Southwestern Surety Insurance v. Clay ( 1914 )

McCulloch, C. J.

Appellees held a policy of fire insurance issued to them by the American Union Fire Insurance Company, and appellant was surety on the bond of said company given pursuant to statute requiring insurance companies doing business in this State to give bond “conditioned for the prompt payment of all claims arising and accruing to any person or persons during the term of said bond, by virtue of any policy issued by any such company or association upon any property in Arkansas. ’ ’

The property described in the policy was destroyed by fire, and on February 19, 1913, the loss was adjusted by the company’s agent and a draft on the company’s home office at Philadelphia was given to appellees by the adjuster for the sum of $999.19, the amount agreed upon according to the terms of the adjustment. The draft was not paid upon presentation, but went to protest. The company became insolvent'and went into the hands of a receiver, and this action was instituted by appellees against the surety alone to recover the amount claimed to be due, $999.19, together with statutory penalty of 12 per cent and attorney’s fee. The company was not sued.

After the commencement of the action appellant paid to appellees the amount claimed, that is to say, the amount of the draft, with interest at 6 per cent per annum from the date of the adjustment, and $2.08 protest fees; but refused to pay damages and attorney’s fee demanded.

The court rendered judgment, notwithstanding for the damages and attorney’s fee, and an appeal has been prosecuted to this court.

Appellees in their complaint set out the policy and bond, together with a statement as to the destruction of the property by fire and the adjustment of the loss, and also set out and exhibited with the complaint a copy of the draft which it is alleged was protested. These allegations were sustained by the agreed statement concerning the facts of the case. It does not appear when the insurance company became insolvent and went into the hands of a receiver, whether before the draft was presented or afterward. The complaint concludes with a prayer for “judgment against the Southwestern Surety Insurance Company of Oklahoma for the sum of $999.19, with interest at the rate of 6 per cent per annum from February 19, 1913, until paid, and for $2.08 protest fees, and for 12 per cent penalty arising under the insurance laws of the State of Arkansas and a reasonable attorney’s fee to be fixed by the court.”

The case is, we think, ruled by the decision of this court in American Insurance Co. v. McGehee Liquor Co., 93 Ark. 62. There the court said:

“They (the plaintiffs) could, not, however, sue upon and recover upon the policy, the original cause of action, unless in the trial of such action they produced and surrendered, or offered to surrender, the two drafts for cancellation, the drafts being negotiable instruments.”

The court decided that -the action being to recover the amount of the draft, there could be no recovery of penalty and attorney’s fee.

Now, in the present action the appellees have not declared specially either upon the policy or upon the draft, but have set both out in the complaint and asked for judgment for the amount of the draft, with interest thereon, and protest fees. They were not entitled to recover protest fees in a suit on the policy, and the fact that the complaint contains an allegation concerning the same and a prayer for judgment shows that the suit is based upon the draft.

In addition to that, the case comes within the rule that the suit can not be maintained on the policy without surrendering the draft, which was not done in this case. On the contrary, the draft was set forth in the complaint and a copy exhibited therewith. The agreed statement of facts recites that it is “contended by plaintiffs that the defendant herein is liable for the amount of said draft,” etc. Neither in the pleadings nor in the agreed statement of facts is there any offer to surrender the draft, but judgment is prayed for the amount thereof and protest fees.

The court erred, therefore, in rendering judgment for damages and attorney’s fee, and as appellant has paid the amount claimed and the costs of the action the judgment is reversed and the action dismissed.