Gray v. Holyoke Mut. Fire Ins. Co.

• Decision Date: 26 September 1974
• Citation: 293 Ala. 291,302 So.2d 104
• Parties: Elizabeth GRAY, as Executrix of the Estate of Ada Fromhold, Deceased, v. HOLYOKE MUTUAL FIRE INSURANCE COMPANY et al. SC 711.
• Court: Alabama Supreme Court

Page 104

302 So.2d 104

293 Ala. 291

Elizabeth GRAY, as Executrix of the Estate of Ada Fromhold, Deceased, v. HOLYOKE MUTUAL FIRE INSURANCE COMPANY et al.

SC 711.

Supreme Court of Alabama.

Sept. 26, 1974.

Rehearing Denied Oct. 31, 1974.

J. Wm. Thomason, Bessemer, for appellant.

Paden & Green, Bessemer, for appellee Robert E. Paden, as Administrator of the Estate of Joseph M. Fromhold, Deceased.

Huie, Fernambucq & Stewart, Birmingham, for appellee Holyoke.

BLOODWORTH, Justice.

Appellant (complainant below) Elizabeth Gray, as executrix of the estate of Ada Fromhold, filed a bill for declaratory judgment in the Circuit Court of Jefferson County, Bessemer Division, against the appellees (respondents below), Robert E. Paden, as administrator of the estate of Joseph M. Fromhold, and the Holyoke Mutual Fire Insurance Company.

The appellant sought a declaration that she is entitled to recover from either, or both, of the appellees one half of the proceeds of a homeowner's insurance poliy issued to Joseph M. and Ada Fromhold on a house owned by them as tenants in common, appellee Paden, as administrator, having previously recovered judgment for the full amount of the policy from appellee Holyoke Mutual.

The circuit judge, sitting without a jury, denied the relief sought by appellant and rendered judgment in favor of the appellees, declaring that the prior judgment extinguished Holyoke's liability on the policy and that Paden, as administrator of the estate of Joseph M. Fromhold, was not liable to appellant for any portion of the policy proceeds. Hence this appeal. We reverse and remand.

Joseph M. Fromhold and Ada R. Fromhold were husband and wife. They owned certain real property and a house situated thereon as tenants in common without any right of survivorship. On August 10, 1968, they purchased a homeowner's insurance policy on the house and its contents for a three-year term from Holyoke Mutual for a premium of $230.00. The premium was payable in three annual installments. The first installment was paid by the Fromholds when the policy was issued. Shortly after the issuance of the policy, Mrs. Fromhold died. (Paden Realty Company, as agent for Holyoke Mutual, was notified of Mrs. Fromhold's death. No change in the policy was made.) By her will, Mrs. Fromhold devised all her interest in the house and its contents to her son by a previous marriage, Alvis Gray, and his wife, Elizabeth, as tenants in common, subject to a life estate in her husband, Joseph Fromhold. Alvis Gray predeceased his mother, Mrs. Fromhold. His wife, Elizabeth Gray, qualified as executrix of Mrs. Fromhold's estate.

When the second and third installments on the premium became due, they were paid by 'someone,' according to a stipulation of the parties. Mr. Fromhold continued to occupy the house and use its contents. On March 21, 1970, Mr. Fromhold died in a fire which totally destroyed the house and its contents.

Mr. Fromhold departed this life intestate. His sole heir is a daughter by a previous marriage. Robert Paden qualified as administrator of, and also acted as attorney for, the estate. Both Mr. Paden and Mrs. Gray filed separate proofs of loss and Holyoke Mutual denied coverage as to both. Mr. Carl Ross, Sr., as attorney for Mrs. Gray, and Mr. Paden, as attorney for the estate of Mr. Fromhold, discussed their respective claims on several occasions. Finally, Mr. Paden, as administrator of the estate of Joseph M. Fromhold, filed suit against Holyoke Mutual. The suit was successful, and Paden recovered the full face value of the policy, $8,000.00 for the house and $3,200.00 for the contents. Following this judgment, Paden accepted $10,000.00 in full settlement thereof. Paden kept $4,000.00, as his fee and expenses, and distributed the balance to the heir of Mr. Fromhold. Mr. Ross, attorney for Mrs. Gray, had knowledge of the suit on the policy but did not participate or aid in it although Mr. Ross appears to contend that he and Mr. Paden had an agreement that their respective clients would share in the recovery. Mr. Paden denies such an agreement. Neither Mrs. Gray nor her attorney Mr. Ross were aware of the judgment and settlement until it had been effectuated.

Appellant raises two issues on this appeal: (1) Did the trial court err in holding that the judgment for the full amount of the policy obtained by Paden, as administrator, against Holyoke completely extinguish Holyoke's liability on the policy? (2) Did the trial court err in holding that Paden, as administrator of the estate of Joseph Fromhold, was entitled to the entire proceeds of the policy? We will deal with each of these issues separately.

I.

The policy was issued to 'Joseph M. & Ada R. Fromhold' for a policy term from '8/10/68' to '8/10/71.' Following the description of the insured premises, the policy recites:

'In Consideration of the Provisions and Stipulations Herein or Added Hereto and of the Premium Above Specified (or specified in endorsement attached hereto), this Company, For the term shown above from inception date shown above (At Noon Standard Time) to expiration date shown above (At Noon Standard Time) at location of property involved, to an amount not exceeding the amount(s) above specified, does insure the Insured named in the declarations above and legal representatives, to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss, * * *' (Our emphasis.)

It is this Court's conclusion that the two personal representatives stand in the shoes of their respective decedents and succeed to the rights and liabilities of each in the policy of insurance. See: Norwich Union Fire Ins. Co. v. Prude, 145 Ala. 297, 40 So. 322 (1906); Hanover Fire Ins. Co. v. Street, 234 Ala. 537, 176 So. 350 (1937). See also, 9 Couch On Insurance 2d § 39:240 (1962); cf. 8 Couch On Insurance 2d § 37:1141 (1962). At Couch, § 39:240, it is stated, viz:

' § 39:240. Death of insured under property insurance.

'A policy of insurance on property is not terminated by the death of the insured in the absence of an express provision to that effect in the policy, the usual ground for the decision being that since such insurance policies usually contain explicit provisions as to termination or forfeiture for grounds other than death of the insured, no additional ground therefor will be implied or read into the contract. And a provision that alienation shall avoid the policy does not apply to a transfer by operation of law resulting from the death of the insured.' (Footnotes omitted.)

Following the destruction of the insured premises, the insurance policy thus became a contract for the payment of money to the personal representatives of the named insureds. United Security Life Insurance Company v. Dupree, 41 Ala.App. 601, 146 So.2d 91 (1962).

Having reached this conclusion, we are still confronted by the general rule that an obligation to pay money to two or more persons, if not in the alternative, is joint, Masterson v. Phinizy, 56 Ala. 336 (1876), and authorities in this State have held that payment to one of two obligees of the whole obligation will discharge the whole. Brooks v. Ward, 287 Ala. 609, 254 So.2d 175 (1971); Ayers v. Ayers, 261 Ala. 421, 74 So.2d 250 (1954); Peck v. Lampkin, 200 Ala. 132, 75 So. 580 (1917).

The rule is, however, that whether an obligation is, in reality, joint or several, is controlled by the intent of the parties at the time of the making of the contract. In Atlanta & St. A.B. Ry. Co. v. Thomas, 60 Fla. 412, 53 So. 510 (1910), the common law rule is expressed thusly:

'* * * Where the rights and interests of the parties are definitely and clearly stated, the terms of the contract fairly interpreted should control, for it must be assumed that the intent of the parties is as it is distinctly and positively expressed by them. If the language used is ambiguous, the real intent of the parties should be ascertained, and it may be shown in an appropriate way when such showing is not inconsistent with the express terms and purpose of the contract. Even though a contract be in form joint in its obligations, if the real rights and interests of the obligees among themselves be several and not joint, actions may be maintained severally by the obligees as their rights and interests appear, when the express terms and purpose of the contract are not in substance thereby violated or disregarded. In ascertaining the intention of the parties and in determining whether the rights and interests of covenantees are in reality joint or several, the subject-matter of the contract, the language used, the purpose designed, the consideration furnished, and the circumstances that induced the making of the contract may be considered. * * *'

A special rule of construction has been applied to insurance policies, where, as here, the policy was issued in the names of several persons who held the insured property as tenants in common. In Hoyt v. New Hampshire Fire Ins. Co., 92 N.H. 242, 29 A.2d 121 (1942), the insurer contended that the actions of one of several tenants in common of insured property could cause the rights of his co-tenants in common to be extinguished on the theory that the policy issued in the name of all, created a joint obligation. The New Hampshire Supreme Court, in rejecting this contention held at p. 121 of 29 A.2d:

'Whether the rights of obligees are joint or several is a question of construction (1 Williston, Con. § 325), and in construing an insurance contract the test is not what the insurance company intended the words of the policy to mean but what a reasonable person in the position of the insured would have understood them to mean. (...