Court Opinion

ID: 9443877
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:32:58.917093+00
Date Added: 2024-06-11T17:29:38.068527
License: Public Domain

SOPER, Circuit Judge
(dissenting).
The discussion should begin with the statement of the established fact that the Bank has lost $5,000 through the fraud of the Fidelity Mutual Life Insurance Company, and that the only possible defense of the Insurance Company is limitations. Hupp, its agent, took an active part in securing a loan of $5,000 from the Bank for Lallemant on his $48,000 life insurance policy; and in the course of the negotiations for the loan Hupp sat quietly by and heard Lallemant offer the cashier an' assignment of the policy as security for the loan and make the false statement that the policy was free and clear of encumbrances. At that time, as Hupp well knew, there was an outstanding prior assignment of the policy which Lallemant had given his wife in the course of a separation agreement. Nevertheless Hupp allowed the false statement to stand and led the Bank to accept it by assuring the cashier that the policy was free of any assignment on record. The latter statement was literally true but the total effect of the conference, as Hupp understood, was to create the belief that no previous assignment had been given; and so the loan was made and Lallemant, being financially untrustworthy, the money was. lost through the deceit of the Insurance Company.
The Insurance Company says that although all of this may be true, it cannot be compelled to make good the Bank’s loss, because the suit is barred by limitations. The false statements were made on March 4, 1949, but the present suit was not brought until September 21, 1951 after, the lapse of more than two years which is the period of limitations prescribed by the applicable state statute. The defense is purely technical since the home office of the Insurance Company was made acquainted with the Bank’s claim very soon after Lallemant defaulted in the payment of his 60 day note. The Bank sued the Insurance Company on its assignment of the policy on June 24, 1949 and the Insurance Company countered by filing an action of interpleader. All the evidence relating to the two assignments of the insurance policy was available then and is available now to all of the interested parties.
Under such circumstances it is a satisfaction to learn that there are two substantial reasons why the defense of limitations is not available to the Insurance Company. The first reason is that on June 29, 1949 the Insurance Company secured an injunction order against the Bank in the interpleader action forbidding the Bank, until the further order of the District 'Court, to institute or prosecute any suit against the Insurance Company “on account of said policy of insurance.” It is an established rule of law that limitations do not run against a claimant if he is prevented from bringing suit by the party to be charged, and hence, while the injunction was in effect, limitations did not run as to any suit forbidden by the court. 34 Am.Jur., Limitation of Actions,. §§ 187, 238.
*537It is said, however, that the injunction against the bringing of a suit “on the policy” did not forbid an action for fraud based on misrepresentations in regard to an assignment of the policy; and therefore the Bank should have sued the Insurance Company for fraud while it was still endeavoring to prove the validity of the assignment in the interpleader suit. This contention should not be sustained if the meaning of the injunction was unclear and might well have been taken to include any suit against the Insurance Company pertaining to the policy. It is manifest that a careful lawyer would not have advised the Bank that despite the injunction it was free to sue the Insurance Company on a cause of action which centered upon and related to the policy itself. The subsequent action of the District Judge supports this construction of the order. After the inter-pleader suit was decided in favor of the wife on December 30, 1950 the District Judge entered a decree on January 9, 1951 directing that the injunction pendente lite be made perpetual “insofar and to the extent only that said injunction applies to prosecuting any action against the policy arising contractually under said insurance policy No. 657,697, or to recover said fund of $5,822.83, or any part thereof, arising under said insurance policy No. 657,697 now deposited in the registry of the court, but said injunction is not further or otherwise perpetuated." (Italics supplied)
Manifestly the District Judge did not think that the preliminary injunction was aimed only at suits on the policy sounding in contract, for otherwise he would have simply converted the preliminary into a perpetual injunction, and he would not have ordered that the preliminary injunction should be made perpetual only in part. Since the District Judge himself held the ■opinion that the preliminary injunction was not restricted to suits on the insurance contract itself but covered a wider field, how ■can we find fault with a litigant who took the same view? Certainly there is no impropriety in placing a heavy burden of proof upon a litigant who seeks to escape the consequence of his fraud by pleading ■the statute of limitations. We should hold that the running of the period of limitations was stayed by the injunction.
The second reason is based on the established law in West Virginia that the right to recover money paid under fraud accrues when the fraud is discovered or by the exercise of due care ought to have been discovered. See Matthews v. Dale, 118 W.Va. 303, 190 S.E. 338. In this case it has been said that the fraud was actually discovered on May 9, 1949, when the Bank was first notified of the prior assignment of the policy to the wife, and that the details of that assignment were clearly shown on August 23, 1949 in Mrs. Lallemant’s answer in the interpleader suit. It would be more accurate to say that the Bank had notice at that time that it had been deceived, but that it did not know that it had been defrauded until the interpleader suit went against it on January 9, 1951.
We must bear in mind that the policy contained the following provision relating to assignments:
“Assignment. — No Assignment shall be binding upon the Company until the original or a duplicate thereof is filed at its Head Office. The Company assumes no obligation as to the effect, sufficiency, or validity of any assignment”
Hence the Bank had good reason to believe that its assignment, which was filed at the head office of the Company, took precedence over the wile’s assignment which was never filed at all. The District Judge took the position, 95 F.Supp. 276, 282, that the Insurance Company by filing the inter-pleader suit waived the provision of the policy that an assignment in order to be binding upon the Company must be filed in its head office. The basis of this ruling is not beyond question, since the obvious purpose of the interpleader suit was to avoid all responsibility and to impose upon the court the duty of deciding between the rival claimants. The Company made no express waiver and left it to the court to decide the controversy. It follows that until the uncertainties of the litigated questions had been cleared up by a final decision of the court, the Bank had no means of know*538ing whether its assignment was good or bad or, in other words, whether it had been merely misled or had actually been defrauded by the misstatements of the representative of the Insurance Company. Under this view limitations did not begin to run until January 9, 1951 and the pending suit was in time.