St. Paul Fire & Marine Insurance Co. v. Daughtry

OPINION

REEVES, Justice.

This is an appeal from a judgment, based on a jury verdict, granting recovery on a fire insurance policy for the loss of a house.

The house in question was situated on acreage owned by Morton Southwest, a land developer. Morton Southwest had other plans for the acreage and wanted the house removed. Matt Martinez, vice president of Morton Southwest, offered the house to a house mover named Jim Dye, provided he could remove it by December 31, 1982. Martinez also gave appellee a letter which permitted him to move the house after January 1, 1983, in the event that Dye failed to exercise his option. Before Dye’s option expired, on December 17, 1982, appellee applied for a “builder’s risk” policy on the house, and appellant’s agent issued a binder on the policy. A fire of unknown origin destroyed the house on December 21, 1982, and the appellant refused to pay the proceeds of the policy on the grounds that appellee did not have an insurable interest in the property.

In its first two points of error, appellant asserts (1) that the evidence is legally and factually insufficient to support the jury findings, and (2) that the court should have *322granted its motion to modify the judgment because appellee had, as a matter of law, no insurable interest in the house.

The standard of review for a legal sufficiency question was established in Garza v. Alviar, 395 S.W.2d 821 (Tex.1965). We apply this standard and we will consider only the probative evidence and inferences that may properly be drawn therefrom which support the judgment.

The facts which support the jury’s findings in this case may be summarized as follows: Appellee was in the business of moving houses; he owned lots onto which he planned to move houses; he made a few investigative trips to the property to estimate the value of the house and the cost of moving it; he obtained permission to move it if Dye chose not to do so; he agreed to remove the foundation and debris; he insured the house; the house burned down.

The primary issue on appeal is whether appellee had an insurable interest in the property. The Texas Supreme Court has held that neither legal nor equitable title to property is required to establish an insurable interest. Smith v. Eagle Star Insurance Co., 370 S.W.2d 448 (Tex.1963). What is required, however, is that the insured either derive a pecuniary benefit from the continued existence of the property or suffer a pecuniary loss from its destruction. Id.

In Smith, the court held that the insured had an insurable interest in the house that burned because she suffered a pecuniary loss because of the destruction, even though the house was situated on land owned by the State. The court reasoned that since Smith had enjoyed the “undisturbed use of the house long prior to and at the time the policy was written, and at the time the loss occurred,” the fire caused Smith a loss of such use. Unlike Smith, appellee had never come into possession, and had no prior period of use on which to base a claim of pecuniary loss. Smith had made a sizeable investment in the property. Appellee had paid nothing for the house, for permits to move it, for the services of those who assisted in its evaluation, or for the insurance.

Because appellee failed to produce evidence that he had ever possessed the house, that he had ever had any use of the house, or that he had expended any funds, labor, or any substantial amount of time preparing to move the house, we hold that he sustained no loss as a result of the destruction of the house.

We must next decide whether appellee would derive a pecuniary benefit from the continued existence of the house. To determine that, we must first examine the nature of appellee’s interest in the property. Appellee claims no right to possession at the time of the fire on December 21, 1982. His only right to the property is derived from a letter of permission to move the house after January 1, 1983. The letter, signed only by Martinez on behalf of Morton Southwest, obligates appellee to remove the foundation and debris if and when appellee moved the house; it does not obligate appellee to move the house. Ap-pellee paid nothing for the letter of permission which was revocable and was contingent upon Dye’s not exercising his prior option to move the house.

Although the Smith court stated that a person who would derive a pecuniary benefit from the continued existence of the insured property has an insurable interest in it, that case was decided on the premise that a person who sustains a loss from the destruction of property has an insurable interest in it. Because the court held Smith’s loss, not her benefit, was the basis of the decision, Smith is not pertinent to the discussion of whether appellee would derive a pecuniary benefit from the continued existence of the property.

No Texas court has yet determined whether a person would derive a pecuniary benefit from the continued existence of property to which someone else has a superior right of possession. The following cases from other jurisdictions have held that there is no insurable interest in such a situation: Hane v. Hallock Farmers Mutual Insurance Co., 258 N.W.2d 779 (Minn. *3231977) (A non-binding option to repurchase property did not create an insurable interest.); Allstate Insurance Co. v. Thompson, 164 Ga.App. 508, 297 S.E.2d 520, 522 (1982) (An ex-husband’s option to repurchase ex-wife’s one-half interest in a house did not create an insurable interest, the court holding, “An option to purchase land does not, before acceptance, vest in the holder of the option any interest, legal or equitable, in the land itself.”); Christ Gospel Temple v. Liberty Mutual Insurance Co., 273 Pa.Super. 302, 417 A.2d 660, 663 (1979) (The insured’s only legal interest in the property was an option to repurchase in the event that the property was used for purposes other than church services. The court held that the insured “had a mere possibility of the expectancy that it might exercise its option to repurchase upon the happening of a contingency,” and “this does not amount to an insurable interest.”).

Because appellee suffered no pecuniary loss from the destruction of the property, and because he would derive no pecuniary benefit from the continued existence of the house until Dye’s option period expired, we hold that appellee had, as a matter of law, no insurable interest.

In view of our holding that appellee has, as a matter of law, no insurable interest, it is unnecessary to reach appellant’s other points of error.

We reverse and render judgment that appellee take nothing.