Opinion
No. 32314.
January 3, 1938.
1. INSURANCE.
The information required by iron-safe clause of fire policy must be obtainable with reasonable certainty from insured's books unaided by oral testimony, except to explain method of keeping books, and removal by insured of considerable portion of his stock to another store, without entering transfer on books, violates policy provision and avoids policy.
2. INSURANCE.
Where insured's books of account were so irregular, contradictory, confusing, and unintelligible that value of insured's stock of goods at time of fire could not be ascertained therefrom with any degree of accuracy, and books of store did not show alleged transfer of goods to it from another store, iron-safe clause of fire policy, requiring insured to keep books which would present complete record of business transacted, was thereby violated, and precluded recovery for loss of goods by fire.
3. INSURANCE.
Under iron-safe clause of fire policy, insured must keep such a set of books as will enable an accountant to ascertain therefrom, together with inventory, with reasonable accuracy value of goods on hand at time of fire.
APPEAL from the circuit court of Harrison county. HON.W.A. WHITE, Judge.
Lotterhos Travis, of Jackson, and Bidwell Adam, of Gulfport, for appellant.
What is known as the "iron-safe clause," or "record warranty," as it is sometimes called, which requires insured to make an inventory at certain times, to keep books of account, to preserve and keep the same at prescribed times in an iron safe or other fireproof safe, or in some other place secure from the danger of fire, that he shall produce the same for insurer's inspection, or one or more of such things, and that a failure to comply with any or all of such requirements shall render the policy null and void, is not illegal or opposed to public policy, but is a reasonable and valid contract stipulation.
Couch on Insurance, sections 1021, 1022, 1032 and 1032a.
This court has in a number of cases applied the iron-safe clause as a defense according to its terms, and granted judgment for the insurer as a matter of law, where the facts show a breach of the provision.
Scottish Union Ins. Co. v. Warren Gee Lbr. Co., 118 Miss. 740, 80 So. 9; Aetna Ins. Co. v. Mount, 90 Miss. 663, 44 So. 162, 15 L.R.A. (N.S.) 471; Phoenix Ins. Co. v. Dorsey, 102 Miss. 81, 58 So. 778; Penix v. American Central Ins. Co., 106 Miss. 145, 63 So. 346; Ins. Co. v. Bank, 61 Miss. 612, 15 So. 932; Phoenix Ins. Co. of Hartford, v. Bourgeois, 105 Miss. 698, 63 So. 212; Merchants Union Ins. Co. v. Johnson, 135 Miss. 311, 99 So. 899; Lewis v. National Fire Ins. Underwriters, 136 Miss. 576, 101 So. 296; Mitchell v. Ins. Co., 111 Miss. 253, 71 So. 38; National Fire Ins. Co. v. Patridge, 162 Miss. 626, 139 So. 876.
Appellee did not prove his loss from the books.
Phoenix Ins. Co. v. Dorsey, 102 Miss. 81, 58 So. 778.
The appellee's case is bottomed largely upon the Picayune inventory and the Poplarville inventory which he claimed to have taken. In neither instance was the original inventory introduced consisting of the work sheets, but it was testified that this had been destroyed. In both instances he offered an alleged copy which he had made in two books. This evidence is completely dependent upon the parol testimony that these books contained true and exact copies of the inventories. Hence, these books do not constitute proof in and of themselves but depend entirely upon the parol proof above mentioned. We submit that the appellee cannot prove the case by such parol evidence any more than he could offer proof that the merchandise consisted of certain amounts in the absence of any inventory at all.
Phoenix Ins. Co. v. Dorsey, 102 Miss. 81, 58 So. 778; Ins. Co. v. Williams, 200 Ala. 681, 77 So. 159; Ins. Co. v. Miles, 132 So. 27; Morris v. Stuyvesant Ins. Co., 82 So. 586; Pennsylvania Ins. Co. v. Malone, 115 So. 156, 56 A.L.R. 1075; Wright v. Union Ins. Co., 13 F.2d 612; Merchants Ins. Exchange v. Southern Trading Co., 229 S.W. 312.
The alleged Poplarville inventory is insufficient.
Lewis v. Natl. Fire Ins. Underwriters, 136 Miss. 576, 101 So. 296; Day v. Home Ins. Co., 177 Ala. 600, 58 So. 549, 40 L.R.A. (N.S.) 652; Home Ins. Co. v. Bank, 71 Miss. 608, 15 So. 932; Alfred Hiller Co. v. Ins. Co., 125 La. 938, 52 So. 104, 32 L.R.A. (N.S.) 453; Southern Fire Ins. Co. v. Knight, 111 Ga. 622, 36 S.E. 821, 52 L.R.A. 70; Phoenix Ins. Co. v. Sherman, 66 S.E. 81; Shawnee Fire Ins. Co. v. Thompson, 119 P. 985; Goldman v. Aetna Ins. Co., 133 S.E. 741; Hartford Fire Ins. Co. v. Walker, 210 S.W. 682; Gillmer Co. v. Fire Association, 80 S.W. 283.
The alleged Picayune inventory is not sufficient.
The books maintained by appellee and on which he relied to prove transactions after January 1, 1935, are wholly insufficient.
14 R.C.L., sec. 323.
Failure to keep sufficient books as required by the clause will invalidate the policy and entitle the defendant to a directed verdict.
Aetna Ins. Co. v. Mount, 90 Miss. 663, 44 So. 162, 15 L.R.A. (N.S.) 471; Phoenix Ins. Co. v. Bourgeois, 105 Miss. 698, 63 So. 212; Merchants Union Ins. Co. v. Johnson, 135 Miss. 311, 99 So. 899; Penix v. American Cent. Ins. Co., 106 Miss. 145, 63 So. 346; National Fire Ins. Co. v. Patridge, 162 Miss. 626, 139 So. 876; Ins. Co. v. Williams, 200 Ala. 681, 77 So. 159; Aetna Ins. Co. v. Johnson, 127 Ga. 491, 56 S.E. 643, 9 L.R.A. (N.S.) 667; Commonwealth Underwriters v. Lawrence, 244 S.W. 200; Home Ins. Co. v. Williams, 237 Fed. 171; Coggins v. Aetna Ins. Co., 144 N.C. 7, 56 S.E. 506, 8 L.R.A. (N.S.) 839; Governale v. Interstate Ins. Co., 141 La. 133, 74 So. 791; Shawnee Fire Ins. Co. v. Thompson, 119 P. 985; Everett v. Trader's Ins. Co., 121 Ga. 228, 48 S.E. 918, 104 Am. St. Rep. 99; Phoenix Ins. Co. v. Sherman, 66 S.E. 81; Fisher v. Sun Ins. Office, 74 W. Va. 694, 83 S.E. 729, L.R.A. 1915C 619; Wright v. Union Ins. Co., 13 Fed. 2d 612; Hanover Fire Ins. Co. v. Wood, 104 So. 224, 39 A.L.R. 1436; Hammond v. Niagara Fire Ins. Co., 92 Kan. 851, 142 P. 936, L.R.A. 1915F 759; Pelican Ins. Co. v. Wilkinson, 13 S.W. 1103; Sun Mutual Ins. Co. v. Dudley, 45 S.W. 539; Scottish Union Ins. Co. v. Weeks, 118 S.W. 1086; Commonwealth Underwriters v. Lawrence, 244 S.W. 200; Crawford v. State, 162 Miss. 158, 138 So. 589.
The appellee breached the iron-safe clause in failing to keep and produce the last preceding inventory.
Lewis v. National Fire Ins. Underwriters, 136 Miss. 576, 101 So. 296; Ins. Co. v. Miles, 132 So. 27; Morris v. Stuyvesant, 82 So. 586; Penn. Ins. Co. v. Malone, 115 So. 156, 56 A.L.R. 1075; Home Ins. Co. v. Bank, 71 Miss. 608, 15 So. 932; Continental Ins. Co. v. Cummings, 81 S.W. 705.
The appellee breached the sole ownership warranty.
Where the insured was not the sole owner, the policy was forfeited.
Bacot v. Phoenix Ins. Co., 96 Miss. 223, 50 So. 729, 25 L.R.A. (N.S.) 1226; Rosenstock v. Miss. Home Ins. Co., 82 Miss. 674, 35 So. 309; Liverpool London Ins. Co. v. Cochran, 77 Miss. 348, 26 So. 932; Ins. Co. v. Erickson, 50 Fla. 419, 39 So. 495, 2 L.R.A. (N.S.) 512; Tyree v. Virginia Fire Ins. Co., 55 W. Va. 63, 46 S.E. 706, 66 L.R.A. 657.
Viewing now the testimony of appellee in its most favorable light, we are confronted with two contradictory and diametrically opposed statements. In effect appellee states upon oath, "I am the sole owner of the business insured," but upon cross-examination he states in effect, "I am not the sole owner of the business insured." Appellee's testimony on direct examination supports his cause, but his testimony on cross-examination absolutely defeats all right of recovery. Each contradictory and diametrically opposed statement of fact is positive and definite.
The solemn statement in the case at bar by appellee under oath, as a party witness in his own sole cause and against his own interest, is in the nature of a judicial admission and, as such, absolutely binding unless explained or excused.
The contradictions in appellee's testimony being diametrically opposed and incapable of reconciliation, when placed side by side in the judicial mind, nulify and cancel each other, and both therefore fall to the ground.
Appellee, as a matter of fact, did not testify that he purchased his wife's interest in the property insured, but merely that he purchased her corporate stock after the decree dissolving the corporation.
Bracey v. Cristler, 151 Miss. 655, 118 So. 138; Cooper v. State, 130 Miss. 288, 94 So. 161; Dahly v. U.S., 50 F.2d 36; 50 A.L.R. 979, note; Harlow v. Laclair, 50 A.L.R. 17; Steele v. Kansas City Southern R.R. Co., 265 Mo. 97, 175 S.W. 177; Casey v. Northern Pacific Ry. Co., 198 P. 141; Wilson v. Blair, 65 Mont. 155, 211 P. 289, 27 A.L.R. 1235; Southern Bank of the State of Georgia v. Goette, 33 S.E. 974; Fowler v. Pleasant Valley Coal Co., 52 P. 594; Bell v. Johnson, 46 P.2d 886; Roehl v. Ralph, 84 S.W.2d 405; 64 C.J. 360-361, sec. 349; Johnson v. Cincinnati, N.O. T.P. Ry., 240 S.W. 429; Smith v. Boston Elevated R. Co., 106 C.C.A. 497, 184 Fed. 387.
Carl Marshall, and Mize, Thompson Mize, all of Gulfport, and Doty Johnson, of Biloxi, for appellee.
The case of Sussex Fire Ins. Co. v. Barton, 225 Ala. 570, 144 So. 439, defines what is meant by the last preceding inventory in the "iron-safe" clause. The court said: "`The last preceding inventory' mentioned in paragraph (3) supra, appearing in a one-year policy, and applied to an inventory taken before the policy was issued, means an inventory taken within the last twelve months, and referred to in paragraph (1). Such an existing inventory, safely kept and produced, excuses the taking of another within thirty days after the policy issues. Any stipulation that an inventory taken in former years, back of the twelve-month period, and that books be kept and produced following up such inventory, should be clear and unambiguous. Penn. Fire Ins. Co. v. Malone, 217 Ala. 168, 115 So. 156; Western Assurance Co. v. McGlathery, 115 Ala. 213, 22 So. 104; 3 Cooley's Briefs on Ins. (2 Ed.), 2810; Continental Ins. Co. v. Waugh, 60 Neb. 248, 83 N.W. 81.
"Manifestly, by the express terms of the contract, the books required to be kept and produced, relate to business transacted after the inventory is taken. The two constitute the record from which the quantum and value of the stock may be reasonably ascertained by the adjuster with the aid of information, if needed, touching the system of bookkeeping employed. The application of the provision to books kept before the issuance of the policy and following an inventory taken within twelve months theretofore is not involved and not decided."
This inventory which the plaintiff offered in evidence was not only taken within twelve months from the issuance of the policy but was taken in less than thirty days of the issuance of the policy and taken virtually contemporaneously therewith.
It is a too well settled principal of law in this state to require the necessity of the citation of authorities that an agent of the company acting in the apparent scope of his authority and being a general agent can bind his principal and can waive conditions of a policy that might otherwise be in force. The plaintiff was precluded from going into this phase of the case to show, as he would have a right to show, that this agent knew what kind of goods he had, the amount of goods, and the system of books he used, and naturally prejudiced the plaintiff's case and limited the scope of his proof.
Mitchell v. Ins. Co., 111 Miss. 253, 71 So. 38.
The court erred in overruling the objection of the plaintiff to the introduction of a ledger account and to testimony with reference to the operation of the Wiggins store for the year 1934 and the inquiry into all records prior to the last inventories which were taken in 1935. This was manifest error because under the law the warranty in the "iron-safe" clause being promissory warranties as has been held in the case of London Assur. Co. v. Poole, 212 Ala. 109, 101 So. 831, and parole evidence being admissible not for the purpose of proving any losses but explaining the system of accounting, as held in the case of Penn. Fire Ins. Co. v. Malone, 115 So. 156.
14 R.C.L., page 1139, sec. 322.
No question is raised as to the books being kept in a safe place as, indeed, none could be raised as the testimony shows conclusively that they were kept in an iron safe. As has been repeatedly held in 14 R.C.L., sec. 325, all that is required is a substantial compliance with the "iron-safe" clause. No special form is required so long as the books reflect with reasonable accuracy the condition of the insured's business.
Miss. Fire Ins. Co. v. Perdue, 217 Ala. 292, 116 So. 142, 62 A.L.R. 626; Commercial Union Fire Ins. Co. v. Kelly, 144 Miss. 833, 110 So. 681.
In the case at bar testimony of the C.P.A., Mr. Moore, was that the books were sufficient and accurate enough to enable him to arrive definitely at the amount of loss sustained by the plaintiff.
We submit that the evidence in this case overwhelmingly shows that a complete and accurate set of books was kept by the plaintiff reflecting all of his business transactions and that this is true as a matter of law and should have been so held by the court without this issue being submitted to the jury. If, however, the court decided we are wrong in this contention, then certainly it becomes a question for the jury and was submitted to the jury under instructions on this precise point and decided in favor of the plaintiff.
Scottish Union Ins. Co. v. Warren Gee Lbr. Co., 118 Miss. 740, 80 So. 9; Liverpool L.G. Ins. Co. v. Sheffey, 71 Miss. 919, 16 So. 307.
In addition to the inventory there were ledger accounts kept showing accounts with manufacturers and jobbers, credit accounts, accounts with the clerks and various and sundry other items which are ordinarily included in ledger account invoices, express and freight receipts, complete records of transfers of goods between stores of the plaintiff not only the invoices themselves but records on the ledger accounts, also bank books of the various banks with which the plaintiff did business in his operation of this store, check stubs, checks, daily reports, daily sales slips and records of the cash and credit sales. How it would be possible for a merchant to keep a more complete set of books than these we are unable to see and this was more than a substantial compliance with the promissory warranty of the insured.
The case of Mitchell v. Ins. Co., 71 So. 382, 111 Miss. 253, held that where a merchant at the request of the agent of an insurance company furnished him an inventory of stock of goods and merchandise in the store before the policy was issued and this inventory contained the different articles of merchandise carried by the merchant in his store, and the gross value of each article, but did not specify numbers, quantities or prices and the agent said it was all right and issued him a policy on the same, it was too late, after the company had issued the policy, received the premium and plaintiff's property was burned, for the defendant company to say that the inventory in question was insufficient. It was estopped by its own conduct.
Appellee in this case attempted to go into this phase of the question but was cut off by the court and prevented from doing so.
Another question argued by the appellant-cross-appellee is that the ownership on the date of the fire was not sole and unconditional. Frankly, we do not see how the appellant can argue this position with any sincerity because the testimony is uncontradicted that at the time of the dissolution of the corporation in July, 1934, in Pearl River County, Mrs. Rosenblum only owned 15/250 interest in the store which she sold to her husband for 10 shares of stock in the New Orleans Homestead Association. This was more than a sufficient legal consideration to effectually divest her of all title in the property. This was also known by the insurance company at the time the policy was issued and, indeed, for more than six months prior to the execution and delivery of the particular policy sued on, the ownership had been sole and unconditioned in Mr. Rosenblum.
No sound reason can be given for requiring conveyances between husband and wife to be recorded, except that the world may know as to the change of ownership. If any given individual has not been prejudiced by this secret conveyance, how can his lack of knowledge possibly operate to his injury?
Groce v. Phoenix Ins. Co., 94 Miss. 201, 48 So. 298, 22 L.R.A. (N.S.), 732; Federal Credit Co. v. Scroggins, 130 So. 153; Wilkinson v. Goza, 145 So. 91.
The court will please bear in mind that the appellee is not a lawyer, or a merchant prince with refined education. He is a small local merchant, unversed in the niceties of corporate and business terminology. But even an experienced attorney might well have been confused by the indirection with which the appellant's counsel questioned the appellee shrewdly as to changes of ownership since the dissolution of the liquidated corporation; and the court's special attention is directed to pages 229 and 230 of the record, in which the entire matter is clearly set forth, it appearing that both the appellee and his counsel honestly construed the appellee's answers to the isolated questions not to mean that there had not been a change or transfer of the appellee's wife's interest in the stock of merchandise. By no stretch of the imagination can it be held that this slight discrepancy in the appellee's testimony, if there were a discrepancy, manifested such untrustworthiness as a witness to warrant an appellate court in holding that it was not within the province of the jury to believe him at all on the point.
64 C.J., 356; 70 C.J., 782.
How can it be said as a matter of law on the slim and attenuated technical reasoning of the appellant that the appellee, giving his version of the facts not as a technical attorney or corporation lawyer, but as a small local merchant, is shown to have testified with deliberate falsity and corruption, when his reasonable version of the facts constituted him the sole and unconditional owner of the stock of merchandise that was destroyed by the fire the appellant insured him against?
Wilkinson v. Goza, 145 So. 91.
The appellant obviously overlooks the fact that the burden of proving that the appellee was not the sole and unconditional owner of the stock of goods rested upon the appellant, and not the appellee.
Cotten v. Fidelity Cas. Co., 41 Fed. 506; Liverpool L.G. Ins. Co. v. Farnsworth Lbr. Co., 17 So. 445, 72 Miss. 555; American Ins. Co. v. Crawford, 70 So. 579, 110 Miss. 493.
The court will not overlook the fact that the record shows without contradiction that Mr. Rose, the insurance broker that represented the appellant as its agent, frequently visited the appellee's store and inspected the stock before the fire, and after the appellee acquired complete individual ownership, and was thoroughly familiar with the volume and value of the stock, and with the details of the appellee's business, while the policy in question was in force. Rose was the agent of the appellant; and all facts known to Rose were known to the appellant under the provisions of Section 5196 of the Mississippi Code of 1930, and the general rules of agency.
Argued orally by Fred Lotterhos and Cecil Travis, for appellant, and by Carl Marshall, for appellee.
The appellant, Central Manufacturers Insurance Company, issued to the appellee, James Rosenblum, a fire insurance policy for $3000, covering the stock of goods in his store at Picayune, Miss.
The appellant plead the breach by appellee of that standard provision in policies covering stocks of merchandise known as the "Iron-safe Clause," alleging that there was no proper inventory of the stock of merchandise on hand as required, and no set of books clearly and plainly presenting a complete record of the business transacted by him.
The policy in question covered appellee's stock of merchandise, and was dated February 4, 1935, and expired at noon on February 4, 1936. In all there was $13,000 insurance covering this stock of merchandise.
On and after January 1, 1935, the appellee had in operation dry goods stores at Picayune, Poplarville, and Gulfport, Miss. It was contended on behalf of the appellee, by his evidence, that the merchandise was totally destroyed by fire. It has been the law in this state that the books of the assured must themselves furnish the information required by the policy with reasonable certainty, unaided by oral testimony, except to explain the method of keeping them, and that the removal by the assured of a considerable portion of his stock to another store, without entering the same on his books of account, violates a policy provision requiring the keeping of a set of books showing all purchases, sales, and shipments, and avoids the policy.
Under the contract here involved, the assured warranted that he would keep a set of books which would clearly and plainly present a complete record of business transacted, including all purchases, sales, and shipments, both for cash and credit, from the date of inventory, as provided in the first section of this clause, and during the continuance of the policy.
The first section of the clause provides: "The assured will take a complete itemized inventory of stock on hand at least one in each calendar year, and unless such inventory has been taken within twelve calendar months prior to the date of this policy, one shall be taken in detail within 30 days of issuance of this policy, or this policy shall be null and void from such date, and upon demand of the assured the unearned premium from such date shall be returned."
The jury in this case returned a verdict for the appellee in the sum of $1500, or one-half of the face of the policy.
The alleged books of accounts and inventories and many other papers and books have been sent to this court, and have been carefully examined.
We have reached the conclusion that the alleged books of account are so irregular, contradictory, confusing, and unintelligible that it would be impossible to say therefrom, with any degree of accuracy, what the value of the goods in the store at Picayune was at the time of its destruction by fire.
We will give only an example to show that oral evidence was necessary to establish the loss, testified by the appellant and his witness, the auditor, to be fixed at $17,514.97. A leaf from the ledger kept by appellee at Gulfport showed that on February 8, 1935, the inventory at Picayune amounted to $12,620.06. It is shown by appellee, on February 5, 1935, that he caused to be removed, in bulk, from the store at Poplarville, all the goods therein inventoried a day or two before, and deposited them, without checking them up, in the store at Picayune. If the inventory in this connection was taken on the 8th of February, then the entry on the books show, beyond cavil, that the goods from Poplarville delivered to the store at Picayune are included in that inventory, as shown by that entry. But in order to arrive at the total loss, appellee adds again the invoice of the goods transferred from Poplarville to Picayune. The truck driver who hauled the goods, and his son, testified positively that one truck load of these goods was not delivered to the Picayune store by him, but was delivered by him, at nighttime, to the Gulfport store. The appellee's brother at the same time carried goods in his car from the Poplarville store to Gulfport. The appellee and his witness orally contradicted the entry on his books as to the date and the amount thereof, but, in their testimony, they did not give an exact date as to when the inventory of the stock of merchandise at Picayune was taken; they varied from January 1 to February 1, 1935. If the inventory was taken prior to February 5th, it was proper to add thereto the value of the goods transferred from Poplarville to the January Picayune inventory, if the goods went into the store. If the ledger showed the correct date, it was not proper so to add it. There is a difference of more than $8000.
The auditor, offered as a witness in behalf of the appellee, testified that from the books there was a total loss of merchandise in the Picayune store in excess of $17,000; but, in so testifying, he necessarily rejected the entry on the ledger at Gulfport and had to adopt the oral testimony as to when the Picayune stock of merchandise was inventoried; namely, as fixed by him, January 1, 1935. The jury rejected this view, as the verdict is in direct conflict with what the auditor claimed to be shown by the books.
There are many glaring inconsistencies and defects in the books. There was no charge in the Poplarville books of an excess of $8000 worth of goods being transferred from that store; there was no entry on the books of the Picayune store of the receipt of such goods; and the only book record thereof is shown by the ledger entry, to which we have above referred, and which was repudiated by the appellee and his auditor. The appellee testified that he kept the books of the Picayune store at Gulfport in an iron safe.
Authorities in this state are uniform with reference to the "Iron-safe" clause in holding that it is necessary as to the keeping of books that the assured keep such a set as will enable an accountant to ascertain from them, together with the inventory, with reasonable accuracy, the value of the goods on hand at the time of the fire. Penix v. American Central Ins. Co., 106 Miss. 145, 63 So. 346; Merchants' Union Ins. Co. v. Johnson, 135 Miss. 311, 99 So. 899; Couch Cyc. of Ins. Law, Vol. 5, sections 1031 to 1032a.
The inventory of the stock of goods in this case was no inventory at all. For instance, in the alleged inventory of the stock of goods at Picayune totaling $13,395.07, there is one entire page recorded with entries such as "Balance on dress and coat . . . $24.38," and on down through eighteen such similar entries.
For the reason indicated, we think the court erred in not granting a peremptory instruction to the appellant. In view of the conclusion we have reached, it is unnecessary to consider the cross-appeal.
Reversed, and judgment here for appellant.