Case Title: Braddock v. Memphis Fire Insurance Corporation

Citation: 493 S.W.2d 453

Docket Number: 

State: tennessee

Court: Tennessee Supreme Court

Date: 1973-04-18T00:00:00Z

Document:
493 S.W.2d 453 (1973) Hezeskiah BRADDOCK et al., Appellants, v. MEMPHIS FIRE INSURANCE CORPORATION et al., Appellees. Supreme Court of Tennessee. April 18, 1973. H.L. Feibelman, Jef Feibelman, Memphis, for appellants. Armistead F. Clay, Leo Bearman, Jr., James F. Eggleston, W. Frank Crawford, Jerre G. Duzane, Hunter K. Cochran, Don Owens, James D. Causey, Stephen H. Biller, R. Gratton Brown, Jr., J. Heiskell Weatherford, Timothy A. Ryan, Albert McRae, Eric Babendreer, Edward W. Kuhn, Henry T.V. Miller, Carroll C. Johnson, James E. Leary, John S. Porter, Max D. Lucas, Jr., John J. Thomason, Memphis, James Clarence Evans, Charles Carter Baker, Jr., W.E. Herod, Nashville, for appellees. JOHN W. WILSON, Special Justice. On September 3, 1971, the plaintiffs, on behalf of themselves and all others similarly situated, brought this action against the defendants, 154 in number, all being insurance companies alleged to be doing business in Shelby County, Tennessee. The complaint was amended on October 8, 1971, so as to make Elnora Rodgers a party plaintiff. Plaintiff Braddock alleges that he had an insurance contract or policy with the defendant Memphis Fire Insurance Corporation, insuring the real property known as 2002 Amity, Memphis, Tennessee; the plaintiff Ethel Golden alleges that she is the owner of an insurance policy issued by the defendant Universal Security Insurance Company, a subsidiary of the defendant Thomas Jefferson Insurance Company, on property known as 257 Lucerne, Memphis, Tennessee. The plaintiff Elnora Rodgers alleges that she is the owner of an insurance policy issued by defendant Republic Insurance Company, insuring the property known as 1184 Hollywood Street, Memphis, Tennessee. Each of the three aforementioned plaintiffs allege that the insurance policies insured the property mentioned against loss by fire or other perils, including lightning, windstorm and hail, explosions or smoke; that each plaintiff sustained a loss by windstorm on April 23, 1971; that each policy contains the following provision in event of loss: The plaintiff Braddock alleges that damages to the roof of his property was estimated at $247.00 and after deducting $185.00 for depreciation and $50.00 deductible provided in the policy, he was tendered a draft for $11.75, by the Memphis Fire Insurance Corporation, with release attached, and that the insurance company has breached its contract by failing to pay him the amount to which he is entitled; the plaintiff Golden alleges the damage to the roof of her house was in the sum of $725.00 and that she has been offered the sum of $421.00 in payment of the loss, after deducting $254.00 for depreciation and $50.00 which is the deductible from the loss, and that the defendant Thomas Jefferson Insurance Company breached its contract in failing to pay the amount to which she was entitled; the plaintiff Rodgers alleges the damage to the roof of her property was $600.00 and that the defendant Republic Insurance Company, after deducting depreciation and $50.00 deductible for any loss, tendered her a draft for $458.00, with a release attached, which she accepted. The plaintiffs further aver in the complaint as follows: The prayer in the complaint is as follows: The defendants have all filed motions to dismiss. A number of the defendants joined in the same motion and others filed separate motions to dismiss. On account of the great number and length of each and the conclusions we have reached as to a disposition of the matter, we will make no further discussion of the various and many motions, other than to say they came on to be heard before the trial court. On December 22, 1971, the trial court filed a written opinion stating its findings and conclusions, from which we quote in part, as follows: Thereafter, on December 28, 1971, a final decree was entered, from which we copy as follows: It seems to us that the Court is saying that since the defendants have a right to claim depreciation under the laws of the State of Tennessee, in the event of loss, the action cannot be maintained as a class action; otherwise, it could be. The plaintiffs excepted and prayed an appeal to the Supreme Court and assign errors as follows: A number of the defendants excepted and prayed an appeal to the Supreme Court to the ruling of the Court that the action could be maintained as a class action. These defendants have filed lengthy briefs in which they say that the trial court was correct in dismissing the action and then assign errors in hundreds of pages of briefs in support of their contention that the action cannot be maintained as a class action if the trial court was in error. Another group of the defendants, 78 in number, identifying themselves alphabetically, from Allstate Insurance Company to Zurich Insurance Company, in reply to the plaintiffs, join in a single but lengthy brief and, while not formally appealing, have assigned error on plaintiffs' broad appeal, and preceding the lengthy assignments of error we quote from the brief as follows: We will first dispose of the plaintiffs' assignments, which we have stated in full above. We will discuss the two assignments together, it appearing that the argument made under both assignments centers around the case of Third National Bank v. American Equitable Insurance Company, 27 Tenn. App. 249, 178 S.W.2d 915 (1943). It is the theory of the plaintiffs in the pleadings, arguments and brief, that depreciation cannot be considered in the determination of actual cash value for partial loss on account of any casualty insured against in the policies issued by the several defendant insurance companies. As stated in the brief, the plaintiffs specifically rely upon the following statement by the Court in Third National Bank v. American Equitable Insurance Company, supra, at page 925: The plaintiffs contend that the trial court was in error in ruling that the language of the Court quoted immediately above was dictum and a lengthy discussion is made in briefs of the parties on that question. A brief history of the case of Third National Bank v. American Equit. Insurance Company, supra, can be obtained from the opinion in the case. The suit was brought to recover for partial loss by fire of a home located at 1713 West End, Nashville, Tennessee. The cause was tried twice below; the first trial was before Chancellor Wade and a jury. The jury reported the amount of the loss to be $7,000. Upon defendant's motion for a new trial, Chancellor Wade suggested a remittitur of $750. Complainant refused to accept the remittitur and the chancellor granted a new trial. The second trial was before Chancellor Shriver and a jury. He submitted to the jury this issue: "What was the amount of all the direct loss or damage caused by the fire in question to complainant's property located at 1713 West End Avenue, City of Nashville, said property consisting of a two-story brick dwelling house." The jury answered, "$6,988.00". Both parties moved for a new trial, which motions were overruled; and both appealed in error. Defendant insisted that the chancellor erred in submitting only the one issue *458 above quoted and in declining to submit to the jury these five issues: The policies contain this provision: Immediately following the above, beginning with the last paragraph on page 918, Third National Bank, supra, the Court says this: Again, at number (15), at page 925, Third National Bank, the Court said: In Third National Bank, supra, at page 924, the Court notes that buildings independently of the land on which they rest, are not the subject of market sales, and therefore have no established market value which corresponds with their actual value, and goes on to say that the cost of reproducing *459 buildings as they were before the loss, actually approximates an expression of the actual value in terms of money. The Court then cites the case of Smith v. Allemannia Insurance Company, 219 Ill. App. 506, and other cases and authorities in support thereof. The Court then proceeds to say: In the last paragraph beginning on page 919, of 178 S.W.2d of Third National Bank, supra, the Court stated the Chancellor was correct in refusing to submit the five issues mentioned hereinabove, stating that they were only fragments of the determinative issue of the loss and were comprehended in that issue. It will be noticed that the Court in the paragraph now under discussion never modified or limited what it had previously stated and which we have pointed out above, to the effect that "actual cash value", "depreciation", and "cost of repair and replacement" were factors to be considered and were properly submitted to the jury under correct instruction. The Court thereafter in the opinion discussed at length other assignments and cited many cases throughout the country, from which lengthy discussion the plaintiffs have lifted out the paragraph quoted hereinbefore and contend it is a recognition by Tennessee of a replacement-without-depreciation rule. The plaintiffs failed to cite or mention the case of Newark Fire Insurance Company v. Martineau, 26 Tenn. App. 261, 170 S.W.2d 927 (1943), wherein the Court said: In Newark Fire, although the dwelling was a complete loss, the valued policy statute did not apply because the fire occurred within ninety days after the policy was written and before the insurer inspected the building. Accordingly, since the valued policy statute did not apply, the question of actual cash value was before the court. Newark Fire was decided by the Tennessee Court of Appeals, Eastern Section, on March 11, 1943; certiorari denied by the Supreme Court on May 8, 1943. Third National Bank, relied upon by plaintiffs, was decided by the Tennessee Court of Appeals, Middle Section, July 10, 1943; certiorari denied by the Supreme Court on November 20, 1943. Newark Fire is not referred to by the court in Third National Bank and there is nothing whatever to be found in the opinion in Third National Bank which indicates any intention on the part of the Middle Section of the Court of Appeals to overrule the holding of the Eastern Section in Newark Fire. The opinion in Newark Fire reversed the trial court but for an error in the charge not in anywise relating to any question of depreciation. We are of the opinion that the action of the Court of Appeals in Third National Bank, in affirming the Chancellor after the Chancellor had charged the jury to take the depreciation into account, does not overrule, but, on the other hand, supports Newark Fire, wherein the same Court, Eastern Section, specifically held that depreciation should be deducted from replacement cost. A fire insurance contract is a contract of indemnity. Its purpose is to reimburse *460 the insured; to restore him as nearly as possible to the position he was in before the loss. The replacement-less-depreciation rule and the broad evidence rule operate to accomplish indemnity. The application of a replacement-without-depreciation rule, as contended for by plaintiffs, would frequently reap a profit for the insured, although it could result in a loss. Exhibit 3 to the complaint indicates that plaintiff Braddock's roof was 15 years old at the time of loss and that a new roof would cost $247.00. Obviously, the "actual cash value" of the old roof, which was 15 years old, must have been considerably less than the cost of a new one. If he should recover the cost of a new roof, as contended for, he would have made a profit on the loss. The ends of indemnity would not have been served. The question of whether depreciation could be considered in determining actual cash value was not an issue for decision by the Court of Appeals in Third National Bank. As we have above pointed out, it was properly submitted to the jury along with all other factors under proper instructions which the Court of Appeals approved. The plaintiffs, in the supplemental brief filed after argument before this Court, say this: This statement again reiterates the contention of the plaintiffs that, in determining actual cash value, the law in Tennessee does not permit a deduction for depreciation. With this, we do not agree, and, as we have pointed out above, the decision in Third National Bank, supra, approved the allowance of depreciation, and that part of the opinion relied upon by the plaintiffs must be regarded as dictum. The judgment of the trial court in dismissing the action will be affirmed and, having arrived at this conclusion, it will not be necessary for us to consider the defendants' other assignments going to the Chancellor's holding that the cause could be maintained as a class action. We assess the costs against the plaintiffs. DYER, C.J., and CHATTIN and McCANLESS, JJ., concur. HUMPHREYS, J., concurs in separate opinion. HUMPHREYS, Justice (concurring). I agree that where the contract of insurance specifies that depreciation is a factor to be taken into consideration in determining loss, that it should be taken into consideration. So, I concur in the result reached by the majority, that the class action cannot be maintained. The action is predicated on the proposition that, as a matter of law, depreciation is not a factor to be taken into consideration. Since contracts must be enforced as written, depreciation is a factor where this is stipulated. My concern about the opinion is that it may be read as excluding proof of the cost of repairs as a means of proving a partial loss. I have concluded it does not do this, even though the opinion holds Judge Felts' statement in Third National Bank v. American Equitable Ins. Co., 27 Tenn. App. 249, 178 S.W.2d 915 (1943) is dictum. As dictum, it may not be adequate to establish, as a matter of law, that depreciation is not a factor in fixing loss, but this does not reduce the utility of this proposition in a suit to recover on a policy. *461 Mention should also be made of the fact that the opinion in this case does not rule out the factor of appreciation in value, for which the insured has paid an increased premium. Limited, as I read the opinion to be, to the proposition that depreciation is not ruled out of consideration, as a matter of law, I concur.