Chabek v. Nationwide Mutual Fire Insurance
Docket: 1564
Court: Court of Appeals of South Carolina; October 28, 1990; South Carolina; State Appellate Court
Nationwide Mutual Fire Insurance Company appeals a decision that reformed an insurance policy to substitute Clarence S. Chabek and Helen E. Chabek as the named insureds instead of Custom Stamping, Inc. The court vacates the judgment due to the master’s lack of subject matter jurisdiction. The case arose after a hailstorm damaged a warehouse owned by the Chabeks, whose claim was denied by Nationwide, leading them to sue for bad faith denial of insurance benefits. After seeking to amend their complaint, the Chabeks indicated their intention to file a separate action for policy reform, which was referred to the master by the circuit court. However, the Chabeks had not yet filed their summons and complaint when the circuit court made the referral, meaning there was no pending action to refer. The ruling emphasizes that a reference can only occur in a pending cause, and without such a cause, the master lacked jurisdiction to issue a judgment. The court also noted that the parties' consent to the reference does not negate jurisdictional requirements, as lack of subject matter jurisdiction cannot be waived. Cases may be referred by statute, but jurisdiction over referees cannot be granted by the parties' consent. The case Ford v. Inhabitants of Town of Whitefield establishes that parties cannot empower a referee to resolve disputes through agreement. Additionally, in Karl Sitte Plumbing Co. Inc. v. Darby Development Company, participation in reference proceedings can lead to a waiver of objections regarding the referral and the referee's authority. If the master were deemed to have subject matter jurisdiction, a reversal and remand for a new trial would be warranted due to the incorrect burden of proof applied. A party must demonstrate mutual mistake by clear and convincing evidence to seek reformation, as outlined in Crosby v. Protective Life Insurance Co. Here, the master incorrectly utilized the preponderance of the evidence standard, leading to the vacating of the judgment, with concurrence from Justices Gardner and Cureton.