Merchants Fire Assurance Corp. v. Watson , 104 Mont. 1 ( 1937 )

The court erred in ruling that the action is one of equity, and in denying appellant's demand for a trial by jury.

Conceding, for the purpose of argument, that respondent's supplemental complaint was sufficient to set up an accord and satisfaction, then the matters set forth in respondent's original complaint were concluded. The alleged facts set forth in the supplemental complaint state an entirely new cause of action. This new action is not an action for the foreclosure of a lien. It is not an action in equity, and appellant was entitled to a jury trial.

"Whether there is or is not evidence of accord and satisfaction legally sufficient for submission to the jury is a question for the court, and where the facts in respect to an accord and satisfaction have been ascertained or are not in dispute their effect is purely a question of law and is not to be submitted to the jury, but if the evidence be such as to give rise to doubt, the case should, of course, be submitted to the jury. The weight of evidence of satisfaction is a question for the jury. If on the evidence adduced the intention of the parties is in doubt, the question should be submitted to the jury. If the evidence is conflicting or of such indeterminate character as to give rise to doubt whether what was given was given in satisfaction and so accepted, the question should be submitted to the jury, and it is an error to instruct the jury that it was an acceptance. Furthermore, it is usually a question for the jury whether a promise instead of the performance thereof has been accepted instead of satisfaction." (1 C.J. 583 and cases cited.)

In this case under the original pleadings, practically the only matter in dispute was appellant's right to recover on his counterclaim. The execution and delivery of appellant's note to respondent and the liability of appellant thereon were undisputed, except that appellant by his answer sets up a counterclaim, and the question of his counterclaim and the amount thereof was the only matter upon which any real issue was joined. The effect of respondent's supplemental complaint was to plead that appellant had agreed to pay the note set up in the original complaint, and to release respondent from any liability on the counterclaim. This was denied by the appellant, and we submit that a question of fact was raised which should have been submitted to a jury, if respondent's theory be correct that its supplemental complaint sufficiently pleads an accord and satisfaction and that the original action has been in all things settled and concluded. We do not anticipate that learned counsel for defendant will contend that an action to foreclose a lien is not one invoking equitable jurisdiction. (35 C.J. 164, sec. 35.)

What effect upon an equitable action has a legal defense? A legal defense does not divest equity of jurisdiction. The general rule is well stated in 35 C.J. 175, section 54, as follows: "Unless otherwise provided by statute, the fact that defendant sets up a legal defense to an equitable cause of action does not change the character of the proceedings or entitle him to demand a jury trial. Where a defendant sets up, as a defense to an equitable cause of action, facts which grow out of that cause of action, or the transaction which gave rise to it, and are so interwoven with it as to be inseparable from it, the defense partakes of the nature of the cause of action and is equitable, and not triable by jury, as of right." (Clark v. Baker,6 Mont. 153, 9 P. 911.) And the courts uniformly hold that cross-complaints and counterclaims, presenting legal issues, do not deprive a court of equity of jurisdiction. (Dover LumberCo. v. Case, 31 Idaho, 276, 170 P. 108; Brush v. Boyer,104 Kan. 168, 178 P. 445; Young v. Vail, 29 N.M. 324,222 P. 912, 34 A.L.R. 980.)

Equity retains jurisdiction to afford complete relief. (SeeClark v. Baker, supra; Maloney v. King, 30 Mont. 414,76 P. 939; Grosfield v. Johnson, 98 Mont. 412,39 P.2d 660.)

The appellant must concede, and has conceded, that certain features of the case were within the jurisdiction of equity. That being so, any request coming from the appellant for a submission of the whole case to a jury was too broad a request. (16 R.C.L., sec. 29, p. 213; 24 Cyc. 114; Bowlin Liquor Co. v. Fauver,43 Mont. 472, 117 P. 103.) This is an action to recover on a promissory note given for the premiums on five hail insurance policies issued by the plaintiff to the defendant to insure a crop of wheat growing on 560 acres of land in Judith Basin and Fergus counties on five separate but adjoining tracts, one policy being issued for each tract. The note was duly secured by a lien on the crop insured in accordance with the provisions of sections 8359-8365, Revised Codes.

The complaint in the action alleges all essential matters necessary to foreclose the lien and recover on the note, and sets out a copy of the lien, by Exhibit A, attached to and made a part of the complaint, such exhibit showing that the lien was duly filed in Fergus county as required by statute.

Defendant's demurrer to the complaint was overruled and thereafter an answer was filed denying the material allegations of the complaint, and setting up six "separate and further defenses," but referred to in the arguments as a counterclaim. In each such defense it is alleged that the growing crops of wheat on the various tracts of land were injured by a hail-storm on the 5th day of August, 1933; that on the 7th day of August following the defendant notified the local agent at Lewistown, Montana, of the loss, and that such agent communicated with the general agent of the plaintiff at Billings, Montana; and that on the 11th day of August, 1933, the local agent of the plaintiff and the adjuster from Billings made a personal inspection of such loss. It is then alleged that, when the adjuster and local agent first called at the farm of the defendant, the adjuster informed the defendant that nothing could be done with reference to an adjustment of the damage sustained by the defendant until the fields of grain had been inspected; that thereafter such fields were inspected by the adjuster and the local agent, acting together, and in company with the defendant; that after such inspection defendant was not advised that he would be required to make further proof of loss, and, by reason thereof, further performance of the terms of the agreement by the defendant as to loss, as provided by the policies, was waived by the plaintiff. It is then alleged that the various crops growing on the different tracts were damaged to the extent of 35 per cent. as to some tracts, and 50 per cent. as to others. Defendant further alleges that he has performed all the conditions of the five agreements or policies of insurance as provided in such policies, and prays that plaintiff's action be dismissed and that defendant be decreed the sum of $1,300, with interest thereon, together with his costs and disbursements, as compensation under such policies for the damages to the crops suffered from such hail-storm.

Plaintiff's reply denies all the material allegations of the affirmative defenses, and alleges that the local agent of the plaintiff and its adjuster from Billings inspected the growing crops and found that no loss had been sustained, and that after the crops had been inspected in company with the defendant, the plaintiff prepared, and defendant executed and delivered to such adjuster, five separate statements in writing constituting a full and complete release of plaintiff, wherein and whereby defendant agreed that there was no loss or liability incurred under any of the policies of hail insurance by reason of the hail-storm of August 5. A like reply is made to each of the separate affirmative defenses set up by the defendant.

Thereafter plaintiff filed a supplemental complaint in which it is alleged that, the pleadings in the matter having developed the issues involved, the court fixed April 10, 1934, for the trial of the action, and that thereafter defendant's attorney requested a continuance until April 14, 1934, which was agreed to by the attorneys for the plaintiff; that defendant's attorney requested plaintiff's attorneys to present to him the written documents containing the agreements entered into by defendant releasing plaintiff from all liability, referred to in plaintiff's reply, and that thereupon the attorneys for plaintiff did deliver such written documents to defendant's attorney Stewart McConochie, who, after examining the same, suggested that he wished to retain such document until after a conference with the defendant which he expected would take place on April 13, the day preceding the day set for the hearing, to which counsel for plaintiff assented; that in the afternoon of April 13, counsel for defendant advised counsel for plaintiff that he had just concluded a conference with his client, the defendant, and that defendant would appear at the office of counsel for plaintiff in a few minutes to make settlement of and "pay the note sued upon with interest," etc.; that within less than half an hour defendant appeared at the office of counsel for plaintiff and stated that he had been advised by his attorney to make payment of plaintiff's cause of action, whereupon the amount of the note, a reasonable attorney's fee, the interest upon the note and costs were computed, except that the witness fee of the adjuster and his mileage to and from Billings were excluded, and the total amount so computed and found to be due was the sum of $646.44; that defendant then stated that the only source from which he could obtain the money to settle was through the sale of the wheat in the elevator at Kolin, upon which the plaintiff had filed and was claiming a lien, as set out in plaintiff's original complaint; that defendant then left the office of counsel for plaintiff with the understanding that he would return before the hour of 5 o'clock and make arrangements for the sale of the wheat; that defendant did not so return, but that some time later the same evening arrangements were made by which O.W. Belden, of counsel for plaintiff, would meet defendant at Kolin at about 9 o'clock the following morning, when and where the wheat would be sold and settlement made by payment of the amount heretofore mentioned, the note canceled and delivered to defendant, the satisfaction of the lien filed and praecipe of dismissal of plaintiff's action also delivered to defendant; that O.W. Belden met the defendant at Kolin in the office of the Montana Elevator Company, as agreed upon, and that Mr. Belden authorized the local agent of the elevator that such elevator might purchase the grain covered by the lien and make settlement with plaintiff for the sum of $646.44; that such arrangement was consummated, one check made to the order of defendant and Belden DeKalb for $520, and another for approximately $200, and out of the latter check defendant was to pay plaintiff $126.44 to make up the amount heretofore mentioned of $646.44, both checks being delivered by the elevator to the defendant; that defendant then decided, before turning over the proceeds of such wheat as represented by the checks, that he wished to exhibit the release of the lien and the praecipe for the dismissal, or copies thereof to his attorney in Lewistown in order to have their legality passed upon by such attorney; that to such arrangement Mr. Belden assented, and it was the understanding that defendant would go to Lewistown, get the approval of his attorney, and that upon such approval defendant would indorse and deliver the checks to plaintiff's attorneys in accordance with the arrangements mentioned; that defendant exhibited the various papers to his attorney and was advised by such attorney that they were legally sufficient, but that defendant then advised the plaintiff's attorneys that he would not turn over and deliver the checks or indorse them as agreed upon or consummate the settlement, and that he had hired another attorney with the intention of "fighting" the case. It is further alleged that plaintiff is placed in a position of prejudice by the refusal of the defendant to make settlement as agreed upon; that the wheat upon which the lien was held was sold and thereupon passed to a bona fide purchaser for value; that the time consumed in making the sale of the wheat and securing the approval of defendant's attorney to the various papers carried the matter beyond the time set for trial, namely, April 14, 1934; that plaintiff is ready to deliver the canceled note, release the lien and dismiss the action upon defendant's complying with the terms of such settlement. Plaintiff prays that "the court investigate the facts set forth in the allegations" and enter judgment for the plaintiff for the amount prayed for and order the delivery and indorsement of the checks in accordance with the agreement, and that plaintiff be allowed further interest on the obligation, reasonable attorneys' fees and further costs in such amount as may be incurred, and for such other and further relief as is agreeable to equity.

The supplemental complaint was filed April 28, 1934; the demurrer of the defendant thereto was filed May 9, 1934, overruled by the court and the defendant given twenty days in which to answer. Thereafter defendant filed his answer to the supplemental complaint, alleging in substance that he went to the office of Belden DeKalb, plaintiff's attorneys; that the arrangement and understanding alleged in the supplemental complaint were made and had, except that there was no agreement for unconditional dismissal of plaintiff's cause of action as alleged, and alleges to the contrary that his attorney advised him that he could pay the note upon which the original complaint was founded and still reserve his right to litigate the issues presented by his counterclaim pleaded in answer to plaintiff's original complaint, and that defendant in his conversation with Belden and DeKalb on April 13, 1934, informed such attorneys that he had been so advised and that he reserved the right to litigate such counterclaim; that it was there agreed that the note described in the original complaint should be paid and settled provided it could be done in a manner whereby the defendant could have the issues presented by his counterclaim litigated and that the arrangement to sell the wheat and pay the note was made with such understanding, and none other. Defendant admits that the check for $520 made payable to defendant and Belden DeKalb represented the proceeds of the wheat sold on April 13, 1934, upon which plaintiff had a lien, but that the additional wheat sold was wheat upon which the plaintiff had no lien or claim; admits that he refused to indorse or turn over to the plaintiff's attorneys the checks received in payment for the wheat sold for the reason that he then learned for the first time that the arrangement prepared by the plaintiff's attorneys did not reserve the right to litigate the issue presented by his counterclaim and plaintiff's reply thereto, and that he refused to deliver and indorse such checks for such reason, and no other; and that defendant at all times since the 14th day of April, 1934, had been willing to pay and discharge the note described in plaintiff's complaint if defendant could do so without dismissing and settling the issues presented by his counterclaim. Plaintiff, in reply to such answer, denies any reservations were made in regard to the settlement agreed upon, and further denies that the check for $520 represented the proceeds of all the wheat upon which plaintiff claimed a lien.

The matter came on for hearing on October 18, 1935, with the Honorable Wm. L. Ford sitting without a jury. At the beginning of the hearing, and after argument by counsel, the court held the action was one in equity and denied the right of trial by jury. At the beginning of the hearing counsel for the defendant moved the court to require the plaintiff to elect upon which cause of action the plaintiff would proceed, which motion was denied. Witnesses were sworn and examined on behalf of both parties, and thereafter the court made its findings of fact to the effect that a settlement was agreed upon and arranged and the sale of wheat made substantially as alleged in plaintiff's supplemental complaint; that the amount agreed upon on April 13, 1934, between the defendant and the attorneys for plaintiff was $646.44, but that defendant declined to consummate such arrangement by the indorsement and delivery of the checks; that the defendant by his actions and conduct caused plaintiff to forego and waive its lien upon the wheat and consent to the sale thereof, and thereby placed plaintiff in a condition of disadvantage and embarrassment in its cause of action, and made necessary the further pleading and supplemental complaint. The court found that the defendant did not in the arrangements agreed upon reserve the right to litigate his counterclaim for the hail losses as presented by his answer to the original complaint, and further found that all the allegations of plaintiff's complaint and of its supplemental complaint are true.

Conclusions of law were made in accordance with the facts as found by the court, and judgment was made and entered in the sum of $646.44, with interest at the rate of 6 per cent. from April 14, 1934, and for plaintiff's costs and disbursements accrued since such date; and defendant was required by the decree to indorse and deliver to plaintiff's attorneys the check for $520, and to indorse the other check and hand the same to the clerk of the court to be cashed and a further payment of $126.44 made to the attorneys for the plaintiff, and, in addition, interest on the total amount found due by the judgment, with plaintiff's costs and disbursements subsequent to April 13, 1934, in the sum of $62.85, and that the remainder of the second check, if any, be delivered to the defendant. From that judgment the defendant appeals.

Defendant assigns ten specifications of error, all of which revolve around, and are founded upon his contention that plaintiff's supplemental pleadings attempt to show accord and satisfaction; that they do show accord but not satisfaction, and the assignments will be dealt with from that standpoint.

The whole controversy is over defendant's contention that his right to litigate his counterclaim was reserved by the agreement made April 13, 1934. Counsel for defendant contend that the supplemental complaint is drafted upon the theory that an accord and satisfaction had been effected, and cite a number of authorities to the effect that there was in fact an accord but no satisfaction, and that such a situation gave rise to a question of fact which the defendant had a right to have tried by a jury. Counsel for the plaintiff contends that there is no question of an accord and satisfaction in the case, and that no attempt was made to plead an accord and satisfaction by the supplemental complaint, and that decisions on such accord and satisfaction are entirely foreign to this controversy. Counsel for defendant say in their brief: "It seems to be respondent's position that the original controversy has been fully settled, and that the only matter in controversy now is the matter presented in its supplemental complaint. It is the contention of appellant that no settlement or novation has been effected. In this state the only method of arriving at a compromise and settlement is by statutory accord and satisfaction. * * * Appellant contends that the allegations in the supplemental complaint fail to state a cause of action upon an accord and satisfaction." Counsel then proceed at some length to cite authorities and argue as to what constitutes accord and satisfaction to show that the plaintiff pleaded accord by its supplemental complaint but "discloses on its face that no satisfaction had been effected." Barbarich v. Chicago,Milwaukee etc. Ry. Co., 92 Mont. 1, 9 P.2d 797, is cited and quoted from to support such contention, as follows: "Respondent has pleaded merely an accord, and its supplemental complaint discloses upon its face that no satisfaction was had. ``We are forced to the inevitable conclusion that the evidence shows an accord without satisfaction, which did not extinguish the original cause of action.'" Defendant further contends: "Conceding, for the purpose of argument, that respondent's supplemental complaint was sufficient to set up an accord and satisfaction, then the matters set forth in respondent's original complaint were concluded. The alleged facts set forth in the supplemental complaint state an entirely new cause of action. This new action is not an action for the foreclosure of a lien. It is not an action in equity, and appellant was entitled to a jury trial."

We think the theory and argument of counsel for defendant, revealed by this line of reasoning, tend to confuse rather than to clarify the issues, and are without merit. The action was begun to foreclose the lien as security for a promissory note. The action was correctly held to be a suit in equity by the trial court. Issues of law brought into the suit by the subsequent pleadings did not deprive the court of its equitable jurisdiction.

The supplemental complaint was made necessary by defendant's[1] actions subsequent to the filing of the original complaint, and the two pleadings are to be taken as one. The supplement is merely an addition to the original. A supplemental complaint is authorized by section 9181, Revised Codes, and the statute was considered in the case of National Bank of Montana v. Bingham, 83 Mont. 21, 269 P. 162. (See, also, CaliforniaFarm Fruit Co. v. Schiappa-Pietra, 161 Cal. 732,91 P. 593.)

On the question of a right of trial by jury it is a well-settled principle that when a court of equity takes[2] jurisdiction of a controversy its jurisdiction is full and complete, and it may render final judgment in relation to all matters involved in and growing out of that controversy. (Grosfield v.Johnson, 98 Mont. 412, 39 P.2d 660; Finch v. Kent,24 Mont. 268, 61 P. 653; Montana Ore Purchasing Co. v. Boston Montana Con. C. S. Min. Co., 27 Mont. 288, 70 P. 1114;Davidson, v. Davidson, 52 Mont. 441, 158 P. 680; In reValley Center Drain District, 64 Mont. 545, 211 P. 218; Bull v. Butte Electric Ry. Co., 69 Mont. 529, 223 P. 514; State v. Mercier, 70 Mont. 333, 225 P. 802.)

It is also generally held that where a statute creating a lien[3] provides no method for its enforcement, a suit in equity is the proper remedy therefor. (21 C.J. 118; 37 C.J. 342; SilverBow County v. Strumbaugh, 9 Mont. 81, 22 P. 453; GreilBros. v. City of Montgomery, 182 Ala. 291, 62 So. 692, Ann. Cas. 1915D, 738.) The statute providing for a lien to secure the premiums on policies to protect growing crops in this state (secs. 8359-8365, Rev. Codes) provides no mode for enforcing the lien granted therein, and equity jurisdiction necessarily follows.

It is also held that a legal defense does not divest equity of jurisdiction. (35 C.J. 175, sec. 54; Clark v. Baker, 6 Mont. 153,9 P. 911; First National Bank v. Hergert, 94 Mont. 197,22 P.2d 169.) And it is generally held that cross-complaints and counterclaims presenting legal issues do not deprive a court of equity of jurisdiction. (Dover Lumber Co. v.Case, 31 Idaho, 276, 170 P. 108; Brush v. Boyer,104 Kan. 168, 178 P. 445; Young v. Vail, 29 N.M. 324, 222 P. 912, 34 A.L.R. 980.)

Section 23, Article III of our Constitution, guaranteeing the[4, 5] right of trial by jury applies to cases where right of trial by jury existed at the time of the adoption of the Constitution; the right did not exist in equity suits before such adoption and does not exist now. (Montana Ore Purchasing Co. v.Boston Montana Con. C. S. Min. Co., supra, and many other cases cited.) In the Montana Ore Purchasing Case Mr. Chief Justice Brantly, speaking for the court, said: "Now, there is nothing in the Constitution manifesting the intention to extend the right to a jury trial to cases wherein it did not theretofore exist."

We find no error in the record and the judgment is affirmed.

ASSOCIATE JUSTICES STEWART and ANDERSON concur.