Day v. Home Insurance

SAYRE, J. Day brought this action, as trustee in bankruptcy of the estate of AY. C. Harmon, against the Home Insurance Company on a policy insuring a stock of merchandise against loss by fire. Defense was interposed in the way of a plea setting up a breach of the covenant contained in the “iron-safe clause” of the policy. The covenant will be stated by the reporter. The plea was that the covenant had been broken in this: “That the insured had not taken a complete itemized inventory of stock on hand within 12 calendar months prior to the date of the policy, and failed to take such inventory 30 days after the issuance, of said policy.” Confessing this plea, plaintiff sought to avoid its effect in several special replications which put fonvard the propositions, to state them generally in the language of appellant's brief, that where a merchant who has been in business for less than 12 months keeps a part of his stock of goods in a warehouse, distant from the store in which, he does business, the goods remaining unpacked and in the boxes in which they have been received from jobbers, and being removed from time to time as needed to replenish the active, stock on his shelves, the iron-safe clause in a policy of insurance on the stock in the. warehouse does not require that an inventory be kept, or, if it does, the requirement, is substantially met when the insured keeps all original invoices and a detailed account of all sales. — 607 — The circumstances stated as conditions of appellant’s first alternative contention are not sufficient to require or permit a declaration that the covenant for an inventory has no office to perform in the policy of insurance. The clause is a perfectly reasonable condition, and is binding on the assured, in the absence of fraud.—Georgia Home Ins. Co. v. Allen, 128 Ala. 451, 30 South. 537; Cooley’s Ins. Briefs, 1814. In general, contracts of insurance are construed most strongly against the insurer; but where there is no occasion for construction, such contracts must be enforced according to their clear and unambiguous meaning. There is no authority in the courts, on the supposition that the purposes which the parties intended to secure may have been unnecessary or as well secured by other means to disregard the valid requirements and conditions of such contracts, or to construct by implication or otherwise, a new agreement in place of that deliberately made by the. parties.—Dwight v. Insurance Co., 103 N. Y. 346, 8 N. E. 654, 57 Am. Rep. 729. But appellant contends that his invoices, plus the books, constituted means of ascertaining the loss and must be taken as a substantial compliance with the requirement of an inventory. Defendant company had stipulated for both inventory and books, and it is clear that both together constituted an important safeguard against fraud, so that the court has no authority to dispense with either. The contention amounts therefore to just this: That under the peculiar conditions the keeping of the invoices ivas a substantial compliance with the stipulation for an inventory. An “inventory” means a list made by a merchant of the goods in his store, and the requirement of the policy was that the insured should take, a complete itemized inventory of stock on hand ivithin 30 days. Such an inventory not only would furnish evidence of — 608 — what the stock contained at the time, but provided a starting point, for the estimate to be based upon the transactions shown by the inventory and the books. An “invoice” is also a list of goods, but it is prepared by the consignor at the point of shipment. It does not show that the goods therein listed have reached the consignee. Nor is it to be expected that any one invoice should ever be the equivalent of an inventory. Possibly we might concede that in exceptional cases invoices may serve the purpose of an inventory. Such was the case in Ruffner v. Dutchess Ins. Co., 59 W. Va. 432, 53 South. 943, 115 Am. St. Rep. 924, 8 Ann. Cas. 866, where it was held that the bills showing a complete list of all the goods put into a new store within a few days before the issuance of the policy constituted an inventory in substance. But the court said: “Of course, the invoices would not constitute an inventory in the case of a store which has been running for a. considerable time. They would not afford any basis upon which to begin the estimate, but in the case of a new store starting simultaneously with the issuance of the policy, or practically so the first bill constitutes as good a basis for the beginning of the estimate as an inventory could possibly afford.” To the same effect is Queen of Arkansas Ins. Co. v. Forlines, 94 Ark. 227, 126 S. W. 719, in which the language of the court was that “ the plaintiff had been in business such a short time that the invoices of the goods first bought by him constituted in effect an itemized inventory of his stock.” In McNutt v. Virginia Ins. Co. (Tenn.) 45 S. W. 61, cited by appellant, a different question was presented. In that case the inventory had been taken as provided by the policy. On the day before the fire the insured had been taking a new inventory, in the same book, which was not completed. Inadvertently the book was left — 609 — out of the safe and destroyed. The court held that the accidental destruction of the inventory did not forfeit the insurance. The adjudications in these cases seem to take liberties with the contracts which the parties had made for themselves; but we need neither express nor withhold approval since the cases may be substantially differentiated on their facts from the case at bar. Other cases cited by appellant are in point only to the extent that they hold in a general way that promissory warrants are often conditions subsequent, and courts should apply to them the doctrine that obtains in adjudging forfeitures, which means, we take it, that the court will hold such conditions satisfied by substantial compliance. No case that we have seen goes to the length of holding a series of separate invoices, covering a considerable period of time during which many transactions may have been had, may by the insured be made to do service for the itemized inventory demanded by the insurer as a condition of liability and yielded by the insured in the beginning as a legitimate and reasonable stipulation. Now appellant’s replications were so framed that the invoices of which they speak, and upon which he relied as a substantial equivalent for the inventory which he agreed to take within 30 days, may have been strung along over a time largely in excess of the 30-day period stipulated for the taking of an inventory in any event, and, if the policy sued on is to be taken as dated from the time when plaintiff’s assignor began business, then the better part of a year. That was not a compliance with the contract on the part of the insured, and any liberality of construction which would dispense with its plain terms in favor of the insured would make a contract for the parties which they saw fit not to make for themselves. There was no error in sustaining demurrers to those replications going to — 610 — the points discussed above.—Southern Fire Ins. Co. v. Knight, 111 Ga. 622, 36 S. E. 821, 52 L. R. A. 70, 78 Am. St. Rep. 216; Fire Ass’n of Phila. v. Masterson, 25 Tex. Civ. App. 518, 61 S. W. 962; Roberts v. Sun Mutual Ins. Co., 19 Tex. Civ. App. 338, 48 S. W. 559; St. Landry Co. v. New Hampshire Ins. Co., 114 La. 146, 38 South. 87, 3 Ann. Cas. 821; 2 Cooley’s Ins. Briefs, 1820. Several of the special replications set up a waiver of the alleged breach of the iron-safe clause in that defendant, after knowledge that the insured had not taken an inventory as required by the iron-safe clause of the policy, recognized and treated the policy as binding and entered into negotiations with plaintiff, as receiver in bankruptcy of the estate of the insured, for an adjustment of the loss, in consequence of which negotiations the said receiver incurred much trouble and expense. Defendant’s special rejoinder as amended brought forward a nonwaiver agreement entered into between the insured and the insurer after the loss and in view of a proposed investigation of the fire and a determination of the amount of the loss. The point taken against the rejoinder is that, after proceedings in bankruptcy have been commenced, the bankrupt can do nothing in derogation of the interests of the estate. If, at the time the nonwaiver agreement was entered into — that is, at a time between the commencement of the bankruptcy proceedings and the appointment of a receiver — the power to make such agreement resided anywhere, it was with the parties to this suit. The amendment rejoinder makes the receiver, plaintiff here, as effectually a party as if he had joined in the paper writing which witnessed the agreement as between the insurer and the insured bankrupt. There was no necessity that the agreement should be reduced to writing. — 611 — The amended rejoinder avers: “That.the said agreement was signed by Harmon in the presence of the said. J. L. Hay, receiver, and under the advice of the said Day, and was so signed after the defendant’s adjuster-had stated to the said Harmon, in the presence of the said Day, that he would not proceed in the investigation of the loss until the defendant was protected against waivers of forfeiture by agreement.” The defendant company had a right to investigate the loss-without waiving forfeitures; but in view of the facility with which the courts have predicated waivers on the-slightest inconvenience caused to the insured, prudence-required the nonwaiver agreement if in fact there was-no intent to waive. On the facts stated in the rejoinder we do not perceive that the nonwaiver agreement was in derogation of any just interest of the estate. The-question of forfeiture was an open one. If there had. been a forfeiture, the estate had no just claim to be prejudiced. If, on the contrary, there had been no forfeiture, the agreement operated for the benefit of the estate by expediting a just estimate of the loss. Of such, an agreement we think it may be safely said that it estopped the estate and those representing it to subsequently deny its force and effect in a suit brought, for the benefit of the estate. On the first decision of this case it was held that demurrers to plaintiff’s several special replications had. been properly sustained. On rehearing the other members of the court are of opinion that the demurrer to> special replication C should have been overruled. They put their conclusion on the averment of the replication, that, at the time of the transfer of the policy, defendant’s agent had notice of the fact that no inventory would be kept. This they hold amounted to a modification of the original policy-contract effective to elimi — 612 — nate therefrom the stipulation for an inventory. On this point I am unable to agree, but refrain from any statement of my reasons. It results from the prevailing opinion that the judgment must be reversed. Reversed and remanded. Simpson, Anderson, McClellan, Mayfield, and Somerville, JJ., concur. Sayre, J., dissents in part. Dowdell, C. J., not sitting.