Hanover Fire Ins. Co. v. Wood

• Decision Date: 28 January 1925
• Docket Number: 6 Div. 120
• Parties: HANOVER FIRE INS. CO. v. WOOD.
• Court: Alabama Supreme Court

104 So. 224

213 Ala. 132

HANOVER FIRE INS. CO. v. WOOD.

6 Div. 120

Supreme Court of Alabama

January 28, 1925

Rehearing Denied May 14, 1925

Appeal from Circuit Court, Jefferson County; C.B. Smith, Judge.

Action on a policy of fire insurance by W.J. Wood against the Hanover Fire Insurance Company. From a judgment for plaintiff, defendant appeals. Reversed and remanded.

Coleman Coleman, Spain & Stewart, of Birmingham, for appellant.

Weatherly Birch, McEwen & Hickman, of Birmingham, for appellee.

SAYRE J.

Appellee had judgment against appellant in an action on a policy of fire insurance. Appellee was a merchant, and the policy covered his stock of goods and store fixtures. The policy contained the following covenants:

"The following covenant and warranty is hereby made a part of this policy:

"First. The assured will take a complete itemized inventory of stock on hand at least once 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.

"Second. The assured shall keep a set of books, which shall clearly and plainly present a complete record of business transacted, including all purchases, sales, and shipments, both for cash and credit, from date of inventory, as provided for in first section of this clause, and during the continuance of this policy.

"Third. The assured will keep such books and inventory, and also the last preceding inventory, if such has been taken, securely locked in a fire proof safe at night, and at all times when the building mentioned in this policy is no [not] actually open for business; or, failing in this, the assured will keep such books and inventories in some place not exposed to fire which would destroy the aforesaid building.

"In the event of failure to produce such set of books and inventories for the inspection of this company, this policy shall become null and void, and such failure shall constitute a perpetual bar to any recovery thereon."

The main insistence for appellant is that appellee breached the covenant, supra, in that he failed to keep a set of books which clearly and plainly presented a complete record of the business transacted by him, and upon this is based the argument for a reversal on the first assignment of error, which is that the trial court erred in refusing appellant's request for the general affirmative charge.

This question depends upon the testimony of appellee, all such records as he kept having been wholly destroyed by the fire. As to the facts involved, he was examined at considerable length, but his account of what he did in the way of keeping a record of the transactions of his business may be fairly stated as follows: He used the "McCaskey system" in keeping a record of his transactions with credit customers. According to this system there was an arrangement of compartments, one for each customer--in appellee's case 600 of them, though appellee had not that number of credit customers--with a cash drawer and a cashier's window in the midst. There was also an arrangement of drawers below to which old accounts were transferred. "This McCaskey register was 6 feet long, about 2 1/2 high, but the little register"--meaning, as we understand, the arrangement of drawers below--"where you keep your accounts, 2 feet long and 2 feet high." "It was a regular chart of your daily business by cards, and there were bottom drawers for those, and there was a daily business, a weekly business, and a monthly business drawer. That was the only books I had, except my ledger and daybook. I kept all of my purchases in the daybook, and received on accounts also in that book, and I transferred them at the end of the week to the register. I used the ledger for purchases and sales, and then the McCaskey system for my customers; just for my daily credit business." At the end of each day's business the total of credit sales would be noted on a daily report sheet which was kept in the register. In the same manner, memoranda showing payments by credit customers were kept in the register. We understand appellee's testimony to intend that, at the end of each credit period, weekly, or monthly--or even daily, if he gave credits for a day only--the loose slips were taken from the register and deposited in the little register, or drawers below. Merely the totals were noted on appellee's so-called ledger. Appellee kept a daybook and a ledger. He used the ledger "for purchases and sales"--you might say a summary on a ledger of my purchases and sales. "At the end of the week I would transfer them to this ledger." Purchases of country produce and expenses were noted on the daybook. Appellee testified:

"I got an invoice for every article that I bought from a jobber, and I would put that in the ledger the number of the invoice, the date, from whom I bought it, and the amount. I would then file the invoices on a file after doing that, for future reference, so I could go back through my books. The book for those invoices was kept under my desk. *** When I sold goods for cash, I would register that on the cash register, and if I sold on a credit, I did as I have detailed with the McCaskey register."

Appellee also testified that he took an inventory of his stock of goods according to contract. The fire which destroyed appellee's stock of goods and fixtures occurred after the store had been closed for the night.

By the great weight of authority the warranties--or conditions subsequent, as we had better describe them in view of the very general rule of the courts to construe them liberally--are held to be perfectly reasonable and binding upon the assured. This court has distinctly and repeatedly announced its concurrence in this proposition. Georgia Home Ins. Co. v. Allen, 128 Ala. 451, 30 So. 537; Day v. Home Ins. Co., 177 Ala. 607, 58 So. 549, 40 L.R.A.(N.S.) 652; Insurance Co. v. Williams, 200 Ala. 681, 77 So. 159, where other cases are cited; 26 C.J. 250, note 57; Cooley's Ins. Briefs, 1814. It may be well also to advert to the doctrine that:

"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; Day v. Home Ins. Co., supra.

However, as the result of the rule of liberal interpretation in favor of the assured, it is by this court, and very generally, held that substantial compliance with the requirements of the policy in this regard is sufficient; but "the books must show with reasonable certainty a complete record of the insured's business transactions, including purchases and sales for cash or credit." Insurance Co. v. Williams, supra. "No particular mode of keeping books is required if the amount and value of the goods destroyed may be ascertained therefrom with reasonable certainty by a person of ordinary intelligence, with the assistance of those who understand the system with which the books are kept, but otherwise unaided by parol." 26 C.J. 254, citing Home Ins. Co. v. Williams, 237 F. 171, 150 C.C.A. 317; Fire Association of Philadelphia v. Williams, 200 Ala. 688, 77 So. 166; Insurance Co. v. Williams, 200 Ala. 681, 77 So. 159; Fidelity-Phoenix Ins. Co. v. Williams, 200 Ala. 678, 77 So. 156. The law requires no particular form of bookkeeping; but it seems obvious that there should be something that perpetuates in intelligible and reasonably accessible form the memory of things as they were understood at their date. It is clear enough that the "McCaskey system" used by appellee was not a set of books nor any part of a set of books such as the policy required appellee to keep. The only evidence of appellee's transactions furnished by it, after they were a week or a month old, was to be found in a number--a very large number, we may assume--of looseleaf memoranda kept in a drawer, and its bulk, along with other features to which we have referred, abundantly suffice to show that it was not designed for keeping in a fireproof safe, or as a compliance otherwise with the requirements of the "iron safe clause," and so not a set of books within the meaning of the policy. Jones v. AEtna Ins. Co., 201 Ill.App. 142; Hughes v. AEtna Ins. Co., 148 Tenn. 293, 255 S.W. (Tenn.) 363.

Appellee's testimony was that sales for cash were registered on a cash register. As for that, it must be noted that it does not appear whether the cash register showed only cash received from cash sales, nor does it appear that any record was kept except, we may assume, though the evidence does not show it the slips on which the cash register noted the amounts of each sale for cash. In Monger v. Insurance Co., 97 Tex. 362, 79 S.W. 7, cited to the text of 26 C.J. 255, where nothing appears to the contrary, the evidence was that the assured, a partnership, "kept a cash register of the National Cash Register Company, and that they had kept the slips which were preserved from that register for each day during the time that the...