Opinion
13438
June 29, 1932.
Before GRIMBALL, J., Richland, July, 1930. Appeal dismissed and decree affirmed.
Action by Fred D. Townsend, receiver for the Gulf Atlantic Insurance Company, against the South Carolina Insurance Company and another. Decree for defendants, and plaintiff appeals.
The decree of Judge Grimball is as follows:
This suit was brought by the plaintiff as receiver of the Gulf Atlantic Insurance Company to recover a share of an award of $6,591,422.92 made on September 18, 1924, by the mixed claims commission to the Globe Rutgers Fire Insurance Company against Germany on account of the loss of certain vessels insured by that company, but destroyed by Germany during the World War, the South Carolina Insurance Company participating in the proceeds of the award on account of a contract of reinsurance with the Globe Rutgers Fire Insurance Company, and the plaintiff claiming the right to participate on account of a contract of reinsurance between the Gulf Atlantic and the South Carolina and alleged losses thereunder. The defendants denied that the Gulf Atlantic Insurance Company had paid any losses under the contract of reinsurance, and alleged that the Gulf Atlantic Insurance Company had repudiated the contract, and that the contract had been completely terminated and canceled between the parties. This presents the principal issue for determination in the case.
In his complaint, the plaintiff alleged that the Gulf Atlantic had sustained and paid losses in the sum of $38,258.12, and sued for that sum, with interest from November 11, 1918, but during the trial he moved to amend the complaint by changing this amount to $83,321.30.
The action was instituted in July, 1930. It was tried before me at the March, 1931, term of the Court of Common Pleas for Richland County. The evidence was taken directly before me. Prior to the trial, the defendants filed a statement showing the amount of the award on each of the vessels insured and lost, and also the amount of the receipts to date on account thereof by the Globe Rutgers from the United States government and the disbursements to the South Carolina. At the trial the plaintiff and the defendant offered evidence, both oral and documentary.
FINDING OF FACTSThis case arises out of very unusual circumstances. The facts as shown by the evidence, and as I find them, were as follows:
In 1916 the South Carolina Insurance Company had a contract of reinsurance with the Globe Rutgers Fire Insurance Company of New York, covering war risk only for not exceeding $10,000.00 on any one steamer, and applying to all risks from March 1, 1916, through February 28, 1917. Under this contract reports of risks attaching were to be made by the Globe Rutgers to the South Carolina as soon as known and accounts current were to be rendered as soon as possible after the close of each month, and the balance due by either party to be paid within 60 days from the end of each month.
The South Carolina, in order to protect itself against the liability assumed under this contract, entered into a contract of reinsurance of retrocession with the Gulf Atlantic Insurance Company. Under this contract the Gulf Atlantic was to reinsure the South Carolina to the extent of 27 1/2 per cent. interest on marine or war risks accepted by the South Carolina direct or as reinsurance. Reports of risks attaching were to be made as soon as known, and monthly accounts current were to be rendered by the South Carolina to the Gulf Atlantic, and the balance due was to be paid within 70 days of the end of each month. The South Carolina was to be entitled under the contract to certain commissions as therein provided to cover taxes and other expenses, and in calculating these commissions it was specified that the Gulf Atlantic should be credited among other things with "salvages." Such "salvages" in the insurance business are understood to include any recoveries by subrogation or otherwise on account of the vessels or other property insured and lost.
The South Carolina also made like contracts of reinsurance with several other companies. These companies, however, complied with their contracts, and are not in any wise concerned in this controversy.
During the period in question, the Globe Rutgers insured a great many vessels against such war risks, and the South Carolina became bound as reinsurer of the Globe Rutgers, and the Gulf Atlantic bound as reinsurer of the South Carolina, under the terms of the said contracts. Accounts were rendered from time to time by the Globe Rutgers to the South Carolina showing the premiums received, the commissions and the losses sustained, and any recoveries. When said accounts showed a balance due the South Carolina, the same was remitted by the Globe Rutgers, and, if they showed a balance due by the South Carolina, the same was remitted by the South Carolina to the Globe Rutgers. The Globe Rutgers had no direct relations with the Gulf Atlantic.
The South Carolina in turn rendered accounts to Gulf Atlantic as soon as possible showing premiums received, commissions, and losses. These accounts showed a credit balance for June, 1916, of $3,321.50 and for September, 1916, a credit balance of $2,456.44, which amounts were duly remitted by the South Carolina to, and accepted by, the Gulf Atlantic on September 9th and November 1st, respectively, these two payments aggregating $5,777.94.
However, during the latter part of 1916 and the early part of 1917 the losses, on account of heavy submarine activities, were unexpectedly large, and the monthly balances between the companies thereafter generally shows a large net loss. The South Carolina was called upon to pay and did pay to the Globe Rutgers heavy monthly balances. The Gulf Atlantic, however, failed and refused upon various grounds to pay any of the balances due to the South Carolina. The Gulf Atlantic soon appeared to become dissatisfied with the contract. Complaint was made about the delay in reporting the premiums and the losses. In February, 1917, the Gulf Atlantic wrote a letter to the South Carolina asking to be relieved from the contract at the legal termination thereof and sooner if possible. In September, 1917, when the net balance due the South Carolina by the Gulf Atlantic was approximately $28,000.00, the Gulf Atlantic returned to the South Carolina the total amounts theretofore received by it, to wit, $5,777.94, claiming that such return was for the purpose and with the intention of terminating and canceling the contract.
The failure of the Gulf Atlantic to remit the balances to the South Carolina as due under the contract caused the South Carolina serious financial embarrassment and inconvenience. By the close of the year 1917 the total losses reported and charged to the South Carolina by the Globe Rutgers exceeded $300,000.00, and at this time the net balance due by the Gulf Atlantic to the South Carolina on account of losses and commissions, after crediting the proportionate share of the premiums, was over $30,000.00.
During the latter part of the year 1918, the South Carolina commenced suit against the Gulf Atlantic in the Court of Common Pleas for Richland County to recover the damages for breach of contract, but thereafter, owing to the rules of evidence prevailing in the Court of Common Pleas, had this suit discontinued and a new suit instituted in March, 1920, in admiralty in the United States District Court for the Eastern District of South Carolina. The principal amount sued for in the admiralty suit as shown by the statement of account attached to the libel was $32,472.18. This amount represented the difference between the Gulf Atlantic's proportion of the losses reported on the 53 vessels listed, less its proportion of the premiums received (after deducting the commissions) amounting to $58,321.30. The Gulf Atlantic filed an answer in this suit similar to that which it had filed in the Court of Common Pleas. Both answers alleged among other things that the contract of insurance was ultra vires, and had been completely canceled and the company relieved of all liability thereunder by the return of the $5,777.94, admitting the refusal to pay the amounts claimed, and denying all liability thereunder.
On February 16, 1921, about ten days before the first reference in the case, the companies effected a compromise settlement and cancellation of the suit and contract. At that time the amount with interest due to the South Carolina by the Gulf Atlantic under the contract was $40,057.46. Under the settlement, the Gulf Atlantic gave to the South Carolina its collateral note for $25,000.00, payable in five annual installments with interest at 6 per cent.
Mr. Edwin G. Seibels, the president of the South Carolina Insurance Company, testified that in his negotiations with Mr. J.E. McDavid, the then president of the Gulf Atlantic Insurance Company, the subject of future right and liabilities with special reference to future premiums and losses came up for discussion, and it was expressly agreed that thereafter there would be no such rights or liabilities under the contract between the parties. This evidence was not denied by Mr. McDavid. In connection with the settlement, the South Carolina Insurance Company executed its written release reciting that the same was "in full settlement of all claims arising out of and by reason of the said suit and contract," and specifically released and discharged the Gulf Atlantic "from any and all claims and demands and liabilities whatsoever arising out of or by virtue of the suit and contract hereinbefore mentioned." The Gulf Atlantic thereafter passed a resolution approving and ratifying the action of its officers in executing the company's note for $25,000.00, said to be "in full settlement and discharge of all claims and demands of the South Carolina Insurance Company arising out of and by reason of the suit, * * * and out of the contract whereupon the said suit is based," and delivered a copy of said resolution to the South Carolina Insurance Company.
After this settlement, additional premiums were reported and received by the South Carolina, and also additional losses in the sum of $5,304.57 were reported and paid by the South Carolina to the Globe Rutgers. The South Carolina, however, never called upon the Gulf Atlantic for any share of the said losses, nor did the Gulf Atlantic ever offer to make any payments thereunder or otherwise recognize the existence of the contract. Both companies thereafter treated the contract of reinsurance as canceled and terminated and abandoned all contractual relations with each other.
It seems to me clear, and I so find, that it was intended by this compromise settlement to cancel and terminate the contract and all rights and liabilities whether already accrued or thereafter arising between the parties in connection therewith.
The $25,000.00 note given to the South Carolina Insurance Company by the Gulf Atlantic was thereafter in due course paid from the proceeds of the sale of, the collateral pledged as security therefor.
The Treaty of Berlin between the United States and Germany of August 25, 1921, 42 Stat., 1939 (terminating the war and ratifying the Versailles Treaty with reservations), provided for the creation of a mixed claims commission to determine the amount of reparations to be paid by Germany to the United States and its nationals as a consequence of the war. On August 10, 1922 (42 Stat., 2200), United States and Germany entered into a further treaty for the creation of this commission. This treaty provided in Article 1 that the commission should have jurisdiction to pass upon "claims for loss or damage to which the United States or its nationals have been subjected with respect to injuries to persons, or to property, rights and interests, * * * since July 31, 1914, as a consequence of the war." The commission was thereafter duly created with an American agent and a German agent and an umpire. Administrative decision No. 1 issued by this commission on November 1, 1923, provided that "the financial obligations of Germany to the United States arising under the Treaty of Berlin * * * put forward by the United States on behalf of its nationals embrace:
"All losses, damages or injuries to their property wherever situated, suffered directly or indirectly during the war period caused by acts of Germany or her agents in the prosecution of the war. * * *"
Under these treaties and the procedure adopted by the commission, the Globe Rutgers through the United States duly presented its claim to the commission on account of the vessels insured by it but destroyed by Germany during the war. After hearing the matter, the commission on September 18, 1924, rendered an award or judgment sustaining the claim; the terms of the award being in part as follows: "The Commission decrees that under the Treaty of Berlin aforesaid, and in accordance with its terms, the Government of Germany is obligated to pay to the Government of the United States on behalf of Globe Rutgers Fire Insurance Company, the sum of Six Million, Five Hundred Ninety-one Thousand, Four Hundred Twenty-two and 92/100 Dollars ($6,591,422.92), with interest thereon at the rate of 5 per cent. per annum from November 11, 1918, to the date of payment."
Thereafter by Act of Congress known as the "Settlement of War Claims Act of 1928" (45 Stat., 254), the Secretary of the Treasury of the United States was directed to pay out of the "German Special Deposit Account" the awards of the commission as and when certified to by the Treasury Department by the Secretary of State and in the manner and priority as set forth in the said Act.
The certificate filed by the defendants in this case shows that the principal amount of the award on the vessels covered by the contract between the Globe Rutgers and the South Carolina here involved was the sum of $293,047.33, of which $288,559.03 was on account of vessels for which losses had been reported and paid prior to the compromise settlement and cancellation of the contract in February, 1921, and the sum of $4,488.30 on account of vessels subsequently reported. The certificate also showed that to date approximately 75 per cent. of the principal of the award less proper deductions had been paid to the Globe Rutgers by the Secretary of the Treasury.
Beginning about August 6, 1928, the Secretary of the Treasury has made payments to the Globe Rutgers on account of the principal and interest of the award from time to time aggregating up to the time of the trial of this case the total principal sum of $5,438,483.60. Of this sum the Globe Rutgers has remitted to the South Carolina to date $274,653.08, being .067340927 of the total, less deductions on account of expenses, attorneys' fees, and other commissions. This amount covers some losses under other contracts than that in which the Gulf Atlantic had been interested. The Globe Rutgers is withholding the South Carolina's share of the last payment ($563,604.82) owing to the pendency of this suit.
The plaintiff claims to be entitled to a share of the South Carolina's recoveries in the proportion which the amount he claims his company lost, to wit, $83,321.30, bears to the total losses sustained by the South Carolina prior to the cancellation of the contract, to wit, $330,158.13, that is to say, .25236785 thereof.
CONCLUSIONS OF LAWI am constrained to the view that the plaintiff has no right of recovery in this case, and that the complaint must be dismissed.
It appears to me clear that, but for the reinsurance contract of 1916 between the Gulf Atlantic Insurance Company and the South Carolina Insurance Company, the plaintiff herein is a stranger to the award and its proceeds. Had it not been for the previous existence of that contract, the plaintiff would have had no greater or other rights in the award than any other unrelated insurance company. But when the contract was first repudiated and thereafter by agreement terminated and canceled between the parties, the situation was thereafter just as though the contract had never existed. It does not seem to me to admit of reasonable doubt that, as a result of the negotiations and the release, the contract must be considered to have been completely terminated and canceled. The written release in terms expressly recited that it was "in full settlement of all claims arising out of and by reason of the said suit and contract"; this shows that the release was intended to settle and cancel all claims of either party whether already accrued or embraced within the suit or thereafter arising in connection with the contract. The reference to the contract as well as to the suit, it seems to me, makes this clear. The Gulf Atlantic could not retain any claims under the contract against the South Carolina when the South Carolina had already explicitly released the Gulf Atlantic. The contract could not be terminated and canceled as to all liabilities due by the Gulf Atlantic to the South Carolina without also being terminated and canceled as to all possible liabilities then existing or thereafter accruing from the South Carolina to the Gulf Atlantic in connection therewith. The acceptance of the release under these circumstances by the Gulf Atlantic must, it seems to me, be construed as a complete mutual release and cancellation of the contract and all rights and liabilities existing at the time or thereafter arising in connection therewith as between the two parties, and I so hold.
Moreover, this was the understanding of the parties as evidenced by their conduct both at the time and thereafter in connection with the contract. Hence the situation as between the two parties as a result of the compromise and cancellation was just as though the contract had never existed.
"Where a contract has been rescinded by mutual consent, the parties are as a general rule restored to their original rights with relation to the subject matter, and no action for breach can be maintained thereafter, nor are the parties bound by the contract with reference to their subsequent action." 13 C.J., 602, 603.
"The rescission of it wiped out the contract, so far as basing any affirmative action on it relating to its enforcement, or for damages for its breach. It destroyed all its vitality, and the relation of the parties thereto as an excess contract was the same as though it never had been entered into." Chesley v. Soo Lignite Coal Co., 19 N.D., 19, 22, 121 N.W., 73, 74, 13 C.J., 603. Cf. also Durham v. Wadlington, 2 Strob. Eq., 258; S. Landow Co. v. Rizer, 152 S.C. 236, 149 S.E., 225. Cf. 12, C.J., 337-341; Pryor v. Newbold, 69 S.C. 426, 48 S.E., 275.
The plaintiff urges very earnestly that no such recoveries were contemplated at the time of the release and cancellation of the contract, and hence they were not embraced in the release. Plaintiff cites the following authorities in support of this view:
"A release ordinarily covers only such claims as were within the contemplation of the parties. Consequently a demand of which the parties were ignorant when the release was given is not as a rule embraced therein." 34 Cyc., 1092; Gist v. Gist, Bailey, Eq., 343.
"A particular release includes the particular claims specified, and as a general rule none others." Sims v. Sims, 2 Hill, Eq., 61, 34 Cyc., 1090.
"Demands originating at a time a release is given or subsequently, and demands subsequently maturing, are not as a rule discharged by the release, unless expressly embraced therein or falling within the fair import of the terms employed." 34 Cyc., 1092; Kennerty v. Etiwan Phosphate Co., 17 S.C. 411, 43 Am. Rep., 607.
However, it seems to me that the parties as insurance people must have realized that there was always a possibility of recovery from Germany or the other parties responsible for the destruction of the ships insured. Hence it cannot be said that recoveries from Germany were not reasonably within the contemplation of the parties or within the fair import of the terms of the settlement and cancellation. Moreover, the contract between the Gulf Atlantic expressly provided as hereinbefore shown that in the future accountings between the parties the Gulf Atlantic should be credited with "Salvages." Salvages so provided for must certainly have embraced such recoveries as in this case have been made from Germany. Hence, when the contract with all its rights and liabilities was terminated and canceled, for a consideration, the Gulf Atlantic must be held to have given up all claims to any such salvage, including the recoveries involved in this case.
Further, it seems to me, the plaintiff has not paid or sustained any such losses caused by Germany as were contemplated under the Treaty with Germany or as alleged in the complaint. The plaintiff is in effect basing his claim upon the contention that under the contract of reinsurance of 1916, he sustained and paid losses on account of vessels destroyed by Germany aggregating $83,321.30; such amount being the sum of the share of premium receipts credited to the Gulf Atlantic in the accounting between the companies in the admiralty suit and the $25,000.00 paid in settlement thereof. But it would appear to me that neither of the elements going to make up this sum can possibly be said to be an amount paid as losses on account of vessels destroyed by Germany. The $58,321.30 was merely an item in the accounting as between the South Carolina and the Gulf Atlantic under the terms of the contract of reinsurance, leaving a net balance due the South Carolina, and did not really represent any payments whatsoever of money actually expended by the Gulf Atlantic as losses on account of the destruction of vessels by Germany, but as a lump sum in compromise settlement and cancellation of the damages due to the South Carolina by the Gulf Atlantic for the breach by the Gulf Atlantic of its contract. In other words, this sum, which was the only sum of money actually expended by the Gulf Atlantic, was paid, not in payment of losses on vessels sunk by Germany, but was paid for the compromise settlement and cancellation of the contract and in order to escape the payment of any losses thereunder. Such a payment of alleged losses by the Gulf Atlantic is merely a business loss, and it seems to me clearly not such as was or could be recoverable from Germany. It is like the many other incidental increased expenses or losses caused by the war, such as war risk insurance premiums, increased wages, or counsel fees, and like matters which have been uniformly held by the mixed claims commission not to be recoverable. See Administrative Decision No. 1; Administrative Decision No. II; Administrative Decision No. VII (pages 308, 316, 319, 320, 332); Option on War Risk Insurance Premiums (pages 46-47).
Therefore any losses sustained by the Gulf Atlantic in connection with this transaction or contract were not "suffered through the acts of the Imperial German Government" as alleged.
The only other payment of any kind ever made by the Gulf Atlantic to the South Carolina was the return in September, 1917, of the balance of $5,777.94 previously paid to it by the South Carolina. This was with the purpose and understanding, as alleged in the answer of the previous suit, that the contract would be completely canceled and discharged, and the Gulf Atlantic completely relieved therefrom. In other words, the only payment ever made by the Gulf Atlantic to the South Carolina was the return of the $5,777.94 in September, 1917, in attempted cancellation of the contract, and the giving of the note for $25,000.00 in February, 1921, for the complete and accepted cancellation of the contract.
(The amount originally sued for in this complaint $38,250.12 represented the sum of this refund of $5,777.94 and the principal balance involved in the admiralty suit $32,472.18.)
The Globe Rutgers alone was in position to, and did, present the claim before the commission on account of the destruction of the vessels by Germany during the war.
Hence I find that the plaintiff has not paid or sustained losses in the sum of $83,000.00 (or $38,250.12) caused by Germany as alleged in the complaint.
Also it would seem that the Gulf Atlantic Insurance Company and the plaintiff as its receiver must now be estopped from claiming that the contract of reinsurance was valid and performed by it, and must be bound by its election as made in the previous suits between the two companies to treat the contract as ultra vires and canceled. In the previous suit in admiralty, as hereinbefore stated, the Gulf Atlantic Insurance Company expressly and repeatedly alleged that the contract had been terminated and canceled by the return to the South Carolina of the $5,777.94, and further that the contract was ultra vires and invalid. By means of these allegations and of the defense therein interposed in that suit, the Gulf Atlantic Insurance Company secured the compromise settlement of the suit and the cancellation of all rights under the contract for the sum of $25,000.00 at a time when the balance already due with interest exceeded $40,000.00. It also secured a release thereby from all future contingent liabilities arising in connection with the contract, which, as it afterwards turned out, amounted to $1,114.79, but which were at the time undetermined and indefinite in amount.
As a result of the action taken in these suits, I hold that the plaintiff should be and now is estopped from changing his position to the prejudice of the defendants. This is in accord with the well-settled authorities from this and many other jurisdictions.
"In Former Proceedings. — (a) In General. A claim made or position taken in a former action or judicial proceeding will, in general, estop the party to make an inconsistent claim or to take a conflicting position in a subsequent action or judicial proceeding to the prejudice of the adverse party" — citing innumerable authorities from all jurisdictions. 21 C. J., 1228.
"Application of Rule. — Position Inconsistent with Defense or Objection Interposed in Prior Action. Applying the rule, a party who has successfully interposed a defense or objection in one action or proceeding cannot shift his ground and take a position in another action or proceeding which is so inconsistent with his former defense or objection as necessary to disprove its truth. * * *" 21 C.J., 1231, citing many cases from all jurisdictions, including:
Virginia-Carolina Chemical Co. v. Kirven, 215 U.S. 252, 30 S.Ct., 78, 54 L.Ed., 179; Id., 77 S.C. 493, 58 S.E., 424: "Estoppel arises when one does some act precluding him from averring anything to contrary. — Southern Ry. Co. v. Day, 140 S.C. 388, 396, 138 S.E., 870."
"Equitable estoppel" arises from conduct and prevents assertion of technical rights contrary to equity and good conscience. Smith v. Williams, 141 S.C. 265, 281, 282, 139 S.E., 625, 54 A.L.R., 964.
"A party who has expressly, or by his conduct, waived his claim or title to property, shall be estopped from asserting it against a party who has acted on the faith of such admission." Cox v. Buck, 3 Strob., 367.
"A party may not take advantage of his own wrong, to the injury of an innocent person; such a position being repugnant to equity and justice. Butler v. Spencer, 116 S.C. 177, 107 S.E., 154." (S.E. Digest, Topic "Estoppel".) Walker v. McDonald, 136 S.C. 236, 134 S.E., 222; Tompkins v. R.R. Co., 21 S.C. 420, 10 R.C.L., 699, 702.
Certainly there was no need for the release to further recite any release by the Gulf Atlantic of any claims against the South Carolina, since the Gulf Atlantic had already formally disclaimed any rights or interest therein by its answer, claiming the contract ultra vires and canceled. 21 C.J., 1228; Southern Ry. Co. v. Day, 140 S.C. 388, 138 S.E., 870; Smith v. Williams, 141 S.C. 265, 139 S.E., 625, 54 A.L.R., 964.
The plaintiff argues very earnestly that his right to share in the award is dependent, not upon the contract of reinsurance between the Gulf Atlantic and the South Carolina, but upon the terms under which the funds have been recovered from Germany. He claims that the recoveries were in the nature of a voluntary trust fund created by the United States for the benefit of those who suffered losses from Germany's action during the World War, and hence that he is the beneficiary of such trust. But it seems to me clear that the plaintiff occupies no such relation to the award or to the funds in question. The position of the Gulf Atlantic with regard to the funds is entirely different from that of the Globe Rutgers. The Globe Rutgers as the insurer of the vessels destroyed stood in the position by subrogation of the owner of such vessels, and hence was directly entitled to the recovery from Germany. Moring v. Privott, 146 N.C. 558, 60 S.E., 509; McNeil v. Miller, 29 W. Va., 480, 2 S.E., 335; Powell Powell v. Wake Water Co., 171 N.C. 290, 88 S.E., 426, Ann. Cas., 1917-A, 1302; Hires v. Exum, 158 Ga. 19, 122 S.E., 784; Joyner v. Reflector Co., 176 N.C. 274, 97 S.E., 44; Liverpool Great Western Steam Co. v. Phenix Insurance Co., 129 U.S. 397, 9 S.Ct., 469, 32 L.Ed., 788; St. Louis, etc., Ry. Co. v. Commercial Union Insurance Co., 139 U.S. 224, 11 S. Ct., 554, 35 L.Ed., 154. Accordingly, the award was made directly in favor of the Globe Rutgers Fire Insurance Company. Any right of the Gulf Atlantic to participate in the proceeds of the award must be dependent upon the contractual relations, if any, existing between the Gulf Atlantic and the Globe Rutgers, or the Gulf Atlantic and the South Carolina. The Gulf Atlantic had no direct relations to the vessels destroyed so as to enable it to effect any recoveries from Germany, and hence it could have no interest in such recoveries, except in and through its relation, if any, with the South Carolina and/or the Globe Rutgers. Of course, it cannot be seriously urged that any one who sustained losses indirectly through the activities of Germany during the World War would have a right to share in these funds. Suppose, for example, the creditors of the Gulf Atlantic whose claims may not have been paid in full should claim that their losses were due to Germany's activities, would they have a right to share in these funds? Or suppose the creditors of such creditors should make a similar claim, would they have the right to share in such funds? It is obvious it seems to me that the Gulf Atlantic can claim a share in these funds, if at all, only by virtue of contractual relations with the South Carolina and the Globe Rutgers, and hence, when such contract was canceled and rescinded, the Gulf Atlantic's right to share in these funds must be held also to have lapsed.
Plaintiff also argues that it is inequitable for the defendants to retain such recoveries for its own use, and contends that thereby the South Carolina is being enriched at the expense of the Gulf Atlantic. It seems to me that there is no merit in this contention. The South Carolina, by the settlement and cancellation of the contract, was damaged to the extent of at least $15,000.00 in 1921 on account of money already paid out to cover losses already accrued and reported. Besides, the South Carolina had been forced to employ counsel and put to expense in connection with the lawsuit, and had, moreover, been put to considerable financial embarrassment by the failure of the Gulf Atlantic to pay balances as due under the contract. It is difficult to estimate the actual amount of such damages, but it is possible that with interest they might at the present time equal the recoveries here involved. The South Carolina furthermore released the Gulf Atlantic from the unknown future liabilities to be reported under the contract. It was impossible at the time to estimate the amount of such future possible losses. Suppose such future losses, instead of turning out to be only about $5,000.00, had turned out to be $50,000.00 or $100,000.00, would the South Carolina have had the right to call upon the Gulf Atlantic for reimbursement on account of such losses? Clearly not. Equally clear it seems to me that the Gulf Atlantic should not now have the right to call upon the South Carolina for a share of the recoveries. It is elementary that one cannot blow hot and cold at the same time.
The claim of the plaintiff to recover in this case upon any equitable principles must, it seems to me, be defeated by the equitable maxim that he who comes into equity must come with clean hands. Pom. §§ 397, 404. Equitable remedies are never available where they work an unjust result or in favor of one not having clean hands. Walker v. Insurance Company, 136 S.C. 144, 134 S.E., 263, 52 A.L.R., 259; Hill v. Kavanaugh, 118 Ark. 134, 176 S.W. 336, 4 A.L.R., 1.
But the defendants' right to retain the recoveries is not dependent upon any equitable principles. It is a clear legal right. It seems to me that both in law and in equity the defendants are entitled to retain the benefits of the recoveries from Germany. When the Gulf Atlantic canceled and terminated the contract which it had with the South Carolina, it gave up any rights legal, equitable, or otherwise to share in any future benefits which it might otherwise have had by reason of such contract. The Gulf Atlantic ceased to have any interest therein. The South Carolina, by assuming and paying the Globe Rutgers out of its own resources the amounts which should have been paid by the Gulf Atlantic, has become entitled both in law and in equity to whatever rights the Gulf Atlantic might otherwise have had in the award and recovery. The Gulf Atlantic's previous contingent interest therein became in effect reassigned to and reassumed by the South Carolina. Hence the South Carolina is entitled both in law and in equity to retain the benefits which it has received by continuing with and carrying out its contract with the Globe Rutgers. This seems to me in accord both with law and with equity.
It is therefore ordered, adjudged, and decreed that the complaint be, and the same is hereby, dismissed, and that judgment be entered in favor of the defendants herein, with costs.
Messrs. F.D. Townsend and T.H. Moffatt, for appellant, cite: As to equality of knowledge: 21 C.J., 1131; 57 S.C. 507; 35 S.E., 800; 83 Me., 100; 21 A., 740; 37 N.E., 1031; 67 S.C. 456; 45 S.E., 1017; 53 S.C. 315; 31 S.E., 306; 42 S.C. 348; 20 S.E., 157; 32 S.C. 511; 11 S.E., 548; 30 S.C. 612; 8 S.E., 799; 28 S.C. 38; 4 S.E., 805. Equitable estoppel: 212 S.W. 151; 97 U.S. 39; 24 L.Ed., 993; 13 S.C. 355; 13 S.C. 371; 96 S.C. 106; 79 S.E., 985. Where waiver works estoppel: 154 S.C. 424; 40 S.E., 587; 58 L.R.A., 788; 50 W. Va., 104. As to release: 34 Cyc., 1092; 58 S.C. 488; 40 F.2d 280. A judgment defined: Sec. 525, Civil Code 1922; 4 S.C. 106; 24 S.C. 86; 27 S.C. 272; 3 S.E., 340; 16 S.C. 15; 50 S.C. 190; 27 S.E., 618; 153 S.C. 43; 149 S.E., 316; 77 S.C. 493; 58 S.E., 424; 215 U.S. 252; 1 R.C.L., 201.
Messrs. Melton and Belser, for respondent, cite: Release may be shown by words or conduct: 24 A. E. Enc., 284; 23 R.C.L., 397; 54 L.Ed., 179; 77 S.C. 493; 58 S.E., 424; 140 S.E., 388; 138 S.E., 870; 136 S.C. 236; 21 S.C. 420. Action for breach cannot be maintained where contract rescinded by mutual consent: 13 C.J., 602; 121 N.W., 73; 2 Strob. Eq., 258; 153 S.C. 236; 69 S.C. 426; 23 R.C.L., 400.
June 29, 1932. The opinion of the Court was delivered by
It is the duty of this Court, and one which it strives faithfully to perform, to give earnest attention to every case which is submitted to it for determination. This present case possesses such unusual features, and has been presented so zealously and ably, as to demand the special attention of the Court. This it has had.
The history of the case has been clearly and succinctly stated in the decree of Judge Grimball, who heard the case on Circuit — which decree will be reported — that it would be an idle gesture to repeat it, and useless to write a long opinion in the case. One or two matters it may be proper to advert to.
This action is prosecuted upon the theory that plaintiff is entitled to recover directly under the provisions of the Treaty of Berlin (42 Stat., 1939), for losses which it alleges it suffered under the contract of reinsurance which it had with South Carolina Insurance Company, which in turn had reinsured risks of Globe Rutgers Fire Insurance Company, to whom Germany had made an award for losses caused by Germany during the period of the war; the award being based upon losses which Globe Rutgers had paid for vessels insured by it, and which had been destroyed by Germany. Gulf Atlantic claims as a reinsurer. We are unable to appreciate the contention that it can sustain such claim independently of its contract with South Carolina Insurance Company.
That question presents the question of its relation to that contract. Has it repudiated the claims it had, or might have had, under it?
If it should be held that it was error to permit Mr. Edwin G. Seibels, president of the South Carolina Insurance Company, to testify to his negotiations with Mr. J.E. McDavid, president of the Gulf Atlantic Insurance Company, leading up to the compromise and release of February 16, 1921, and as to what was intended to be included therein, there remains in the record sufficient evidence to show that both parties to that transaction understood that the contract was at an end. It is in evidence that, after the signing of the release, South Carolina Insurance Company made no further reports of losses to Gulf Atlantic, and did not call on it to pay any such losses, nor did Gulf Atlantic demand any share of premiums which might be due. All relations between the companies ceased. In February, 1917, the Gulf Atlantic had requested to be relieved of its obligations under the contract as soon as possible. September, 1917, Gulf Atlantic returned to the South Carolina Company $5,777.94, which the South Carolina had paid it as its share of premiums earned, and refused to pay its share of the losses then due. In its answer in the admiralty suit it admitted its refusal to pay such claims, and alleged that the $5,777.94 had been received by South Carolina Insurance Company with the understanding that the contract would be canceled. It further alleged in that answer that the contract was ultra vires, and denied all liability under it.
There was ample evidence to sustain the finding and conclusion of the Circuit Judge that the parties, when the release of February 16, 1921, was signed, considered the contract was at an end; and this independently of the testimony of Mr. Seibels. The South Carolina Insurance Company was compelled for its own protection to assume the obligations which the Gulf Atlantic Insurance Company had repudiated and failed to perform.
It would be inequitable to permit it to come in now under the aegis of the repudiated contract and participate in the recoveries awarded Globe and Rutgers under the provisions of the Treaty of Berlin.
The Circuit Judge has reached a correct conclusion.
The appeal is dismissed, and the decree appealed from is affirmed.
MR. CHIEF JUSTICE BLEASE and MESSRS. JUSTICES STABLER and CARTER concur.