Opinion
No. 29029.
December 8, 1930. Suggestion of Error Overruled, January 19, 1931.
INSURANCE. Tenant, although bound under lease to restore building destroyed by fire, held not entitled to proceeds of insurance taken out by lessor ( Hemingway's Code 1927, section 2494).
Lease required lessee, upon termination of lease, to deliver property to lessor in as good state of repair as when received with certain exceptions. Lease contract, however, contained no provision for insuring building, and lessee had no connection whatever with issuance of insurance policy to lessor. Code 1906, section 2834 (Hemingway's Code 1927, section 2494), requires lessee to restore building burned if lease contract discloses such to be intention of parties.
APPEAL from chancery court of Hinds county, First district. HON. V.J. STRICKER, Chancellor.
Creekmore Creekmore, of Jackson, for appellant.
In jurisdiction where the loss of a building caused by accident falls upon the vendee the courts necessarily in order to be consistent, hold that if the vendor received insurance money the vendee is entitled in equity, as between himself and the vendor, to demand that insurance be applied on the purchase price, or to the restoration of the property.
27 R.C.L. 559.
Where a lease with option to purchase is executed, and afterwards the building covered by the option is destroyed by fire the plaintiff exercises the option to purchase and thereupon the purchase price is paid and a conveyance made and insurance is payable to the optionor who collected the proceeds, the lessee and optionee is entitled to the proceeds of the insurance.
Peoples Street R.R. Co. v. Spencer (Penn.), 27 A. 113; Williams v. Lilley et ux. (Conn.), 34 A. 765; Schnee et al. v. Elston et ux., U.S. Dailey of Jan. 13, 1930; Camp v. Mfg. Co., 95 S.E. 424. L.R.A. 1918D, 936; Grange Mill Co. v. Western Assurance Co., 9 N.E. 274; Russell v. Elliot, 186 N.W. 824; Carnation Lumber Co. v. Land Co., 103 Wn. 633, 175 P. 331; U.S.F. G. Co. v. Parsons, 147 Miss. 335.
The rule that the vendor who received insurance money paid to him in settlement of the loss of a building by fire, upon premises sold by him under an executory contract to convey after full payment of the purchase price, holds and retains the same as trustee for the vendee, is a wholesome one, and tends to effect justice between the parties.
Brady v. Welch, 203 N.W. 234, 40 A.L.R. 603; Cetkowski v. Knutson, 204 N.W. 528, 40 A.L.R. 599; Millville Fraternal Order v. Weathersby, 88 A. 847; Brakhege v. Tracey, 13 S.D. 343; Houston Canning Co. v. Virginia Can. Co., 211 Ala. 232, 35 A.L.R. 912; Plumb Lime Co. v. Keeler, 101 A. 509; Baker v. Rushford, 101 A. 769; Camp v. Mfg. Co., L.R.A. 1918D, 936; Phinezy v. Guernsey, 111 Ga. 346.
Watkins, Watkins Eager, of Jackson, for appellee.
In the absence of contract, neither the vendor nor the purchaser is entitled to the benefit of the insurance taken by the other, but each is entitled to the proceeds only of his own insurance. Unless the policy has been assigned to the purchaser, the right to proceeds of insurance taken out by the vendor for his benefit is in the vendor, and not in the purchaser, although the vendor has parted with all his interest in the property before the loss.
26 C.J., sec. 586, p. 434; Phinizy v. Guernsey, 111 Ga. 346, 36 S.E. 796, 78 Am. St. Rep. 207, 50 L.R.A. 680.
It is well settled, both upon principle and by the authorities, that the contract of insurance is a personal contract of indemnity between the insured and the insurance company alone, which does not inure to the benefit of another party and in which he can claim no interest whatever; and the insured, having collected that which he has purchased and for which he has paid, is under no obligation to account for it.
Demus Investment Co. v. Dickerman, 63 Kan. 728, 66 P. 1029, 88 Am. St. Rep. 265; Plimpton, Executor, v. Farmer's Mutual Insurance Co., 43 Vt. 497, 5 Am. St. Rep. 297.
The result of the rule that the policy does not pass with the property is that the majority of the cases hold that the person who effected the insurance is entitled to retain the proceeds.
Note, 37 L.R.A. 150.
In their very nature, policies of insurance are not incidents of the property. They are contracts between insurers and assured for indemnity of the assured, and not for loss or damages which another person may have sustained because of the destruction of the property, no matter what the interest of that person may be, as mortgagee, creditor, or otherwise. If another person has an interest in the property, he may insure for himself; nor can he set up claim to money which has become due to another, unless the other be his debtor, and the money is garnished or attached.
Home Insurance Co. v. Gibson, 72 Miss. 58; Bernheim v. Bein, 56 Miss. 149; 26 C.J., p. 437; Quarles v. Clayton, Admr., 3 L.R.A. 170; Washburn-Crosby Co. v. Home Insurance Co., 85 N.E. 592; McLean v. Hess, 7 N.E. 567; Shadgett v. Phillips Crew Co., 31 So. 21; McLaughlin v. Park City Bank, 22 Utah 473, 54 L.R.A. 343; Cromwell v. The Brooklyn Fire Insurance Co., 44 N.Y. 42, 4 Am. Rep. 641; Zenor v. Hays, 228 Ill. 626, 81 N.E. 1144, 13 L.R.A. (N.S.) 909; Kortlander v. Elston, 52 Fed. 180; Northern Trust Co. v. Snyder, 76 Fed. 34.
The appellant, by means of an original bill, sought to recover from the appellee Therrell and the Ætna Insurance Company a judgment for six hundred dollars and interest. A demurrer to the bill was sustained, and an appeal to this court was granted, to settle the principles of the case.
The bill alleges, in substance, that Therrell leased to the appellant a lot in the town of Florence, on which was situated a filling station, for five years, at an annual rental of two hundred forty dollars per year, the lease contract stipulating that:
"Party of the second part (Panhandle Oil Company) does further agree to deliver the aforesaid property at the termination of this lease contract in the hands of party of the first part in as good state of repair as when received under the terms of this lease contract, saving and excepting wear and tear and ordinary deterioration of the property, and all acts of Providence, such as destruction by lightning, tonado, etc., for which no liability is assumed by party of the second part.
"It is further understood and agreed that party of the second part shall have the option of purchasing the above described land and property at any time during the life of this lease at a price of two thousand ($2,000) dollars. In case party of the second part does purchase said property during the life of this lease, then the yearly rental of two hundred forty dollars covering rent for the year during which purchase is made will be applied on the purchase price of the property."
Before the expiration of the lease a house on the lot used in connection with the filling station was destroyed by fire, not caused by lightning, a tornado, or any other act of Providence. When the house was burned Therrell held a fire insurance policy thereon in the Ætna Insurance Company for six hundred dollars, which he collected. The appellant decided, after the burning of the house, to purchase the lot in accordance with the terms of the lease contract, notified Therrell of its intention so to do, and demanded that he credit on the price thereof the six hundred dollars collected by him from the insurance company; which company, when it paid Therrell, knew that the proceeds of the policy were, or would be, claimed by the appellant. Therrell declined to comply with this request, and the appellant then paid him for the lot, in accordance with its lease contract, and he executed to it a deed therefor.
We will assume, for the purpose of the argument, that the appellant's right, vel non, to the proceeds of the insurance policy, remains unaffected by the settlement made by it with Therrell, pursuant to which Therrell executed to it a deed to the lot.
The appellant's contention, in effect, is that the insurance policy, being a contract of indemnity, inured to the benefit of the party to the lease contract on whom the loss, in event of the destruction of the house by fire, must fall; that had it restored the house, as under the lease contract it was bound to do, the loss would have fallen on it; and since it paid Therrell the full price for which he agreed to sell the lot before the house was burned, the loss occasioned by the burning of the house has fallen on it.
Under section 2834, Code of 1906, Hemingway's 1927 Code, section 2494, the appellant was bound to restore the burned house if the lease contract discloses — and we will assume for the purpose of the argument that it did disclose — that such was the intention of the parties thereto. The lease contract did not provide for the insuring of the house, and it does not appear from the bill of complaint that the appellant had any connection whatever with the issuance of the policy of insurance thereon.
This being true, the fact that Therrell insured the house for his own benefit did not relieve the appellant from its obligation to rebuild the house; and had it rebuilt the house, it would not have been entitled to recover the insurance money from Therrell. 36 C.J. 146; Jones on Landlord and Tenant, section 398. That, instead of rebuilding the house, the appellant purchased the lot in accordance with the terms of its option so to do, in no way changed its relation to the insurance policy or its proceeds.
Had the lease contract provided for the insuring of the house, as did the contract in Williams v. Lilley, 67 Conn. 50, 34 A. 765, 37 L.R.A. 150, here relied on by the appellant, a different question would be presented.
Affirmed.