#### MRS. MINTIE MORTT v. LIVERPOOL AND LONDON AND GLOBE INSURANCE COMPANY, Limited.

(Filed 27 May, 1926.)

1. Insurance — Fire—Policy—Contracts—Inventory Clause — Substantial Compliance — Evidence.

An inventory of a stock of general merchandise containing the number of articles and cost of each class at a date made about one month before the fire, and testified to as being practically the same as on the date of the fire, is a substantial compliance with the inventory provision in the standard form of a fire insurance policy, and is competent as evidence upon the trial. C. S., 6347.

2. Insurance — Pire—Policies—Contracts—Unconditional Ownership — Assignment — Assent of Insurer.

The clause in a fire insurance policy that the insured must be the unconditional owner of the property insured, and that an assignment of the policy to a purchaser will render the policy void if not assented to by the officials of the insurer, is valid and enforceable in favor of the company against the assured and his assignee.

3. Insurance, Eire — Unconditional Ownership — Assignment of Policy— Premium Entire and Single.

Where the owner of a store and a stock of merchandise is insured at one premium rate, the merchandise to remain in the store during the term covered by the contract, a change of ownership of the merchandise, without the consent of the insurer, will avoid the obligation of the insurer, under an express condition relating thereto contained in the policy, under the principle that the premium is entire, and the obligation single, and each dependent on the other.

*94. Same — Principal and Agent — Ratification.

Where the owner of a building and merchandise therein has sold the merchandise, thus rendering the policy void, according to its terms, and ' thereafter the insurer, with knowledge has retained the unearned premiums after its agent had consented to the assignment of the policy to the purchaser of the merchandise, the insurer will be bound, under the terms of the policy, to the payment of damages to the assignee of the policy, the purchaser of the merchandise, caused by a fire thereafter occurring, under the principle of ratification.

Appeal by defendant from *Walter B. Broclc, Emergency Judge,*at January Term, 1926, of Haywood. No error.

Action to recover upon policy of insurance for loss resulting from total destruction, by fire, of stock of merchandise, and store furniture and fixtures, contained in a store building at Japan, Grabam County, N. 0. The policy was, in form, the Standard Fire Insurance. Policy of the State of North Carolina. C. S., 6437. It was issued by defendant on 5 April, 1924, and in consideration of the stipulations therein named and of the premium therein recited, insured C. D. Mortt, as owner, against loss or damage, by fire, for the term of one year, to a store building, in the sum of $150, to a stock of merchandise, while contained in said building, in the sum of $1,900, and to store furniture and fixtures, while contained in said building, in the sum of $80. The policy contains, among others, the following provision, to wit:

“This entire policy shall be void, unless otherwise provided by agreement in writing, added thereto . . .

“(d) if any change, other than by the death of the insured, takes place in the interest, title or possession of the subject of insurance (except change of occupants without increase of hazard) ; or “(e) if this policy be assigned before a loss.”

On 1 May, 1924, the insured, C. D. Mortt, sold the store building, covered by the policy, to T. J. Edwards, to whom he and his wife, the plaintiff in this action, conveyed the same by deed which was duly recorded on 3 May, 1924, in Graham County.

On 19 June, 1924, C. D. Mortt sold the stock of merchandise, and the store furniture and fixtures, covered by the policy, to the plaintiff, Mrs. Mintie Mortt, his wife; the policy was on said date duly assigned by O. D. Mortt to the plaintiff, with the consent in writing of defendant, as appears from indorsements on said policy.

Thereafter, to wit, on 29 July, 1924, the store building, together with the stock of merchandise and the store furniture and fixtures, were totally destroyed by fire. The policy contains the Three-fourths Yalue Clause. The stock of merchandise, as shown by the inventory taken by plaintiff on 30 June, 1924, was worth $3,097. The store furniture and fixtures were worth $200.

*10Plaintiff testified that Mr. Long, tbe agent of defendant, who issued the policy, and who signed the indorsement, consenting in behalf of defendant to its assignment by C. D. Mortt to plaintiff, knew that her husband, C. D. Mortt, had sold and that he and she had conveyed the store building prior to the date of the assignment-, that she did not remember whether she told him so or not, but that her husband had told him of the sale. Mr. Mortt testified that after the issuance of the policy ■ and prior to the sale of the stock of merchandise to plaintiff, and the assignment of the policy to her, he had a conversation with Mr. Long about the sale of the building; that he talked with him about the sale. Defendant offered no evidence.

The issues submitted to and answered by the jury were as follows:

1. Did the plaintiff and the defendant enter into this contract for insurance, as alleged in the complaint? Answer: Tes.

3. What amount, if any, is the plaintiff entitled to recover ? Answer: $1,980, with interest from 29 September, 1924.

2. Was the plaintiff’s stock of goods and fixtures destroyed by fire, as alleged in the complaint? Answer: Yes.

From judgment upon this verdict defendant appealed.

*Morgan & Ward for plaintiff.*

*Alley & Alley and John M. Robinson for defendant.*

Connor, J.

Defendant’s first assignment of error is based upon its contention that “the court erred in allowing the plaintiff to introduce in evidence the alleged inventory dated 30 June, 1924, consisting of seven sheets, and marked ‘Exhibit P-I.’ ” Plaintiff testified that she and her husband made the inventory of the articles of merchandise, composing her stock of goods, on 30 June, 1924; the articles were listed at the cost price. The fire occurred on 29 July, 1924. Between the date of the inventory and the date of the fire, plaintiff was sick, and sold very few goods from the stock. More goods came in than were sold. The sheets offered in evidence as an inventory show the number of pairs of shoes, with stock number and price of each, and the value of the groceries, hardware, dry goods, notions, hats, pants, boys’ and men’s suits, separately. In view of the character of the business which plaintiff was conducting, and the size of her stock, we must hold that there was a substantial compliance by her with the provisions of the policy, relative to an inventory. *Arnold v. Ins.*Co., 152 N. C., 232. We find no error in the overruling by the court of defendant’s objection to the evidence.

By its exceptions to the refusal of the court to allow its motion for judgment as of nonsuit, at the close of the evidence, and to the instruc*11tion of tbe court to tbe jury tbat “if you believe tbe evidence, you will answer tbe first issue. ‘Yes,’ tbe second issue ‘Yes,’ and tbe third issue, ‘$1,980, witb interest from 29 September, 1924,’ ” defendant presents its contention tbat plaintiff cannot recover in tbis action for tbat tbe entire policy was avoided by tbe sale and conveyance by tbe insured of tbe store building covered by tbe policy, not only as to tbe building conveyed, but also as to tbe stock of merchandise and as to tbe store furniture and fixtures. Plaintiff contends tbat, conceding tbat by tbe change in tbe ownership of tbe store building, resulting from its sale and conveyance by tbe insured, prior to tbe assignment of tbe policy to plaintiff, tbe policy was avoided as to tbe store building, it was and remained in full force and effect witb respect to tbe stock of merchandise and to tbe store furniture and fixtures. These contentions involve tbe question as to whether tbe contract evidenced by tbe policy was divisible or indivisible as between G. D. Mortt, tbe insured, and defendant, tbe insurer. Tbis question has been authoritatively determined in tbis jurisdiction. Oonceding tbat there is much conflict among tbe decisions in different jurisdictions on tbe question here presented, tbis Court has said in *Coggins v. Ins. Co.,*144 N. C., 8: “Without going into any extended review of these different decisions, we are of tbe opinion tbat tbe great weight of authority, as well as tbe better reason, establishes tbe position tbat when to tbe fact tbat tbe premium is entire, there is added tbe fact of identity of risk, tbe obligation is single, and on tbe breach of tbe stipulation all recovery is barred. Tbis question of identity of risk being held tbe determinative factor in policies of tbis kind, where tbe amounts are separate and tbe premiums entire, is very well treated in a note to *Wright v. Ins. Co.,*19 L. R. A., 211.” *Cuthbertson v. Ins. Co.,*96 N. C., 480, and *Biggs v. Ins. Co.,*88 N. C., 141, are cited in support of tbe bolding tbat identity of risk is tbe controlling feature in tbe decision of tbe question.

In *Coggins v. Insurance Company,*the policy covered tbe building and also a stock of merchandise, contained therein, tbe amount of insurance on tbe building being fixed in tbe policy at $200, and tbat on tbe stock of merchandise at $1,500. Both were destroyed by fire, before tbe expiration of tbe term for which tbe property bad been insured. There was a violation of tbe “iron-safe clause.” It was held tbat, by tbe terms of tbe policy, tbis violation avoided tbe policy, both as to tbe stock of merchandise and as to tbe building. *Judge Solee,*writing tbe opinion for tbe Court, says: “True, tbe amount of tbe insurance is apportioned, a definite sum being specified for tbe building, and another for tbe goods. It is also true that- tbe stipulations of tbe iron-safe clause are more especially addressed to tbe insurance of the goods; but tbe premium on tbe policy is entire; tbe concluding stipulation is to tbe *12effect that if the insured fails to produce the set of boohs and inventory as required by the contract, the policy shall become null and void, and the 'failure shall constitute a perpetual bar to any recovery thereon’; and, furthermore, the goods are insured 'while they are contained in the storehouse and not elsewhere,’ thus making the risk on the goods and on the building substantially identical.”

In the instant case, by its policy of insurance, defendant, for one entire premium, insured C. D. Mortt, the owner, against loss or damage, by fire, to three classes of property, to wit: (1) the store building; (2) the stock of merchandise; (3) the store furniture and fixtures, the insurance on the two last-named classes of property to be in force, only ''while contained in this building.” Here we have both (1) an entire premium, and (2) an identity of risk. The obligation is therefore single. It is expressly stipulated that change in the interest, title or possession of the subject of the insurance shall avoid the entire policy. The admitted violation of this stipulation rendered the entire policy void, not only as to the property, the title to which was changed by the sale and conveyance, but also as to the property, the title to which remained in the insured. The entire policy having become void, by the act of the insured, no action could thereafter be maintained by him for any recovery upon the policy. ¥e necessarily reach this conclusion under the law as declared by this Court in *Coggins v. Insurance*Com*pany.*The law has been declared otherwise in other States and in other jurisdictions, both before and since that decision; we do not find the reasoning which has led other Courts to a different conclusion from that reached by this Court, so conclusive as to justify us in considering whether the decision of the question in *Coggins v. Insurance Company*should be overruled, and we therefore follow that decision as the law in this State. See *Joffe v. Niagara Fire Ins. Co.,*116 Md., 155, and full note in 51 L. R. A. (N. S.), 1047. The annotator says: “The earlier cases on this subject will be found collected and discussed in the note to *Wright v. Fire Ins. Asso.,*19 L. R. A., 211. There has been very little change in the attitude of the Courts since the publication of the earlier note, but such alteration of the views as have taken place have been in favor' of the divisibility of a policy covering different kinds of property separately valued.” 'Where the different classes of property insured by the same policy are not exposed to the identical risk, and the rate of premium on each class is determined by this fact, it may well be held, on principle, that the contract is divisible; but where the risk is identical, and the premium is entire, we hold the law to be, in this State, that the contract is indivisible.

In *Northern Assurance Co., Ltd., of London, v. Case,*decided 14 April, 1926, in the United States Circuit Court of Appeals, Fourth Cir*13cuit, a contrary view of tbe law is declared. Authorities are cited in the opinion in that case, written by *Parker, Circuit Judge,*in support of tbe decision, although it is said that some of the State Courts of high authority hold policies of insurance upon a building and its contents indivisible on the theory that there is an identity of risk. The decision of the question there presented follows the law as declared in that circuit in the opinion of *Judge Knapp,*in *Downey v. German Alliance Insurance Co.*(C. C. A., 4th), 252, Fed., 701. This decision, however persuasive the reasoning by which it is supported may be, cannot be authoritative with us. The law in this State is as declared in the opinion of *Hoke, J.,*in *Coggins v. Ins. Co., supra.*

The rights of the plaintiff in this action, however, under the policy, arise out of the assignment of the policy, by the insured, with the com sent, in writing, of the insurer, dated 19 June, 1924; conceding that the entire policy was void on that date as to the insured, and that no action could have been maintained by him, on the policy, it does not necessarily follow that the policy was thereafter void as to plaintiff. The statement of the law in 32 C. J., 1314, sec. 563, is well supported by the authorities cited. It is as follows:

> “As a general rule, a ground for avoidance or forfeiture of a contract of insurance which is available as against the insured may be asserted as against any third person claiming the benefits of the contract, such a third person beneficiary, or an assignee, or a creditor. Where, however, the policy has been assigned with the consent of the company in such manner as to become a new contract between the company and the assignee, it will not be avoided by misrepresentations upon the part of the original insured not material to the new agreement, nor by a subsequent breach of the policy by the assignor, and the assignee is not affected by conditions not appearing in the policy, and of which he had no knowledge.”

In Vance on Insurance, p. 413, it is said: “The assignment of a fire policy before it becomes a fixed liability by the loss of the property insured can be made only with the consent of the insurer, which transforms the assignment into a novation, and eliminates any question of conflicting rights of assignor and assignee.”

In *Hall v. Niagara Fire Insurance Co.*(Mich.), 18 L. R. A., 135, it was held that the assignment of an insurance policy, with the consent of the insurer, creates a new contract, between the latter and the assignee, which is unaffected by any causes of forfeiture previously existing, and unknown to either party. It has been held that acts of the assignor, prior to the assignment, by which the policy was forfeited, or became void, as to him, do not affect the rights of the assignee, even where the insurer was ignorant at the time of its consent to the assignment, of the *14acts of forfeiture, or of acts which rendered the policy void as to the original insured. *Ellis v. Ins. Co. of North America,*32 Fed. Rep., 646; *City Fire Ins. Co. v. Mark,*45 Ill., 482; *Coniinental Ins. Co. v. Munns,*120 Ind., 30, 5 L. R. A., 430. Where the insurer has knowledge of such acts, and with such knowledge consents to the assignment of the policy, to a purchaser of the property, and thereby becomes liable to him, under the policy, in the event of a loss, it is clear that an action by the assignee to recover for such loss cannot be barred by reason of any act of the assignor, prior to the assignment, although the act rendered the policy void as to him.

In the instant case, plaintiff knew of the act of the original insured, to wit, the conveyance by him of the store building, covered by the policy, which under its terms, rendered the entire policy void; she, as his wife, had joined with him in the deed conveying the property. She offered evidence, which was uncontradicted, that defendant’s agent, who acted in its behalf, in consenting to the assignment, also knew of the sale of the building. The knowledge of its agent is imputed to defendant, not upon the principle of waiver — for under the terms of the policy the agent was without power to waive the forfeiture resulting from the change in title of the store building — but upon the principle of estoppel. *Johnson v. Ins. Co.,*172 N. C., 142; *Grabbs v. Ins. Co.,*125 N. C., 395. Defendant, with knowledge that the entire policy was void on 19 Tune, 1924, consented to its assignment to plaintiff, and retained the unearned portion of the premium. It cannot be supposed that defendant consented to the assignment of a policy which it knew to be void and retained the unearned portion of the premium on a policy under which it had no liability to the assignee, the owner of the property insured by the policy. *Forward v. Ins. Co.,*142 N. Y., 387. However this may be, we hold that defendant cannot now resist recovery by plaintiff upon the facts, as the jury must have found them, if they believed the evidence. The judgment is affirmed. There is

No error.