Lannom v. Town of Tullahoma

• Decision Date: 29 January 1927
• Citation: 290 S.W. 8,155 Tenn. 25
• Parties: LANNOM ET AL. v. BOARD OF MAYOR AND ALDERMEN OF TOWN OF TULLAHOMA.
• Court: Tennessee Supreme Court

290 S.W. 8

155 Tenn. 25

LANNOM ET AL. v. BOARD OF MAYOR AND ALDERMEN OF TOWN OF TULLAHOMA.

Supreme Court of Tennessee.

January 29, 1927

Certiorari to Court of Appeals.

Suit by G. S. Lannom, Jr., and others, as trustees in bankruptcy of W. L. Clarke, against the Board of Mayor and Aldermen of the Town of Tullahoma. A decree dismissing complainants' bill was affirmed by the Court of Appeals, and complainants bring certiorari. Affirmed.

SWIGGART J.

The appellants G. S. Lannom, Jr., trustee, and others, as trustees in bankruptcy of W. L. Clarke, filed the bill in this cause to recover from the town of Tullahoma the proceeds of a policy of fire insurance procured by Clarke on a building of which he had title; the policy containing a clause providing for its payment to the town of Tullahoma, as its interest might appear.

The chancellor dismissed the bill and his decree was affirmed by the Court of Appeals. The trustees presented their petition for certiorari to this court, which was granted at a former term, and the cause has been argued orally at the bar of this court.

The building insured was located on property owned by the town of Tullahoma as the situs of a school. This property was first leased and then conveyed to Fitzgerald & Clarke, without monetary consideration; the deed containing a clause that the property should be used by the vendees for school purposes and that, if it should cease to be used for school purposes the title should revert to and reinvest in the board of mayor and aldermen of the town of Tullahoma. The deed also contained the following provision:

"It is further stipulated, agreed, and made a part of this conveyance that the said W. S. Fitzgerald & W. L. Clarke their successors, and assigns shall keep the main building of said property insured in some solvent insurance company, or companies, against damage or destruction by fire or windstorm in the sum of not less than $15,000, and in the event the said building shall be damaged or destroyed by fire, or windstorms, in that event all sums of insurance paid on account of such damage or destruction shall be used for the repair, replacement, or rebuilding of said building so damaged or destroyed. It is further stipulated and agreed and made a part of this conveyance that, if the said Fitzgerald & Clarke, or their successors or assigns, shall fail or refuse to so keep said building insured and pay the premiums therefor, such failure or refusal may be treated by the board of mayor and aldermen as a failure to use said property for school purposes, in which event the title to said property shall revert to said board of mayor and aldermen."

Fitzgerald conveyed his interest in this property to his partner, W. L. Clarke, and Clarke was subsequently adjudicated a bankrupt. Prior to the bankruptcy the building described in the foregoing clause was insured in the sum of $15,000, with a clause in the policy providing that it should be payable to the town of Tullahoma as its interest might appear. The building was destroyed by fire after Clarke was adjudicated a bankrupt, and payment of the policy was refused by the insurer on the ground that the bankruptcy of Clarke had brought about a change in the title to the property, which rendered the policy void under certain of its provisions. The town of Tullahoma effected a compromise with the insurer and collected two-thirds of the face value of the policy, $10,000, out of which it paid $1,500 to its attorneys who brought about the compromise.

The answer filed by the town of Tullahoma to the original bill asserts that the town is holding the net proceeds of the policy, $8,500, as a trust fund, to be expended in accord with the clause of the deed hereinabove quoted.

Shortly after the property was conveyed to Fitzgerald & Clarke they conveyed it in trust to secure the payment of borrowed money. This deed of trust was foreclosed after the bankruptcy and after the town of Tullahoma had collected the compromise settlement of the insurance, and the title to the property is now in Mrs. Goldie Bear, the purchaser under the foreclosure, subject to the limitation in the deed to Fitzgerald & Clarke, with regard to the use to which the property may be put.

The contention of the trustees in bankruptcy is that the contract of insurance was a personal contract between Clarke and the insurer, and that the proceeds of the insurance are personal property; that the amount realized is...