Summary
In Collette v. Long, 179 Miss. 650, 176 So. 528, 529, it was held that the rule can not be extended beyond the mutual rights and duties of the cotenants, the court saying: (Hn 9) "If, strictly speaking, a fiduciary relationship exists between cotenants by reason of the mere fact that they are such (compare 62 C.J. 419, with Shelby v. Rhodes, 105 Miss. 255, 62 So. 232, Ann. Cas. 1916D, 1306), it can extend only to their mutual rights and duties."
Summary of this case from Dampier v. PolkOpinion
No. 32859.
October 25, 1937.
1. INSURANCE.
Policies of insurance are not as incident of the property insured but are contracts between insurers and assured for indemnity of assured rather than for loss or damages which another person may have sustained because of destruction of the property, no matter what the interest of that person may be, as mortgagee, creditor, or otherwise, and another person having interest may insure for himself.
2. TENANCY IN COMMON.
A fiduciary relationship existing between cotenants by reason of the fact that they are such can extend only to their mutual rights and duties.
3. TENANCY IN COMMON.
One cotenant is under no duty, merely as such, to indemnify his cotenant for the destruction of their common property nor to procure insurance so indemnifying them.
4. TENANCY IN COMMON.
A cotenant may obligate himself to procure insurance to indemnify his cotenant for destruction of their common property or all of cotenants may combine in procuring such policy or each may insure it for himself, and amount for which policy is issued is for determination of insurer and the one procuring the policy.
5. INSURANCE.
Proceeds of policy procured by widow of homestead property occupied by herself and children as cotenants, each having an undivided one-fifth interest therein, did not inure to the benefit of the children as cotenants merely because of alleged fiduciary relationship existing between them as such, notwithstanding insurance was not limited to widow's separate interest (Code 1930, section 1412).
APPEAL from the chancery court of Lee county. HON. JAS. A. FINLEY, Chancellor.
Mitchell Clayton, of Tupelo, for appellants.
The question at issue in this case is of first impression in this court. It is our contention that the widow in possession of the homestead and the exempt personal property which descends to her upon death of her husband, occupies a quasi-fiduciary relation to the other tenants in common with her. That this fiduciary relation is such that she cannot insure the entire property for her exclusive benefit and if she attempts to do so her conduct amounts to a fraud in law and renders her a trustee as to any amount of insurance collected by her above her interest in the property.
In the case of Shelby v. Rhodes, 105 Miss. 267, our court holds that the rule which prevents one tenant in common from purchasing an outstanding title to the common property and setting it up against his cotenants is founded upon the confidential relation which is presumed to exist between them.
Cotenancy is, as to the common property, a relation in the nature of trust and confidence, and from this relation presumptions of the utmost good faith to all joint owners arise, to the end that the title and rights of each in the common estate may be preserved unimpaired, at least to the extent that no direct or indirect assault on the interest of any one owner shall be made by any other. This principle is apparently the basis of the general rule that the possession of one is the possession of all the cotenants and inures to the benefit of all.
7 R.C.L. 816.
Applying this rule to the matter of insurance, a tenant in common may insure his interest alone, but if he attempts to insure more than his interest in the property it inures to the benefit of all.
Good faith required of the widow that she insure the property for the benefit of all the tenants in common, or insure only her interest in same. When she attempted to insure for more than the value of her share, she was guilty of fraud in law. This was indirect way of taking the cotenants' property, which was just as effective as acquiring an outstanding title.
We recognize the law as announced in King v. King, 143 So. 422, that the insurance contract is a personal indemnity contract, yet it is to indemnify the party against loss of her property and not some other person's property. That rule of law will not permit a tenant in common in possession to perpetrate a fraud upon the rights of her cotenants by attempting to make a personal contract indemnifying her against the loss of the cotenants property. No such question was involved in the King case, and our court has never decided that such a fraud could be perpetrated.
A court of equity can and should always grant relief from a fraud, and should never permit the taking of property under circumstances which render its taking unjust and inequitable.
We admit that as a general rule where there is an insurable interest the contract of insurance is a personal contract to indemnify the contracting party against loss. However, where the insurance is for more than the interest of the insured, the rule does not apply and the presumption is that the insurance was for the benefit of the other parties jointly interested. Especially is this true where the parties are tenants in common and a quasi-fiduciary relation exists.
Sharp v. Zeller, 38 So. 449; Hunt v. Hunt, 109 Mich. 399, 67 N.W. 510; Holt v. Couch, 34 S.E. 703; Mettenburger v. Beacon, 9 Pa. 198; Miles v. Miles, 99 So. 187.
Our court has held many times that a tenant in common cannot purchase an outstanding tax title or other hostile claim.
Falkner v. Thurmond, 23 So. 584.
If appellee's position is upheld, then the tenants in common are deprived of their property by the indirect route of insurance. Courts will not permit that to be done indirectly which cannot be done directly.
Cubertson v. Cox, 13 N.W. 177.
It matters little whether it is called a constructive trust or an implied trust or resulting trust. It is a trust which arises by operation of law when a person clothed with some fiduciary character, by fraud or otherwise, attempts to gain some advantage for himself.
65 C.J. 223; Robinson v. Strauther, 64 So. 726; Hill, Trustees, 1 Spencer, Eq. Jur. 511; Nester v. Gross, 66 Minn. 371, 69 N.W. 39; Jewelry Co. v. Volfer, 106 Ala. 205, 17 So. 525, 28 L.R.A. 707, 54 A.S.R. 31; Perry on Trusts Trustees (6 Ed.), 27; Kersh v. Kersh, 121 So. 169.
It is well settled that when one acquires title to real estate with funds of another that a trust arises. The act of the tenant in common in possession in the case at bar of insuring the fee for much more than her interest in same is tantamount to acquiring title to the part of the building which belonged to the tenants in common.
Butts v. Cooper, 44 So. 619; Zimmer v. Peoples Bank, 81 So. 814.
The law forbids a trustee, and all other persons occupying a fiduciary or quasi-fiduciary position, from taking any personal advantage touching the thing or subject as to which such fiduciary position exists; or wherever one person is placed in such relation to another, by the act or consent of the other, or the act of a third person, or of the law, that he becomes interested for him, or interested with him, in any subject or property or business, he is prohibited from acquiring rights in that subject antagonistic to the person with whose interest he has become associated.
Exemption laws are designed for the welfare of families as families. It was not the purpose to have the property so that every one of a large family of children might compel a division between them and the widow of property not averaging in the estate perhaps $500. This would result in stripping them all of the means of support, and even of shelter.
The widow occupies a position more advantageous than an ordinary tenant in common in possession. She cannot be disturbed in the enjoyment and use of the exempt property during her life or widowhood. She is in a position of trust. The children have a right to expect her to deal fairly with their joint property, the possession of which is denied to them. It would be very inequitable to permit her to so abuse her right to use and occupancy as to insure the entire property in her name and secure the proceeds, resulting from destruction of the property.
Household goods are exempt to the value of $200. This descends to the widow and children but under the provisions of Sec. 1412, Code of 1930, the widow has right to use this personal property. This right to the use also carries with it the duty to protect it. It would certainly be unjust and inequitable to permit the widow to insure this furniture in her own name and when it is destroyed permit her to keep all the proceeds.
Falkner v. Thurman, 23 So. 584.
C.P. and S.H. Long, of Tupelo, for appellee.
This insurance policy, as to real estate only, purported to insure the life interest of Mrs. Annie Cummings in the house, and in our opinion it is immaterial what her interest in the furniture was at the time of the taking out of said insurance or at the time of her death; however, she was the absolute owner of all of her own personal effect and whatever household goods were on hand that were bought and owned by her, and the owner of the undivided one-fifth interest in all of the other personal property that was owned by J.Y. Cummings, at the time of his death, and in our opinion, under the law, it is immaterial whether she owned absolutely, or owned at all, any of this property, for the reason that this contract of insurance was a personal contract between the insurance company and the insured and only purported to insure the property which the insured owned or in which she had an interest and only purported to insure her interest therein.
In King v. King, 163 Miss. 584, it was held that a life tenant may insure property for its full value and where there is no contract or trustee relation requiring such life tenant to keep the property insured, in case of loss or destruction, may collect, keep and retain the full amount of the insurance collected and not pay any part thereof to the remainderman.
Berheim v. Beer, 56 Miss. 149; Lerow v. Wilmouth, 9 Allen 385; Carpenter v. Insurance Co., 16 Pet. 495; Nipps Appeal, 75 Pa. St. 478.
Where one or two or more joint owners, or owners in common, of property, insures his interest separately against loss by fire, he is entitled in case of loss, to recover and retain the insurance.
26 C.J. 435, sec. 582, note 4.
A widow entitled to a life estate in lieu of dower in insured property is not, on that account, entitled to any life estate in the insurance money where the policy on the property was procured by her husband before his death.
Quarrels v. Clayton, 87 Tenn. 308, 10 S.W. 505, 3 L.R.A. 170.
A life tenant has no right to the proceeds of insurance taken out by the remainderman on his own interest.
Seitz v. Bollinger, 37 Pa. C.O. 260; Ridge v. Home Ins. Co., 64 Mo. App. 108; 26 C.J. 434, sec. 581.
Where the insurer is not to be liable beyond the interest of the insured in the property, a stranger to the contract cannot collect thereon simply because he is the owner of an undivided interest in the property destroyed.
Continental Ins. Co. v. Mazwell, 9 Kans. App. 268, 60 P. 539; Harvey v. Cherry, 76 N.Y. 436; Carpenter v. Life Ins. Co., 16 Pet. 495, 10 L.Ed. 1044.
Policies of insurance against fire are not deemed, in their nature, incidents to the property insured, but they are made special agreements with the person insuring against such loss or damage that they may sustain and in the loss or damage that any other person, having an interest as grantee, mortgagee or creditor, or otherwise, may sustain, by reason of the subsequent destruction by fire.
Thompson, Sheriff, v. Dearhart, 35 A.L.R. 36.
Insurance is a contract whereby one for a consideration undertakes to pay money if another shall suffer loss. The contract of insurance is an executory contract executed by the payment of the sum insured on a loss; it is a personal contract and does not pass with the title to the property insured.
5 Lawson's Rights, Remedies and Practice, sec. 2037; Miles v. Miles, 99 So. 187.
Where one joint owner insures his interest in the property separately, he, of course, is entitled, in case of loss, to recover and retain insurance, if he insures for the benefit and at the expense of all, each is entitled to a share of the proceeds and if one takes out insurance on the whole and calls on the co-tenants to help the premium or pays them from rents of the common property, they should share therein in case of loss.
26 C.J. 435; Bank v. Bond, 89 Tenn. 462; Continental Ins. Co. v. Maxwell, 9 Kans. App. 268, 60 P. 539; Freeman on Co-tenancy and Partition (2 Ed.), 264.
In the case of Bell v. Barefield, decided by the Alabama Supreme Court, 122 So. 318, it is expressly decided that in the absence of anything in the instrument creating the estate, or an agreement between the parties, no duty rests on tenants in common to insure property for benefit of the remainderman or co-tenant. Also, that insurance taken by one with insurable interest in the property, who pays the premiums with his own funds, is a personal indemnity to the insured.
Strangers to an insurance contract cannot acquire in their own right any interest in the insurance money, except through an assignment or some contract with which they are connected.
Shacgett v. Phillips Chew Co., 131 Ala. 478, 31 So. 20, 90 A.S.R. 95; Panhandle Oil Co. v. Therrell, 158 Miss. 811.
There is some intimation in a few cases that where the equities of the case demand it that a variation from the rule announced in all of the Mississippi cases and almost everywhere else, that he who takes out the policy will receive the benefits accruing thereunder in case of loss or destruction of the property but an examination of the cases basing the question of who is entitled to the proceeds of a policy on property insured and destroyed on the equities of the case is confined solely and alone to equities arising out of the contract by which the person insuring the property holds the same or on account of some trust relation such as guardian, trustee or otherwise existing between the person procuring the insurance of the property and the person so claiming the proceeds of the policy after destruction of the property and in this case there was absolutely no duty imposed upon the deceased by contract, law or otherwise, to insure the property destroyed and for which the money in litigation herein was paid and no trust relation of any kind whatever.
Deming Investment Co. v. Dickerman, 88 A.S.R. 265; U.S.F. G. Co. v. Parsons, 147 Miss. 335.
We have searched all the law books that we could reach and counsel for appellants have doubtless done the same from the vast amount of law relevant and irrelevant to this controversy cited by them, and we dare say that no law book of any kind, either code or decisions, has ever held that there was any duty encumbent on one tenant in common or joint tenant to keep the property insured for the benefit of the other parties in interest.
J.Y. Cummings died some years since, leaving surviving him a widow, Annie Cummings, and four adult children. He left a will, which the widow renounced. Among other property owned by him was a house and lot which constituted his homestead, and certain furniture and household effects. The widow, under section 1412, Code 1930, continued to use and occupy this homestead. She procured an insurance policy from the Home Insurance Company of New York on the house and the furniture therein, against all direct loss and damage by windstorm, cyclone, and tornado. Afterwards the property insured was destroyed and the widow was killed by a tornado. The appellee was then appointed, and qualified, as the widow's administrator. He thereupon called upon the insurance company for the proceeds of the policy, but it declined to pay him, for the reason that Cummings' children claimed to have an interest therein, but offered to pay the money to the Clerk of the court below, to be disposed of as the court might direct in a proceeding therefor. This was accordingly done, and this litigation is for the purpose of determining to whom the money belongs. The court below awarded it to the widow's administrator.
Cummings' widow and children were cotenants of this property, each having an undivided one-fifth interest therein; and the contention of the appellants is that this policy of insurance inured to the benefit of all of the cotenants. "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." Bernheim v. Beer, 56 Miss. 149.
Where the owner of property conveys it in fraud of his creditors, the creditors have no interest in the proceeds of an insurance policy procured thereon by the grantee. Bernheim v. Beer, supra. A remainderman has no interest in the proceeds of an insurance policy procured on property by the life tenant thereof, merely because of the relations that exist between a life tenant and the remainderman. King v. King, 163 Miss. 584, 143 So. 422. A tenant, bound under his lease to restore a building destroyed by fire, is not entitled to the proceeds of an insurance policy procured by the lessor on the building destroyed, although the tenant rebuilds the house. Panhandle Oil Co. v. Therrell, 158 Miss. 810, 131 So. 263. The ratio decidendi in these cases applies here unless, as claimed by the appellants, the fiduciary relations existing between cotenants prevents.
In support of their contention, the appellants say that, because of the fiduciary relationship existing between cotenants, a policy of insurance procured by one cotenant on the common property, not limited to his separate interest therein, should be presumed and held to have been procured for the benefit of himself and his cotenants.
If, strictly speaking, a fiduciary relationship exists between cotenants by reason of the mere fact that they are such (compare 62 C.J. 419, with Shelby v. Rhodes, 105 Miss. 255, 62 So. 232, Ann. Cas. 1916D, 1306), it can extend only to their mutual rights and duties. One cotenant is under no duty, merely as such, to indemnify his cotenant for the destruction of their common property, nor to procure a policy of insurance so indemnifying them. He may obligate himself so to do, or all of the cotenants may combine in procuring such a policy, or each may insure it for himself, and the amount for which the policy is issued is for the determination of the insurer and the one procuring the policy.
Affirmed.