Arkansas Insurance Company v. McManus

• Decision Date: 20 April 1908
• Citation: 110 S.W. 797,86 Ark. 115
• Parties: ARKANSAS INSURANCE COMPANY v. MCMANUS
• Court: Arkansas Supreme Court

110 S.W. 797

86 Ark. 115

ARKANSAS INSURANCE COMPANY v. MCMANUS

Supreme Court of Arkansas

April 20, 1908

Appeal from Calhoun Circuit Court; George W. Hays, Judge; affirmed.

Judgment affirmed.

C. S Collins, for appellant.

1. The court erred in treating the inventory of October 16th as a substantial compliance with the terms, conditions and warranties of the contract. It was no compliance at all with the plain letter and spirit of the contract. The promises to keep certain books, inventories, invoices, etc., were by the terms of the application and policy made warranties. 102 S.W 195. The iron safe clause is valid, and compliance with its conditions indispensable to recovery. 61 Ark. 207; 62 Ark 43; 65 Ark. 240; 31 S.W. 321; 33 S.W. 554; 78 Am. St. Rep. 216. Where there has been no compliance at all, there can be no substantial compliance, and here there is no pretense that the inventory contracted for the application, that of June 1st, was preserved. In the absence of proof of a custom to that effect, keeping a sales book showing daily cash sales in the aggregate is no substantial compliance with the contract to keep a merchandise account. 58 Ark. 573; 53 Ark. 353; 65 Ark. 248.

2. The policy was void for want of legal title in the appellee, whereas under the policy he was required to have both the legal and equitable title. 71 Ark. 292.

Smead & Powell, for appellee.

1. The inventory of October 16th, taken by appellee in the belief that it was necessary in order fully to comply with the requirements of the policy, part of the previously taken inventory having been lost, was a substantial compliance with the policy. 79 Ark. 160-4; Id. 266.

2. If the testimony of appellee is true, and it is not disputed, he is the "sole, unconditional and fee simple owner" of the land on which the building was located. There is certainly a sufficient showing of title, coupled with possession to support a recovery. Ostrander on Fire Insurance, § 72, p. 234; 29 F. 496; 16 Am. Eng. Enc. of L., (2 Ed.) 931.

MCCULLOCH, J. WOOD, J., dissents as to penalty.

OPINION

MCCULLOCH, J.

This is an action instituted by the appellee, J. W. McManus, against the Arkansas Insurance Company to recover the amount of a policy of fire insurance upon a store house and stock of merchandise. The complaint alleges that the property insured was totally destroyed by fire, and that appellant had refused to pay the amount of the policy. The appellant, in its answer, set forth the defense that the assured had failed to comply with the iron-safe clause by preserving his last preceding inventory, taken on June 1, 1905, and by failing to keep a cash-book and merchandise account as required by that clause. By an amendment to its answer, it set forth an alleged breach of one of the conditions of the policy which provided that the entire policy should be void "if the interest of the assured be other than unconditional and sole ownership, both legal and equitable, or if the subject of the insurance be upon ground not owned by the assured in fee simple."

The application for insurance contained a statement that an inventory had been taken on June 1, 1905. The policy, which was dated October 13, 1905, contained the following clause: "The assured shall take a complete itemized inventory of stock at least once in each calendar year, and, unless such an inventory has been taken in detail within twelve months prior to the date hereof, one shall be taken in detail within thirty days after the date hereof, or this policy shall be null and void from this date." Another clause of the policy required the assured to keep his books "and also the last preceding inventory, if such has been taken," in a fire-proof safe.

Appellee testified that he received the policy on October 16, 1905; that he immediately discovered that several pages of the preceding inventory had been destroyed or lost, and that he at once proceeded to take a new inventory, showing the stock on hand to be $ 1,244.59 which he preserved and produced at the trial. He admitted that he did not preserve the parts of the inventory taken in June preceding, and that the same was burned in the fire.

It is contended on behalf of appellant that the failure to preserve the partially destroyed inventory of June, 1905, was a violation of the terms of the policy. We do not so regard it. The requirements of the policy must be tested according to the facts as they existed at the time of the issuance of the policy, which contained the conditions quoted above. The effect of these conditions was to require the preservation of the inventory then in existence, and, if there was no inventory then in existence, that one should be taken within thirty days and preserved. This clearly had reference to a perfect and complete inventory, and not to an incomplete one or one which had been partially destroyed. There was no obligation on the part of the assured to preserve an incomplete inventory; but it was obligatory upon him, from the conditions of the policy, that, if he did not then have a complete inventory, he should take one within thirty days. If he had failed to take a complete inventory within thirty days from the date of the policy, the fact that he had on hand an incomplete inventory would not have been a compliance with the policy. It follows, therefore, that the taking of a new inventory, when the preceding one was found to be incomplete, was a sufficient compliance with the terms of the policy. Certainly, the assured was not required to preserve an incomplete preceding inventory and also to take a new one within thirty days.

The contention of the appellant that the terms of the policy were violated by failure to keep an itemized account of his daily cash sales is disposed of in the recent case of Arkansas Mut. Fire Ins. Co. v. Stuckey, 85 Ark. 33, 106 S.W. 203, and need not be further discussed. The proof in this case shows that the daily cash sales were entered on the books.

A violation of the policy is also contended for on the ground that the assured failed to keep a merchandise account in that particular form on his books. The account, however, does show the amount of his sales, and the inventory taken at the time of the issuance of the policy and the invoices of goods purchased since then were preserved, and it is a complete account. The purpose of a merchandise account is to show the amount of goods purchased and sold, so that the amount on hand may be ascertained. Where an account shows the amount of goods sold, and the invoices are preserved which show the amount of goods purchased, all that is required in keeping such an account is fully accomplished. The statutes of this State require that the terms and conditions of an insurance policy need only be substantially complied with. Under the statutes, therefore, it is necessary to look only to the substance, and not to the particular form, of the account kept. If the account is substantially in such form that the amount of goods on hand may be reasonably ascertained, that is all that is required.

The evidence adduced at the trial shows that the store house covered by the policy was situated upon ground which had been given to appellee by his father, but which had not been conveyed to him by deed. He testified that his father gave him the land and promised to make him a deed, and that he built the house. He testified further that he had exclusive possession of the property since his father gave it to him, and that the failure to make the deed was the result only of carelessness. The question arises then, whether or not this is a sufficient compliance with the term of the policy. It is well settled by authority that conditions in insurance policies that the assured shall have "unconditional and sole ownership" of the property insured, or that he shall have "the title in fee simple," are complied with by showing that the assured has the equitable title. It is held in many cases that possession under a contract to convey is "unconditional and sole ownership," and also that it is "title in fee simple," within the meaning of that requirement of the policy. 2 Cooley's Briefs on Insurance, pp. 1354, 1376; Ostrander on Insurance, § 72. It was so held as to a parol contract to convey. Milwaukee Mechanics' Ins. Co. v. Rhea, 123 F. 9. And the same doctrine must necessarily prevail as to possession under a parol promise to convey as a gift, where valuable improvements have been made by the donee upon faith of the promise.

We find no cases involving the construction of a policy which contains the exact language of the policy in this case, wherein it is stated that the interest of the assured must be "unconditional and sole ownership, both legal and equitable." But it follows from the authorities just cited that the same rule should apply to the construction of these terms of this policy. The equitable title, coupled with actual possession, bears with it all the incidents of legal title. This constitutes in effect the legal title for all practical purposes. Under such a title, the possessor may defend his possession at law as well as in equity. Equitable title, coupled with actual possession, may be the basis of a defense in a suit at law. Daniel v. Garner, 71 Ark. 484, 76 S.W. 1063. And it is sufficient upon which a suit against a trespasser may be based.

The language of an insurance policy is the language of the insurer, and must be most strongly construed against the insurer. The particular terms used in the policy must be construed according to their ordinary meaning and acceptation. Therefore, the title of an equitable owner who is in actual possession and is entitled to a deed conveying the legal title must be construed as "sole ownership both legal and...