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MACON AUTO AUCTION, INC. v. GEORGIA CASUALTY & SURETY COMPANY; and vice versa.
38946.
38951.
Action on insurance policy; summary judgment, etc. Bibb Superior Court. Before Judge Anderson.
EBERHARDT, Judge.
1. An auto auction policy which provides for indemnity against "pecuniary loss" resulting from the acceptance or encashment of checks in connection with sales made through the auction includes a loss sustained when a substitute check of a purchasing dealer, given to take up other checks that had been returned by the bank on account of insufficient funds and with the representation that there had been a mix-up in his bank account but that he had on deposit ample funds to cover the check, was likewise dishonored.
2. The provisions of an insurance policy must be construed against the company and in favor of the insured, and when the performance of one act is, by the terms of the policy, made a condition precedent to liability it must be held that all others provided therein are not.
Macon Auto Auction, Inc. filed suit against Georgia Casualty & Surety Co. for amounts allegedly due under an "Automobile Dealer's Title and Fraudulent Instrument Coverage" policy. The pertinent parts of the policy are as follows:
"We the company hereby agree to indemnify the insured against pecuniary loss sustained owing to acceptance or encashment of forged, fraudulent or altered checks, drafts or instruments from purchasers of motor vehicles made payable to the assured, or checks, drafts or instruments given by the purchasing or selling dealer authorized to transact business by the assured, issued, endorsed or guaranteed by the assured. No loss shall be payable on any forged, fraudulent, or altered checks, drafts or instruments where any person or firm other than the purchaser or duly authorized representative of the purchaser, has signed the check, draft or instrument. Coverage is also extended to checks, drafts or instruments given on insufficient funds where there is no intent to defraud. However, there shall be no liability hereunder in respect of any check(s) not requiring a title attachment which has/have not been deposited with a bank within seven days after the date of the auction, at which time the check was issued. Loss arising from checks that require the attachment of a title instrument shall be covered hereunder provided such checks and titles are referred to a bank within fourteen days, unless circumstances prevent securing title papers and in which case notice must be given to Georgia Casualty and Surety Company, Atlanta, Georgia, or to Auction Insurance Agency, 1922 Fifth Avenue North, Birmingham, Alabama.
"It is a condition precedent to liability hereunder that the sale shall be reported to the company or to Auction Insurance Agency, 1922 Fifth Avenue North, Birmingham, Alabama, prior to the time a loss is discovered in respect of that sale . . .
"Upon discovery by the assured of any fact or circumstances indicating a probable loss hereunder, the assured shall as soon as possible after the discovery, notify the company, giving all details then known to the assured. The assured shall within 60 days after such discovery file with the company a proof of claim sworn to by the assured, and shall also file the instrument which is the basis of such claim.
"Any losses for which the company may be liable shall be payable immediately upon the receipt of the company of proof of claim provided above. No suit shall be brought against the company unless commenced within one year of the assured's discovery of loss.
"It is understood and agreed that the underwriter, or its representative, without assigning any reason therefor, may from time to time notify the insured that transactions with a certain named dealer or dealers are not covered hereunder, and that immediately upon receipt of such notice by the insured at its office herein named the underwriter shall have no liability arising from any subsequent transactions between the insured and such named dealer or dealers."
(1) Sumner Motor Company $2,060.00 (3) Connell Auto Sales 1,585.00
Total $5,665.00
Those checks were given to the sellers and, in each case, as was its usual practice, plaintiff guaranteed the checks by stamping on them, "This instrument guaranteed by Macon Auto Auction, Inc., under the terms of its policy through Auction Insurance Agency, Birmingham, Alabama."
On June 4, 1959, the payees in two of the checks, Sumner ($2,060) and Pilcher ($2,020), notified plaintiff that the checks had been returned to them marked "insufficient funds." Whereupon, plaintiff issued its checks to the payees in accordance with its guarantee and took possession of the checks. The third payee, Connell ($1,585), advised plaintiff on the same date that it had received notice that its check would not be paid.
Plaintiff contacted Fincher, who came to Macon on June 9, 1959, explaining that there had been some error in his deposits but that he now had sufficient moneys on deposit to pay all three of the checks given on May 27. Plaintiff then accepted Fincher's check for the amount of the May 27 checks ($5,665) and returned to him the Sumner and Pilcher checks.
The next day, June 10, 1959, plaintiff learned that the third payee, Connell ($1,585), had redeposited its check and that the check had been paid, resulting in an apparent overpayment by Fincher. The same day Fincher purchased another automobile from Connell for $2,320. Since plaintiff's books showed Fincher with a credit of $1,585, this transaction was handled by plaintiff's issuing its check to Connell for the $2,320 and accepting another check from Fincher for $735, the difference in Fincher's "credit" and the sales price of the automobile.
As might be expected, the $5,665 check given by Fincher to plaintiff on June 9, 1959, was returned marked "insufficient funds," as was the $735 check of June 10. Plaintiff alleged a pecuniary loss totaling $6,400 as a result of these transactions.
Georgia Casualty & Surety Co. filed its plea in bar and answer, which incorporated the allegations of the plea in bar. Macon Auto Auction, Inc., filed both general and special demurrers to the plea in bar. The general demurrer was overruled as were several of the special demurrers but some of the special demurrers were sustained.
The defendant then filed a motion for summary judgment as to its liability for two of the checks of May 27, [Sumner ($2,060 and Pilcher ($2,020)], and for the $1,585 "credit" involved in the June 10 transaction. The motion was granted as to the May 27 checks and denied as to the June 10 transaction.
Macon Auto Auction, Inc., excepted to the granting of a portion of the motion for summary judgment and to the overruling of its general and special demurrers. Georgia Casualty & Surety Co., by cross-bill of exceptions, assigns error on the denial of part of the summary judgment motion and on the sustaining of the special demurrers.
1. Plaintiff in error on the main bill, hereinafter referred to as plaintiff, urges as error the granting of part of the defendant in error's (hereinafter referred to as defendant) motion for summary judgment relating to two of the May 27 checks [Sumner ($2,060) and Pilcher ($2,020)]. A ruling on this point involves a construction of the applicable portions of the "Automobile Dealer's Title and Fraudulent Instrument Coverage" policy issued by the defendant.
Although the coverage is part of a relatively new type policy evolved to meet a specific need of the modern business world, this factor does not alter the well-settled rules that: (1) Where a contract is ambiguous or the construction doubtful, it is to be construed most strongly against the maker or drawer. Small Co. v. Claxton, 1 Ga. App. 83 (57 SE 977); Jenkins v. Morgan, 100 Ga. App. 561 (112 SE2d 23); (2) The provisions of a policy of insurance will be strictly construed against the insurer. Continental Life Ins. Co. v. Wells, 38 Ga. App. 99 (142 SE 900); Penn Mut. Life Ins. Co. v. Milton, 160 Ga. 168 (127 SE 140, 40 ALR 1382); Johnson v. U. S. Fidelity &c. Co., 93 Ga. App. 336 (91 SE2d 779); and (3) Where a policy of insurance is reasonably susceptible of more than one construction, the interpretation most favorable to the insured will be given effect, resolving all ambiguities against the insurer. Aetna Life Ins. Co. v. Padgett, 49 Ga. App. 666 (176 SE 702); Gill v. Federal Life &c. Co., 86 Ga. App. 455 (71 SE2d 683).
Let us now turn to an examination of the policy in dispute and the factual situation in the case at bar. The coverage paragraph of the policy, stripped of those portions immaterial here, is as follows: "We the company hereby agreed to indemnify the insured against pecuniary loss sustained owing to acceptance or encashment of . . . checks, drafts or instruments given by the purchasing . . . dealer authorized to transact business by the assured, issued, endorsed or guaranteed by the assured . . . Coverage is also extended to checks, drafts or instruments given on insufficient funds . . ."
and sustained that loss as a result of "instruments given on insufficient funds." Furthermore, there is no dispute for the purposes of this review that Fincher was authorized to "transact business" or that the assured plaintiff "guaranteed" the checks involved. The only remaining question is whether or not plaintiff's "pecuniary loss was sustained owing to acceptance" of the checks of May 27.
No definition of the words "owing to" appears in the policy and there is no specification other than set out above as to how the "pecuniary loss" must occur in order to be covered by the policy. If the phrase "sustained owing to acceptance" is ambiguous, as we think it is, then, in accordance with the rules set out above, it should be given the construction most favorable to the insured. Aetna Life Ins. Co. v. Padgett, 49 Ga. App. 666, supra.
Such a construction requires a holding that the "pecuniary loss" of plaintiff was sustained as a result of the checks of May 27. This interpretation is also in accord with the evident purpose of the parties in entering this contract of insurance, the loss being the very type hazard insured against. The defendant was liable on the two checks of May 27 [Sumner ($2,060) and Pilcher ($2,020)] and, therefore, the motion for summary judgment as to these two checks was improvidently granted and should be reversed.
2. Plaintiff also excepts to the overruling of his demurrers to defendant's plea in bar. Demurrers 1 through 4 are general demurrers to the plea in bar as a whole and to each of three paragraphs thereof. The remaining demurrers attack certain paragraphs of the plea specially on various grounds.
The policy has a provision that: "Upon discovery by the assured of any fact or circumstances indicating a probable loss hereunder, the assured shall as soon as possible after the discovery, notify the company, giving all details then known to the assured. The assured shall within 60 days after such discovery file with the company a proof of claim sworn to by the assured, and shall also file the instrument which is the basis of such claim."
In its plea in bar defendant sets our that plaintiff acquired knowledge on June 4, 1959, that the checks of May 27 would be dishonored but failed to give notice of that fact to defendant until June 30, that no sworn proof of loss was filed until March 22, 1960, thus beyond the sixty-day period within which it was required to be filed by the terms of the policy, and that the instruments which form the basis of the claim, having been surrendered to Fincher, were never filed--and that the performance of its obligation with respect to each of those matters was a condition precedent to the right of plaintiff to bring the action. A reading of the policy will disclose that it was not so provided therein, while in another portion it was provided that "it is a condition precedent to liability hereunder that the sale be reported" to the defendant or a named agency prior to the time a loss is discovered in respect to that sale. (Timely report of the sales involved is conceded to have been made.)
Since this one policy provision was made a condition precedent by the terms of the policy itself, we must conclude that all others were not such. Expressio unius est exclusio alterius. And see Atlanta Street R. Co. v. City of Atlanta, 66 Ga. 104, 108. And if other provisions were not conditions precedent, as contended in the plea, the general demurrers thereto should have been sustained. This ruling, together with our conclusion that the grant of the motion for summary judgment was error, renders unnecessary any disposition of the overruling of the special demurrers to the plea in bar.
3. The defendant seeks review by cross-bill of exception of the ruling of the trial court in denying a portion of its motion for summary judgment and to the sustaining of certain demurrers to its plea in bar. Plaintiff has filed a motion to dismiss the cross-bill in this court.
Section 8 of the Summary Judgment Act of 1959 (Ga. L. 1959, p. 236; Code Ann. 110-1208) provides: "An order granting summary judgment on any issue or as to any party shall be reviewable by direct bill of exceptions, but an order denying summary judgment shall not be subject to review."
Defendant is cognizant of this statute and concedes that, standing alone, these rulings would not be subject to review by this court. But the defendant contends that it has the right to review where, as here, a portion of a motion granting summary judgment is brought up by bill of exceptions. This contention is based on Code 6-701, as amended (Ga. L. 1957, pp. 229-232).
In the face of the clear prohibition in the Summary Judgment Act set out above, defendant's contention must fail, and the cross-bill of exceptions is hereby dismissed.
Judgment reversed on the main bill. Cross-bill dismissed. Carlisle, P. J., and Nichols, J., concur.
Martin, Snow, Grant & Napier, T. Baldwin Martin, for plaintiff in error.
DECIDED JULY 11, 1961 -- REHEARING DENIED JULY 27, 1961.
Friday May 22 23:37 EDT


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