had proceeded so far in the foreclosure that the interest, title, and possession of the plaintiff in the property had changed, all of which was in violation of the terms of the policy of insurance.

(7) That the defendant did not learn of the violation of the policy set forth in this defense until after the other portions of the answer were written, and after it had offered the plaintiffs a return of the premium, but it now, or at any time hereafter to be designated by the plaintiffs, offers them a return of the premium on this account.

(8) Denies all allegations of the complaint which are inconsistent with this statement.

Miller & Lawson, of Darlington, for appellants.

Fowles & Bailey, of Columbia, and Dargan & Paulling, of Darlington, for respondent.

WATTS, J.

This action was commenced in June, 1922, to recover $4,000 and interest thereon at the legal rate from November 23, 1921, on account of a contract of insurance issued to the plaintiffs by the defendant for damages sustained by the plaintiffs by the destruction by fire of the insured property on November 23, 1921. Liability was denied, first, on the ground that there had been an assignment of the policy in violation of its terms and by an amended answer a further defense was allowed over plaintiffs' objection; said defense, as well as the original defense, being set forth in the copy of answer hereinbefore set out. The cause came on for trial before Hon. N. G. Evans, special judge, and a jury, at Darlington at the fall, 1923, term and resulted in a verdict for the defendant. Motions were submitted by the plaintiffs and the defendant for the direction of verdicts, respectively, in their favor and were overruled. Plaintiffs moved for a new trial on grounds hereinafter set out. From judgment duly entered the plaintiffs served due notice of intention to appeal. The relevant portions of the pleadings and testimony, including proffered instructions and the trial judge's charge, hereinafter appear. The appeal questions the allowance of the amended answer; the correctness of the rulings of the court on certain testimony; the refusal of plaintiffs' motion for a directed verdict; the refusal and modification of plaintiffs' requests to charge; and the refusal of plaintiffs' motion for a new trial.

The exceptions are 20 in number. Exceptions 1, 2, 11, 15, and 19 complain of his honor allowing respondent to amend its answer. That was a matter purely within the discretion of his honor, and we see no erroneous exercise of that discretion under the circumstances of the case.

Exceptions 3, 4, 5, 6, 8, and 11 allege that error was committed in allowing certain testimony to be admitted, particularly the record in the claim and delivery action of W. H. Steele against M. D. Stokes, and challenge the correctness of his honor's instructions in reference thereto. These exceptions are sustained. There is no question that the property insured was partnership property, and it was prejudicial to allow in evidence the record in the claim and delivery action of W. H. Steele v. M. D. Stokes. It was a proceeding against M. D. Stokes, and not against M. D. and M. L. Stokes, copartners.

There was no mortgage to be foreclosed; it was under a retention of title contract; no service was made on Mrs. M. L. Stokes; she was not even a party to the proceeding. It does not appear affirmatively that it was the same property covered by the policy of insurance, and it does appear from the record that Steele had been eliminated by the order of Judge Dennis, October 27, 1923, and order permitting intervention vacated, and status restored which existed before attempted intervention.

The judgment in the claim and delivery proceeding is not against the partnership. The property insured is partnership property; the insurance policy makes it such. A judgment, in an action brought against an individual where the partners are not joined, has no validity whatever, in respect to partnership property. Haslet v. Street, 2 McC. 310, 13 Am. Dec. 724; Bull v. Lambson, 5 S. C. 288; Manufacturing Co. v. Cycle Co., 55 S.C. 528, 33 S.E. 787.

The record shows beyond question that the property insured was the partnership property of the appellants, and it was destroyed by fire. The judgment was against M. D. Stokes individually, and was an absolute nullity as far as the partnership property was concerned, had nothing to do with the partnership property covered by the policy of insurance sued on.

Exceptions 14 and 16 are as to assignment. There was not an absolute assignment, but the evidence shows that it was a pledge as a collateral security for a debt. A pledge of an insurance policy as a collateral security is not an assignment within the prohibition of the policy. Henderson v. Ins. Co., 96 S.C. 430, 81 S.E. 171; Creed v. Ins. Co., 111 S.C. 487, 98 S.E. 334. I think the appellant was entitled to a directed verdict as asked for on all the evidence in the case.

There was a policy issued on partnership property. That partnership property was wholly destroyed by fire. The respondents failed to make good the defenses set up in their answer, original and amended. I think the judgment should be reversed, with directions to the clerk of court for Darlington county, to enter up judgment for plaintiffs as provided for by rules of court, but a majority of the court think differently, and the judgment is reversed, and new trial granted.

New trial.

FRASER, COTHRAN, and MARION, JJ., concur.

FRASER, J.

I think there should be a reversal and a new trial, and not a directed verdict.

COTHRAN, J., concurs.

GARY, C.J., did not participate.

COTHRAN J. (concurring and dissenting).

Action upon a policy of fire insurance, issued September 17, 1921, to M. B. Stokes and M. L. Stokes (husband and wife), in the sum of $4,000, upon the following property: The gin building $1,500, the gin $1,500, and the engine $1,000. The entire property was destroyed by fire November 23, 1921.

The insurance company denied liability for the loss upon these grounds: (1) That, before the loss, the insured had assigned the policy to the Bank of Oates, causing a forfeiture of the policy under a provision contained therein that "this entire policy shall be void * * * if this policy shall be assigned before a loss"; (2) that, before the loss, the holder of a retention of title contract covering the machinery and not the building instituted an action of claim and delivery against the owner of the machinery, for the purpose of foreclosing his claim upon it, causing a forfeiture of the policy under a provision contained therein that "this entire policy shall be void * * * if, with the knowledge of the insured, foreclosure proceedings be commenced * * * of any property insured hereunder by reason of any mortgage or trust deed"; (3) that, before the loss, the holder of a retention of title contract covering the machinery, and not the building, instituted an action of claim and delivery against the owner of the...