Bollinger v. National Fire Insurance

SCHAUER, J.

Concurring and Dissenting.—I concur in the judgment but reach my conclusion upon a different ground and dissent from certain propositions declared in the majority opinion as hereinafter indicated. That opinion, in effect, reviews the judgment which was rendered in the municipal court in the preceding action. I agree with the majority statement by Mr. Justice Traynor that, upon the facts as pleaded here, it appears that in the municipal court action “defendant’s motion for nonsuit should have been denied. ’ ’ But concluding that the municipal court erred at that time in that action is immaterial on this appeal. The fact remains that the municipal court did grant the motion, did determine that such action was prematurely brought, and did enter judgment of dismissal. We have no power, on this appeal from the judgment of another court in another action, to vacate the judgment in the previous action in the municipal court. We cannot revive that action in the guise of sustaining this one. The only materiality of that one here concerns not what should have been done but what was done.

As a secondary basis for its conclusion Justice Traynor’s opinion declares, “Defendant’s position would not be improved had the action [in the municipal court]. in fact been premature, for defendant had lost the privilege to urge this defense by failing to plead it plainly and to assert it promptly. . . . Defendant’s plea of prematurity was a dilatory plea in abatement, unrelated to merits and not asserted for nearly a year after plaintiff’s action was filed. Under these circumstances defendant loses its privilege to raise it.” (Italics added.) I do not know whether Justice Traynor intends to imply that the trial court in such a situation loses jurisdiction to entertain a special dilatory plea or merely errs in sustaining it. If he means the former it seems to be a rather drastic innovation of law to promulgate without precedent, and if he means the latter, then, obviously, his attack on the municipal court judgment is collateral. Assuming that that court abused its discretion in entertaining the dilatory plea when it was so tardily raised, nevertheless, that court, not this one, possessed the jurisdiction to, and did, pass on the plea. The action in *413 the municipal court, erroneously or otherwise, was ended by the judgment of dismissal. The new action, in which this appeal is taken, was not commenced until the complaint in it was filed. (Code Civ. Proc., §§ 350 and 405.) That date is February 25, 1941, and it is with that date we must reckon in determining whether the action is barred by the statute of limitations.

In seeking to avoid the bar of the statute here Justice Tray-nor goes on to declare that “The statutes of most states provide that when an action is brought in good time and diligently pursued, but defeated by some technicality unrelated to the merits, a new action may be brought within a certain period, usually six months or a year, which shall be. deemed a continuance of the former action. ... In any event, this court is not powerless to formulate rules of procedure where justice demands it. . . . Since this action is in reality a continuance of the earlier action involving the same parties, facts, and causes of action, and was promptly filed after entry of judgment on the nonsuit, plaintiff should not be deprived of a trial on the merits because he failed to seek other remedies in the Municipal Court.” (Italics added.) While legislation such as that which Justice Traynor says ‘ ‘ The statutes of most states provide” would seem desirable under the circumstances of the case before us, the fact remains that in California the statutes do not so provide. I do not feel at liberty to concur in supplying the lacking legislation. Statutes of limitation are more than “rules of procedure.” In addition to the fact that the prescribing of limitation periods, otherwise than by contract, is essentially a legislative function, it is the law that parties acquire vested rights through the operation of statutes (or contracts) of limitation when the prescribed period has completely run and even the Legislature cannot retroactively enlarge a period which has expired. (See Peiser v. Griffin (1899), 125 Cal. 9, 14 [ 57 P. 690 ]; Chambers v. Gallagher (1918), 177 Cal. 704, 708-709 [ 171 P. 931 ].) Hence we have no right to innovate the amendment decreed by the majority opinion and give it retroactive effect.

But there is a sound basis upon pre-existing statutes for reaching the conclusion that the present action is not barred. The Legislature has fixed four years (Code Civ. Proc., § 337) as being ordinarily the reasonable period within which an action founded upon an instrument in writing shall be *414 brought, but by the provisions of sections 2070 and 2071 of the Insurance Code has prescribed “fifteen months next after the commencement of the fire” as the period within which an action for the recovery of a claim upon a fire insurance policy must be instituted. This special limitation is required to be set forth in every policy and, by reason of such statute, it is to be deemed included in every policy, regardless of whether it is actually written therein. (See Brown v. Ferdon (1936), 5 Cal.2d 226, 230 [ 54 P.2d 712 ]; Hales v. Snowden (1937), 19 Cal.App.2d 366, 369 [ 65 P.2d 847 ]; Mueller v. Elba Oil Co. (1942), 21 Cal.2d 188, 204 [ 130 P.2d 961 ]; Fernelius v. Pierce (1943), 22 Cal.2d 226, 243 [ 138 P.2d 12 ]; Baugh v. Rogers (1944), 24 Cal.2d 200, 215 [ 148 P.2d 633 ].) It derives its effectiveness from the statute. The same statute also prescribes certain requirements as to notification, proof, ascertainment of loss, and lapse of time, which must be met before an action can be “sustained.” It specifically provides that “No suit or action . . . for the recovery of any claim shall be sustained, until after full compliance by the insured with all of the foregoing requirements, nor unless begun within fifteen months next after the commencement of the fire.” (Italics added.)

The meaning of the word “sustained,” and the effect of the clause in which it appears, might be open to argument if the defendant here had not already committed itself to its understanding of a definite meaning for that word and the clause, and enforced that meaning on the plaintiff. This section, on its face, would seem open to the meaning that an action on the policy could be commenced at any time “within fifteen months next after the commencement of the fire” but that it could not be “sustained,” as by a judgment for plaintiff, until the lapse of the required time, etc. But the meaning attributed to the clause by defendant, and adopted by the municipal court in granting defendant’s motion for nonsuit, is not merely that an action assertedly prematurely brought can be abated during the incompetent period and until the specified requirements have been met, but is, rather, that such an action must be dismissed. In other words, the position of the defendant, as invoked in the preceding action, and held by the court in a judgment which has become final, is that the provision in question amounts to a statutory prohibition staying the commencement of the action. Defendant cannot be *415 permitted to invoke the benefits of a statutory prohibition against the commencement of an action on the policy without also bearing the burden of such statutory prohibition. Section 356 of the Code of Civil Procedure is a general law of the state, applicable under the circumstances shown. It provides that “When the commencement of an action is stayed by . . . statutory prohibition, the time of the continuance of the . . . prohibition is not part of the time limited for the commencement of the action.” Excluding the time during which, on defendant’s theory, plaintiff was prohibited from commencing the action, his second complaint was filed in time.

For the reasons above stated I concur in the judgment of reversal.

EDMONDS, J.

Some months ago, upon an opinion written by Mr. Justice Traynor, this court affirmed the judgment in favor of the insurer. (Bollinger v. National Fire Ins. Co., * (Cal.) 147 P.2d 611 .) I concurred in the decision and nothing was developed upon the rehearing to change my views that the applicable law was then correctly applied to the uncontroverted facts. The present discussion of my associate omits all reference to the principal contentions of the parties and places the decision upon a ground correctly designated by Mr. Justice Schauer as judicial legislation. I assert with confidence that the rule of procedure which is now promulgated as justification for reversing the judgment has no sound legal basis, and I adhere to the principles which were stated and applied in the former opinion.

In California, all fire insurance must be written upon a standard form of policy which, in part, provides: “No suit or action on this policy for the recovery of any claim shall be sustained, until after full compliance by the insured with all of the foregoing requirements, nor unless begun within fifteen months next after the commencement of the fire.” (Ins. Code, § 2071.) The fire which occasioned the damage for which the appellant demands reimbursement occurred about eighteen months before this action was filed. Eelying upon the provision of the statutory policy, the insurer demurred upon the ground that the action was begun subsequent to the expiration of the period of limitation. The trial court sustained the demurrer without leave to amend, and entered *416 judgment for the insurer. The issue, consequently, concerns the propriety of that ruling.

The language of the policy, the appellant asserts, must be interpreted as permitting an insured to commence an action within fifteen months from the time the cause of action accrues, which, he declares, is the date “it was first possible to file a suit under the policy” after the amount of loss has been ascertained. The courts of a small minority of states have so construed policy provisions such as the one required by our statute. (Ellis v. Council Bluffs Ins. Co., 64 Iowa 507 [ 20 N.W. 782 ]; German Ins. Co. v. Fairbank, 32 Neb. 750 [ 49 N.W. 711 , 29 Am.St.Rep. 459 ]; Sample v. London etc. F. Ins. Co., 46 S.C. 491 [ 24 S.E. 334 , 57 Am.St.Rep. 701 , 47 L.R.A. 696 ] ; Boston Marine Ins. Co. v. Scales, 101 Tenn. 628 [ 49 S.W. 743 ]; Hong Sling v. Royal Ins. Co., 8 Utah 135 [ 30 P. 307 ]; McFarland & Steele v. Peabody Ins. Co., 6 W.Va. 425 .) The great weight of authority, however, holds that the clear terms of such a limitation will be enforced and, accordingly, a policy providing that no action will be sustained “unless begun within fifteen months next after commencement of the fire” simply fixes a period beyond which the insured may not sue. (Provident Fund Soc. v. Howell, 110 Ala. 508 [ 18 So. 311 ]; Daly v. Concordia Fire Ins. Co., 16 Colo.App. 349 [ 65 P. 416 ]; Chichester v. New Hampshire Fire Ins. Co., 74 Conn. 510 [ 51 A. 545 ]; Gibralter Fire & Marine Ins. Co. v. Lanier, 64 Ga.App. 269 [ 13 S.W.2d 27 ] ; Maxwell Bros. v. Liverpool etc. Ins. Co., 12 Ga.App. 127 [ 76 S.E. 1036 ]; McDaniel v. German-American Ins. Co., 134 Ga. 189 [ 67 S.E. 668 ]; Williams v. Greenwich Ins. Co., 98 Ga. 532 [ 25 S.E. 31 ]; Trichelle v. Sherman & Ellis Inc., 259 Ill.App. 346 ; Western Coal etc. Co. v. Traders Ins. Co., 122 Ill.App. 138 ; Colonial Mut. F. Ins. Co. v. Ellinger, 112 Ill.App. 302 ; Oakland Home Ins. Co. v. Allen, 1 Kan.App. 108 [ 40 P. 928 ] ; State Ins. Co. of Des Moines v. Stoffels, 48 Kan. 205 [ 29 P. 479 ]; Smith v. Herd, 110 Ky. 56 [ 60 S.W. 841, 1121 ]; Owen v. Howard Ins. Co., 87 Ky. 571 [ 10 S.W. 119 ]; Guccione v. New Jersey Ins. Co. (La.App.) 167 So. 845 ; Tracy v. Queen City F. Ins. Co., 132 La. 610 [ 61 So. 687 , Ann.Cas.l914D 1145]; Blanks v. Hibernia Ins. Co., 36 La.Ann. 599 ; Carraway v. Merchants Mut. Ins. Co., 26 La.Ann. 298 ; Earnshaw v. Sun Mut. Aid Soc., 68 Md. 465 [ 12 A. 884 , 6 Am.St.Rep. 460 ]; Metropolitan Life Ins. Co. v. Dempsey, 72 Md. 288 [ 19 A. 642 ] ; Fullam v. New *417 York Union Ins. Co., 7 Gray (Mass.) 61 [66 Am.Dec. 462]; Little v. Phoenix Ins. Co., 123 Mass. 380 [ 25 Am.Rep. 96 ]; Dahrooge v. Rochester-German Ins. Co., 177 Mich. 442 [ 143 N.W. 608 , 48 L.R.A.N.S. 906 ]; Shackett v. People’s Mut. Ben. Soc., 107 Mich. 65 [ 64 N.W. 875 ] ; Peck v. German F. Ins. Co., 102 Mich. 52 [ 60 N.W. 453 ]; Rattier v. German Ins. Co., 84 Minn. 116 [ 86 N.W. 888 ]; Willoughby v. St. Paul German Ins. Co., 68 Minn. 373 [ 71 N.W. 272 ]; Grigsby v. German Ins. Co., 40 Mo.App. 276 ; Bradley v. Phoenix Ins. Co., 28 Mo.App. 7 ; Glass v. Walker, 66 Mo. 32 ; Ignazio v. Fire Assn, of Phila., 98 N.J.L. 602 [ 121 A. 456 ]; Electric Gin Co. v. Fireman’s Fund Ins. Co., 39 N.M. 73 [ 39 P.2d 1024 ]; Biloz v. Tioga etc. Assn., 21 N.Y.S.2d 643 [affd. 23 N.Y.S.2d 460 ] ; Hamilton v. Royal Ins. Co., 156 N.Y. 327 [ 50 N.E. 863 , 42 L.R.A. 485 ]; King v. Watertown F. Ins. Co., 47 Hun. (N.Y.) 1; Rouse v. Old Colony Ins. Co., 203 N.C. 345 [ 166 S.E. 177 ]; Welch v. Phoenix Assur. Co., 192 N.C. 809 [ 136 S.E. 117 ]; John Tatham & Co. v. Liverpool etc. Ins. Co., 181 N.C. 434 [ 107 S.E. 450 ]; Travelers’ Ins. Co. v. California Ins. Co., 1 N.D. 151 [ 45 N.W. 703 , 8 L.R.A. 769 ]; Appel v. Cooper Ins. Co., 76 Ohio 52 [ 80 N.E. 955 , 10 Ann.Cas. 821, 10 L.R.A.N.S. 674 ]; Lucas v. Life Ins. Co. of Virginia (Ohio App.), 42 N.E.2d 674 ; United States F. Ins. Co. v. Swyden 175 Okla. 475 [ 53 P.2d 284 ]; Camden F. Ins. Assn. v. Walker, 111 Okla. 35 [ 238 P. 462 ]; Wever v. Pioneer F. Ins. Co., 49 Okla. 546 [ 153 P. 1146 ]; Egan v. Oakland Home Ins. Co., 29 Ore. 403 [ 42 P. 990 , 54 Am.St.Rep. 798 ]; Miners Savings Bank v. Merchants F. Ins. Co., 131 Pa.Super, 21 [ 198 A. 495 ]; Howard Ins. Co. v. Hocking, 130 Pa. 170 [ 18 A. 614 ]; Schroeder v. Keystone Ins. Co. (Penn.), 2 Phila. 286 ; Braunstein v. North River Ins. Co., 62 S.D. 561 [ 255 N.W. 463 ] ; Kroeger v. Farmers’ Mut. Ins. Co., 52 S.D. 433 [ 218 N.W. 17 ]; Schlitz v. Lowell Mut. F. Ins. Co., 96 Vt. 334 [ 119 A. 516 ]; Morrell & Co. v. New England F. Ins. Co., 71 Vt. 281 [ 44 A. 358 ] ; Virginia F. & M. Ins. Co. v. Wells, 83 Va. 736 [ 3 S.E. 349 ] ; Virginia F. & M. Ins. Co. v. Aiken, 82 Va. 424 ; Hefner v. Great Amer. Ins. Co., 126 Wash. 390 [ 218 P. 206 ]; State Ins. Co. v. Meesman, 2 Wash. 459 [ 27 P. 77 , 26 Am.St.Rep. 870 ]; Hart v. Citizens Ins. Co., 86 Wis. 77 [ 56 N.W. 332 , 39 Am.St.Rep. 877 , 21 L.R.A. 743 ] ; McFarland v. Railway etc. Accident Assn., 5 Wyo. 126 [ 38 P. 347, 677 , 63 Am.St.Rep. 29 , 27 A.L.R. 48 ].)

The decisions in California follow this rule and hold that an *418 insured must begin his action within fifteen months from the date of loss. (Tebbets v. Fidelity & Casualty Co., 155 Cal. 137 [ 99 P. 501 ]; Garido v. American Cent. Ins. Co., 2 Cal. Unrep. 560 [ 8 P. 512 ]; Harlow v. American Equitable Assur. Co., 87 Cal.App. 28 [ 261 P. 499 ] ; Fitzpatrick v. North American Acc. Ins. Co., 18 Cal.App. 264 [ 123 P. 209 ].) The appellant insists, however, that in Case v. Sun Ins. Co., 83 Cal. 473 [ 23 P. 534 , 8 L.R.A. 48 ], the court followed the minority-rule. But in that case the insurer exacted compliance with policy provisions which required thirteen months to complete although the contract restricted the commencement of an action to “within twelve months next after the fire shall occur.” Under those circumstances the limitation was held unenforceable. A similar situation was shown in Bennett v. Modern Woodmen, 52 Cal.App. 581 [ 199 P. 343 ], because, giving literal effect to the insurer’s by-laws, the remedy of the beneficiary was suspended until the organization rejected her claim although the period of limitation was then running. Otherwise stated, the by-laws .which the insurer there relied upon gave it the opportunity to delay action until the period of limitation had expired.

In the present case, less than ninety days after the fire the appellant and the insurance company agreed upon the amount of the loss which, by the terms of the statutory policy, was payable thirty days thereafter. The present action was commenced about eighteen months after the date of the fire and thirteen months after the loss was payable. Moreover, had the insurance company exacted full compliance with every provision of the policy, the amount of the loss would have become payable not more than five months after the fire, and the limitation of fifteen months for the commencement of an action gave the insured ten months in which to sue. In other words, by the terms of the policy contract, the time for bringing an action could not have been reduced to less than ten .months and because in the present case the amount of the loss was promptly agreed upon, the insured had thirteen months within which to pursue his remedy.

Certainly this situation is entirely different from that shown in either Case v. Sun Ins. Co., supra, or Bennett v. Modern Woodmen, supra, and it affords no justification for applying the doctrine relied upon by a few courts for the purpose of relieving from policy provisions which unduly shortened the *419 period of limitation by policy covenants. (See 41 Tale L.J. 1069.) In a number of states- the Legislature has adopted a statute either prohibiting any limitation by contract or providing for a specified time after accrual of the cause of action for the commencement of the action. But in jurisdictions having no statutory prohibition against policy limitations, the rule is that although parties to a contract may agree upon a limitation period less than that provided by statute generally, a reasonable time must be allowed for the commencement of an action. (Tebbets v. Fidelity & Casualty Co., supra; Fitzpatrick v. North American Acc. Ins. Co., supra; Harlow v. American Equitable Assur. Co., supra; Beeson v. Schloss, 183 Cal. 618 [ 192 P. 292 ]; Fageol T. & C. Co. v. Pacific Indemnity Co., 18 Cal.2d 748 [ 117 P.2d 669 ].) According to the doctrine of these cases, the form of policy required by the Insurance Code of this state (§ 2071) unquestionably provides for a reasonable period within which to sue.

In the opinion of Mr. Justice Traynor, it is implicitly admitted that, under ordinary circumstances, an action must be commenced within fifteen months after the date of the fire, and that the limitation is not unreasonable. There is the further implication that the insurer is not estopped, nor did it waive the right to assert that the present action is barred. However, the opinion avoids the consequence of the principles formerly deemed controlling by formulating a rule of procedure heretofore unknown in this state, to the effect that when an action is brought in good time and diligently pursued, but defeated by some technicality unrelated to the merits, a new action may be commenced within a reasonable time, which shall be deemed a continuance of the former action. The asserted basis for such relief is that the legislative enactments of several states so provide, and the justification for its adoption by this court is said to be that in the present case the end to be achieved justifies the means. Judicial decision should not rest upon that doctrine.

Admittedly the appellant finds himself in unfortunate circumstances. But those circumstances were of his own choosing and his plight is no different from that of a multitude of litigants against whom this court has applied clear rules of law. And contrary to the intimation raised by dictum in the majority opinion, the appellant’s position was not occasioned by any unreasonable conduct of the insurer. Although it is said that the situation of the plaintiff at the present time *420 is attributable to the improper ruling of the trial court in the original action granting the insurer’s motion for a non-suit, the record shows no allegation nor claim by him that the company obtained extensions of time for the designed purpose of causing the period of limitations to expire, that the continuances were improper or not for good cause, or that the insurer affirmatively misled him by lulling him into a sense of false security.

On the contrary, it appears that the appellant, an attorney at law, consented to the continuances granted the company. He is charged with notice of the provisions of his policy (Madsen v. Maryland Casualty Co., 168 Cal. 204 [ 142 P. 51 ]; Rice v. California-Western States Life Ins. Co., 21 Cal.App.2d 660 [ 70 P.2d 516 ]) and the state of the law governing his suit. Implicit in the present holding of Mr. Justice Traynor, however, is the assumption that in some unspecified manner the insurer took unfair advantage of the appellant and, consequently, justice demands that this court create a remedy. The so-called “factual background of this action,” warrants no such assumption; on the contrary, controlling principles compel the conclusion that according to settled rules of law the insurer took no undue advantage of Bollinger. He and the insurance company were adversaries in an action at law and as such entitled to deal at arm’s length. The company was under no duty to warn Bollinger that his action would be forfeited if he did not commence a proper action within the time limited by the policy (Fleishbein v. Western Auto S. Agency, 19 Cal.App.2d 424 [65 P.2d 928]; Wilhelmi v. Des Moines Ins. Co., 103 Iowa 532 [ 72 N.W. 685 ]; Howard Ins. Co. v. Hocking, 130 Pa.St. 170 [ 18 A. 614 ] ; Travelers’ Ins. Co. v. California Ins. Co., supra) nor to warn him that it intended to rely on strict enforcement of the policy provisions. The rule that the insurer and the insured owe each other a high degree of good faith in contracting (Vance on Insurance (2d ed., 1930), pp. 74-75) does not in any sense affect their position as adversaries in a court of law for, in litigation, they face each other in an entirely different capacity having entirely different incidents.

Unquestionably Bollinger chose to follow a course by which, according to the former rule of decision in this state, he lost his right of action. I concur in the conclusions of Mr. Justice Sehauer that the ruling in the first suit brought by Bollinger *421 is immaterial to the present litigation and that this court should not countenance a collateral attack upon the former judgment of nonsuit. But if it is to be considered, as stated by Mr. Justice Traynor the determination was incorrect, because “an unconditional denial of liability by the insurer after the insured has incurred loss and made claim under the policy gives rise to an immediate cause of action. ’ ’ Bollinger therefore had an effective remedy by appeal which he did not invoke. Instead of doing so he commenced the present action, alleging that by its conduct the insurer waived the right to rely upon the provisions of the policy, and the court now devises an extraordinary remedy to relieve a litigant who instead of taking an appeal from an erroneous judgment, sued in another court upon the same claim.

The rule now applied is said to be one of procedure, but .it determines the substantive rights of the parties and, in addition, operates retroactively to interfere with vested rights acquired by virtue of the term of the policy contract and the Insurance Code. And if the remedy is a part of the common law, it certainly directly conflicts with constitutional and statutory provisions. To me, the question for decision is readily determinable by fundamental principles which have long been recognized and applied. Accordingly, and even more particularly for the reasons well stated by Mr. Justice Traynor upon the previous decision of this case, I am of the opinion that the judgment should be affirmed.

Curtis, J., concurred.

Respondent’s petition for a rehearing was denied January 4, 1945. Edmonds, J., Schauer, J., and Spence, J., voted for a rehearing.

Rehearing granted.