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COLEMAN v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.
38963.
Breach of contract. Floyd City Court. Before Judge Maddox.
FELTON, Chief Judge.
1. Where the petition alleges the defendant's settlement of a lawsuit with a tortfeasor which sought to recover damages for personal injuries to himself and property damage to his automobile, there is a sufficient allegation that the settlement included recovery for property damages to said automobile.
2. In an action by an insurer against an insured for breach of the loan receipt agreement by his refusal to repay the insurer to the extent of the money advanced him by the insurer, a copy of the insured's action against the tortfeasor, with whom he later settled, need not be attached to the petition, since the action is on the loan receipt, not on the insured's action.
3. An insured can not be permitted, after accepting money under a loan receipt, to breach the terms of the loan receipt by settling the claim with the tortfeasor, thus destroying the insurer's right of subrogation, and then escape completely free of liability under the loan receipt under the guise of having settled for personal injuries only.
The State Farm Mutual Automobile Insurance Co. brought an action for breach of contract against A, W. Coleman. The petition alleged in substance that the plaintiff had issued a certain policy of collision insurance covering defendant's automobile; that while the policy was in effect the defendant's automobile was damaged by a collision with a railroad engine or train owned and operated by the Southern Railway System; that as a result of said collision the defendant recovered from the plaintiff the sum of $1,070, in consideration for which the defendant executed, on November 2, 1959, a loan receipt in which he agreed that said sum was a loan repayable only to the extent of any net recovery he might make from any person or persons, corporation or corporations, on account of loss by collision to his property on or about October 14, 1959. As security for such repayment, defendant pledged to the plaintiff the said recovery and delivery to it of all documents necessary to show his interest in said property, and he agreed to enter and prosecute in his name suit against such person or persons, corporation or corporations, on account of said claim for said loss, with all due diligence, at the expense and under the exclusive direction and control of the plaintiff. The defendant covenanted in said loan receipt that he had made no settlement with anyone who might be responsible for said loss, and that any money paid him by any other participant in loss was held in trust pending instructions by the plaintiff. A copy of the loan receipt was attached as an exhibit to the petition.
The petition alleged that after the execution of said loan receipt by the defendant, the defendant filed a suit in the Superior Court of Floyd County against Southern Railway to recover for personal injury to himself and property damage to his said automobile; that plaintiff's attorneys notified defendant's attorney by letter dated July 18, 1960, that plaintiff had a claim under the loan receipt against any funds received by the defendant from the railway; that thereafter, on or about December 23, 1960, the defendant settled the lawsuit with Southern Railway, receiving the gross sum of $5,000, resulting in a net recovery of $4,000 after payment of attorney's fees; that as a result of said settlement, the defendant dismissed the lawsuit with prejudice; that the automobile was sold by the plaintiff for junk for $172, which sum was credited to the $1,070 originally due under the loan receipt, leaving a balance due to the plaintiff of $898, plus interest and costs, plaintiff's demand for which was refused by the defendant.
The defendant demurred on the ground that there was no allegation in the petition showing that the defendant had included any claim of loss or damage to the automobile in the settlement with the Southern Railway System. He also demurred to the plaintiff's failure to attach to the petition a copy of the defendant's action against the railway. The trial judge overruled these demurrers and the plaintiff in error excepts to that judgment.
(After stating the foregoing facts). 1. The first ground of special demurrer attacks the petition on the ground that there is no allegation therein showing that the defendant had included any claim of loss or damage to the automobile in the settlement with the Southern Railway System. This ground of demurrer is without merit. In paragraph 7 of the plaintiff's petition, it is alleged that ". . . the defendant, without the knowledge or consent of the plaintiff and in violation of the terms of said loan receipt, filed suit in the Superior Court of Floyd County, Georgia, against the Southern Railway to recover for personal injury to himself and property damage to his said automobile, same being Case No. 9424." (Italics ours). Paragraph 9 alleges that thereafter ". . . the said Coleman settled said lawsuit with the Southern Railway System . . ." and paragraph 10 alleges that "as a result of said settlement, the said Coleman . . . dismissed said lawsuit with prejudice." It seems obvious that the defendant's dismissal of the lawsuit was an indication that the settlement obtained from Southern Railway included everything sued for in said lawsuit, which included damages to his automobile; otherwise, he would have continued his action against the railway. "Though damage was sought for personal injury and for reduction in value of the car, there was but a single cause of action. Georgia Ry. &c. Co. v. Endsley, 167 Ga. 439 (145 SE 851, 62 ALR 256). The settlement constituted a release of the tortfeasor, not merely as to the amount paid, but as to all liability because of the negligence complained of. Pennsylvania Casualty Co. v. Thompson, 130 Ga. 766 (61 SE 829)." Universal Credit Co. v. Service Fire Ins. Co., 69 Ga. App. 357, 361 (25 SE2d 526). Thus the defendant's act of settlement with the tortfeasor was a final disposition of any claim the defendant had against it as a result of the collision. The bringing of the suit and the settlement and dismissal thereof by the defendant constituted a breach of the contract in the loan receipt, which provided that the defendant should prosecute such suits "under the exclusive direction and control of said insurance company." As to plaintiff in error's argument that the insurer is not alleged to have called upon him to prosecute an action in behalf of the insurance company, nor offered to pay expenses attendant thereon, the terms of the loan receipt do not require the insurance company to initiate the action; on the other hand, the insured agreed to enter and prosecute the suit himself, subject only to the company's exclusive control and direction.
2. The second ground of special demurrer, that of failure of the plaintiff to attach to the petition a copy of the defendant's action against the railway, is likewise without merit, for the reason that the plaintiff's action is based on the breach of the contract in the loan receipt, rather than on the defendant's action against the railway. Code Ann. 81-105 requires writings to be attached to the petition only when "they constitute the cause of action, or the relief prayed for must be based thereon," and neither condition exists here.
3. As to the defendant's general demurrer, the cases of Universal Credit Co. v. Service Fire Ins Co., 69 Ga. App. 357, supra; Service Fire Ins. Co. v. Powell, 70 Ga. App. 213 (27 SE2d 896); and Clark v. American Cas. Co., 96 Ga. App. 328 (99 SE2d 897) are sufficient authority to justify the conclusion that an insured can not be permitted, after accepting money under a loan receipt, to breach the terms of the loan receipt by settling the claim with the tortfeasor, thus destroying the insurer's right of subrogation, and then escape completely free of liability under the loan receipt under the guise of having settled for personal injuries only.
From the foregoing it follows that the court below did not err in overruling all the demurrers to the petition.
Judgment affirmed. Bell and Hall, JJ., concur.
James Maddox, for plaintiff in error.
DECIDED SEPTEMBER 6, 1961.
Friday May 22 23:23 EDT


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