Indiana Lumbermens Mutual Insurance Co. v. Metro Material Marketing, Inc.

SPARLING, Justice.

This is an appeal from a summary judgment. Appellant, Indiana Lumbermens Mutual Insurance Company, in three points of error, complains that it was entitled to summary judgment as a matter of law; that summary judgment was erroneously granted for appellee, Metro Material Marketing, Inc., because a fact issue of whether its insured suffered a legal loss was raised; and that the amount of damages was not established as a matter of law. We hold that damages were improperly assessed and, accordingly, reverse.

On May 31, 1978, Metro contracted with Texas Federal Savings and Loan to purchase a lot and a partially constructed building. Texas Federal, as acknowledged in the contract, was not the owner of the property, but rather the mortgagee. The contract of sale was conditioned upon the expected purchase of the property by Texas Federal at a foreclosure sale. Previously, the builder in default had secured a builder’s risk insurance policy from Indiana Lumbermens payable to Texas Federal.

On June 6, 1978, Texas Federal, as expected, purchased the property at the trustee’s sale, and on June 13, 1978, Metro contacted an agent of the Gulf Insurance Company requesting builder’s risk insurance coverage on the premises. Despite the dissent’s contention that the property was insured by Gulf, the record indicates that Gulf agreed to insure the premises effective at the time of closing. The Gulf Insurance agent, in a deposition made part of the summary judgment proof, denied that the *549premises were ever insured by Gulf.1 In response to a question of what would happen if the insurance policy did not arrive by the time of closing, the insurance agent replied “if it [the sale] went on and closed, and everything was in order and he [Metro] had an insurable interest, then this [the application] would constitute a binder.” (Emphasis supplied.)

The property was destroyed by fire on June 19, 1978. Texas Federal offered to rescind the contract of sale on the destroyed property. Metro agreed, however, to complete the sale provided Texas Federal would assign to Metro its proceeds from Indiana Lumbermens’ coverage on the damaged property. On June 23, 1978, the property was deeded to Metro, along with Texas Federal’s assignment of the proceeds from the Indiana Lumbermens’ policy. Metro, in turn, paid the full contract price of $46,-720.00 to Texas Federal. Indiana Lumber-mens denied Metro’s claim to the insurance proceeds. Metro then sued Texas Federal and Indiana Lumbermens joined Gulf Insurance Company as a third party defendant. Gulf prevailed against Indiana Lum-bermens by summary judgment which cause was severed from the present case. Although the correctness of that ruling is not before us, it appears to be a determination contrary to the dissent’s contention that Metro had insurance coverage with Gulf.2

Indiana Lumbermens relies upon Paramount Fire Ins. Co. v. Aetna Casualty & Surety Co., 163 Tex. 250, 353 S.W.2d 841 (Tex.1962), that resolved the question of which insurance company is liable when property, destroyed while under contract of sale, is insured against loss by both the vendors and vendee. Paramount held that the vendee’s insurance company was liable because the insured vendors suffered no pecuniary loss to premises destroyed by fire while under the contract of sale which was ultimately completed. The Court in Paramount specifically limited its holding to circumstances involving dual coverage, saying, “... we leave open the question of whether, where the vendee has no insurance, there can be recovery on the vendor’s policy subject to a constructive trust for the vendee....” 353 S.W.2d at 845. In the present case, the summary judgment proof does not reflect that Metro obtained insurance coverage, though negotiations aimed at obtaining builder’s risk coverage apparently occurred. There is no fact issue properly presented indicating that Gulf was liable under any policy, and it was the duty of Indiana Lumbermens to raise the issue, if any existed, by summary judgment proof. See City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671 (Tex.1979).

The Supreme Court in Paramount reasoned that since the vendors received the full purchase price after the destruction, the interest of the vendors “... became the amount of the unpaid purchase price, and, as to that interest, they suffered no loss.” 353 S.W.2d at 845. The rule was thus adopted that the entire transaction would be considered, rather than the relative position of the parties at the time of the loss. Therefore, we must consider the entire transaction between Texas Federal and Metro, including the events after the fire loss. As in Paramount, Metro paid the full contract price for the property after the contract had been renegotiated to include the insurance proceeds. Thus, Texas Federal suffered no pecuniary loss, and may not keep any insurance proceeds for the loss. But since Metro, the purchaser, held equitable title under its executory contract of *550sale, it should recover for the loss it has suffered. Equity requires this result; otherwise, should the vendor receive the full purchase price and the insurance proceeds, he would be compensated twice. We therefore hold that Indiana Lumbermens is liable to Texas Federal, who, in turn, must hold the proceeds in trust for Metro. See Cheatwood v. De Los Santos, 561 S.W.2d 273 (Tex.Civ.App.—Eastland 1978, writ ref’d n.r.e.).

Indiana Lumbermens finally contends that the amount of damages was improperly assessed by the court in its summary judgment. We agree. An affidavit attached to Metro’s motion for summary judgment established that Metro contracted to pay $46,720.00 for the lot and partially constructed building. The fair market value of the lot alone was $13,000.00. The court calculated the net loss to be $33,-720.00: the difference between the contract price and the value of the lot without the building. That amount, plus interest, was awarded to Metro.

The insurance policy entered in the record as summary judgment proof does not contain a provision for measuring the loss incurred by the insured or its assignee, but contains only a provision limiting the liability of the insurer. The proper measure of damages for permanent injury to real property is the difference between the reasonable cash market value immediately before and immediately after the injury. Weaver Construction Company v. Rapier, 448 S.W.2d 702, 703 (Tex.Civ.App.—Dallas 1969, no writ). There is no summary judgment proof establishing the market value of the partially constructed building before it was destroyed by fire. We cannot presume that the sale price of the property, considered alone, established its fair market value. Therefore, the amount of damages awarded to Metro by the trial court was computed improperly. Point of error number three is sustained.

Although Tex.R.Civ.P. 166-A allows partial summary judgment, the Court of Appeals may not affirm a judgment as to liability, but reverse and remand it for trial of the damage issue. Tex.R.Civ.P. 434; Hanover Fire Ins. Co. v. Bock Jewelry Co., 435 S.W.2d 909, 919 (Tex.Civ.App.—Dallas 1968, writ ref’d n.r.e.). Accordingly, we reverse and remand for further proceedings consistent with this opinion.

. The dissent relies upon a Gulf builder’s risk policy effective “June 16, 1978.” This policy was actually issued nine days after the loss to give the Gulf claims department a policy number under which to file the claim. The notation “spoiled” on the policy indicated that it was a “dummy” policy.

. The dissent incorrectly presumes that “Gulf was granted a summary judgment on the grounds that Indiana Lumbermens lacked standing to sue on the policy.” Actually, a reading of the transcript reveals that the trial court gave no reason for granting summary judgment. Gulfs Motion for Summary Judgment recites three grounds for entitlement, including that, as a matter of law, Metro was not insured by Gulf.