Scanlan v. Home Ins. Co.

• Decision Date: 23 January 1935
• Docket Number: No. 2514.,2514.
• Citation: 79 S.W.2d 186
• Parties: SCANLAN et al. v. HOME INS. CO. et al.
• Court: Texas Court of Appeals

79 S.W.2d 186

SCANLAN et al. v. HOME INS. CO. et al.

No. 2514.

Court of Civil Appeals of Texas. Beaumont.

January 23, 1935.

Rehearing Denied February 6, 1935.

Appeal from District Court, Harris County; Ewing Boyd, Judge.

Actions by Kate Scanlan and others against the Home Insurance Company, against the Fidelity-Phenix Fire Insurance Company, against the New Hampshire Fire Insurance Company of Manchester, and against the Ætna Insurance Company of Hartford, Connecticut. The actions were consolidated. From the judgment, plaintiffs appeal.

Judgment modified and, as so modified, affirmed.

Walter F. Brown, of Houston, for appellants.

Thompson, Knight, Baker & Harris, of Dallas, and Chas. C. McRae and Bryan & Bryan, all of Houston, for appellees.

COMBS, Justice.

This case originated in the district court of Harris county and is before us on transfer by the Supreme Court. On January 30, 1932, a three-story brick building belonging to appellants, Kate Scanlan, Lillian Scanlan, and Stella Scanlan, and located in the Houston business district, was damaged by fire to the extent of more than 50 per cent. of its value. The building was insured in four insurance companies, appellees herein, in the aggregate amount of $65,000. The proper authorities of the city of Houston refused appellants a permit to rebuild or restore the building using any part of the structure remaining for the reason that the fire ordinances of the city of Houston did not permit the reconstruction of it. Appellants filed with the insurers proper proofs and claimed the face amount of the policies as for total loss. The insurance companies refused payment. Appellants, as plaintiffs in the court below, filed a separate suit against each of the four companies, and each defendant filed answer denying liability. The policies being identical in form and the defenses urged by the several companies being the same, the suits were consolidated and trial of the consolidated suit was had to a jury.

In their petition plaintiffs alleged, among other things, that the building was destroyed to the extent of more than 50 per cent. of its value and that, acting under the ordinances of the city of Houston, which they specifically plead, the city engineer of the city of Houston had forbidden them the right to rebuild the building utilizing any part of the structure remaining, and that as a consequence the building was a "total loss" within the meaning of the Texas valued policy law. Vernon's Ann. Civ. St., art. 4929. During the trial the insurance companies withdrew their denial of liability and confined their contest to the amount of the recovery. They contended by pleading and proof that the building was not in fact a total loss, and that the measure of their liability was the cost of restoring the building in as good condition as it was in before the fire. They also assailed the validity of the fire ordinances and building code of the city of Houston on various grounds. They also contended by pleading and proof that the total value of the building before the damage by fire did not exceed $45,000 and that in any event recovery should be limited to that amount. Plaintiffs, by supplemental petition, leveled numerous special exceptions at the special defenses pleaded by the defendants carrying out their theory that the policies constituted a liquidated demand for their face amount. We will note here that the defendants did not seek to avoid the policies by any plea of fraud or that they were deceived or overreached by the plaintiffs in the making of the contract. At the conclusion of the evidence plaintiffs moved for an instructed verdict for the face amount of the policies. The motion was overruled, and the trial court submitted the case to the jury on special issues, in response to which the jury found that the building was not in fact a total loss, and fixed the cost of repair and replacement at $30,500. Plaintiffs moved the court for judgment non obstante veredicto for $65,000, which motion was overruled, and judgment entered in plaintiffs' favor for $30,500. Plaintiffs have duly perfected their appeal from that judgment. The insurance companies have not appealed, but contend here that the correct judgment has been rendered.

The ordinances of the city of Houston introduced in evidence are quite extensive, covering many pages of the statement of facts. For the purpose of this opinion it is only necessary that we make a brief statement of the nature of the ordinances with brief quotations from the pertinent provisions. In 1922 the city of Houston enacted an ordinance setting forth building restrictions, regulations, etc., for the city. In subsection (a) of section 1155 of the ordinance it was provided that: "It shall be unlawful to erect any building within that portion of the fire limits of the city of Houston hereinafter designated unless such building shall be of fireproof construction as the same is hereinafter defined." It then lists a large number of blocks which shall compose the fire limits referred to, including block 45, in which the building in question was located. It then defines "fireproof construction," as used in the ordinance. It is further provided in subsection (e) of the same section of the ordinance: "It shall be unlawful to reconstruct or repair any non-fireproof building within the limits set out in sub-section (a) hereof when the same shall have been damaged by a storm, fire, decay or other means as much as fifty per cent. of its value, exclusive of foundations, and in such case no permit shall be issued for the reconstruction or repair of said non-fireproof building."

It is without dispute that this ordinance of 1922, if given effect, would prevent the repair or restoration of the Scanlan building. It was damaged more than 50 per cent., in fact 70 per cent., of its value, exclusive of foundations, and it was not of fireproof construction within the meaning of the ordinance. It is likewise without dispute that except for the ordinance, the foundations and walls, or at least portions of them, could have been utilized in the restoration of the building, and that as a consequence it could have been restored at a cost considerably less than the cost of erecting a new building of the same type. There is also evidence to support the jury's finding that the building could be repaired and restored for a cost of $30,500. It is evident from his rulings that the trial judge considered the ordinances and building code of the city of Houston of no effect in determining the extent of loss. The correctness of such holding is the controlling question in this case.

For reasons which we will discuss later in this opinion, we have concluded that the ordinance of 1922, from which we have quoted briefly above, is valid as against the attacks which appellees now urge against it. Pretermitting here a discussion of those questions and assuming the validity of the ordinance, we will first consider the controlling question of whether it should be given effect in determining whether the building was a total loss. Under the facts there was a remnant of the building remaining which, but for the ordinance, a reasonably prudent owner, uninsured and desiring such a structure as the insured building was before the injury, could have utilized as a basis for restoring it. Therefore, we think it cannot be questioned that under the rule announced by our Supreme Court in such cases as Royal Ins. Co. v. McIntyre, 90 Tex. 170, 37 S.W. 1068, 35 L. R. A. 672, 59 Am. St. Rep. 797, and Fire Ass'n v. Strayhorn, 211 S. W. 447, the building was not a total loss unless the ordinance which denied appellants the right to restore it rendered it so.

But it is equally apparent that if the ordinance be given effect, appellants' building was a total loss to them. The fire had so far destroyed it that the city had refused a permit for restoring it. The part of it which remained was in effect so much débris to be demolished and removed. Therefore, the real question to be decided here is: Was it reasonably within the contemplation of the parties to the insurance contracts that a fire loss thus rendered total by fire ordinances of the city of Houston should be considered total within the meaning of the policies of insurance? It is our conclusion that it was. Cooley, in his Briefs on Insurance, § 5032, says: "If a building covered by a policy is located within the fire limits of a city and is of such class that under certain conditions the city ordinances prohibit the repair or restoration of such building recovery may be had as for total loss." And in 26 Corpus Juris, 351, it is said: "If by reason of public regulations as to rebuilding of buildings destroyed by fire such rebuilding is prohibited the loss is total although some portion of the building remains which might otherwise have been available in rebuilding. So also if the insured building is so injured by the fire as to be unsafe and is condemned by the municipal authorities, the loss is total." We think the general rule thus announced by Mr. Cooley and Corpus Juris is unquestionably sound and is supported by the great weight of authority. The power of a city, by proper ordinance, to regulate the construction, reconstruction, and repair of buildings within its limits so as to prevent and abate fire hazards is of universal recognition. In fact, it is an essential attribute of municipal government under modern conditions. The proper exercise of such police power is for the public good and inures to the benefit of insurer and insured alike. Every one dealing with property within a city is presumed to recognize the existence of such power and to have knowledge of ordinances enacted in the exercise of it. So it has been often held that parties to an insurance contract are regarded as having contracted in view of pertinent municipal ordinances so that they become a part of the contract. Hamburg-Bremen Fire Ins. Co. v. Garlington, 66...