Alabama Farm Bureau Mut. Ins. Service, Inc. v. Nixon, 8 Div. 919
| Decision Date | 09 October 1958 |
| Docket Number | 8 Div. 919 |
| Citation | 268 Ala. 271,105 So.2d 643 |
| Parties | ALABAMA FARM BUREAU MUTUAL INSURANCE SERVICE, Inc. v. George M. NIXON. |
| Court | Alabama Supreme Court |
Lusk & Lusk, Guntersville, for appellant.
Scruggs & Scruggs, Guntersville, and H. H. Conway, Albertville, for appellee.
The question in this case arose between a vendor and vendee of realty when the improvements thereon were destroyed by fire during the time between the inception of the contract of sale and prior to its consummation by delivery of the warranty deed. The parties to the contract had no agreement about insurance but the vendor insured the buildings on the property in his own name and paid the premiums out of his own funds. The question is whether the proceeds of this insurance should inure to the benefit of the vendee so as to cancel the unpaid balance of the purchase price.
The facts show that in January of 1955, R. E. Buckelew, the vendor, and George M. Nixon, the vendee, entered into an oral contract of sale. The price was fixed at $7,000, $1,000 down and $1,000 to be paid per month for a period of six months. Nixon was put in possession of the property and it was agreed that Buckelew would deliver to him a warranty deed, conveying title to the property, when the purchase price was paid in full. Buckelew secured a policy of insurance covering his equity in the property with his own funds and in his own name from Alabama Farm Bureau Mutual Insurance Service, Inc., the appellant in this cause, in the amount of $6,000. Two buildings were on the premises, one the main building, a combination building consisting of a dwelling and a store, the other a feed barn. The store was operated as a gas service station.
The parties also entered into contracts with one Slaton, whereby Slaton purchased the fixtures and stock of the store from Buckelew, and leased the building from Nixon. Slaton had no need for the living quarters in the main building so he subleased that part of it to Buckelew, who continued to live therein.
Nixon made payments on the purchase price until the buildings were burned on June 4, 1955. The main building was a complete loss and the feed barn was heavily damaged. At the time Nixon still owed Buckelew $2,000 of the original contract price, having paid $5,000.
Appellant, Alabama Farm Bureau Mutual Insurance Service, Inc., admitted coverage under the policy as follows:
Main building $4,500.00
Buckelew's personal effects 1,000.00
Feed barn 500.00
Total $6,000.00
In making its settlement with Buckelew appellant made the following allowances
Main building, 100% loss, limited by Buckelew's equity $2,000.00
Buckelew's personal effects, 100% loss 1,000.00
Barn, 50% loss 250.00
Total $3,250.00
Appellant delivered a draft for $3,250 to Buckelew on July 12, 1955, and received its release. Although Buckelew had received $2,000 from the insurance company which represented his total remaining equity in the property, he also wanted to collect the remaining balance of the purchase price from Nixon. However, Nixon demanded that Buckelew deliver to him a warranty deed and on Buckelew's refusal to do so, Nixon filed his original bill of complaint in this cause in the equity court. In his answer to the bill which was prayed to be taken as a cross bill, Buckelew contended that Nixon owed him $2,000, the remainder due under the contract purchase price and further, making the insurance company a party to the cross bill, contended that the insurance company should be required to pay $6,000, the face value of the insurance policy, instead of only $3,250.
The insurance company, Alabama Farm Bureau Mutual Insurance Service, Inc., made answer to the cross bill and not only disclaimed any further obligation under the policy, but prayed that it be subrogated to the rights of Buckelew against Nixon under the contract of sale and that the court decree that Nixon pay it the balance of the purchase price.
The court in its final decree found that Nixon and Buckelew had entered into a valid contract which was not subject to the Statute of Frauds and that under the contract there was an unpaid balance due Buckelew of $2,000, but it further found that Buckelew had received $2,000 under the insurance policy and that this amount 'should be and is applied to the balance of the indebtedness due to the said R. E. Buckelew.' In order to do equity it further decreed that Nixon pay Buckelew the full amount of the insurance premiums which he had paid for the insurance.
Only the Alabama Farm Bureau Mutual Insurance Service, Inc., has appealed. It insists on five assignments of error. All of these except the last, which is assignment No. 11, come down to a contention that the insurance company should be subrogated in the place of Buckelew for the $2,000, which Nixon has not paid on the purchase price. In its last assignment of error, Assignment No. 11, the appellant complains of what it considers an ambiguity in paragraph 5 of the court's decree. Paragraph 5 reads as follows:
The appellant feels that the words 'upon payment of the sum of $3,250.00', imply the idea that the liability of the insurance company has not been discharged. Buckelew has not appealed and there is no indication that he is insisting on any further liability from the insurance company. Considering the questioned phrase in its context and with the rest of the decree, it should be interpreted to mean that the insurance company (appellant) is discharged from any further liability either to Buckelew or to Nixon.
The other assignments of error insisted on by the appellant all present the proposition that the insurance policy purchased by vendor is a personal indemnity to him, that the proceeds did not inure to the benefit of vendee so as to discharge the remainder of the contract price under the contract of sale and that the insurance company, having paid the loss, should be subrogated to the rights of its insured.
We shall consider first the question of subrogation. In the early case of Houston v. Branch Bank, 25 Ala. 250, 257, subrogation was defined as 'the act of putting, by a transfer, a person in the place of another.' It should further be observed that the insurance company cannot have subrogation unless Buckelew is Nixon's creditor and still has a right to the remainder of the purchase price under the contract of sale. The insurance company can acquire no greater right against Nixon than Buckelew had against him. This court in an early case said:
* * *.' Colvin v. Owens, 22 Ala. 782, 794.
The principle set forth in the foregoing case has been followed in later cases. American Bonding Co. of Baltimore v. Fourth National Bank, 205 Ala. 652, 88 So. 838; Turner v. Lumbermens Mutual Ins. Co., 235 Ala. 632, 646, 180 So. 300.
Therefore, before we can apply the doctrine of subrogation we must determine that Buckelew has a valid claim against Nixon for the remainder of the purchase price and further at this point we call attention to the proposition that this court has held that Jefferson Standard Life Ins. Co. v. Brunson, 226 Ala. 16, 17, 145 So. 156.
If we should determine that Buckelew has a valid claim against Nixon for the remainder of the purchase price, this would mean that the court was in error in finding that as between Buckelew and Nixon, Buckelew's insurance could be used to cancel Nixon's debt. No decision in this state has been called to our attention which in our judgment determines the exact question here presented. In other jurisdictions we find that there has been no unanimity in the decisions.
In this connection in Bruce v. Jennings, 190 Ga. 618, 10 S.E.2d 56, 57, the Supreme Court of Georgia has stated the general rule as follows:
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