3 N.Y.2d 179 | NY | 1957
Lead Opinion
"When a land purchase contract requires the vendee to keep the property insured against fire and there is a fire loss before performance of the contract is completed, any such insurance received by the vendor is to be applied on any
It would be most unjust if a contract vendee, although complying with the contract by keeping the property insured in the name of the vendor, should get no benefit from the insurance. A situation would result where the vendor would be entitled to the full purchase price even though the building was destroyed, plus the insurance proceeds, but the vendee, although deprived of the destroyed building, would nonetheless pay the full price. The courts have refused to adopt so inequitable a result. Whether we say that these insurance moneys were “ a trust fund ” or describe the relationship in- some other way,
Section 240-a of the Eeal Property Law has nothing to do with the present case. Under common law the risk of fire loss during the pendency of the contract and before passing of title was on the purchaser in all cases. Under the ‘ ‘ Uniform Statute ” which New York has adopted as section 240-a, the risk of destruction by fire is on those vendees only who are in possession at the time of the fire or have taken legal title. Thus either at common law or under section 240-a this vendee would be in the same position. He must take the damaged property and pay the full purchase price but he is entitled to credit thereon for the insurance proceeds since he and the vendor have so agreed.
The judgment should be affirmed, with costs.
Dissenting Opinion
The issue presented is whether, in the absence of an agreement so providing, a contract vendee of real property is entitled to have the proceeds of a fire insurance policy, in the vendor’s name only, applied in reduction of the purchase price where the contract of sale required the vendee to pay the insurance premiums, the fire occurring intermediate the execution of the contract and the passing of title while the vendee was in possession of the premises. We think not. This court took advantage of the opportunity afforded by the case of Brownell v. Board of Educ. (239 N. Y. 369) to adopt the doctrine of Rayner v. Preston (18 Ch. D. 1) and unanimously and unequivocally laid down the flat and positive rule that by its nature a policy of property insurance is a personal contract of indemnity which runs solely to the named insured and not with the land, and, in the absence of a specific agreement, a vendee is not entitled to the proceeds of the vendor’s policy because it is not part of the res bargained for and no trust relation exists in regard to it (see Brownell case, supra, pp. 373-374). This court reiterated that rule without qualification four years later (see Reife v. Osmers, 252 N. Y 320, 324). That the Bench and Bar have recognized the rule laid down by the Brownell case as such is attested to by the numerous references in the volumes of legal citations which fail to distinguish or depart from it. That this was the Legis
Since the Brownell case there have been only two reported decisions in this State which deal with the issue presented by this case. One, Persico v. Guernsey (129 Misc. 190, affd. without opinion 222 App. Div. 719), which reached the same result that the majority reaches in this case, and the other, Cowan v. Sutherland (6 Misc 2d 71), which holds to directly the opposite. As the only opinion in the Guernsey case indicates, it was decided upon the erroneous theory that the vendor was the trustee of the insurance proceeds because he was trustee of the legal title to the property once the contract of sale was made (see Persico v. Guernsey, 129 Misc. 190, 193). In view of this we do not think that the Guernsey case is sound authority upon which to predicate the decision of the present appeal. Of course, as the other cases cited by the majority were decided before the Brownell case and were on the books at the time the rule in that case was adopted, they do not provide a sound basis for altering the rule.
The majority opinion suggests that we may ignore the rule laid down in the Brownell case {supra) by describing the insurance proceeds as something other than a trust fund, for example, by saying that the contract was insured for the benefit of all the parties concerned. This is not a novel suggestion. Lord Justice James in his dissenting opinion in Rayner v. Preston (supra, p. 15) made a similar suggestion: “I believe it to be considered by the universal consensus of mankind, to be a policy for the benefit of all persons interested in the
In light of these circumstances we think that this court should adhere to the rule established by the Brownell case. Such adherence, it seems to us, is imperative, not only because this is a well-recognized rule which the Legislature has not undertaken to change, but also because many businessmen and their lawyers may have entered into contracts in reliance upon it (see Matter of City of New York v. Bedford Bar & Grill, 2 N Y 2d 429).
Accordingly, we believe that the judgment should be reversed and the complaint dismissed.
Dye, Fuld and Froessel, JJ., concur with Desmond, J.; Burke, J., dissents in an opinion in which Conway, Ch. J., and Van Voorhis, J., concur.
Judgment affirmed.