Dorroh-Kelly Mercantile Co. v. Orient Ins. Co.

• Decision Date: 29 March 1911
• Citation: 135 S.W. 1165
• Parties: DORROH-KELLY MERCANTILE CO. v. ORIENT INS. CO.
• Court: Texas Supreme Court

Page 1165

135 S.W. 1165

DORROH-KELLY MERCANTILE CO. v. ORIENT INS. CO.

Supreme Court of Texas.

March 29, 1911.

Error from Court of Civil Appeals of Sixth Supreme Judicial District.

Action by the Dorroh-Kelly Mercantile Company against the Orient Insurance Company. From a judgment of the Court of Civil Appeals (126 S. W. 616) reversing a judgment for the plaintiff, plaintiff brings error. Affirmed.

J. P. Hart, Warren & Briggs, and Young & Stinchcomb, for plaintiff in error. Crane, Seay & Crane, for defendant in error.

BROWN, C. J.

On January 29, 1908, J. M. Dorroh and his son, J. M. Dorroh, Jr., were owners of a stock of merchandise situated at Big Sandy, Tex., and were negotiating with T. J. Kelly to sell to him a half interest in the said stock of goods. For the purpose of ascertaining the value of the stock, as a basis for the transaction, the parties took a partial inventory of the said stock of goods. With reference to this inventory Kelly testified substantially as follows: "The interest that I was buying was in the stock of goods at Big Sandy and also at Pritchett. I was to get a one-half interest. We made the trade on the basis that there was a $20,000 stock on hand; but, invoicing the stock in the building at Big Sandy, we got up to $18,638 and some odd cents. That is to say we inventoried that much goods including the furniture and fixtures, and at the time we left uninventoried about $2,000 approximately of goods. I swore on a preliminary examination that we left uninventoried $3,000 or $4,000, and there was probably that much uninventoried. Of the amount inventoried there was $1,050 furniture and fixtures. Taking that from $18,638 leaves the actual amount of stock that we inventoried as a basis of the trade as $17,588.01. This item was entered on the stock account. When we reached that point, I told them that the stock was going to be of greater value than I anticipated; that I had only $6,187.50 to put into the business, and there was no use going further with it. After some conference with the elder Dorroh and the junior Dorroh, it was agreed that we should stop taking the inventory, and they would sell me one-half interest in the business for the sum of $6,187.50. This sale included all the stock of goods at Big Sandy, including furniture and fixtures and some $1,900 worth of stock at Pritchett; but the Pritchett goods were not included in this inventory." After this inventory had been completed, Kelly purchased a one-half interest in the stock, and the parties formed a corporation under the name of the Dorroh-Kelly Mercantile Company. On February 7, 1908, the Orient Insurance Company issued to the Dorroh-Kelly Mercantile Company one of the policies sued upon, being No. 149,998, wherein it insured the said stock of goods to the said Mercantile Company against loss by fire for one year in the sum of $1,000, and on April 1, 1908, the said Insurance Company issued to the Mercantile Company another policy on the same stock of goods, which policy is No. 330,456, whereby it insured the said stock of goods against fire in favor of the said Mercantile Company for one year in the sum of $2,300. On January 9, 1909 the stock of merchandise, then valued at $22,000, and at the time insured for $16,000, was destroyed by fire, except a portion of the stock which was valued at the sum of $2,000. The Insurance Company denied liability upon the ground that no inventory of the goods had been taken in compliance with the terms of the contract. At the trial the Insurance Company requested the court to give a peremptory instruction to the jury to find for the defendant, which was refused, and under the charge as given a verdict was returned by the jury in favor of the plaintiff for the sum of the two policies with interest, and a judgment was accordingly entered. Upon appeal to the Court of Civil Appeals of the Sixth District the judgment of the trial court was reversed, and judgment was rendered in favor of the Insurance Company. 126 S. W. 616.

Each of the policies here sued upon contained practically the following provision: "The following covenant is hereby made a part of this policy, and a warranty on the part of the assured: Section 1. The assured will take a complete itemized inventory of stock on hand at least once in each calendar year, and unless...