Clark v. Leverett

• Decision Date: 16 December 1924
• Docket Number: 4329.
• Citation: 126 S.E. 258,159 Ga. 487
• Parties: CLARK v. LEVERETT ET AL.
• Court: Georgia Supreme Court

126 S.E. 258

159 Ga. 487

CLARK v. LEVERETT ET AL.

No. 4329.

Supreme Court of Georgia

December 16, 1924

Rehearing Denied Jan. 23, 1925.

Syllabus by the Court.

Where a life tenant is guardian for a remainderman, and takes out insurance in his own name on a dwelling on premises owned by him for life and the remainderman in fee after the expiration of his life, the life tenant paying the premium with his own funds, and, upon the destruction of such dwelling by fire collects the full insurance, which is equal to the value of both the life and remainder estates, the proceeds of such insurance stand in the place of the property destroyed, and should be used in rebuilding the dwelling, or should be held by the life tenant for the benefit of the remainderman upon the life tenant's death, in which case the life tenant would be entitled to the interest on the fund during his life.

In view of the above ruling, the petition set forth a cause of action, entitling the plaintiff to the relief sought; and the court below erred in dismissing it upon demurrer.

Error from Superior Court, Meriwether County; C. E. Roop, Judge.

Suit by L. C. Clark, guardian, against H. B. Leverett, guardian, and others. Judgment for defendants, and plaintiff brings error. Reversed.

Russell C.J., and Gilbert, J., dissenting.

Jones & Jones and N. F. Culpepper, all of Greenville, for plaintiff in error.

J. F Hatchett and H. H. Revill, both of Greenville, for defendants in error.

HINES J.

1. Where a policy of insurance to the full value of the property is taken out by the life tenant for his own use, and the premises are destroyed by fire, and the full insurance is collected by him, the authorities on the question of the rights of the remaindermen in the proceeds of the insurance money are in conflict. Different rules have been adopted by different courts. We may designate them as the Massachusetts, Rhode Island, and South Carolina rules. The Massachusetts rule is as follows: "A life tenant is not required to use the proceeds of insurance obtained by him on a total loss of buildings insured in his own interest, in rebuilding on the premises, and cannot be held accountable to the remaindermen for such money, even if it amounts to more than the value of the life tenant's interest," and is equal to the whole value of the property destroyed. Harrison v. Pepper, 166 Mass. 288, 44 N.E. 222, 33 L.R.A. 239, 55 Am.St.Rep. 404. The Rhode Island rule is this: If the policy covers merely the life tenant's interest, he is entitled to the insurance in full; but if the policy is issued to him for the full value of the fee and this amount is recovered by him, he is a trustee for the remainderman as to the excess of the amount received over the value of his life interest. Sampson v. Grogan, 21 R.I. 174, 42 A. 712, 44 L.R.A. 711. The South Carolina doctrine is this: Moneys collected by a life tenant upon a policy of fire insurance upon a building subject to the tenancy, though the premium has been paid with the personal funds of the life tenant, stand in place of the property destroyed, and should therefore be used in rebuilding it, or should be held by the life tenant for the benefit of the remainderman after such tenant's death, in which case the life tenant would be entitled to the interest on the fund during his life. Green v. Green, 50 S.C. 514, 27 S.E. 952, 62 Am.St.Rep. 846.

The question involved in this case has never been passed upon by this court; and we are now required to lay down the true rule applicable under the facts of this case. We are now free to establish in this state such rule. The Massachusetts doctrine is based upon two propositions. One is, that, in the absence of anything that requires it in the instrument creating the estate, or of an agreement to that effect on the part of the life tenant, the life tenant is not bound to keep the premises insured for the benefit of the remainderman; that each can insure his own interest, but, in the absence of any agreement, neither has any claim upon the proceeds of the other's policy. The other proposition is, that the contract of insurance is a personal one, and inures only to the benefit of the party by whom it is made, and by whom the premiums are paid. The reasoning upon which the Massachusetts rule is bottomed is not convincing and controlling. We cannot agree to the proposition that in all cases the life tenant is not bound to keep the premises insured for the benefit of the remainderman. While the tenant for life is entitled to the full use and enjoyment of the property, he is required by our law to exercise in such case "the ordinary care of a prudent man for its preservation and protection." Civil Code 1910, § 3666. If the exercise of ordinary care requires him to insure, his failure to do so would render him liable to the remainderman at least for damages. Loss resulting from such negligence would amount to waste. If such waste was both permissive and voluntary, and was committed in a manner evidencing an utter disregard of the rights of the remainderman, the life tenant would forfeit his estate. Parker v. Chambliss, 12 Ga. 235; Roby v. Newton, 121 Ga. 679, 49 S.E. 694, 68 L.R.A. 601; Brown v. Martin, 137 Ga. 338, 341, 73 S.E. 495, 39 L.R.A. (N. S.) 16; Grimm v. Grimm, 153 Ga. 655, 113 S.E. 91. The fact that the life tenant, acting in his own behalf, insured this property for his own benefit, would indicate that he thought it prudent to insure, and is persuasive proof that "the ordinary care of a prudent man for the preservation and protection" of this property required him to insure it for the benefit of the remainderman as well as himself. But it must be borne in mind that we are not dealing in this case with the neglect of the life tenant to insure, but with the disposition of the proceeds of the insurance when he did insure for the full value of the property, and, upon loss of the property, received funds sufficient to cover the full value of the property.

Nor do we think that the second proposition is a sound one in all cases. If an agent insures the property of his principal in his own name, the latter would be entitled to the insurance money. Graham v. Fire Insurance Co., 48 S.C. 195, 26 S.E. 323, 59 Am.St.Rep. 707. If a trustee insures in his own name property of his cestui que trust, the latter would be entitled to the proceeds of the insurance. If a carrier insures the goods of a shipper in his own name and the same are destroyed, the shipper would be entitled to the proceeds of the insurance. So if a guardian insures the property of his ward in his own name, in case of its loss by fire, the ward would be entitled to the insurance money.

Both the Rhode Island and South Carolina doctrines are closely akin. Both rest upon the foundation that the relation between the life tenant and the remainderman is one of trust or quasi trust. Sampson v. Grogan, Green v. Green, supra. Does such relation exist between them in this state? We have already seen that it is the duty of the life tenant to exercise ordinary care in the protection and preservation of the remainder estate. Whoever is charged with the duty of protecting and preserving property for the use of another occupies a relation of trust to the latter. It is not necessary that the relationship should be that of an express trust. It may be only that of a quasi trust. "Because of this duty to preserve and protect the estate in remainder, his relation to the remainderman is to a certain extent a fiduciary one, and has frequently been termed an implied or quasi trusteeship." 17 R.C.L. 625, § 15. The power of a court of equity to enjoin the life tenant from committing waste is based upon the principle that the tenant is considered in the nature of a trustee for those in remainder. Smith v. Daniel, 2 McCord Eq. (S. C.) 143, 16 Am.Dec. 641. It is true that the life tenant is a trustee only in the sense that a duty rests on him as life tenant to have merely due regard for the remainderman, a duty giving him the character rather of a quasi trustee. Hardy v. Mayhew, 158 Cal. 95, 110 P. 113, 139 Am.St.Rep. 73. The above provision from Ruling Case Law was quoted with approval by the chief justice who delivered the opinion in Barmore v. Gilbert, 151 Ga. 260, 106 S.E. 269, 14 A.L.R. 1060; and the principle that the life tenant is a quasi trustee for the remainderman in protecting and preserving the remainderman's interest was expressly stated. Upon due analysis nothing to the contrary of this was held by this court in Russell v. Kearney, 27 Ga. 96. It is true that in the third headnote in that case it was said:

"That an estate is given to A. for life, or years, and, to B. in remainder, does not make A. the trustee of B. as to B.'s remainder."

In that case the court was dealing with the question whether the life tenant bore the relation of an express trustee to the remainderman, and not with the question whether the relationship was one of quasi trustee. In that case a slave was bequeathed by testatrix to her son, Richard B. Kearney to be held by him during his life and after his death to go to his widow. Kearney during his lifetime sold this slave to the defendant Russell. After the death of Kearney, the widow brought trover against Russell to recover this slave. The trial judge was requested to charge that the husband stood in the relation of trustee for this property, and that, if the defendant bought from him without notice, he obtained a good title against the remainderman. The trial judge declined to so charge. This court affirmed his ruling. This was not a holding that the life tenant occupies no fiduciary relation to the remainderman, but that, under the will in which the testatrix devised this slave to her son for life, and at his death...