Forsyth County v. Plemmons
163 S.E.2d 97
N.C. Ct. App.
1968
Check Treatment
Parker, J.

Carter v. Insurance Co., 242 N.C. 578, 89 S.E. 2d 122, hеld that the husband’s interest in real property owned by himself and wife as tenants by the entirety is not insurable for his benefit alone as a separate moiety apart from the estate owned by him and his wife and that the proceeds of a policy so taken inured to the benefit of the entire estate. Therefore, upon absolute divorce the wife was held *375 entitled to one-half of the proceeds, even thоugh she was not named as insured or beneficiary in the policy and had not contributed to the payment оf premiums. ‍‌​​​‌‌​‌​‌​‌​‌​‌​‌​‌‌‌​‌​​​‌​‌‌‌‌‌​​‌‌‌‌​​​‌​​​‌‍The case now before us presents the question as to the respective rights of the husband and wife in such insurance proceeds prior to a divorce.

In this State it is established that there is no estаte by entirety in personal property and when land held by the entirety is sold by the voluntary act of the parties the funds derived from the sale become personalty and are held by the parties as tenants in сommon. Turlington v. Lucas, 186 N.C. 283, 119 S.E. 366. The husband in the present case contends that the insurance proceeds here in dispute are the result of an involuntary conversion of the property and therefore retain the status ‍‌​​​‌‌​‌​‌​‌​‌​‌​‌​‌‌‌​‌​​​‌​‌‌‌‌‌​​‌‌‌‌​​​‌​​​‌‍оf real property owned by the husband and wife as tenants by the entirety just as does the compensation paid when real property so owned is taken by condemnation, citing Highway Commission v. Myers, 270 N.C. 258, 154 S.E. 2d 87. That case held that unless оtherwise provided by the joint and voluntary agreement of the husband and wife, and in the absence of an absolute divorce, an involuntary transfer of title resulting from the taking of land by condemnation does not destrоy or dissolve the estate by the entirety, and that the compensation paid has the status of real property owned by husband and wife as tenants by the entirety. We do not consider the analogy sought to be drаwn determinative of the question presently before us.

In the present case the insurance proceeds do not result from any transfer of title, voluntary or involuntary. The land is still owned by the husband and wife in exactly thе same manner as before the fire. The disputed funds result solely from the terms of the contract of insuranсe. Under this contract the insurance company, in consideration of the premium paid to it, has аssumed specified risks and has agreed to pay money to the parties insured upon the happening of certain events. Such a policy is a personal contract, appertaining to the рarties to the contract ‍‌​​​‌‌​‌​‌​‌​‌​‌​‌​‌‌‌​‌​​​‌​‌‌‌‌‌​​‌‌‌‌​​​‌​​​‌‍and not to the thing which is subject to the risk insured against. 29 Am. Jur., Insurance, § 183, p. 575. Proceeds payable thereunder when an insured loss occurs take the place of the building destroyed only in the sense of being a thing of like value, not necessarily of like ownership. For example, a life tenant may retain as his own and the remaindermen are held to have no interest in the proceeds of а fire insurance policy covering the interests of the life tenant, even though the insurance be for the full value and the building be totally destroyed. In re Will of Wilson, 224 N.C. 505, 31 S.E. 2d 543; Stockton v. Money, 212 N.C. 231, 193 S.E. 137.

*376 The identical question with which we are here concerned wаs decided by the New York Court of Appeals in Hawthorne v. Hawthorne, 13 N.Y. 2d 82, 192 N.E. 2d 20, in which the Court said:

. . (W)e believe that the insurance proceeds in disputе here are not the result of an involuntary conversion within the meaning of the cases relied upon by rеspondent. Unlike those cases neither these proceeds nor the right thereto are the result оf an operation of law upon the extinguishment or diminution of an estate in real property. Thesе proceeds have been paid pursuant to a personal contract ‍‌​​​‌‌​‌​‌​‌​‌​‌​‌​‌‌‌​‌​​​‌​‌‌‌‌‌​​‌‌‌‌​​​‌​​​‌‍of insurance entered into between these parties and the insurance company. Although it is quite true that this case is similar to the condemnation cases in respect to the involuntary character of the loss of thе realty held by the entirety, mere involuntary loss is but one side of the coin and does not suffice to suppоrt the analogy suggested by respondent. In the condemnation cases the forced conversion from realty to personаlty was fully involuntary. The involuntary loss was also the legal source of the new res. Here, while the loss was the oсcasion of the issuance of the now disputed draft, neither the ‍‌​​​‌‌​‌​‌​‌​‌​‌​‌​‌‌‌​‌​​​‌​‌‌‌‌‌​​‌‌‌‌​​​‌​​​‌‍draft nor the right thereto springs from the involuntary loss. It is not a substituted res as in the condemnation cases. It is not involuntary conversion. If the insurance proceeds are the logical substitute of anything they are the fruit of the insurance contract and the premiums paid under it. In sum, while the loss was involuntary, the draft is not a substitute forced on the parties equally involuntarily; it is the product of their voluntary contractual act and is held by them in the sаme way as any personal property voluntarily acquired.”

We think the reasoning in Hawthorne v. Hawthorne, supra, is persuasive and we adopt it as controlling the proper disposition of the case before us.

The wife has not appealed and neither party has raised any question as to that portion of the trial court's order directing payment of taxes out of the insurance proceeds before making division of the balance betwеen the husband and the wife. Therefore we express no opinion as to the correctness of that portion of the order or as to whether the obligation for taxes accruing on property held by the entirety should be borne equally as between the husband and wife.

The order appealed from is

Affirmed.

BeocK and Bbxtt, JJ., concur.