Court Opinion

ID: 3887422
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:16:44.167465+00
Date Added: 2024-06-11T14:15:31.592573
License: Public Domain

Action upon a policy of fire insurance, issued September 17, 1921, to M.B. Stokes and M.L. Stokes (husband and wife), in the sum of $4,000, upon the following property: The gin building, $1,500; the gin, $1,500, and the engine, $1,000. The entire property was destroyed by fire November 23, 1921.
The insurance company denied liability for the loss upon these grounds: (1) That, before the loss, the insured had assigned the policy to the Bank of Oates, causing a forfeiture of the policy under a provision contained therein that "this entire policy shall be void * * * if this policy shall be assigned before a loss"; (2) that, before the loss, the holder of a retention of title contract covering the machinery and not the building instituted an action of claim and delivery against the owner of the machinery, for the purpose of foreclosing his claim upon it, causing a forfeiture of the policy under a provision contained therein that "this entire policy shall be void * * * if, with the knowledge of the insured, foreclosure proceedings be commenced * * * of any property insured hereunder by reason of any mortgage or trust deed"; (3) that, before the loss, the holder of a retention of title contract covering the machinery and not the building, instituted an action of claim and delivery against the owner of the machinery, for the purpose of foreclosing his claim upon it, causing a forfeiture of the policy under a provision contained therein that "this entire policy shall be void * * * if any change * * * take place in the interest, title, or possession of the subject of insurance."
The evidence tends to show that the assignment to the Bank of Oates was as collateral security to loans made by the bank to Mr. and Mrs. Stokes, for the purpose of building a gin house and purchasing the machinery; in fact this appears upon the face of the assignment. The authorities *Page 529 
are abundant that this is not such an absolute assignment as comes within the forfeiture clause. Griffey v. Ins. Co.,100 N.Y., 417; 3 N.E., 309; 53 Am. Rep., 202; AEtna Ins.Co. v. Smith, 117 Miss., 327; 78 So., 289; L.R.A., 1918D, 1158 (in which many cases are cited sustaining this conclusion and to which is appended a note of many others); 14 R.C.L., 998; 26 C.J., 266. Allen v. Phoenix Co.,12 Idaho, 653; 88 P., 245; 8 L.R.A. (N.S.), 903; 10 Ann. Cas., 328.
In reference to the second and third defenses above stated, the appellants take the position that by the pleadings it appears incontrovertibly that the entire property covered by the policy was partnership property belonging to Mr. and Mrs. Stokes as partners, and that the claim and delivery proceedings against Mr. Stokes alone could not have the effect of forefeiting the policy.
The complaint does not allege that, at the time the policy was issued, Mr. and Mrs. Stokes were partners engaged in business at Lydia, S.C. under the firm name of M.L. and M.D. Stokes, and that they had an interest in the property insured as owners of it to an amount exceeding the amount of the assurance.
The nearest that the defendant comes to a denial of these allegations is in the first defense of his answer, wherein he "denies the material allegations of the complaint." The appellants contend that this is no denial at all, and that the facts alleged must be taken as true. The form of what was claimed to be a general denial is objectionable, but I think that the true rule is thus stated in 1 Enc. Pl. and Pr., 782:
"A denial of all the `material' allegations of the complaint does not constitute a good general denial."
And in the footnote it is added:
"But such a denial is good against a demurrer, thoughnot good against a motion to make more definite andspecific." *Page 530 
In the absence of such a motion, it should stand as a general denial.
Assuming what appears to be decided in Griffin v.McCain, 126 S.C. 506; 120 S.E., 95 (though not to my satisfaction), that a general denial does not put in issue the allegation of partnership, in this particular case it does put in issue the fact alleged that the plaintiffs were the owners of the property insured.
The fact of partnership, however, is very far from establishing the partnership ownership of the machinery. The complaint does not allege the character of business in which Mr. and Mrs. Stokes were engaged, and, if it should be assumed that it was a ginning business, the conduct of that business was not inconsistent with separate ownership of the building by Mrs. Stokes and separate ownership of the machinery by Mr. Stokes; nor is the allegation that they were the owners of the building and machinery inconsistent with that condition of title.
The evidence tends to show that Mrs. Stokes owned the land, and of course the building erected upon it, and that Mr. Stokes owned the machinery. He certainly owned it (subject to the retention of title contract), when he bought it in July, 1920, and there is no evidence tending to show that he ever parted with any portion of his interest. It is significant that there is not a particle of evidence tending to show that there was a partnership between Mr. and Mrs. Stokes in the ginning business, or that either conveyed to the other any interest in the property separately owned by them.
I do not think that this situation presents any obstacle to either collecting the amount of insurance carried upon their respective properties. 26 C.J., 19, note 13a, citing Peck v. Ins. Co., 22 Conn., 575. It is as if each had taken out a separate policy covering his or her separate property, for it appears that the insurance agent had knowledge of the situation and united both in the same policy as a matter of convenience. The vital question is *Page 531 
whether the interest of Mr. Stokes has been affected by the proceedings of claim and delivery. It hardly needs authority for the position that the contract of sale in this case was in legal contemplation a chattel mortgage. Hill v.Granite Co., 112 S.C. 243; 99 S.E., 836. Woodruff v.Timms, 93 S.C. 99; 76 S.E., 114.
The question is: When Steele, the mortgagee, began claim and delivery proceedings, did he commence foreclosure proceedings by reason of the mortgage? I do not see how there can be but one answer to that question. When a chattel mortgage becomes past due, the mortgagee has three remedies for realizing upon his security: (1) He may peaceably take possession of the chattel, advertise and sell and apply the proceeds of sale to his secured debt, paying the surplus, if any, to the mortgagor; (2) if possession be refused, he may institute claim and delivery proceedings to get possession of the chattel for the purpose of sale as in the first instance; (3) he may institute a proceeding similar to the foreclosure of a mortgage of real estate. Any one of these remedies is at least a step in the process of foreclosing his mortgage. The policy does not provide that this foreclosure must be made in a certain way.
In Hoover v. Thames, 96 S.C. 31; 79 S.E., 795, it is said, referring to a proceeding of claim and delivery:
"This action was brought to recover possession thereoffor the purpose of foreclosing the mortgage."
In 14 R.C.L., 1128, it is said:
"The usual provision that the policy shall be void if, with the knowledge of the insured, foreclosure proceedings be commenced against the subject of insurance, means the institution of suit or judicial proceedings for the enforcementof the mortgage."
The proceeding in claim and delivery is so closely connected with foreclosure that the plaintiff upon giving bond, *Page 532 
after waiting for the defendant's replevy bond, may proceed to sell the mortgaged property, and may not be compelled to await the outcome of his claim and delivery proceedings, the defendant being amply protected by his bond. Cavanaughv. Sanderson, 152 Mich., 11; 115 N.W., 955.
In Elders v. Feutrel, 110 S.C. 307; 96 S.E., 541, the Court, referring to claim and delivery proceedings under a chattel mortgage, says:
"This is a proceeding, not primarily to secure a judgment for the amount of the note, but to enforce the provisionsof the mortgage."
The retention of title contract, which I have treated as a mortgage, was dated July 1, 1920, and fell due November 1, 1920. The policy was issued September 17, 1921, nearly a year after the mortgage was past due. The evidence does not show whether the company knew of the existence of the mortgage and that it was past due when the policy was issued. The point whether, if the company knew of these facts, it could rely upon the forfeiture upon commencement of a suit for foreclosure, has not been discussed, and I intend to indicate no opinion in reference thereto. See HartfordCo. v. Clayton, 17 Tex. Civ. App. 644; 43 S.W. 910.Butz v. Ins. Co., 76 Mich., 263; 42 N.W., 1119; 15 Am St. Rep., 316.
I have not considered the effect upon the insurance on the separate property of Mrs. Stokes of a forfeiture of Mr. Stokes' insurance, if such should be decreed. I do not think there is anything in the defendant's third defense, above stated, as it does not appear that the machinery was taken into the possession of the Sheriff or turned over to the plaintiff Steele in the claim and delivery proceedings, that there had been any change in the title or possession of the property.
I concur with Mr. Justice Watts in his disposition of exceptions 1, 2, 11, 15, and 19. *Page 533 
The Judge's charge being inconsistent with the views expressed above, I favor a reversal of the judgment and an order for a new trial.
Mr. JUSTICE MARION concurs.