Case Name: TENNESSEE FARMERS MUTUAL INSURANCE COMPANY, Plaintiff in Error, v. W. N. HAMMOND, Defendant in Error
Court: Tennessee Court of Appeals
Jurisdiction: Tennessee
Decision Date: 1957-05-23
Citations: 43 Tenn. App. 62
Docket Number: 
Parties: TENNESSEE FARMERS MUTUAL INSURANCE COMPANY, Plaintiff in Error, v. W. N. HAMMOND, Defendant in Error.
Judges: Avery, P. J. (Western Section), dissents.
Reporter: Tennessee Appeals Reports
Volume: 43
Pages: 62–122

Head Matter:
TENNESSEE FARMERS MUTUAL INSURANCE COMPANY, Plaintiff in Error, v. W. N. HAMMOND, Defendant in Error.
306 S. W. (2d) 13.
Western Section at Jackson.
May 23, 1957.
Dissenting Opinion June 26, 1957.
Petition for Certiorari Denied by Supreme Court, October 4, 1957.
Heatheock, Elam & Cloys, Union City, and John M. Drane, Newbern, for plaintiff in error.
Miles & Miles, Union City, for defendant in error.

Opinion:
BEJACH, J.
This cause involves an appeal in the nature of a writ of error by the Tennessee Farmers Mutual Insurance Company from a judgment against it in the sum of $10,000 plus $1,246.79 interest thereon, making a total of $11,246.79, rendered in the Circuit Court of Obion County, Tennessee in favor of W. N. Hammond. The parties will be styled as in the lower court, plaintiff and defendant, or called by their respective names, W. N Hammond having been plaintiff and. Tennessee Farmers Mutual Insurance Company the defendant in the lower court.
The plaintiff was on October 31,1952, and had been for some time prior thereto, insured by the defendant under the provisions of an automobile liability insurance policy covering his Chevrolet automobile, which policy limited liability of the insurance company to $10,000 for each person injured and to $20,000 for any one accident. On October 31, 1952, the said automobile, driven by the plaintiff, was involved in an accident at the Lindenwood School in Obion County, Tennessee, where a Hallowe'en party was being held. In that accident, Mrs. Helen Mansfield and Mrs. Eva Mae Mansfield were injured. The injuries to Mrs. Helen Mansfield were extremely severe, her left leg having been crushed between the bumper of the automobile and the concrete steps of the school building, which steps she was ascending at the time the automobile driven by W. N. Hammond ran into her from the rear. Her leg was shattered, and, as a result she was hospitalized for eight months, during which time she had eleven operations performed on her leg, the use of which has been permanently impaired. The medical, nursing, and hospital bills for Mrs. Helen Mansfield, incurred as a result of this injury, amounted to $6,000. Following this accident, W. N. Hammond was sued by Mrs. Helen Mansfield for $50,000, by her husband, Walter W. Mansfield, for $10,000, and by WalterW. Mansfield as administrator of Mrs. Eva Mae Mansfield, his mother, for $20,000. Mrs. Eva Mae Mansfield died subsequent to the accident, but not as a result of same. These suits resulted in judgments in the Circuit Court in favor of Mrs. Helen Mansfield for $17,000, in favor of Walter W. Mansfield for $3,000, and in favor of Walter W. Mansfield as administrator of Mrs. Eva Mae Mansfield for $500, said judgments having been rendered March 3, 1954. Appeals from the judgments in favor of Mrs. Helen Mansfield and Walter W. Mansfield were prayed and perfected by W. N. Hammond. The de fendant, Walter W. Mansfield, appealed from the judgment in his favor for $3,000, claiming that it was inadequate, and, as administrator, from the judgment for $500, on the same ground. All three judgments were affirmed by the Court of Appeals, and certiorari was denied by the Supreme Court. See Hammond v. Mansfield, 41 Tenn. App. 515, 296 S. W. (2d) 652. The Tennessee Farmers Mutual Insurance Company paid the judgment of $500 in favor of the administrator of Mrs. Eva Mae Mansfield and paid $10,000 of the total amount of the two judgments amounting to $20,000 rendered against W. N.' Hammond in favor of Mrs. Helen Mansfield and Walter W. Mansfield. Thereafter, on October 10, 1955, W. N. Hammond brought suit against the Tennessee Farmers Mutual Insurance Co., seeking a recovery from it of $10,000, representing that part of the judgments against him which the insurance company has not paid, together with interest thereon. The basis of this suit, which is the case at bar, is the claim by W. N. Hammond that the defendant, Tennessee Farmers Mutual Insurance Co., had an opportunity to settle the claims of Mrs. Helen Mansfield and Walter W. Mansfield, her husband, within the policy limit of $10,000, but had arbitrarily and in bad faith refused to make this settlement, although there was no fair and reasonable prospect of escaping liability or holding the recovery within the policy limits. The defendant filed pleas in which it denies bad faith on its part, denies that it had an opportunity to settle the claims of Helen Mansfield and Walter W. Mansfield within the policy limits, and avers that its only opportunity to settle was a lump sum settlement of all three cases, including that of Mrs. Eva Mae Mansfield's administrator, along with those of Walter W. and Helen Mansfield. Defendant's pleas deny the extent of the injuries to Mrs. Helen Mansfield as alleged, deny that it failed to keep plaintiff advised as to the negotiations of settlement, deny that it consciously risked loss to plaintiff in an attempt to protect its rights, deny that it placed the rights of defendant ahead of the plaintiff's rights, and aver that it acted honestly and with due consideration of the best interest of the plaintiff and of its obligations to him.
The cause was tried before the Circuit judge and a jury with the result that a verdict was returned in favor of the plaintiff, W. N. Hammond, and against the Tennessee Farmers Mutual Insurance Co., in the sum of $10,000, with interest thereon from March 3,1954. After a motion for a new trial had been overruled, the defendant filed an appeal in the nature of a writ of error, which appeal has been perfected.
The defendant, Tennessee Farmers Mutual Insurance Co., as appellant in this court, has filed fifteen assignments of error. It will not be necessary to discuss each of these fifteen assignments of error separately. Able counsel for defendant did not do so, either in their briefs, or in their arguments before this court, and following their example, we will discuss them separately only so far as may be necessary to dispose of the essential merits of the appeal.
Assignment of Error Number I complains of the failure of the trial judge to grant the defendant's motion for a directed verdict, and therefore raises the question of whether there is any material evidence in the record to sustain the jury's verdict. This assignment is, in our opinion, determinative of the lawsuit.
Assignments Numbers II, XI, XII, and XIII complain of the trial judge's action in overruling defendant's objections to testimony offered on behalf of plaintiff. Assignments Numbers III, IY, V, YI, VII, VIII, IX, and X complain of the trial judge's having refused to give instructions to the jury contained in special requests tendered by defendant. Assignment Number XIV complains of the trial judge's having overruled defendant's objection to part of the argument made by plaintiff's attorney. Assignment Number XV is based on the claim that the trial judge failed to exercise a trial judge's function as the thirteenth juror.
In our opinion, as stated above, the first assignment of error presents the controlling issue in this lawsuit. Before passing upon it, we will, therefore, dispose of the other assignments and then discuss, at some length, the issues presented by it.
We have given due weight to the objections made by the defendant to the testimony admitted in favor of the plaintiff over the objection of defendant, and have given careful consideration to the argument of counsel on all of the assignments of error with reference thereto, and have reached the conclusion that all of defendant's objections are without merit. The testimony offered and admitted by the trial judge with reference to the extent of the injuries sustained by Mrs. Helen Mansfield in the accident of October 31, 1952 did not amount, in our opinion, to a retrial of the damage suit growing out of that accident. On the contrary, we think such testimony was properly admissible for the purpose of enabling the trial jury in the instant case to intelligently pass on the issue presented of whether or not there had been a reasonable probability of holding the verdict in the damage suit case within the policy limits. Likewise, the testimony of plaintiff as to his insistence on settlement of the case, and the cross examination by plaintiff's attorney of defendant's claim agent, Keith Kogers, tended to throw light on the issue of defendant's bona tides or lack of it in failing or refusing to settle within the policy limits. In any event, after an examination of the entire record of the cause, it does not affirmatively appear that the rulings of the trial judge, even if erroneous, affected the results of the trial. Accordingly, in compliance with the provisions of section 27-117, Tenn. Code Ann., Assignments of Error II, XI, XII, and XIII are overruled.
With reference to the trial judge's refusal to give in charge to the jury the special requests presented by defendant, we think that, either the general charge of the judge sufficiently and adequately covered the subject matter of .these instructions, that, as worded, they were properly refused, or that it does not affirmatively appear that the refusal of these requests affected the results of the trial, as required by Section 27-117, Tenn. Code Ann. Assignments of Error III, IV, Y, VI, VII, VIII, IX, and X are accordingly overruled.
Assignment of Error XIV complains of the trial judge's having overruled defendant's objection to the argument to the jury made by plaintiff's attorney, that the fact that Walter Wayne Mansfield was a man of no property may have influenced the refusal or failure of the insurance company to settle the damage suit claims. This argument, in our opinion, did not go outside the record, because that conclusion might fairly have been drawn from Mr. "Walter Wayne Mansfield's testimony. Likewise, as with, reference to the assignments of error hereinabove disposed of, the provisions of Section 27-117, Tenn. Code Ann., wonld, in any event, preclude a reversal. Same is accordingly overruled.
Assignment of Error XY complains that the trial judge in overruling the motion for a new trial in this cause declined to exercise his function as the thirteenth juror, and contends that the record affirmatively shows that he did so refuse to exercise his function in that capacity. The exact language used by the trial judge when he overruled defendant's motion for a new trial, which is relied upon by defendant's counsel as establishing their contention that he refused to exercise his function as a thirteenth juror, is in the record and is, as follows:
"I heard the evidence in the former case and also the evidence in this case and I have come to the conclusion as, after considering this motion for quite a long while — the fact is this motion, though I just heard it this morning, but knowing that necessarily ought likely to be in the motion I thought of it at various times and I come to the conclusion that this matter should be determined by the appellate courts, I appreciate the fact that what a judge says in passing on these motions is considered by the Appellate Court but I only have one remark to make for whatever it may be considered or not considered, I think this case should be determined by them in this record but I will make this one affirmative statement that Mr. Heathcock, in my opinion, was in no way dishonest and I do not think this record dis closes that. So, the motion will he overruled that the Appellate Court may be able to determine this matter."
We find nothing in this language to indicate that the learned trial judge either failed or refused to exercise his function as a thirteenth juror. The circumstance that he saw fit to express his views with reference to one aspect of the evidence in the cause does not indicate that he had failed to carefully consider and adequately weight all of the evidence pertaining to all of the issues in the cause. In the case of McLaughlin v. Broyles, 36 Tenn. App. 391, 255 S. W. (2d) 1020, 1023, the cause was reversed because the record affirmatively disclosed that the trial judge had failed to weigh the evidence and exercise his function as a thirteenth juror; but the language of this decision expressly authorizes a trial judge to overrule a motion for new trial without comment, in which case, it is said that the presumption will be that he did weigh the evidence and exercise his function as the thirteenth juror. To the same effect, see Gordon's Transports, Inc. v. Bailey, 41 Tenn. App. 365, 294 S. W. (2d) 313, 320-321. In the instant case, the affirmative expression by the judge on one aspect of it, does not, in our opinion, destroy this presumption with reference to other aspects of the case. Assignment of Error XY is accordingly overruled.
We will now take up Assignment of Error Number I, which we think is determinative of this cause. This assignment is:
"The court erred in overruling and disallowing the defendant's motion for a directed verdict at the close of all the testimony in the case as follows: 'The defendant in this case moves the court to direct the jury to return a verdict in its favor in this case because there is no evidence introduced in the case to support a verdict'."
Disposition of this Assignment of Error, of course, requires us to review the evidence preserved in the bill of exceptions. In doing this, however, we may ignore the testimony of defendant's witnesses, except to the extent that same tended to support the plaintiff's theory of the case. Lackey v. Metropolitan Life Ins. Co., 30 Tenn. App. 390, 397-398, 206 S. W. (2d) 806; Osborn v. City of Nashville, 182 Tenn. 197, 185 S. W. (2d) 510; Coatney v. Southwest Tenn. Elec. Membership Corp., 40 Tenn. App. 541, 292 S. W. (2d) 420.
It was the theory of defendant in this cause that the defendant did not have an opportunity to settle the claims of Mrs. Helen Mansfield and of Walter Wayne Mansfield within the limits of the policy because their claims were tied in with that of the administrator of Mrs. Eva Mae Mansfield, that they handled the claims with due care and consideration for the rights of W. N. Hammond, the insured, and that, in any event, they acted with complete good faith and fairness. There was ample proof to have sustained a verdict of the jury to that effect, but, unfortunately for the defendant, the jury's verdict went the other way.
Reviewing the evidence then, from the standpoint of plaintiff's contentions, we find that there was ample evidence, including a letter from the attorney of the plaintiffs in the damage suit case, to warrant a finding of fact by the jury in the instant case, that the claims of Mrs. Helen Mansfield and Walter Wayne Mansfield, her husband, could have been settled within the policy limits of $10,000 and without having such settlement conditioned on settlement of the claim of Mrs. Eva Mae Mansfield's administrator. Counsel for defendant, in the instant case who represented W. N. Hammond as defendant in the damage suit case, as, of course, they had a right to do under the provisions of the insurance policy, contended in the damage suit case that the accident was an unavoidable one because Hammond's brakes had suddenly and unexpectedly failed to function. There was evidence, however, both in the trial of the damage suit case and in the trial of the instant case that it was not possible for the brakes to suddenly fail, and with no work having been done on them in the meantime, as was shown to have been the case, to be again in good working condition two days later, as was testified by one of plaintiff's -witnesses. In any event, there was ample evidence in the damage suit case, to sustain the jury's verdict in that case, even if it be assumed that the brakes did suddenly and unexpectedly fail to work. On that theory, this Court affirmed the verdicts of Mrs. Helen Mansfield and of Walter W. Mansfield. See Hammonds v. Mansfield, Tenn. App., 296 S. W. (2d) 652. One example of this character of evidence is the testimony of W. N. Hammond, himself, given at both trials, — that he might have avoided the accident by steering his automobile into other parked cars. In the instant case, he testified that in making his original statement to Messrs. Heathcock and Elam who, as attorneys for the Tenn. Farmers Mutual Ins. Co., represented him in the damage suit case, that he made this observation but was told by Mr. Tom Elam not to let him hear him say that again. In view of the fact that Mrs. Helen Mansfield was struck from the rear by Hammond's automobile, which pinned her leg between the bumper of the car and the concrete steps, it is hardly possible that she could have been found guilty of contributory negligence; and, in view of the extent of Mrs. Mansfield's injuries, and in light of the extremely large amount of her medical expenses, the jury in the instant case was certainly warranted in finding that there was no reasonable probability in the damage suit case, either of successfully defending same or of holding a verdict within the $10,000 limit of the policy.
But, it is contended on behalf of defendant in the instant case that the defendant was entitled to have had its motion for a directed verdict granted, because there was no evidence from which the jury could have found that either the defendant insurance company or its attorneys were guilty of bad faith, or lack of good faith, in electing to try the damage suit case rather than settle same within the limits of the insurance policy. They rely on the cases of Aycock Hosiery Mills v. Maryland Casualty Co., 157 Tenn. 559, 11 S. W. (2d) 889, and Southern Fire and Casualty Co. v. Norris, 35 Tenn. App. 657, 250 S. W. (2d) 785, as authorities for this contention. These cases are also relied on by counsel for the plaintiff.
The case of Aycock Hosiery Mills v. Maryland Cas. Co., was one in which a recovery for the excess judgment was sustained by the Supreme Court. In this case, the Hosiery Mills had insured its risks under the Workmen's Compensation Act by a policy of the Maryland Cas. Co. One of the Hosiery Mill's employees was injured, whereupon the Casualty Company refused to pay compen sation to Mm, on the ground that his injuries did not "arise out of and in the course of his employment." [157 Tenn. 559, 11 S. W. (2d) 890] When suit was filed, the Casualty Company, as under its policy it had a right to do, assumed the defense. At the trial of this suit, brought under the Workmen's Compensation law, the father of the employee testified that his son had been employed in violation of the Child Labor Law, without an employment certificate. The Casualty Company undertook then to amend its pleas so as to rely on the illegality of the employment, which defense, if successful, would have absolved the Casualty Company but would have cast the employer in a common law action. This defense was later abandoned; but, after some delays, a continuance by agreement or acquiescence of the Casualty Company, and the reinstatement of the cause as for a new trial, the employee took a nonsuit and brought suit against the Hosiery Mills in a common law action. The Casualty Company could have settled the Workmen's Compensation action and the employer had insisted that it do so, but the Casualty Company had refused. Prior to the trial of the common law action, the court house at Jasper, Tennessee had burned, and the Hosiery Mills was unable to prove the legality of the employment, which it claims it could have done while the Workmen's Compensation suit was pending. The Hosiery Mills was cast in the common law action, whereupon it brought suit against the Maryland Casualty Company for the amount of the judgment which it had been required to pay. Its recovery of this amount in the lower court was affirmed by the Supreme Court. From the opinion of the Supreme Court written by Cook, J., we quote:
"Facts presented by the record make a clear case of liability. The contract of insurance created a relation out of which grew the duty of the casualty company to exercise, not only good faith, but ordinary care. It assumed the defense of the suit brought by the employee under the Compensation Act to the exclusion of the defendant. Instead of disclaiming liability and retiring from the case, when it learned of the controversy over the issuance of an employment certificate, it exhibited bad faith in its effort to protect itself at the hazard of its indemnitee by setting up the defense that the emloyment was illegal. When, after protest from the insured, that defense was abandoned, the casualty company refused to adjust the claim, and, according to the testimony of Aycock and Carter, prevented the hosiery mills from adjusting it. The casualty company was given an opportunity to abandon the contest and let the employer bring the compensation case to a final judgment determinative of its liability. Moreover, there was negligent failure to bring about the entry of a final judgment after the trial judge found the case of liability under the Compensation Act; and, after dallying with the claimant over the measure of compensation for a year, the casualty company negligently agreed to restore the case to the docket as upon a new trial.
"An insurer assuming under its policy to control litigation against the insured must act in good faith and with reasonable diligence and caution. Douglas v. United States Fidelity & Guaranty Co., 81 N. H. 371, 127 A. 708, 37 A. L. R. 1477. That obligation attended the contract, and liability for breach of the obligation arises out of tbe injurious conduct of the insurer who assumed to act under the contract. 34 A. L. R., Note p. 738, and cases cited; Anderson v. Southern Surety Co., 107 Kan. 375, 191 P. 583, 21 A. L. R. 761; Attleboro Mfg. Co. v. Frankfort Marine Accident & Plate Glass Ins. Co., [1 Cir.] 171 F. 495. " Aycock Hosiery Mills v. Maryland Casualty Co., 157 Tenn. 559, 568-569, 11 S. W. (2d) 889, 892.
In the case of Southern Fire & Casualty Co. v. Norris, 35 Tenn. App. 657, 250 S. W. (2d) 785, 787, the insured, under a garage liability policy, had recovered a judgment against the insurance company for the excess over the policy limit which had been recovered in a damage suit against him. The trial court had instructed the jury that no verdict could be rendered solely on a showing of negligence in the investigation of the claim and in negotiating, attempting to negotiate, or failure to negotiate a compromise of the claim, though such negligence, if shown, could be considered in determining the existence of bad faith. That term, the Court defined as conveying the "idea of willingness to gamble with the insured's money in an attempt to save its own money", or, "as an intentional disregard of the.financial interests of the plaintiff in the hope of escaping the full liability imposed upon it by its policy." The Court of Appeals, Eastern Section, held that the questions of bad faith and proximate cause were for the jury. From the opinion of that Court, written by McAmis, J., we quote:
"It is clearly shown that when defendant declined to accept the offer to settle for $9,500, or to pursue the offer to recommend such a settlement if it so understood the offer, it had before it evidence that Davis would be able to show on the trial a condition of total and permanent disability and that a great preponderance of the evidence would show a case of liability. In view of these circumstances and the counter offer of only $7,500 it was within the province of the jury to decide whether the $9,500 was rejected and whether good faith required defendant to make known to Davis' counsel its willingness to pay the policy limit in the hope of saving its insured from having to pay a much larger verdict, especially in view of Davis' offer to settle only a few days earlier for $500 less than the policy limit.
"The jury, as to the triers of the facts, may have concluded that defendant had become resigned to the probability of having to pay $10,000 and was indifferent to the effect of its failure to compromise upon its insured. We cannot say under all the evidence and the inferences most favorable to plaintiff that there is no reasonable basis for such conclusion. Defendant had neglected to learn Davis' true condition until a trial was imminent and had failed to learn of the existence of a most material witness. It had declined to accept an offer of compromise within the limits of the policy liability and, failing to advise plaintiff of the offer, had authorized a counter offer of such an amount that Davis apparently considered it a rejection of his own offer which he promptly increased to $12,000. Although then fully aware of the seriousness of its insured's position both on the issue of liability and the probable amount of the recovery and although willing to pay $10,000, it made no further effort to compromise and proceeded to trial suggesting that plaintiff pay $2,000 and settle on the basis of Davis' last offer.
"We recognize the fnll weight of defendant's insistence that hindsights are always better than foresights and that counsel placed in such a plight are not required to have the gift of prophecy. We are aware also of the delicacy of the relationship between insurer and insured in cases of this kind. The insurer is under no duty to compromise a claim for the sole benefit of its insured if to continue the fight offers a fair and reasonable prospect of escaping liability under its policy or of getting off for less than the policy limit. The insured surrenders to the insurer the right to investigate and compromise or contest claims knowing that, in event of a claim, the insurer will have its own interests to consider. But an insured also has a right to assume that his interests will not be abandoned merely because the insurer faces the prospect of a full loss under the policy. The relation is one of trust calling for reciprocity of action. The insured owes the duty of full co-operation — -the insurer the duty of exercising good faith and diligence in protecting the interest of its insured.
# # # # # *
"The cases covered in the notes, supra, establish the prevailing rule that the right to control investigation, settlement and litigation of claims must be subordinated to the insurer's contractual duty to indemnify the insured against loss; that the insurer cannot escape liability by considering only what appears to be for its own interest. It must consider also the impact of its decision npon its insured and deal fairly and in good faith. This dnty arises not so much under the terms of the contract but is said to arise because of the contract and to flow from it.'' Southern Fire and Casualty Company v. Norris, 35 Tenn. App. 657, 667-668, 250 S. W. (2d) 785, 789.
In the case of Vanderbilt University v. Hartford Accident & Indemnity Co., 6 Cir., 109 F. Supp. 565, where an offer to settle for the limit of the policy had been made with no reply given, even though the insurer had just before the trial offered to settle for its policy limit, which offer was then rejected, the insurance company was held liable for the excess of the verdict over the policy limit on the ground that the action of the insurer amounted to bad faith and intentional and wanton disregard of and indifference to the interest of the insured. See also Vanderbilt Law Review, Volume 6, Number 5, page 1071.
Applying the principles announced in the above cited authorities to the facts of the case at bar, we think the evidence in this record is amply sufficient to have justified the jury in finding as a fact that the Tennessee Farmers Mutual Insurance Company subordinated the rights of its insured to its own interests, and that this amounted to lack of good faith on the part of the insurance company. Mr. J'. Paul White, who had represented the Mansfields in the damage suit case, testified in the instant case that when he made an offer to Mr. Heath-cock, one of the attorneys for W. N. Hammond in the damage suit case, who is also general counsel for the defendant, Tennessee Farmers Mutual Insurance Co., within the limits of the policy, that Mr. Heathcock said, "There is no reason for ns to settle this case with yon, yon are demanding the policy limits; we have nothing to lose by trying it"; and that on another occasion when he said to Mr. Heathcock, "Why don't yon settle these cases?" Mr. Heathcock replied, "We can't lose; you are asking all the coverage."
There is another circumstance, clearly established in this record, which, in onr opinion, conclusively establishes that the attorneys for defendant insurance company were concerned with the interests of that company to the exclusion of the interests of the insured, W. N. Hammond. This occurred after the verdict and after said attorneys had made a motion for a new trial in the damage suit case on behalf of W. N. Hammond, but it was a circumstance that clearly warranted the jury in the instant case in finding as a fact that the attorneys for the Tenn. Farmers Mutual Ins. Co., who were also attorneys for W. N. Hammond in the damage suits, had subordinated the rights of the insured to those of the Insurance Company. The motion for a new trial had been argued before the trial judge, and apparently the only ground in the motion for a new trial, about which the judge seemed to be in doubt, was the charge of misconduct on the part of the jury with reference to considering the question of insurance in connection with arriving at the verdicts. In that situation, Messrs. Heathcock and Elam as attorneys for the Tenn. Farmers Mutual Insurance Co., prepared and procured the signature of W. N. Hammond to a letter addressed to the Tenn. Farmers Mutual Insurance Co., which is as follows:
"Union City, Tennessee
"May 8, 1954
"Tennessee Farmers Mutual Insurance Company
"Columbia, Tennessee
"Re: Policy No. 14400
"Claim No. 13156
"Assured: W. N. Hammond
"During the latter part of the January Term of the Circuit Court of Obion County, Tennessee, judgments were entered in the three cases pending against me growing out of my automobile accident at the Lindenwood School in favor of the plaintiffs in the following amounts:
"Helen Mansfield_$17,000.00
"Walter Wayne Mansfield_ 3,000.00
"Walter Wayne Mansfield, Administrator of Eva May Mansfield_ 500.00
"I understand that Paul White, attorney for plaintiffs, has filed motions for new trial in the eases of Walter Wayne Mansfield and Walter Wayne Mansfield, administrator, on the ground of the inadequacy of the verdicts.
"I understand that Ileatheock & Elam, representing your interests and mine in the suits, have filed motions for new trial in the Helen Mansfield and the Walter Wayne Mansfield cases, assigning numerous errors including the ground of misconduct on the part of the jury when it discussed and considered what they understood to be the policy limits in arriving at their verdicts in the cases.
"I understand that all of those motions were argued before the Court on May 3, at which time the Court indicated a disposition to overrule all of the motions except that he was concerned about the charge of misconduct on the part of the jury. He indicated that the members of the jury should be summoned and examined in regard to their discussion of the policy limits during their deliberations. Originally it was suggested that the members of the jury be summoned for May 15, 1954.
"I understand that there is a distinct possibility that if Heathcoek & Elam would strike from their motions in the Helen Mansfield and "Walter Wayne Mansfield cases the charge of misconduct on the part of the jury, the Court would overrule all motions for a new trial and leave the parties to appeal on the other questions raised by the motions.
"I am firmly of the opinion that neither the company nor I would be benefited by a new trial, as another jury would most likely find against me in the cases for amounts equal to or in excess of the amounts of the present judgments.
"I understand that if the motions for new trial are overruled an appeal could be prayed by either party from the judgments in the cases in which the motions were filed, in which appeals the legal questions involved could be passed on by the Appellate Courts.
"This letter will authorize you and Heathcoek & Elam to move to strike the ground of misconduct on the part of the jury from the motions for new trial in the Helen Mansfield and Walter Wayne Mansfield cases, provided that in the same order the Court will overrule all motions for new trial including those filed by Walter Wayne Mansfield and Walter Wayne Mansfield, administrator.
"Heathcock & Elam have explained the entire situation to me. I understand the situation and believe that the move hereinabove outlined would be to our mutual interests.
"Yours very truly."
This letter is obviously in the interest of the insurance company, rather than that of the insured. It surrendered what apparently was the best chance of W. 1ST. Hammond, as defendant in the damage suit case, and of the insurance company representing him, to obtain a new trial. W. N. Hammond, as plaintiff in the instant case, testified that he did not at the time of signing this letter, nor at the time of testifying in the instant case, fully understand what he had signed. A copy of the letter which he had signed was not left with Hammond at the time he signed same; but after he had consulted Mr. W. M. Miles, one of his attorneys in the present law suit, a copy of same was given to him. Thereupon, Mr. Miles, representing W. N. Hammond, confronted Mr. Heathcock with this letter and told him he thought he had had Mr. Hammond sign a letter which was contrary to his interest. So far as the insurance company is concerned, in giving up what may have been its best chance for obtaining a new trial, it certainly eliminated any danger of a larger verdict at a second trial in the case of Walter W. Mansfield as administrator of Mrs. Eva Mae Mansfield, and thereby eliminated, potentially, additional loss up to $9,500, which would still have been within the limits of its policy. The clause in the letter, "provided that in the same order the Court will overrule all motions for new trial including those filed by Walter Wayne Mansfield and Walter Wayne Mansfield, administrator", clearly indicates that this benefit to the insurance company was one of the motivating reasons for procuring the letter and for abandoning the charge of misconduct of the jury as one of the grounds for a new trial. In that situation, the insurance company was certainly gambling with the insured's money, or liability, in an attempt to save its own. It is apparent to us, also, that in that situation, where Messrs. Heathcock and Elam were acting in the dual capacity of attorneys for the insurance company and for W. N. Hammond, they gave priority to the interests of the insurance company, rather than to those of Mr. Hammond. This situation, therefore, falls within the spirit if not the letter of language used by Judge Caruthers in the case of Tisdale v. Tisdale, 34 Tenn. 596, 608, 64 Am. Dec. 775, part of which is quoted with approval by Mr. Justice Samuel Cole Williams in Pemiscot County Bank v. Central State National Bank, 132 Tenn. 152, 158, 177 S. W. 74, and which is as follows:
"It is one of the canons of a court of equity that one who undertakes to act for others cannot in the same matter act for himself. Where confidence is reposed, duties and obligations arise which equity will enforce. A trustee cannot throw off the trust at pleasure, to the injury of the cestui que trust. He will not be allowed to mix up his own interests and affairs with those of the beneficiary. This doctrine has its foundation not so much in the commission of actual fraud, but in that profound knowledge of the human heart, which dictated that hallowed petition, 'Lead ns not into temptation, but deliver us from evil', and that caused the announcement of the infallible truth, that 'a man cannot serve two masters'."
In overruling the motion for new trial in the instant case, the learned trial judge said, "Mr. Heatheock, in my opinion, was in no way dishonest and I do not think this record discloses that." Mr. Heathcock's honesty was not in issue in this lawsuit, but his error of judgment in undertaking to represent two conflicting interests, and in preferring one of these over the other, was, in our opinion, sufficient justification for the jury's having returned its verdict in the instant case against the insurance company, whose interests were thus preferred.
The rule of good faith established in Tennessee by the decisions in Aycock Hosiery Mills v. Maryland Casualty Company, 157 Tenn. 559, 11 S. W. (2d) 889, and Southern Fire and Casualty Co. v. Norris, 35 Tenn. App. 657, 658, 250 S. W. (2d) 785, is substantially analogous to and controlled by the same principle as that provided for in Sec. 56-1105, Tenn. Code Ann. which imposes a 25% penalty on insurance companies failing or refusing to pay claims within sixty days where, "it shall be made to appear to the court or jury trying the case that the refusal to pay said loss was not in good faith." Construing this provision, originally enacted by chapter 141, Acts of 1901, in Silliman v. International Life Insurance Co., 135 Tenn. 646, 188 S. W. 273, the Supreme Court held that a life insurance company was not liable for this penalty where it had refused payment and had in good faith defended a suit brought for the proceeds of a life insurance policy on the ground that the suicide clause in the policy constituted a valid defense, even though the Supreme Court had held that a clause in this particular policy made it incontestable after one year, and that the suicide relied on had occurred after one year, in view of the fact that, after this decision, the insurance company tendered the full amount of the policy. In the case of Daugherty v. Stuyvesant Insurance Co., 169 Tenn. 300, 86 S. W. (2d) 1095, the Supreme Court held, however, that the imposition of this penalty had been properly allowed by the trial court and added to the recovery on a fire insurance policy, where the only defense had been the contention that the transfer of notes secured by the property which had burned operated as a transfer of title to the property in violation of a provision of the policy, which defense was held to be wholly without merit.
Evidently able counsel for defendant in the instant case must have thought that there was considerable doubt about the issues involved in the instant case, because they undertook to forestall this litigation by trying to obtain a declaration of their rights and liabilities in a suit filed in the Chancery Court of Obion County under provisions of the Declaratory Judgment Law of this State. In that suit the learned Chancellor refused to entertain the suit, because of disputed issues of fact which were determinative of the rights of the parties. This ruling of the Chancellor was affirmed by the Supreme Court in the case of Tennessee Farmers Mutual Insurance Co. v. Hammond, 200 Tenn. 106, 290 S. W. (2d) 860. The parties in that case were the same as the parties in the instant case. The disputed issues of fact which caused the Chancellor, in that case, to refuse a declaratory judgment, have, in the instant case, been resolved by the jury's verdict against the defendant, Tennessee Farmers Mutual Insurance Company.
For the reasons hereinabove stated, we think there was ample evidence to have warranted the submission of these issues to the jury in the instant case, and that Assignment of Error Number I, along with all of the other assignments of error hereinabove disposed of, must be overruled. The result is that the judgment of the Circuit Court of Obion County will be affirmed, and judgment will be entered in this Court in favor of plaintiff, W. N. Hammond and against the defendant, Tennessee Farmers Mutual Insurance Company, for $11,246.79, the amount of the judgment entered in the Circuit Court of Obion County, Tennessee on June 13, 1956, together with interest thereon at the rate of 6% per annum from August 18, 1956, the date on which the motion for a new trial was overruled.
The costs of the appeal, together with the costs of the lower court, will be adjudged against the defendant, Tennessee Farmers Mutual Insurance Company and the sureties on its appeal bond.
Avery, P. J. (Western Section), dissents.
Carney, J., concurs.