Ellerbusch v. Myers

• Decision Date: 19 August 1997
• Docket Number: No. 87A01-9610-CV-314,87A01-9610-CV-314
• Citation: Ellerbusch v. Myers, 683 N.E.2d 1352 (Ind. App. 1997)
• Parties: Brenda ELLERBUSCH, Personal Representative of the Estate of Frederick William Ellerbusch, IV, Deceased, Appellant-Plaintiff, v. Herb MYERS, Personal Representative of the Estate of Anna H. Ellerbusch, Deceased, Appellee-Defendant.
• Court: Indiana Appellate Court

Page 1352

683 N.E.2d 1352

Brenda ELLERBUSCH, Personal Representative of the Estate of Frederick William Ellerbusch, IV, DeceasedAppellant-Plaintiff, v.Herb MYERS, Personal Representative of the Estate of Anna H Ellerbusch, Deceased, Appellee-Defendant.

No. 87A01-9610-CV-314.

Court of Appeals of Indiana.

Aug. 19, 1997.

Jeffrey A. Wilhite, White and Associates, Evansville, for Appellant-Plaintiff.

F. Stephen Sheets, Evansville, for Appellee-Defendant.

OPINION

NAJAM, Judge.

STATEMENT OF THE CASE

In this case of first impression, we are asked to determine the rights of remaindermen to fire insurance proceeds collected by the life tenant when the improvements are destroyed.Brenda Ellerbusch, as the Personal Representative of the Estate of Frederick William Ellerbusch, IV, ("Brenda") filed suit against Anna Ellerbusch("Anna") to recover a portion of the insurance proceeds paid to Anna after a total loss.¹The trial court granted partial summary judgment against Brenda and in favor of Anna.Brenda now appeals.

We affirm.

ISSUE

Brenda presents several issues for our review which we consolidate and restate as whether a life tenant has a duty to hold insurance proceeds received after a loss to the property in trust for the benefit of the remaindermen.

FACTS

On June 10, 1985, Anna executed a warranty deed which granted a 50 percent remainder interest to each of her sons, Frederick William Ellerbusch IV, and Ronald H. Ellerbusch(collectively, "Remaindermen"), and reserved a life estate for herself in property consisting of 88 acres and a house.On August 9, 1995, the house was totally destroyed by fire.At the time, the house was insured for its repair or replacement value up to $130,000.00 by Illinois Farmers Insurance Company("Illinois Farmers").Anna had procured the policy and had paid all premiums from her personal funds.Illinois Farmers paid Anna the fair market value of the home.²Anna did not use the proceeds to repair or rebuild the house.

On April 16, 1996, Brenda Ellerbusch, as the Personal Representative of the Estate of Frederick William Ellerbusch IV, filed a complaint against Anna.³Count I alleged that Anna's failure to maintain the property constituted a nuisance which damaged or could damage the value of the property.Brenda sought damages to compensate her for any loss in value to the property, or in the alternative, an order that Anna maintain the property or surrender her life estate to the Remaindermen.Count II alleged that because Anna had committed past frauds against the Remaindermen, she was likely to convert the insurance proceeds for her own use.Brenda asked the court to order that Anna hold the Remaindermen's share of the insurance proceeds in constructive trust.

Anna moved for partial summary judgment on Counts I, II and IV ⁴ of Brenda's complaint.Brenda also moved for partial summary judgment on Count II.After a hearing, the trial court granted summary judgment on Counts I and II in favor of Anna.Brenda now appeals.

DISCUSSION AND DECISION

Standard of Review

When reviewing the grant or denial of summary judgment, we apply the same standard used by the trial court.Ramon v. Glenroy Const. Co., 609 N.E.2d 1123, 1127(Ind.Ct.App.1993), trans. denied.Summary judgment is appropriate only when the evidentiary matter designated by the parties shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.Ind. TrialRule 56(C).The movant bears the burden of establishing the propriety of summary judgment, and all facts and inferences to be drawn therefrom are viewed in a light most favorable to the non-movant.Ramon, 609 N.E.2d at 1127.

Insurance Proceeds

Brenda contends that Anna has breached her fiduciary duty to the Remaindermen by retaining all of the fire insurance proceeds.In response, Anna maintains that she does not owe a duty to the Remaindermen to hold the proceeds in trust for them and that she is entitled to retain the full amount of the proceeds.

Although there is some authority to the contrary, the rule adopted by the majority of states holds that where a life tenant insures the property in his own name and for his own benefit and pays the premiums from his own funds, the life tenant is entitled to the entire proceeds of the insurance upon a loss to the property, even if the insurance covers the full worth of the property.51 AM. JUR.Life Tenants and Remaindermen§ 158 at 415-16(1970);Harrison v. Pepper, 166 Mass. 288, 44 N.E. 222, 223(1896).There are several recognized exceptions to the majority rule.A life tenant must provide insurance for the benefit of the remainderman if the instrument creating the estate expressly so provides, if the life tenant and remainderman so agree, or if a fiduciary relationship exists between the life tenant and the remainderman apart from the incidents of the tenancy.SeeConvis v. Citizens' Mut. Fire Ins. Co., 127 Mich. 616, 86 N.W. 994, 997(1901)(life tenant's duty to insure arises by agreement);Bell v. Barefield, 219 Ala. 319, 122 So. 318, 319(1929)(instrument can create duty to insure);Clark v. Leverett, 159 Ga. 487, 126 S.E. 258, 259(1924)(life tenant who is guardian to remainderman must hold proceeds in trust).

In contrast, a minority of courts has concluded that a life tenant is entitled to all of the insurance proceeds only when the policy of insurance merely covers the life tenant's interest.See e.g., Sampson v. Grogan, 21 R.I. 174, 42 A. 712, 717(1899).Under this view, if the life tenant recovers insurance proceeds that exceed the value of the life estate, then the tenant must hold the excess in trust for the benefit of the remaindermen.Id.Yet another minority rule holds that insurance proceeds collected by the life tenant, regardless of the amount, stand in place of the destroyed property and must be used to rebuild the property.See e.g., Green v. Green, 50 S.C. 514, 27 S.E. 952, 959(1897).If the property cannot be rebuilt, the life tenant must invest the proceeds for the benefit of the remaindermen, in which case the life tenant would be entitled to any interest earned on the fund during his life.Id.

We hereby adopt the majority rule and its exceptions.We find compelling the following policy reasons that have been consistently advanced for the...