On application of rules of law to the agreed facts in an action for specific performance, a vendee of realty was not entitled to an abatement on the balance owing on the price, in the amount of fire insurance collected by the vendor, less premiums, with interest.
No. 13313. JULY 12, 1940. REHEARING DENIED JULY 23, 1940. Jennings, as administrator of the estate of Matthews, brought a petition for specific performance against Mrs. Bruce. It was alleged that in May, 1937, Mrs. Bruce had executed to the decedent a bond for title to convey improved real estate for the agreed price of $1200; that $600 was paid in cash, and the balance was evidenced by a note due in one year with interest at 7 per cent.; that *Page 619 when the contract of sale was made, there was a frame dwelling on the land worth $900, which was insured in the name of the defendant vendor, that in March, 1938, the house was destroyed by a fire, in which the vendee lost his life; that the insurer paid to the vendor $642, which she has retained for her own use and benefit; that the amount due on the bond for title is approximately the same as these proceeds. The plaintiff tendered to the defendant vendor and paid into court the premiums paid by the vendor with interest. The petition sought the benefit of the insurance proceeds, or alternatively, an "abatement in the purchase-price in accordance with the amount of damage done by the fire." In her answer the defendant claimed that under her agreement with the vendee (shown in the agreed facts), she alone was entitled to the insurance; and she prayed for a recovery of the $600 balance of purchase-money and interest, with a special judgment against the property.
The judge, trying the case without a jury, on an agreed statement of facts, found that the plaintiff was entitled to an abatement of the $642 owing on the purchase-price, which was the amount of the insurance proceeds; that the defendant was entitled to the tendered insurance premiums and interest; and that the defendant should execute a warranty deed to the plaintiff. The essential agreed facts are as follows: That a named witness would testify, and it was considered in evidence, that the defendant vendor had "insisted in connection with said contract [of purchase] that the said [vendee] take over a policy of fire and storm insurance which she had on the property with the [named] insurance company, or else take out a policy, and make a loss payable clause to her. The said [vendee] positively refused to do this, telling [the vendor] that he had never taken insurance on any property, and would not do so now, and that she could take out such insurance in her own name as she saw fit, or hold the policy she already had, paying the premiums on the property herself, and that he would have no interest of any kind or character in the insurance." It was further agreed that "under this arrangement, the [vendor] continued her policy of $700 with the [said] company, she having given the company a complete statement of fact, making the said payments, and having continued the policy in her own name without any interest in the said [vendee] in any way, and without his *Page 620 paying any assessments on the insurance or being obligated therefor. The said dwelling-house had a market value of $900, and she had $700 insurance in her own name as above stated on the property. She paid [the said premiums], [and] received the $642 proceeds of insurance. . . Neither [the vendee] nor his administrator . . paid any consideration for the policy except that the administrator after the fire and before filing the suit tendered the amount of premiums and assessments, admitting that the estate was liable for the premiums. It was agreed that the maturity date of the note had arrived, and that no payments had been made upon it by the deceased or his administrator. [The vendee] had entered into possession of the property upon execution of the bond for title, and remained in possession until the date of the fire and his death, and the administrator is still in possession under the bond for title." 1. It is the general rule that, where the purchaser goes into possession under a binding executory contract for the sale of improved realty which the seller is able to convey, but where, before the transfer of the legal title is consummated, the improvements are destroyed by fire without the fault of either party, the loss falls on the purchaser as the owner of the equitable title. Mackey v. Bowles, 98 Ga. 730,734 (25 S.E. 834); Bispham's Equity (5th ed.), § 364; 27 R. C. L. 556; 66 C. J. 1052, 1053. If in such a case the property was insured by the seller, he holds the insurance money which he may collect on the bargained property as trustee for the purchaser, subject, however, to his own claims for any unpaid purchase-money plus the insurance premiums. Phinizy v. Guernsey, 111 Ga. 346,349 (36 S.E. 796, 50 L.R.A. 680, 78 Am. St. R. 207); Brady v. Welsh, 200 Iowa, 44 (204 N.W. 235, 40 A.L.R. 603, 605), and cit. Godfrey v. Alcorn, 215 Ky. 465 (284 S.W. 1094, 51 A.L.R. 925); 27 R. C. L. 559, § 298; 66 C. J. 1054, 1055 (§ 815); Mehrtens v. Knight, 29 Ga. App. 390 (2, b) (115 S.E. 506). In Phinizy v. Guernsey, supra, it was held that where the failure to consummate the contract of purchase and sale was occasioned by the inability of the vendor to make title as he had agreed, with the result that the contract of sale had not been so far completed *Page 621 that the legal title in the vendor must be treated as being held in trust for the vendee, then and in such event an intervening loss by fire would fall on the vendor rather than on the vendee, so that, since the loss was his, the right to indemnification by the insurance was also his, and he was entitled to collect and hold it in his own right, and not as trustee for the vendee. In that case it was held that if under such circumstances the vendee should elect to enforce the contract by a bill in equity for specific performance, he would be entitled to such an abatement of the purchase-price as was just and reasonable, even beyond the amount of any such insurance, in accordance with the changed condition of the property. It was, however, plainly recognized that in a case where the vendor is able to perform, and "a binding agreement is entered into to sell land, equity regards the vendor as a trustee of the legal title for the benefit of the vendee, while the latter is looked upon as a trustee of the purchase-money for the benefit of the former;" and that "if the contract of sale had been so far completed that the vendors would have held the legal title as trustees for the vendee, then they would likewise have held title to the policies in the same capacity." 111 Ga. 348, 349.
2. In accordance with the above rules, where, as here, there was an executory contract for the sale of improved realty by a vendor able to perform, a subsequent loss by fire would fall upon the vendee, and under the general rule the insurance would be held by the vendor for the benefit of the vendee; but where such parties, as in this case, had specifically agreed, as a part of the terms of the contract of purchase and sale, that the vendee would have "no interest of any kind or character" in the insurance maintained by the vendor, the effect of such a special agreement would be to leave the vendee in the same position as if no insurance was maintained, with the result that under such circumstances the general rule as to the disposition of the insurance could not be given application. Accordingly, the vendee was not entitled, in this his suit for specific performance, to claim any portion of the insurance which had been collected by the vendor; and under the stipulated facts the court erred in allowing the vendee an abatement on the balance owing on the purchase-price in the amount of insurance collected by the vendor less the insurance premiums paid by the vendor, with interest thereon.
Judgment reversed. All the Justices concur. *Page 622