Marsh v. Northland Insurance , 242 Ga. 490 ( 1978 )

Per curiam.

The insured appeals from an order setting aside on the ground of fraud a judgment he obtained against his insurance company.

After the insured vehicle was determined to be a total loss, a dispute arose between Marsh, the owner-insured, and Northland, the insurance company, about the value of the vehicle before the collision.

The insured filed suit against the insurance company, seeking judgment for $6,435 principal plus penalties and attorney fees. Thereafter, and before the time for the filing of defensive pleadings, the insurance company sent by mail to the insured’s attorney a draft for $5,935, together with a demand that the insured pay the court costs and dismiss the suit. The draft stated on its face that it was "In Full Settlement of Total Collision Loss” and on its back that "Endorsement of this draft by payee or payees is acknowledgment of full settlement, satisfaction, compromise, and discharge of all claims and demands of every nature and kind arising from the loss or accident described on the face hereof and shall apply to all unknown anticipated injuries or damages as well as those now disclosed.” The draft was endorsed by the insured and his attorney, deposited and paid.

The insured’s attorney sent his notice of dismissal to the insurance company by letter stating that the suit could be dismissed by mailing the notice of dismissal to the clerk of court and by the insurance company’s paying the court costs in the amount of $22. The letter thanked the insurance company for the "remittance of $5,935.00 in payment of Mr. Marsh’s claim.” The letter further stated: "This is a technicality, of course, but it is important that you do mail this dismissal with ... [your] check [for court costs] before December 20,1973, or your company will be liable for a judgment in the amounts prayed for in the complaint.”

The insurance company returned the notice of dismissal to the insured’s attorney by letter demanding that the insured pay the costs and dismiss the case. The insurance company did not file defensive pleadings.

The insured thereafter took judgment against the insurance company for $500 principal plus penalties and attorney fees.

The insurance company then filed an action pursuant to Code Ann. § 81A-160 (e) to set that judgment aside on the ground of fraud.

The trial court heard the matter on the foregoing stipulated facts and set the judgment aside. The trial court held that under Rivers v. Cole Corp., 209 Ga. 406 (73 SE2d 196) (1952), there was an accord and satisfaction when the insured accepted the draft; that thereafter the only dispute was as to who should pay the court costs; and that the insured’s having taken judgment under these circumstances amounted to fraud under Code Ann. § 81A-160 (e).

The insured appeals. This court affirms.

The parties have joined issue in the present appeal on the question of whether the insured’s having taken judgment for the $500 difference between the $6,435 demanded in his complaint and the $5,935 draft accepted by him (together with a judgment for penalties and attorney fees) amounts to fraud based upon which a court of equity will set that judgment aside under Code Ann. § 81A-160 (e). In reliance upon Citizens Bank of Ludowici v. Todd, 151 Ga. 475, 479 (2) (107 SE 486) (1921) and Rivers v. Cole Corp., 209 Ga. 406 (73 SE2d 196) (1952), the insurance company says that it had a right to rely on the insured’s acceptance of the draft as an accord and satisfaction of all of his claims arising out of the collision; hence, that it was not negligent in failing either to answer the suit or to file the notice of dismissal and pay the court costs. The insurance company contends that the payment of court costs and dismissal of the action were conditions of the tender of the draft; that when the insured accepted the draft, he accepted these conditions and became obligated to pay the costs and dismiss the action. The insured relies upon Hirsch v. Collier, 104 Ga. App. 271 (121 SE2d 318) (1961), in support of his contention that nothing he said or did represented to the insurance company that an accord and satisfaction had been reached according to the terms set forth in the insurance company’s letter and on the draft. Rather, he contends that his attorney had made it clear that the insurance company should effect dismissal, of the suit by paying the court costs and filing the notice of dismissal and that judgment would be taken should .the insurance company fail to do so.

The majority of this court favors the view that under the facts of this case, the trial court correctly held that the insured committed "fraud,” and the insurance company was not negligent or at fault, within the meaning of Coda Ann. § 81A-160 (e). The majority wish to make clear that they do not by this ruling establish a general principle excusing a defendant from filing his defenses in a pending lawsuit. Rather, the ruling is limited to those situations, as in the present case, where an insured accepts a draft from his insurance company in full and final settlement, accord and satisfaction of his insurance claims, and in consideration of his promise, express or implied, to pay the costs of court and to dismiss his pending. lawsuit against the insurance company. Having accepted the draft, thereby accepting the conditions of its tender, including the obligations to pay the costs and to dismiss, he is contractually obligated to pay the costs and to dismiss and his taking judgment thereafter in the lawsuit, rather than performing his promises to pay the costs and to dismiss, amounts to "fraud” within the meaning of Code Ann. § 81A-160 (e). Further, the insurance company is not under these circumstances negligent or at fault within the meaning of Code Ann. § 81 A-160 (e) in relying upon the promises to pay the costs and to dismiss and in failing either to answer or to pay the costs and to file the insured’s attorney’s written dismissal.

Submitted July 28, 1978 Decided October 17, 1978 Rehearing denied November 7, 1978. Pilcher & Murray, William Anthony Murray, for appellants. Fulcher, Hagler, Harper & Reed, William C. Reed, for appellee.

The majority of this court therefore concludes that the trial court did not err in setting the judgment aside.

Judgment affirmed.

All the Justices concur, except Nichols, C. J., Undercofler, P. J., and Hall, J., who dissent.