McGuire v. Wilson

• Citation: 372 So.2d 1297
• Parties: William B. McGUIRE, Individually and d/b/a McGuire Realty Co. and American Liberty Insurance Co. v. Ronald A. WILSON. 77-400.
• Decision Date: 22 June 1979
• Court: Supreme Court of Alabama

Page 1297

372 So.2d 1297

William B. McGUIRE, Individually and d/b/a McGuire Realty Co.

and

American Liberty Insurance Co. v. Ronald A. WILSON.

77-400.

Supreme Court of Alabama.

June 22, 1979.

Rehearing Denied July 20, 1979.

Larry W. Harper of Dunn, Porterfield, Scholl & Clark, Birmingham, for appellants.

Wilbor J. Hust, Jr., of Zeanah, Donald & Hust, Tuscaloosa, for appellee.

ALMON, Justice.

This appeal is from an order granting the appellee's motion for a summary judgment. We reverse.

The appellant, William B. McGuire is engaged in the business of building and selling homes. In connection with this enterprise, McGuire acquired insurance coverage with appellant, American Liberty Insurance Co. under a "builder's risk" policy. Broadly speaking, American Liberty undertook to insure McGuire against losses incurred during construction.

In December, 1975, McGuire and the appellee, Ronald A. Wilson, entered into a contract for the sale of a residence in Northport, Alabama. This contract was contingent upon Wilson and his wife obtaining an FHA mortgage loan.

Prior to obtaining the FHA loan, the Wilsons moved into this residence pursuant to a lease provision in the real estate sales contract. Within a week, a fire occurred at the residence and the appellants alleged that this fire was caused by Wilson's negligence. The fire caused $22,421.77 in damages. This damage was repaired by McGuire and the sale was subsequently consummated according to the terms of the sales contract. American Liberty paid McGuire for the damages, evidently on the assumption that these damages were covered by the "builder's risk" insurance policy. The appellants filed this action in December, 1976, seeking to recover $22,421.77 from Wilson for the damages which they alleged were caused by Wilson's negligence.

In a related action, Southern Guaranty Insurance Company sought a declaratory judgment as to whether it was required to defend Wilson under the terms of a homeowners policy which it had issued to Wilson. The trial court in the declaratory judgment action ruled that Southern Guaranty Insurance Company was required to defend the appellee, Ronald A. Wilson, in this case and to pay any judgment rendered against Wilson up to the limit of Wilson's homeowners policy with Southern Guaranty.

The appellee, Ronald Wilson, filed a motion for summary judgment in this case and that motion was granted. The order granting summary judgment provided in pertinent part:

The court finds that the plaintiff, William B. McGuire, is not a proper party plaintiff and is not a real party in interest and, therefore, there is no question of any material fact concerning the claim of William B. McGuire and the defendant is entitled to a judgment against plaintiff, William B. McGuire, as a matter of law.

The court further finds that the claim of plaintiff, American Liberty Insurance Company is one based upon subrogation but the court finds that there is no genuine question of any material fact and that the plaintiff, American Liberty Insurance Company, has no right of subrogation against this defendant and further the court is of the opinion that subrogation should not be applied in this case against the defendant and, therefore, the defendant is entitled to a judgment as a matter of law.

McGuire and American Liberty have appealed, asserting the following grounds for reversing the judgment of the trial court: there are questions of material fact which preclude the granting of a motion for summary judgment and this Court should allow a quasi-contractual recovery against the appellee (and his insurer) to prevent unjust enrichment.

The appellants suggest that there are disputed factual questions with respect to the following points:

1. whether the fire was negligently caused by the appellee;

2. whether the appellee was a lessee under the sales contract or a vendee in possession;

3. whether obtaining an FHA mortgage at 8% Interest was a condition precedent to the enforceability of the sales contract; and

4. whether the conduct of the parties implied a contract whereby the appellee was to pay for the cost of repairs.

In view of the decision we reach in this case, we need not treat each of these alleged factual discrepancies extensively. The summary judgment standard embodied in Rule 56, ARCP is conjunctive. There must not only be an absence of genuine issue as to material fact, but there must also be circumstances entitling the moving party to judgment as a matter of law. Regardless of how the factual issues may be ultimately resolved in this case, the record does not support the judgment of the trial court that as a matter of law, American Liberty is not entitled to a subrogation claim against the appellee.

Although the order of the trial court does not indicate why American Liberty's subrogation claim was denied, the appellee asserts that there are four independent theories that will sustain the judgment of the trial court.

The first of these theories is that the insurer, American Liberty, can obtain no greater rights against the appellee than the insured, McGuire has. The appellee contends that after the fire, McGuire could only claim the balance of the purchase price from the appellee. Notwithstanding the fact that the premises were repaired and the sale was subsequently consummated, the appellee contends that since the balance of the purchase price was tendered and accepted, the insured's claim against Wilson was extinguished and therefore the insurer's claim was also extinguished.

The appellee relies heavily on Alabama Farm Bureau Mutual Ins. Serv. v. Nixon, 268 Ala. 271, 105 So.2d 643 (1958). Nixon had entered a contract to buy property from Buckelew for $7,000. Buckelew insured the property in his own name with Alabama Farm Bureau Mutual Insurance Service and after Nixon had paid $5,000 of the purchase price, improvements on the property were heavily damaged. Alabama Farm Bureau Mutual paid Buckelew $2,000, the balance of the purchase price and attempted to subrogate itself to the rights of Buckelew against Nixon to recover $2,000 from Nixon. This Court denied the insurer's subrogation claim reasoning that "when Buckelew received the proceeds of the insurance he had no further claim against Nixon . . . and thus there is no right to which appellant may be subrogated." The Court pointed out that to allow the insurer to claim against the purchaser, Nixon, would require the purchaser "to pay for that which he does not receive." Thus, to summarize Nixon, by refusing the insurer's subrogation claim, the purchaser paid $5,000 for property originally worth $7,000 that had sustained $2,000 worth of damage. The seller received $7,000 for the property he had contracted to sell for $7,000; $5,000 from the purchaser and $2,000 from his insurer. The insurer paid the seller $2,000, the extent of the seller's loss, in accordance with the terms of the policy.

Nixon held, in effect, that the payment of the insurance proceeds to the seller extinguished the seller's claim against the purchaser, and absent a viable claim of the seller against the purchaser the insurer was not entitled to subrogation. It is significant to note that, in Nixon, the risk of casualty loss to the property in question was neither discussed nor decided.

In this case the appellee unequivocally states in his brief that

. . . a vendor incurs the risk of loss of a building until the vendee takes possession or accepts the premises. At that point the risk of loss shifts to the vendee. Whether the premises are damaged with or without the fault of the vendee, he is responsible and is not absolved from his contractual obligation.

Wilson was the equitable owner of the house when the fire occurred because he was a vendee in possession. (Citation omitted.) Therefore, the risk of loss by fire had shifted to him, and McGuire had no obligation to rebuild the property. McGuire's only claim against defendant was for the balance of the purchase price.

The appellee concedes that he bore the risk of loss in this case irrespective of fault, yet he attempts to avoid this loss despite allegations that the loss was caused by his negligence. The appellee clearly will succeed in avoiding this loss if the insurer is not allowed to subrogate his claim in this case.

Nixon, supra, does not require such a result, especially since it has been limited to its particular facts. ABC Supermarket, Inc. v. American Employers Ins. Co., 283 Ala. 13, 214 So.2d 291 (1968). ABC Supermarket, supra, quoted a pre-Nixon case, Hackett v. Cash, 196 Ala. 403, 72 So. 52 (1916) with approval.

Where a policy of fire insurance is upon the interest of the mortgagee, and does not accrue to the benefit of the mortgagor, the insurance company has a right to pay the mortgage and take an assignment or to become subrogated to the right of the mortgagee in case there is no assignment. 283 Ala. at 22, 214 So.2d at 298.

While we are not to be understood as strictly equating a vendor under a conditional sales contract with a mortgagee, the legal principles underlying an insurer's subrogation claim are analogous.

In City of Birmingham v. Walker, 267 Ala. 150, 101 So.2d...