Smith v. Herd

Opinion of the court by

JUDGE DuRELLE

Affirming.

In May, 1896, appellant sold a house and lot in Lexington to appellee Herd. At the time of the sale the property was mortgaged to a building and loan association, and an insurance policy upon the house for $2,300 in the Hamburg-Bremen Insurance Company had been made payable to the building and loan company as its interest might appear. After the sale Herd took out an additional policy for $700 in the British-American Assurance Company, appellee here. Within ten days after the policy was taken out the house was burned. It was provided by the policy that “if fire occur the insured shall give immediate notice of any loss thereby in writing to this company, and within sixty days after the fire, unless such time is extended in writing by this company, shall render a statement to this company, signed and sworn to by said insured, stating the knowledge and belief of the insured as to the time and origin of the fire; the interest of the insured and of all others in the property; the cash value of each item- thereof, and the amount of loss thereon; all incumbrances thereon; all other insurance, whether valid nr not, covering any of said property, and a copy of all the descriptions and schedules in all policies; any 'changes in the title, use-, occupation, location, possession, or exposures of said property since the issuing of this policy; by whom and for what purpose any building herein described, and the several parts thereof, were occupied at the time of the fire,” etc. The statement in this clause required to be given within sixty days after the fire seems to be the satisfactory proof of loss referred to in other stipulations hereinafter quoted. In the first clause- of the stipulations of limitation upon the liability of the company it is provided that the “ascertainment or estimate [of loss or damage] shall be made by the insured and disinterested appraisers, the insured -and this company as hereinafter provided; and, the amount of loss or damage having been thus determined, the sum for which this company is liable pursuant to this policy shall be payable sixty days after due notice, ascertainment, estimate, and satisfactory proof of the loss have been received by this company in accordance with the terms of this policy.” In a subsequent clause there is also a provision that, in the event of disagreement “as to the amount of loss, the same shall, as above provided, be ascertained by two competent and disinterested appraisers, the insured and this company each selecting one, and the two so chosen shall first select a competent and disinterested umpire, the appraisers together shall then estimate and appraise the loss, stating separately sound value and damage, and, failing to agree, shall submit their differences to the umpire, and the award in writing of any two shall determine the amount of such loss. . . . This company shall not be held to have waived any provision or condition of this policy, or any forfeiture thereof, by any requirement, act, or proceeding on its part relating to the appraisal or to any examinations herein provided for, and the loss shall not become payable until sixty days after the notice ascertainment, estimate, and satisfactory proof of the loss herein required having-been received by this company, including an award by appraisers when appraisal has been required.” The policy contains a further provision that “no suit or action on this policy, for the recovery of any claim, shall be sustainable, in any court of law or equity, until after full compliance by •the insured with the foregoing requirements, nor unless commenced within twelve months next after the fire.” The policy contains the usual provision that officers shall not have power to waive any provision of the' policy unless the power to so waive is given by the policy. These provisions -are the ones necessary in considering the contentions upon this appeal. The immediate notice of loss was duly given to the company by J. M. Hocker & Sons, agents.

Pursuant to the provision for an appraisal, Herd and the company entered into an agreement for submission to appraisers, by which George Glass and George Clark were selected as appraisers, the agreement containing this provision: “It is expressly understood and agreed that this agreement and appraisement is for the purpose of ascertaining and fixing the amount of said sound value and loss and damage only, and shall not determine, waive, or invalidate any other right or rights of either party to this agreements This agreement is made pursuant to the terms of the policies of insurance on said property.’’ The appraisers by their award determined “the loss and damage to be the sum of twelve hundred and eighty-three dollars and seventy cents ($1,283.70), and the sound value thereof at the time of the fire to be the sum of eighteen hundred and ten dollars ($1,810).” As the total insurance in both companies upon 'the property was $3,000, of which $700 was in appellee company, appellee’s share of the loss could not, in any event, exceed .seven-thirtieths of the total loss, or $299.53. The company’s agent appears to have made out the proof of loss for Herd to sign upon that basis, but Herd refused to sign it, or to be 'bound by the award, saying that it was inadequate, and that he would bring suit. This, however, he has never done. In October following Smith, a creditor of Herd, appears to have brought a common-law suit against Herd, making the appellee company garnishee. The company seems not to have answered until about a year thereafter, when, in October, 1897, ’† answered alleging that it owed Herd nothing. Thereupon appellant dismissed that suit without prejudice, *>rd on the same day instituted the present proceeding, vdiich is an attachment suit upon return of nulla bona. U his petition in equity he set up two judgments; exoerrions and returns of nulla bona; set up the policy of insurance by appellee company, and -the provision for the selection of appraisers therein; and averred that the house had 'burned without Herd’s fault; that he had made satisfactory proof of-loss; that he and the company, by its agent, had selected appraisers to fix the amount of loss or damage which “Herd should be paid by defendant company,” and that the appraisers had fixed the damage at $299. The petition prayed for a judgment against the company for' that amount in favor of appellant, and that the payment thereof be adjudged to be in full 'satisfaction of the company’s indebtedness to Herd. The company denied that satisfactory proof of loss had been made, or that the submission to appraisement was to determine any question except the amount of the loss, and averred that the submission to appraisal reserved all other rights of the company except as to the amount of loss. It pleaded, also, that no suit had been brought within twelve months after the loss for any recovery upon the policy, and that no proof of loss, as required by the provisions above quoted, had been made within sixty days after the fire. Issue was joined upon the affirmative averments upon both sides. By an amended petition, Smith sought a recovery of • $808.92 against the company, upon what theory does not fully appear, but the amendment was not permitted to be filed. By an amended reply, appellant alleged the fact of the institution of his action at law against Herd; the suing out of his attachment against Herd and his property therein, and service of the attachment upon appellee company; that, by reason of the pendency of the action at law, Herd’s right of action was suspended, and the time of its pendency should be deducted from the period of limitation; the answer by the company; the fact that on the same day the action at law was dismissed without prejudice he instituted this proceeding; that his failure to bring suit against the company was caused by the company’s failure and neglect to answer as garnishee in the action at law; and these facts are relied upon as avoiding the provision of the policy that no action should be brought after one year from the date of the loss. The case was heard and submitted, and the circuit court dismissed appellant’s petition.

Appellant’s contention is that by the immediate notice, followed by the appraisement, there was a substantial compliance with the requirement of proof of loss or a waiver of it; that the appraisement was' an award as to ■the amount which the company owed Herd; that the plea of the provision limiting the time within which suit might be brought is avoided by the fact that from a period within five months after the loss he, as a creditor of Herd, has.had suits pending to which appellee company was a party as garnishee or a party defendant, in which he sought to coerce the payment of $299 which he avers ,the company owed Herd; and, further, that if the dismissal of the first suit in October, 1897, was a break in the continuity of proceedings, his present action was based upon the award, and not upon the policy, and therefore not within the provision referred to. On behalf of appellee company it is claimed that the appraisal was limited, both by the terms of the policy and by the agreement of submission, to the ascertainment of the amount of the loss; that all rights of the company to require proof of loss and to make any defenses to which it had been entitled were expressly by both instruments reserved to it; and that no proof of loss was ever made as required by the policy. It is further claimed that if the suit is upon tlie policy it was not brought in time, but that it is evidently, as in fact is claimed by appellant, not brought upon the policy, but on the award, and that the award is conclusively shown to be an award, not as to what the company owed Herd, but solely as to the amount of Herd’s loss, all other .questions between the company and Herd being 'expressly reserved; -that, therefore, such an award does not constitute a cause of action, and that the action should have been upon the policy, in which cause the award would establish one of the constituents of a cause-of action. '

Without going into the details of the testimony, it may be stated that we have reached the -conclusion that in this ease the arbitration and aw-a-rd, taken in connection with the immediate notice of loss and the circumstances shown in the testimony as attending the award, show a waiver on the part of the company of what is termed in the policy “satisfactory proof of loss.”

The next question is as to the effect which the award had in fixing a liability upon the company. We think it had no such effect, except in so far as it tended to show a waiver of the proof of loss required, and as it did establish one fact necessary to constitute a cause -of action upon -the policy, to-wit, the amount of the loss occasioned by the fire. Manifestly, it did nothing more than this. By its terms it was limited to this. By the terms of the policy under which the arbitration was had its effect was limited to this. As between the parties, it established what wasHhe amount of the loss occasioned by the fire, and, in the absence of fraud or mistake, the question of the amount of the loss, as between the parties, was distinctly settled, and could not be further inquired into. This seems too plain to require any argument other than a statement of the conditions, of the award itself. From this it follows that if, as both parties claim, the action is not upon the policy, but solely upon the award, no cause of action is made out, because the award, in and of itself, does not constitute a cause of action.

Rut, assuming that the petition as amended sufficiently sets out a cause of action upon the policy for the amount fixed by the award, we reach the question whether in such a contract a provision is valid which limits the time within which an action may be instituted to a period less than that fixed by the statute of limitations. The great weight of authority in this country seems to be in favor of the validity of such a provision, and the general doctrine has been so well stated by Mr. Justice Field in Riddlesbarger v. Insurance Co., 7 Wall., 389, (19 L. Ed., 257), that we quote his argument, in full upon this branch of the ease: “The objection to the condition is founded upon the notion that the limitation it prescribes contravenes the policy of the statute of limitations. This notion arises from a misconception of the nature and object of statutes of this character. They do not confer any right of action. They are enacted to restrict the period within which the right, otherwise unlimited, might be asserted. They are founded upon the general experience of mankind that claims which are valid are not usually allowed -to remain neglected. The lapse of years- without any attempt to enforce a demand creates, therefore, a presumption against its original validity or that it has ceased to subsist. This presumption is made by these statutes a positive bar, and they thus become statutes of repose, protecting parties from the prosecution of stale claims', when by loss of evidence from death of some witnesses and the imperfect recollection of others, or the destruction of documents, . it might be impossible to establish the truth. The policy of these statutes is to encourage promptitude in the prosecution of remedies. They prescribe what is supposed to be a reasonable period for this, purpose, but there is nothing in their language or object which inhibits, parties from stipulating for a shorter period within which to assert their respective claims. It is clearly for t'he interest ■of insurance companies that the extent of losses sustained by them should be speedily ascertained, and it is equally for the interest of the assured that the loss-should be speedily -adjusted and paid. The conditions in policies requiring notice of the loss1 to be given, and proofs of the amount to be furnished the insurers within certain prescribed periods, must be strictly complied with to enable the- assured to recover. And it is not perceived that the condition under consideration stands upon any different footing. The contract of insurance is a voluntary one, and the insurers have a right to designate the term» upon which they will be'responsible for losses; and it is not an unreasonable term that in case of a controversy upon a loss resort shall be had by the assured to the proper tribunal, while the transaction is recent, and the proofs respecting- it are accessible. A stipulation in a policy to refer all disputes to arbitration stands upon a different footing. That is held invalid because it is an attempt to oust the courts of jurisdiction' by excluding the assured from all resort to them for his remedy. That is a very different matter from prescribing a period within which such resort shall be had. The condition in the policy in this case does, not interfere with the authority of the courts; it simply enacts promptitude on the part of the assured in the prosecution of his legal remedies, in case a loss is sustained respecting which a controversy arises between the parties.” In a note to the opiuion in the Riddlesbarger case is giren a long list of authorities in support of the doctrine there announced. See, also, Joyce, Ins., section 3181.

While this question does not seem to have been expressly passed upon in this State, the validity of such a provision was distinctly recognized in Owen v. Insurance Co., 87 Ky., 574, (10 S. W., 119), where, in an opinion by Judge Bennett, it was held that, under a provision limiting the bringing of such a suit to one year, it was clearly the intention of the parties to the contract that the insuree should have 365 days in which to bring his suit, and that Sundays should be counted to make the number of days, but that he should be as much entitled to the last day of the 365 as to the first day, and, as that day fell upon Sunday, he was equitably entitled to bring his suit upon the Monday following.

Did the bringing of the action at law set up in the amended reply operate to suspend the running 0? the contract limitation? We think not. That suit does not come within the meaning of section 2545, Kentucky Statutes, as it was not dismissed for want of jurisdiction. And. in the Riddlesbarger case, supra, it was held: “The action mentioned, which must be commenced within the twelve months, is the one which is prosecuted to judgment. The failure of a previous action from any cause can not alter the case. The contract declares that an action shall not be sustained, unless such action, not some previous action, shall be commenced within the period designated. It makes no provision for any exception in the event of the failure of an action commenced, and the court can not insert one without changing the contract.” In that ease it appeared that the statute of limitations of Missouri, where the action originated, provided that, if any action commenced within the periods mentioned the plaintiff should suffer a nonsuit, he might commence a new action within one year afterwards. S-o, in Joyce, Ins., section 3204, it is said: “The rule is that if a suit is brought within the time provided in the policy, but is dismissed or discontinued for any reason, and a subsequent suit is brought after the expiration of the time limited, though perhaps immediately upon the dismissal or discontinuance of the first suit, the second action can not be maintained.” But it is contended that section 227 of the Civil Code of Practice applies. That section provides: “If a garnishee fail to make a disclosure satisfactory to the plaintiff, the latter may bring an action against him, by petition or amended petition, in the same manner, -and the proceedings therein shall be the samé as in other actions; and the plaintiff may procure an order of attachment in the same manner, and the proceedings thereupon shall be the same, as is hereinbefore and hereinafter authorized concerning attachments, except that the plaintiff’s affidavit shall state, in addition to the facts required to be stated in section one hundred and ninety-six, the sum which the defendant owes to the plaintiff’s debtor; and the plaintiff shall not be entitled to attach for or recover more than that sum and costs not more than the amount of the plaintiff’s claim against his debtor and costs.” Under this section it is contended that, as the garnishee did not make a disclosure satisfactory to the claimant, he had the right, either in that suit, by amended petition, or in a separate suit, by original petition, to assert the rights under the lien which it is insisted that he obtained by virtue of the service of garnishee process in the action at law, and that, therefore, the proceeding is a continuous one, the present proceeding being a continuation of the one which was dismissed.

In the first place, the present proceeding was not brought for any such jmrpose. The former suit is not referred to in the petition or any of the amendments. It does not seek to assert any lien by virtue of the service of the garnishee process. And even if we were authorized to consider the averments1 of the amended reply a-s an amendment to the petition, and to hold that the defendant company was not entitled to ignore those averments, as it did, an examination of them discloses the fact that they are not only palpably not intended to assert any such right, but are not sufficient to do so if such right existed. It does not appear by any averment that either of the causes of action against Herd which are set up on this proceeding is the same as the cause of action against him sued on in the action at law. On the contrary, in so far as the averments show anything upon that question, they show that the cause of action sued on in the action at law was not the same as either of the ones upon which the judgments against Herd set up in the present proceedings were obtained; for one of the judgments alleged in the petition was for $799.48, subject to a credit of $100, and the other was for $250, subject to four credits, while the action at law averred in the amended reply is stated to have been “upon a promissory note for* over $250.” The fact is that the present suit was an ordinary proceeding upon return of nulla lona, and neither at the time of filing the petition nor of filing the amended reply could there have been any idea of relying upon section 227 of the Code. The judgment is affirmed.

Judges Guffy, White and O’Rear dissenting from that part of the opinion which holds that the contract limita-' ti on is valid.