I think that the errors upon the trial of this case demand a new trial, and, therefore, dissent from the affirmance announced in the opinion of Mr. Justice Watts.
The plaintiff held two policies of fire insurance upon his stock of goods; one was issued by the Palatine Company on September 30, 1920, for $2,000, the other by the London Lancashire Company on December 23, 1920, also for $2,000. The stock of goods was destroyed by fire on June 27, 1921, within the period of insurance. The companies declined to pay the loss, and on October 10, 1922, separate suits were instituted. At April term, 1923, the two cases were tried together before Hon. R.E. Babb, Special Judge, and a jury. The trial resulted in verdicts in favor of the plaintiff upon both complainants, and from judgments entered thereon the defendants have appealed.
The defendant's defense in each case was a violation by the insured of what is commonly termed the "iron-safe" clause in the policies, which, in brief, requires the insured:
(1) To take a complete itemized inventory of his stock of goods on hand at least once a year.
(2) If such inventory shall not have been taken within the year prior to the date of the policy, to take it in detail within 30 days of its issuance.
(3) To keep a set of books which shall present a complete record of business transacted, including purchases, sales, and shipments, both for cash and credit, from the date of the inventory, and during the continuance of the policy.
(4) To keep his books and the inventory locked in a fireproof safe at night, or when the building is not actually open for business.
(5) Should the insured fail in the preceding requirement, he must keep the books and inventory in some place not exposed to a fire which would destroy the building in which the stock of goods insured was kept. *Page 395 he had the record." It is evident that the plaintiff meant to make no admission except of what the record itself would show. Neither the record nor a copy of it was proven or offered in evidence, nor was any proof whatsoever presented of the authenticity of the paper upon which plaintiff was questioned. I do not consider that this colloquy was effectual to draw from the plaintiff an admission of his tax return, even if it should be admitted that this would have constituted a counter showing to plaintiff's testimony of the value of his stock of goods in June, 1921. It is further true that there is in the record an exceedingly vague notation of the existence of some testimony, which is not set out, of some unstated quantity of goods having been removed from the store before the fire, "which issue," the record states, "is not raised by the exceptions." The record further fails to show that this alleged removal was accomplished after the estimates were made of the value of the stock, which estimates were made "shortly" before the fire; hence the Court may assume that this testimony did not constitute a contradiction of the aforesaid estimates.
Hence, eliminating completely the erroneously admitted testimony, we have the estimates of five witnesses, all versed in merchandising, before the jury, to the effect that the goods destroyed were worth from $5,000 to $7,000, which testimony was not contradicted. In other words, the only testimony before the jury on this subject, be its probative value weak or strong, was to the effect that the value of the destroyed stock of goods was in excess of the insurance.
Under these circumstances, found to exist in this particular case, and under the decisions of this Court herein cited, the error hereinbefore pointed out in the use of the duplicate invoices was not, in my opinion, prejudicial, and did not constitute reversible error. For these reasons I concur in the opinion of Mr. Justice Watts, affirming the judgment below. *Page 396
The Palatine policy was dated September 30, 1920, and the London Lancashire, December 23, 1920. The insured claims to have taken an inventory on January 2, 1921, which was within 30 days after the London Lancashire policy was issued, but not within that time after the Palatine was issued.
In what immediately follows, I shall take up the Palatine policy separately, and later refer to the other.
It is conceded that the insured had not taken an inventory of his stock within the year prior to September 30, 1920, the date of the Palatine policy, and that he did not take an inventory within 30 days thereafter; that he did not keep a set of books as required by the third subdivision above set forth; that he did not have an iron safe in his store. He did not have books, inventory, or safe, and hardly could be expected to keep in a safe which he did not have, books and inventory which never existed, or to keep them in some other place not exposed.
The plaintiff countered to these conceded grounds of forfeiture by alleging that the Palatine Company has waived its right to insist upon them.
The circumstances upon which he relies to establish his contention, that the question of waiver was properly submitted to the jury, are as follows:
(1) That, at the time the Palatine policy was issued, the agent, Graham, knew that the plaintiff had not taken an inventory, did not keep a set of books, and had no safe.
(2) That Reeves, the inspector for the London Lancashire, was in his store during the life of the policy, and was informed that the plaintiff did not keep a set of books, and had no safe.
(3) That Redding, the adjuster for both companies, applied for a nonwaiver agreement, and was given one limited to the matter of the cancellation of the London Lancashire policy; that he then proceeded with an investigation of the loss. *Page 397
(4) That the Palatine had not returned the unearned premium.
As to the first circumstance:
The evidence tends to show that when the agent, Graham, solicited the insurance in the Palatine Company, he was in the plaintiff's store where the conditions surrounding the plaintiff's business were open to his view; that he asked the plaintiff if he had an inventory; that he was told that he did not; that Graham said: "I don't reckon it is necessary to have an inventory; there is sufficient goods here"; that Graham estimated the value of the stock at $4,000.00, and wrote a policy for $2,000.00. If this be true, and for the purposes of the appeal it must be assumed to be so, while Graham's statement undoubtedly was made in reference to the amount of insurance to be carried, and not to any provision in the policy, it may not have been an unnatural inference for the plaintiff to draw that the inventory was unnecessary for any other purpose. Graham denied this statement, and testified that the plaintiff promised to take an inventory within 30 days, although it does not appear that any effort was made by him between that date and the fire to see that the promise was fulfilled.
The evidence also tends to show that at that time the plaintiff explained to Graham the method he used in keeping a record of his business, the McCaskie system, as it is called, which admittedly does not comply with the requirement that the insured shall keep a set of books which shall present a complete record of business transactions, purchases, sales, cash, and credit, etc. It does not appear that Graham interposed any objection to the method used by the plaintiff, and it may not have been an unnatural inference that it was sufficient.
The evidence also tends to show that at that time the plaintiff informed Graham that he did not have an iron safe in which the inventories and books were to be kept; that Graham replied, "That is all right." He not only did *Page 398 not object to the absence of the safe, but approved it. It may not have been an unnatural inference that the absence of the safe was "all right" during the continuance of the policy.
There is also evidence tending to show that Graham returned to the plaintiff's store in December, and solicited insurance with the London Lancashire Company, and at that time, three months after he had issued the Palatine policy, knew that the same method of keeping business records was in force, without objection on his part, and that he said nothing about the iron safe or inventory.
I think that there is enough evidence tending to show a waiver, in this circumstance, to justify a submission of the question to the jury. The defendant insists that the conversation between Graham and the plaintiff occurred a year before, when the first policy was taken out, and so Graham testifies. It strikes me that that makes matters worse for the company, as Graham then had a whole year to ascertain whether or not the conditions were complied with, and, without satisfying himself as to this, renewed the policy for another year.
As to the second circumstance:
The information received by Reeves, the inspector for the London Lancashire Company, cannot be imputed to the Palatine Company.
As to the third circumstance:
The adjuster for both companies was sent to Greenwood under specific instructions to proceed with the investigation under a non-waiver agreement. When he asked for it, he was given one which was limited to the matter of cancellation of the London Lancashire policy, which has not been made a question in the case. He then went to the plaintiff, and as soon as he learned that the plaintiff had no inventory of his stock, and nothing to show his cash sales except the bank deposit account, he again asked for the non-waiver agreement and, upon refusal, left. *Page 399
I think there is nothing in this circumstance which would justify the submission of the question of waiver to the jury.
As to the fourth circumstance:
I think that the true rule upon this subject is expressed in Pearlstine v. Insurance Co., 70 S.C. 75; 49 S.E., 4.Young v. Insurance Co., 68 S.C. 387; 47 S.E., 681.Norris v. Insurance Co., 55 S.C. 450; 33 S.E., 566; 74 Am. St. Rep., 765. McBryde v. Insurance Co., 55 S.C. 589;33 S.E., 491; 74 Am. St. Rep., 769; note to 25 L.R.A. (N.S.), 1 (quoted) by the writer in Whaley v. InsuranceCo., 124 S.C. 173; 117 S.E., 209); and is substantially this: The question whether or not the failure to return the unearned part of premiums shall be considered evidence of a waiver of a forfeiture depends upon the time at which notice of the breach has been brought to the company. If before the loss, it is evidence tending to show a waiver; if after the loss, not. The reason for the rule, so clearly stated in the above extracts, need not be here repeated.
As there is evidence tending to show that the company had notice before the loss of the breach now relied upon, the failure to return the premium is some evidence tending to show a waiver, which required submission of that issue to the jury.
It is insisted by the insurance company that the iron safe clause contains "promissory warranties," and that a knowledge of conditions existing at the time the policy is issued cannot be construed into a waiver of prospective duties. This is generally true; but where, from that knowledge or from statements made by the agent at the time, a reasonable inference may be drawn by the insured that these prospective duties will not be required, the waiver of them is as complete as of an existing condition.
So much for the motion for a directed verdict in favor of the Palatine Company, which, I think, was properly refused.
Next, in reference to the motion on behalf of the London Lancashire Company for a directed verdict: *Page 400
The circumstances upon which the plaintiff relies as evidence of waivers of the three conditions in the "iron-safe clause" are the same as in the case of the Palatine Company.
As to the first circumstance:
The plaintiff seeks to impute to the London Lancashire Company the knowledge acquired by Graham while he was acting as agent of the Palatine Company, in reference to the absence of inventories, the failure to keep a set of books, and the failure to have an iron safe in which these papers should be kept. I have considerable doubt as to this proposition, upon the principle that only such knowledge as may have been acquired by the agent in the course of his agency can be imputed to the principle (2 Joyce, Ins., § 544.Cobb v. Insurance Co., 78 S.C. 388; 58 S.E., 1099); but as the question appears to be decided contrary to my impression, in the case of Madden v. Insurance Co., 70 S.C. 295;49 S.E., 855, I yield, for the moment, my doubts to the authority of that decision.
Now, as to the inventory: The plaintiff claims to have taken an inventory on January 2, 1921, which was within 30 days after the issuance of the policy; he does not rely upon a waiver of this requirement, but insists upon his compliance therewith; so the matter of waiver in this connection disappears from consideration. And, even though it could be considered, the London Lancashire Company could only be charged with the knowledge of Graham that, at a time three months before its policy was issued, an inventory had not been taken within the past year; it could not be charged with any conduct of Graham, while acting as agent of another company, upon an entirely distinct transaction, from which it might be inferred that the other company intended to waive future compliance with the requirement.
Next, as to the keeping of a set of books: The same observations are pertinent to the knowledge of Graham acquired while he was acting for the Palatine Company in *Page 401 regard to this matter; but the evidence tends to show that, when he solicited the insurance with the London Lancashire Company, he acquired the same information as to the method adopted for keeping a record of the business, as he did formerly when the Palatine policy was issued; which, as in the case of that policy, was some evidence of waiver.
Next, as to the iron safe: The London Lancashire Company could only be charged with the knowledge of Graham that, when the Palatine policy was issued three months before the London Lancashire policy was issued, the plaintiff did not have an iron safe; it could not be charged with any conduct of Graham, while acting as agent for another company, upon an entirely different transaction, from which it might be inferred that the other company intended to waive future compliance with the requirement.
As to the second circumstance:
It appears without controversy that Reeves, an inspector of the London Lancashire Company, went to the store of the plaintiff before the fire, for the purpose of inspecting the risk, and that while there he asked about the books kept by the plaintiff; the plaintiff showed him the McCaskie system, with which he shows by his testimony he was familiar. The defendant insists that Reeves was sent there merely to inspect the fire hazard. His testimony refutes this contention, as he admits that he asked about the books. It was a question for the jury whether or not his inspection covered other matters than the fire hazard, and, if it did, the company would be charged with knowledge acquired by him. There was evidence, therefore, that the company, before the fire, knew that the plaintiff was not complying with the requirement as to keeping books, and whether that constituted a waiver of the agreement was a question for the jury.
As to the third circumstance:
The foregoing observations in connection with the Palatine policy are equally applicable to the London Lancashire. *Page 402 As to the fourth circumstance:
The same may be said of this.
I think, therefore, that there was sufficient evidence to require a submission of the question to the jury, as to a waiver of the requirement that a set of books be kept; but that there was no such evidence as to a waiver of the requirement an iron safe be kept, within which the inventories and books, such as they were, should be placed at night; and that for this reason the motion of the London Lancashire Company for a directed verdict should have been granted.
Both of the defendants assign error in permitting the plaintiff to read into the record the duplicate invoices, under the pretense of testifying from memory as to the quantity and value of the goods indicated thereon.
The plaintiff had flagrantly violated every reasonable provision of the policies, intended to supply the means of information upon which a settlement of his actual loss could be made; he took no inventory, except that of January, 1921; he kept no books showing his purchases and sales; he kept no safe in which the papers which might have supplied this information should have been preserved; he provided no other place in which they could be kept. The original invoices of purchased goods were destroyed in the fire; he attempted to meet the situation in this way; taking the inventory of January, 1921, as a basis, he proposed to add thereto the purchases made between that date and the fire, and to deduct therefrom his cash sales, thus:
Inventory January 2, 1921 _____________________$ 5,710.47
Invoices and freight from January 2, 1921, to
June 17, 1921 (date of fire) ________________ 10,289.79
_________
$16,000.26
Sales during the same period, less 15 per cent.
profit and goods on hand ___________________ 8,255.56
__________
Net value _________________________________$ 7,744.70
*Page 403
The plaintiff procured from the sellers duplicate invoices, and offered them in evidence. Upon objection the Circuit Judge excluded them, upon the ground that they could only be proved by the person who made them as original evidence. Counsel for the plaintiff then, one by one, handed the duplicate invoices to the plaintiff on the stand, and, over objection of counsel for the defendants, the Court allowed the plaintiff to read from them and testify that he had purchased the goods at the prices indicated thereon. The plaintiff did not pretend to testify from memory; in fact admitted that he was not doing so, and his testimony shows that he testified only from the information afforded by the papers themselves. I think that this method of examination was a palpable evasion of the ruling excluding the invoices as evidence, and a plain violation of the rule in reference to refreshing memory from written papers.
The rule by this time should be considered settled that, where the witness has made a memorandum himself of a transaction, substantially contemporaneously therewith, he may testify from the writing, and it may be introduced in evidence, although he may not at the time of testifying have a recollection of the matter; but, where he has not made the writing himself, the paper cannot be used except where the witness after referring to it speaks from his own memory.Gwathmey v. Foor Co., 121 S.C. 237; 113 S.E., 688.Copeland Co. v. Davis, 125 S.C. 449; 119 S.E., 19, and cases cited, particularly in the first case.
The question in this case is not as to the admissibility of the paper in evidence, for it was excluded, but whether the witness shall in manifest evasion of the rule be permitted to use the paper at all. What would be the efficacy of the rule, if the witness should be allowed to get before the jury, the facts stated in the paper which he did not make and could not possibly have remembered? In answer to the question: "Independently of these figures, you could not have told (what was bought)?" the plaintiff replied: "No. sir; and no other man." *Page 404
It is no reply to the inadmissibility of this evidence to say that other witnesses testified to the value of the stock. The other witnesses were men casually in the store, and testified after a necessarily cursory examination, giving only an estimate. The documentary evidence of the invoices, if properly proved, was worth a dozen of such estimates, and having been practically admitted, improperly, there was manifest error.
There are other matters which I do not deem it necessary to discuss. The exceptions of the defendants numbered 8, 9, 11, 12, assigning error in not charging admitted facts, are well taken.
For these reasons I think that the judgment should be reversed and a new trial had. The Court might well order a directed verdict in favor of the London Lancashire Company, but, as the motion was made upon a defect of proof which may be supplied, a new trial is to be preferred under Rule 27.