Pennsylvania Fire Ins. Co. v. Malone

CourtSupreme Court of Alabama
Citation217 Ala. 168,115 So. 156
Docket Number7 Div. 746
Decision Date12 January 1928

Appeal from Circuit Court, De Kalb County; W.W. Haralson, Judge.

Action on a policy of fire insurance by G.L. Malone and L.P. Lewis against the Pennsylvania Fire Insurance Company. From a judgment for plaintiffs, defendant appeals. Reversed and remanded.

Coleman Coleman, Spain & Stewart, of Birmingham, and Baker & Baker of Ft. Payne, for appellant.

Chas J. Scott, John B. Isbell, and C.A. Wolfes, all of Ft. Payne, for appellees.


Plaintiffs' action was for the value of a stock of goods destroyed by fire.

Defendant's pleas were the general issue and that setting up the violations of specific clauses of the policy. These special pleas invoke provisions of the contract, to the effect, that "assured will (1) 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 thirty days of issuance of said policy," and, failing in this, the "policy shall be null and void from such date" of failure; (2) will keep a set of books presenting "a complete record of business transacted," of "all purchases, sales and shipments, both for cash and credit, from date of inventory"; (3) that "such books and inventory, and also the last preceding inventory, if such has been taken (will be) securely locked in a fire-proof safe at night," and when the building is not open for business, or "will keep such books and inventories in some place not exposed to a fire which would destroy the aforesaid building"; and (4) concluded with the averment that the policy stipulated that, in the event of failure to produce "such set of books and inventories," said policy "shall be null and void, and such failure shall constitute a perpetual bar to any recovery thereon." And respective counsel concede that plea 2 concluded with the averment of assured's failure to take complete inventory of stock of goods on hand within 30 days of the issuance of the policy, "nor within one year previous" thereto. And the ruling as to this plea and the issues of fact raised by the evidence will be rested upon the concession of counsel that plea 2 in both cases before us are alike.

Pleas 3, 4, 5, and 6 contained matter indicated in plea 2, with the respective additional averments as follows:

"*** Assured did not, within 12 calendar months prior to the issuance of the policy sued on, take a complete itemized inventory of stock on hand, and did not, within 30 days after the issuance of said policy, take such inventory.
"*** The assured did not keep a set of books which 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 the last inventory and to the date of the fire.
"*** Assured did not produce his set of books which clearly and plainly present a complete record of the business transacted, including all purchases, sales, and shipments both for cash and credit from the date of the last inventory to the date of the fire.
"*** Assured did not produce the inventories required to be kept and produced by assured, by the provision hereinabove quoted."

Replications to pleas 5 and 6 are to the effect that, after the fire, all books, inventories, and papers set out in said pleas were produced or tendered to the local agent, "who wrote the policy"; that there was no demand by defendant for such production. Demurrers directed thereto should have been sustained. The authority of the agent issuing the policy, without more, was not that to waive production or other material provisions after the fire, and is not shown by the facts set out in the replications, nor by the express averment of the pleader. The third replication does not aver that defendant was required by the terms of the contract to make demand, nor is it averred that the books and inventories required to be taken and kept were preserved, or were forthcoming after the fire. The law would not require the doing of a useless thing as a demand for the production and inspection of books and inventories that were not taken or kept or preserved as per contract terms, and that were destroyed by fire. The insurer had the right to rely upon the warranties and covenants, in said respects, contained in the policy. Robinson v. AEtna Ins. Co., 135 Ala. 650, 659, 34 So. 18.

The use of the word "building" for "premises" in the plea (premises in the policy), and the use of the words "destroy the aforesaid building" in the plea for "destroy the property hereby insured," as contained in the policy, were averments of fact in the plea of the legal effect of the third covenant or warranty contained in the policy. And no variance was presented, nor would be declared, if the same had been duly invoked during the trial and according to the rule. It is sufficient to say that such variance was not insisted upon as the basis of affirmative instruction requested by plaintiffs as to said pleas.

Judge Malone owned and sold the property to Lewis on December 29 or 30, 1924, and the latter assumed possession of the business as owner on January 1, 1925, and operated it subject to Malone's contract of sale and right of intervention for cause. The intention manifested by the parties as to the renewal of the insurance expiring January 21, 1925, was to constitute a new contract with loss payable to Malone to the extent of his unpaid contract debt and the balance to Lewis as owner. This made them in legal effect joint adventurers in the consummation of the contract of sale and purchase, and as affecting the insurance on that stock of goods and the policies evidencing same held by Malone. Such is the effect of the evidence of Malone and Sawyer, the terms of the contract of sale in evidence, and arguments of counsel. Such was the effect of an assigned policy by the owner to the purchaser of a stock of goods in Bayless v. Mercantile, etc., Co., 106 Mo.App. 684, 80 S.W. 289. The assignment, when approved by the insurer, constituted a new and original contract between the insurer, by his assent, and the vendor and assignee by their contract and agreement, and such policy was not subject to any forfeiture for a previous breach of an inventory clause by the seller and assignor, prior to the assignment. Continental Ins. Co. v. Munns, 120 Ind. 30, 22 N.E. 78, 5 L.R.A. 430; Shearman v. Insurance Co., 46 N.Y. 526, 7 Am.Rep. 380; Steen v. Insurance Co., 89 N.Y. 315, 42 Am.Rep. 297; Ellis v. Insurance Co. (C.C.) 32 F. 646.

What was the contract? It is provided by the terms of the policy as follows:

"If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached, or appended hereto."

Such was the express agreement of the joint adventurers and insurer. There was no misjoinder of parties plaintiffs available to defendant. The joint adventurers may maintain the suit as plaintiffs, and each acts for the interest of the other. Christie v. Durden, 205 Ala. 571, 88 So. 667; Saunders v. McDonough, 191 Ala. 119, 67 So. 591; Id., 201 Ala. 328, 78 So. 160. As between Malone and Lewis, one sues for the benefit of the other within the terms of their enterprise; the insurer had agreed to pay such insurance, if liable therefor; and it is estopped to question their right of suit by said joint plaintiffs. The undisputed facts are that the insurance issued on the stock, fixtures, etc., theretofore carried by G.L. Malone & Co., was to expire on January 21 or 22, 1925. The renewal thereof had been prepared by the local agent, or written up by him (not delivered), a short while before the date of expiration and that of the sale of the stock by Malone to Lewis; the policy being countersigned December 26, 1924. The period for which the policy was to embrace was one year from January 22, 1925. And before delivery of the policy that agent was informed of the sale, and requested that it be rewritten according to the interests represented by the sale. To accomplish this, the agent affixed to said policies a rider agreement of date of January 1, 1925, that "recognizes George L. Malone and L.P. Lewis, owners, as the assured by this policy," subject "to all conditions of the policy."

The relations of the plaintiffs to each other and to the insurer as to the insurance effective from January 22, 1925, entering therein as a part of the security to Malone for the purchase price of the goods, were that Lewis, the owner, was in possession from January 1, 1925, with the power of disposition in due course, and Malone was the loss payee, protected in his sale by the insurance, the installment payments of one-half the monthly gross sales, and the right of intervention for cause. After the change of possession was effective, Lewis had the ownership of the stock of goods, furniture, and fixtures, in the primary sense, and was not only placed in possession of the subject-matter, but of the inventory made by Malone in 1924--it was left in his possession, and he kept the books. Malone took no further or active part in the conduct of the business from January 1, 1925, to the date of the fire in November, except only to make his collections of monthly installments and maintain a representative in and about the store to report to him of Lewis' operations.


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