Security Nat. Fire Ins. Co. v. Schott Drug Co.

After reading the motion for rehearing and hearing the oral argument of attorney for appellant, I have reached the conclusion that this court erred in the original opinion filed herein on February 4, 1937.

Our former opinion sufficiently states the nature and result of the suit, and the issues presented by this appeal, and, with such additions and modifications as may be hereinafter indicated, a correct statement of the material facts shown by the evidence.

We say in that opinion that the invoices of goods received by the appellee prior to the fire were retained "but not filed in the safe, and were destroyed by the fire which occurred February 23, 1934. Whenever goods were returned to a shipper, entries were made upon the journal showing their value, and for which appellee took credit, but no memos of the returned items were preserved. * * *

"The record appellee kept of its credit sales was on charge tickets which, for the current month, were kept in the safe. But at the end of each month the total for that month was transferred to the journal, and the charge tickets taken from the safe and filed away. They, too, were destroyed by the fire. And the only record appellee had of its customers' accounts, after the fire, was a record showing the total purchases by a given customer for a given month, but which did not show the items of which such total consisted — appellee, indeed, had had such a record, but it was not kept in the safe and was destroyed by the fire."

The holding in our former opinion that the record so kept and preserved by appellee was a sufficient compliance with the iron-safe clause of the insurance contract, pleaded by appellant and set out in our former opinion, is not sustained by the authorities cited in the opinion.

It is apparent from a reading of our former opinion that we failed to give due consideration to the fact that the contract of insurance not only required the appellee to keep a complete set of books in its regular course of business, but to preserve all such records from fire "by placing and locking them in an iron fire proof safe at night and at all times when the building mentioned in the policy is not actually open for business; or failing in this the Assured shall keep such books and inventories, and each of them, in some secure place not exposed to a fire which would destroy said building; and in event of a loss or damage insured against to the personal property mentioned, said books or inventories, and each of them, must be by the Assured delivered to this Company for examination; or this entire policy shall be null and void and no action shall be maintained hereon for any such loss."

This contract further expressly provides:

"The assured will make and prepare in the regular course of business, from and after the date of this policy, 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 on credit, or this entire policy shall be null and void.

"The term `complete record of business transacted', as used above, is meant to include in said set of books a complete record of all property which shall go into the premises and be added to the stock, and of all property taken from the stock, whether by the assured or by others, even though not technically purchases or technically sales."

This language of the contract is plain and unambiguous. There is nothing unlawful or unreasonable in such provisions, and courts are not authorized to disregard them. The fact that the books as kept may have substantially complied with the provisions of the contract relating to their preparation and contents does not fulfill the obligation of appellee's contract, even if these books were not destroyed by the fire, because the other records called for by the contract were not preserved from fire and delivered to appellant after the destruction of the goods by fire.

The following quotation from the written argument contained in appellants' motion for rehearing is adopted and incorporated in this opinion:

"The appellants have never at any time during this controversy had any complaint to make of the system of books kept by the assured. It is recognized that the books actually prepared in the regular course of business by the assured were sufficient to constitute a substantial compliance with the record warranty clause. The testimony of the accountant witness De Loach and of the other bookkeepers and accountants who testified is to the effect only that the books actually prepared by the assured were the usual and customary books kept by merchants doing that type of business. There is no testimony in the record that merchants customarily did not preserve and keep, for instance, either the original invoices or copies of them. In fact, the testimony is to the contrary, and the appellee Schott Drug Company recognized this fact by filing away and keeping its invoices for reference from time to time. The matter complained of by appellants is that such invoices were not kept either in the safe or in some safe place not exposed to the fire and therefore were burned and could not be produced after the fire. If such invoices were an integral part of the assured's records, they should have been preserved from the fire and produced after the fire. This was not done.

"These invoices, or some other itemized record of purchases, were deemed by the insured necessary to its records, were contracted for by the appellants, and served a valuable purpose to any one trying to determine whether the goods contained in the store had been purchased at fair prices and were the type of goods covered by the policies. The appellants were deprived of these records by the failure of the insured to preserve them, and the record warranty clause was thus clearly violated.

"The statements above made with reference to an itemized record of the purchases are also true as to the daily records of credit sales. The assured's bookkeeper testified that records showing the amount purchased by a given customer on a given day and showing the credit sales from day to day had been prepared in the regular course of business and were kept — but were kept outside of the safe, in violation of the record warranty clause, and were burned by the fire. If such daily records were considered by the assured as a necessary part of its records — and were kept by the assured as the evidence shows — then they were one of the books (records) which the assured was required to keep and preserve, for a year at least and the failure to preserve them worked a forfeiture of the policies."

Appellees' construction of the language of Justice Graves in the opinion of this court in the case of Commonwealth Underwriters' Agency of Republic Insurance Co. v. Lawrence Grocery Co., 244 S.W. 200, seems to be that the holding of this court in that case was that it required a violation by the insured of both the ironsafe provision and the provision requiring the keeping of a proper set of books, to render the contract of insurance unenforceable. The writer cannot believe that the learned justice who wrote that opinion had any idea that his language would be so interpreted.

The opinion of Justice Graves in the case just cited, in reference to the inventory presented to the company after the fire, which in all essentials is similar to the one presented by appellants in this case, as set out in the opinion, says:

"Concerning the itemized inventories provided for, to constitute even a substantial compliance, there must be `an itemized list, or an enumeration, article by article, of the property,' to the end `that the insurance company may test the correctness of the claim in two respects: (1) Whether the articles of which the stock was composed all belonged to the classes of property covered by the policy; and (2) whether the valuation attached to the different items and which went to make up the total sum expressed, was reasonable.' Roberts, Willis Taylor Co. v. Insurance Co., 19 Tex. Civ. App. 338, 48 S.W. 559; North British Mercantile Insurance Co. v. Kemendo, 94 Tex. 367, 61 S.W. 1102."

A number of other cases are cited which fully sustain Justice Graves' opinion.

The inventory presented in this case, prepared by the trustee in bankruptcy of the J. J. Schott Corporation, the original owners of the stock of drugs which was purchased by the appellee company from the bankrupt estate, even if such inventory had been sufficient in all other respects, is not in my opinion a compliance with the provision of the contract which required the appellee "to take a complete inventory of stock on hand at least once in each calendar year and within twelve months of the last preceding inventory, if such had been taken"; but, be that as it may, the inventory presented to appellant is clearly insufficient upon the grounds stated in Justice Graves' opinion.

The original opinion in this case finds no support in the opinion of this court in the case of Scottish Union National Insurance Company v. Andrews Matthews, 40 Tex. Civ. App. 184, 89 S.W. 419, 421, cited by the original opinion. In the cited case, it is stated that "the only books kept by the plaintiffs were the ledger, the blotters, the cash book, and an invoice book. * * * They took an inventory January 12, 1903, and from that date they kept all the invoices or original bills of goods purchased, and exhibited same at the trial. * * * This blotter showed the name of the purchaser, and the items that he purchased, and their value or price at which they were sold. * * * The cash book and ledger were preserved in a fireproof safe and exhibited at the trial. They also kept an invoice book in which a statement of all goods purchased was entered. This book was preserved and exhibited at the trial."

It seems clear to the writer that the cited case gives no support to the original opinion in this case. It follows from the conclusions above expressed that, in my opinion, the motion for rehearing should be granted, the judgment in favor of appellee for the loss and damage of the stock of goods destroyed by the fire which caused the loss and damage complained of in the petition should be reversed, and judgment here rendered in favor of appellant that appellee take nothing on that portion of his claim. The loss and damage to the furniture and fixtures, amounting to the sum of $3,000, is not complained of by appellant, and that portion of the judgment should be affirmed.