Bennett v. Imperial Ins. Co.

• Decision Date: 11 August 1980
• Docket Number: No. 20224,20224
• Parties: John A. BENNETT et al., Appellants, v. IMPERIAL INSURANCE COMPANY, Jack Hagar, Cliff Depoy and Morris Apple, Appellees.
• Court: Texas Court of Appeals

Page 7

606 S.W.2d 7

John A. BENNETT et al., Appellants, v. IMPERIAL INSURANCE COMPANY, Jack Hagar, Cliff Depoy and Morris Apple, Appellees.

No. 20224.

Court of Civil Appeals of Texas, Dallas.

Aug. 11, 1980.

Rehearing Denied Sept. 24, 1980.

Edward B. Cloutman, III, Fred Weldon, Mullinax, Wells, Baab, Cloutman & Chapman, Dallas, for appellants.

Nathan L. Hecht, Locke, Purnell, Boren, Laney & Neely, Dallas, for appellees.

Before GUITTARD, C. J., and AKIN and STOREY, JJ.

STOREY, Justice.

This appeal is from a judgment in favor of the insurer, notwithstanding a jury finding that a fire, the risk insured against, resulted in "total loss" to the insured premises. The principal question on appeal is whether the record contains evidence to support the jury finding. Other questions presented are whether the trial court properly submitted the issue of damages for partial loss and whether it properly granted summary judgment denying plaintiff's claims under the Deceptive Trade Practices Act and the Texas Insurance Code. ¹ We have concluded that the record contains no evidence supporting the finding of total loss and that the claim for partial loss was properly submitted. We also conclude that summary judgment with respect to the Deceptive Trade Practices Act and the Texas Insurance Code was improvidently granted but was harmless error under the circumstances of this case.

TOTAL LOSS

The standard applied in determining total loss by fire is whether a reasonably prudent owner, uninsured, desiring such a structure as the one in question was before injury, would, in proceeding to restore the building to its original condition, utilize such remnant as such basis. Glens Falls Insurance Co. v. Peters, 386 S.W.2d 529 (Tex.1965); Royal Insurance Co. v. McIntyre, 90 Tex. 170, 37 S.W. 1068, 1074 The question of whether a fire resulted in total loss is generally one of fact, United States Fire Insurance Co. v. Boswell, 82 S.W.2d 176, 178 (Tex.Civ.App.-Fort Worth 1935, writ dism'd), and the standard of review here where total loss was found by the jury is whether the record contains any evidence to support the finding. Langlotz v. Citizens Fidelity Insurance Co., 505 S.W.2d 249, 250 (Tex.1974). In examining the evidence we must view it most favorably in support of the verdict, and evidence to the contrary must be of such character that reasonable minds could not differ as to the conclusion to be drawn from it. Najera v. Great Atlantic & Pacific Tea Co., 146 Tex. 367, 207 S.W.2d 365, 367 (1948); Joske v. Irvine, 91 Tex. 574, 44 S.W. 1059, 1063 (1898).

(1896). The trial court's charge to the jury followed this standard. Neither party questions this precept, nor do they question the statutory authority that if a total loss be found by probative evidence to exist, the face amount of the policy becomes a liquidated amount and no further proof of damage need be made. Tex.Ins.Code Ann. art. 6.13 (Vernon 1963). Under the statute, it is immaterial whether the face amount of the policy exceeds the actual value of the building. Superior Fire Insurance Co. v. Roberts, 84 S.W.2d 810, 811 (Tex.Civ.App.-Dallas 1935, no writ).

We turn now to the historical facts. The insured property was a twenty-six unit brick veneer apartment building which was built in 1965 at a cost exceeding $100,000. The original construction or purchase money loan was foreclosed in 1975 and the property stood vacant until the time of loss. Plaintiffs purchased the property in April 1977 for about $8,000. At the time of purchase and immediately before the loss, the property was not habitable because of deterioration and vandalism, and the neighborhood surrounding it was a depressed real estate market area. The policy in question was issued in May 1977. For coverage purposes, the insurer valued the property at $150,000. This value was determined by calculating square footage and multiplying by replacement cost per square foot. The $120,000 value stated in the policy was eighty percent of this product. Plaintiffs were under compulsion from the city to bring the property to building code standards, but no repairs had been made at the time of the fire loss on July 27, 1977. While there are differences in the testimony of the witnesses, the adjudicative facts are without material dispute. Mrs. Bennett, who was experienced in buying and selling real estate in the area, testified that the actual value of the property before the fire was $150,000 and that the cost of repairs before the fire would be about $200 per unit. She testified that after the fire the brick walls remained standing. Henry, an expert witness called by plaintiff, testified that before the fire, repairs could have been made for about $1,000 per unit. Afterward, according to Henry, the cost of rebuilding would be $131,000, or about $5,000 per unit, and the cost of razing and rebuilding would be $230,000. He testified that ninety-five percent of the brick walls were intact and six of the largest apartments were in sound condition. Terrell, plaintiff's other expert witness, testified that cost of rebuilding from the remnant would be $124,000. Reese, an expert witness called by the insurer, testified that the value before the fire was $8,500 and that the cost of rebuilding from the remnant would be $160,000. He also expressed the opinion that after repairs were accomplished, the property value would be less than the cost of repairs and concluded that a prudent owner would not spend his own money to repair.

All witnesses agreed that useable remnants remained after the fire. Plaintiffs testified that they had taken out a building permit to rebuild from the remnants. Henry testified that in his professional judgment the reasonable course would be to rebuild from the remnant rather than to raze and rebuild from the ground. Terrell testified that there was a substantial amount of the structure worth saving rather than tearing it down.

Plaintiff argues that the jury was free to draw inferences from this testimony and the only reasonable inference to be drawn is that a prudent owner would not use his own money to repair the remnant. We disagree. While it may be concluded that the evidence tends to prove the building was worth substantially less after the fire than before, the cost of rebuilding after the fire was substantially greater than before, and the cost of repair would likely exceed the value of the building after repair, none of these facts go to the real issue. Rather, these facts relate to the question of whether a prudent owner would make the decision to rebuild. The test, on the other hand, is whether the owner, having made the decision to rebuild, would use the remnants as a basis for rebuilding. Glens Falls Insurance Co. v. Peters, 386 S.W.2d at 531. Plaintiff's reasoning ignores other factors affecting value which are not related to the insured risk. For example, the witness Reese testified that when rebuilt the property value would be less than the $160,000 needed to rebuild. This relates to the depressed market in the area and consequently goes to the decision to rebuild rather than, having decided to rebuild, whether the owner would use the remnants.

Nor can we agree with plaintiff that, standing alone, a substantial reduction in value before and after the loss is evidence of total loss. Plaintiff points out that whether the value before was $150,000, as testified by Mrs. Bennett, or $8,500, as testified by Reese, or $28,900, as found by the jury, all witnesses agree that the value was nominal after the fire. Plaintiff relies on the authority of Ranger Insurance Co. v. Kidd, 478 S.W.2d 803 (Tex.Civ.App.-Amarillo 1972, writ ref'd n.r.e.). That case resulted from loss to an aircraft, but the parties acquiesced in the submission of the case as if it were real property, that is, the prudent owner desiring to rebuild. While the court pointed out that the evidence showed a substantial reduction in value after the crash and that costs of repair exceeded the estimated value after repair, it also pointed out that because of the unique nature of aircraft, determination of its value and extent of loss are subject to variables not present in real property. Consequently, the rationale in Ranger Insurance is not applicable to the test required to be met in the case of real property.

Plaintiff relies upon St. Paul Fire & Marine Insurance Company v. Crutchfield, 162 Tex. 586, 350 S.W.2d 534, 537 (Tex.1961) where the court held that "the mere fact that some of the charred structure might have been used in new construction does not make the loss partial;" and upon Aetna Casualty & Surety Co. v. Clark, 427 S.W.2d 649 (Tex.Civ.App.-Dallas 1968, no writ), where, despite the fact that all exterior walls remained standing, the finding of total loss was affirmed. Crutchfield supplies no facts to guide us except that "one or more witnesses who viewed the (building) after the fire ... testified ... that (it was a total) loss." 350 S.W.2d at 537. Here, no witness testified that the building was a total loss. Rather, it was undisputed that ninety-five percent of the exterior walls were intact, and the interiors of six large apartments were untouched by fire. In Clark, while the evidence showed the exterior to be virtually untouched, the crucial fact appeared to be that the interior was described as "melted" and no part of it escaped the fire. On these facts we do not consider these cases persuasive here. We conclude, therefore, that none of the cited testimony goes to the legal standard required to determine total loss and consequently the evidence fails to support the jury finding that the loss was total.

Plaintiffs insist, however, that the jury could infer total loss from photographs before it. In our view, the photographs do no...