Townsend v. South Carolina Ins. Co.
| Decision Date | 29 June 1932 |
| Docket Number | 13438. |
| Parties | TOWNSEND v. SOUTH CAROLINA INS. CO. et al. |
| Court | South Carolina Supreme Court |
Appeal from Common Pleas Circuit Court of Richland County; W. H Grimball, Judge.
Action by Fred D. Townsend, receiver for the Gulf & Atlantic Insurance Company, against the South Carolina Insurance Company and another. Decree for defendants, and plaintiff appeals.
Appeal dismissed, and decree affirmed.
The decree of Judge Grimball is as follows:
This suit was brought by the plaintiff as receiver of the Gulf & Atlantic Insurance Company to recover a share of an award of $6,591,422.92 made on September 18, 1924, by the mixed claims commission to the Globe & Rutgers Fire Insurance Company against Germany on account of the loss of certain vessels insured by that company, but destroyed by Germany during the World War, the South Carolina Insurance Company participating in the proceeds of the award on account of a contract of reinsurance with the Globe & Rutgers Fire Insurance Company and the plaintiff claiming the right to participate on account of a contract of reinsurance between the Gulf & Atlantic and the South Carolina and alleged losses thereunder. The defendants denied that the Gulf & Atlantic Insurance Company had paid any losses under the contract of reinsurance, and alleged that the Gulf & Atlantic Insurance Company had repudiated the contract, and that the contract had been completely terminated and canceled between the parties. This presents the principal issue for determination in the case.
In his complaint, the plaintiff alleged that the Gulf & Atlantic had sustained and paid losses in the sum of $38,258.12, and sued for that sum, with interest from November 11, 1918, but during the trial he moved to amend the complaint by changing this amount to $83,321.30.
The action was instituted in July, 1930. It was tried before me at the March 1931, term of the court of common pleas for Richland county. The evidence was taken directly before me. Prior to the trial, the defendants filed a statement showing the amount of the award on each of the vessels insured and lost, and also the amount of the receipts to date on account thereof by the Globe & Rutgers from the United States government and the disbursements to the South Carolina. At the trial the plaintiff and the defendant offered evidence, both oral and documentary.
Finding of Facts.
This case arises out of very unusual circumstances. The facts as shown by the evidence, and as I find them, were as follows:
In 1916 the South Carolina Insurance Company had a contract of reinsurance with the Globe & Rutgers Fire Insurance Company of New York, covering war risk only for not exceeding $10,000 on any one steamer, and applying to all risks from March 1 1916, through February 28, 1917. Under this contract reports of risks attaching were to be made by the Globe & Rutgers to the South Carolina as soon as known and accounts current were to be rendered as soon as possible after the close of each month, and the balance due by either party to be paid within 60 days from the end of each month.
The South Carolina, in order to protect itself against the liability assumed under this contract, entered into a contract of reinsurance of retrocession with the Gulf & Atlantic Insurance Company. Under this contract the Gulf & Atlantic was to reinsure the South Carolina to the extent of 27 1/2 per cent. interest on marine or war risks accepted by the South Carolina direct or as reinsurance. Reports of risks attaching were to be made as soon as known, and monthly accounts current were to be rendered by the South Carolina to the Gulf & Atlantic, and the balance due was to be paid within 70 days of the end of each month. The South Carolina was to be entitled under the contract to certain commissions as therein provided to cover taxes and other expenses, and in calculating these commissions it was specified that the Gulf & Atlantic should be credited among other things with "salvages." Such "salvages" in the insurance business are understood to include any recoveries by subrogation or otherwise on account of the vessels or other property insured and lost.
The South Carolina also made like contracts of reinsurance with several other companies. These companies, however, complied with their contracts, and are not in any wise concerned in this controversy.
During the period in question, the Globe & Rutgers insured a great many vessels against such war risks, and the South Carolina became bound as reinsurer of the Globe & Rutgers, and the Gulf & Atlantic bound as reinsurer of the South Carolina, under the terms of the said contracts. Accounts were rendered from time to time by the Globe & Rutgers to the South Carolina showing the premiums received, the commissions and the losses sustained, and any recoveries. When said accounts showed a balance due the South Carolina, the same was remitted by the Globe & Rutgers, and, if they showed a balance due by the South Carolina, the same was remitted by the South Carolina to the Globe & Rutgers. The Globe & Rutgers had no direct relations with the Gulf & Atlantic.
The South Carolina in turn rendered accounts to Gulf & Atlantic as soon as possible showing premiums received, commissions, and losses. These accounts showed a credit balance for June, 1916, of $3,321.50 and for September, 1916, a credit balance of $2,456.44, which amounts were duly remitted by the South Carolina to, and accepted by, the Gulf & Atlantic on September 9th and November 1st, respectively, these two payments aggregating $5,777.94.
However, during the latter part of 1916 and the early part of 1917 the losses, on account of heavy submarine activities, were unexpectedly large, and the monthly balances between the companies thereafter generally shows a large net loss. The South Carolina was called upon to pay and did pay to the Globe & Rutgers heavy monthly balances. The Gulf & Atlantic, however, failed and refused upon various grounds to pay any of the balances due to the South Carolina. The Gulf & Atlantic soon appeared to become dissatisfied with the contract. Complaint was made about the delay in reporting the premiums and the losses. In February, 1917, the Gulf & Atlantic wrote a letter to the South Carolina asking to be relieved from the contract at the legal termination thereof and sooner if possible. In September, 1917, when the net balance due the South Carolina by the Gulf & Atlantic was approximately $28,000, the Gulf & Atlantic returned to the South Carolina the total amounts theretofore received by it, to wit, $5,777.94, claiming that such return was for the purpose and with the intention of terminating and canceling the contract.
The failure of the Gulf & Atlantic to remit the balances to the South Carolina as due under the contract caused the South Carolina serious financial embarrassment and inconvenience. By the close of the year 1917 the total losses reported and charged to the South Carolina by the Globe & Rutgers exceeded $300,000, and at this time the net balance due by the Gulf & Atlantic to the South Carolina on account of losses and commissions, after crediting the proportionate share of the premiums, was over $30,000.
During the latter part of the year 1918, the South Carolina commenced suit against the Gulf & Atlantic in the court of common pleas for Richland county to recover the damages for breach of contract, but thereafter, owing to the rules of evidence prevailing in the court of common pleas, had this suit discontinued and a new suit instituted in March, 1920, in admiralty in the United States District Court for the Eastern District of South Carolina. The principal amount sued for in the admiralty suit as shown by the statement of account attached to the libel was $32,472,18. This amount represented the difference between the Gulf & Atlantic's proportion of the losses reported on the 53 vessels listed, less its proportion of the premiums received (after deducting the commissions) amounting to $58,321.30. The Gulf & Atlantic filed an answer in this suit similar to that which it had filed in the court of common pleas. Both answers alleged among other things that the contract of insurance was ultra vires, and had been completely canceled and the company relieved of all liability thereunder by the return of the $5,777.94, admitting the refusal to pay the amounts claimed, and denying all liability thereunder.
On February 16, 1921, about ten days before the first reference in the case, the companies effected a compromise settlement and cancellation of the suit and contract. At that time the amount with interest due to the South Carolina by the Gulf & Atlantic under the contract was $40,057.46. Under the settlement, the Gulf & Atlantic gave to the South Carolina its collateral note for $25,000, payable in five annual installments with interest at 6 per cent.
Mr Edwin G. Seibels, the president of the South Carolina Insurance Company, testified that in his negotiations with Mr. J. E. McDavid, the then president of the Gulf & Atlantic Insurance Company, the subject of future right and liabilities with special reference to future premiums and losses came up for discussion, and it was expressly agreed that thereafter there would be no such rights or liabilities under the contract between the parties. This evidence was not denied by Mr. McDavid. In connection with the settlement, the South Carolina Insurance Company executed its written release reciting that the same was "in full settlement of all claims arising out of and by reason of the said suit and contract," and specifically released and discharged the Gulf & Atlantic "from any and all claims and demands and liabilities whatsoever arising out of or by virtue of the suit and...
To continue reading
Request your trial