Brown v. Brown

George Rose Smith, Justice, dissenting. In Barner v. Barner, 241 Ark. 370 , 407 S.W. 2d 747 (1966), we held that a fire insurance policy taken out by a life tenant did not inure to the benefit of the remainderman, in the absence of a fiduciary relation between the two. The reason is that an insurance policy is a personal contract for the benefit of the person with whom it was made and by whom the premiums were paid.

Thus the controlling distinction is whether or not a fiduciary relationship exists. Here the parties were divorced. Thereafter there was not even a confidential relationship between them, much less a fiduciary one, merely because they had formerly been husband and wife.

They were, however, tenants in common with respect to the insured property. We have said that tenants in common by descent (such as brothers and sisters) are in a fiduciary relationship, because they stand by operation of law in a confidential relation to each other. Clements v. Cates, 49 Ark. 242 , 4 S.W. 776 (1887). The Clements holding has been cited in a number of cases, but it has not been applied except to cotenants who held the property by common descent or devise. Quite the contrary, we pointed out in Trout v. Harrell, 217 Ark. 670 , 233 S.W. 2d 233 (1950), that “the mere relationship of a co-tenancy does not, ipso facto, create a confidential relationship in all the dealings between the parties, even though such a relationship may exist in some matters.”

The suggestion is made in a concurring opinion in this case that the Clements holding, creating a fiduciary relationship, should be applied to any tenants in common whose title is acquired by the same instrument. We have never so extended the rule. Such an extension was stated, as dictum, in a quotation to be found in Brittin v. Handy, 20 Ark. 381 (1859), but in that case the court pointed out. that “Brit-tin and Handy were not tenants in common under the same instrument.” Nor as far as I can find, has any such rule been applied in any other Arkansas case.

Such an extension of the fiduciary principle would put form above substance. Suppose, for example, that two business acquaintances decide to buy an apartment house together. They might equally well have the seller make a single deed conveying the property to them as tenants in common or have him make separate deeds conveying a half interest to each grantee. The difference is simply one of form, as the final substantive effect of the transactions is exactly the same. But, according to the argument now being made, when only one deed is used the two men are fiduciaries toward each other. Thus, for example, if one seeks to buy the other’s half interest, he must make a full disclosure of everything he knows about the property. If, however, the common title had been acquired by separate deeds, even as part of the same transaction, the two men would be in a position to negotiate at arm’s length, with no fiduciary obligation toward each other. Surely the obligation of a fiduciary — perhaps the most burdensome position of trust that the law has ever created — should rest upon some legal or moral duty, not upon the extraneous fact that one deed rather than two was used in the transfer of property.

It is nevertheless true, however, that when the conduct of cotenants affects the entire property, they are unavoidably under an obligation to one another. Thus when one cotenant possesses the entire property or pays taxes upon it, his action inures to the benefit of the other owners. Someone must be in possession, someone must pay the taxes; such matters are ordinarily not susceptible of separate action.

I have emphasized the word ordinarily, because the situation is different if the interests of the cotenants are separable for a particular purpose. That situation was presented in Neilson v. Hase, 229 Ark. 231 , 314 S.W. 2d 219 (1958). There the two cotenants each owned an undivided half interest in certain minerals, but their interests were separately assessed for taxation. In holding that one cotenant was at liberty to buy the other’s half interest at a delinquent tax sale, we based our decision on the fact that the purchasing cotenant was under “no duty or obligation, legal or moral,” to pay the taxes on the other’s interest. That decision is sound and should control the case at bar.

The same reasoning is applicable to fire insurance. Each cotenant is free to insure his own interest, just as the life tenant and the remaindermen in the Earner case, supra, were free to insure their own interests. That is what the divorced husband did in this case. The policy provides that it insures the named insured, Bill Brown, to the extent of the actual cash value of the property, but in any event not more than his interest. Perhaps the insurance company might have contested its liability on the ground that its insured owned only an undivided half interest in the property and had overinsured its value. But I do not see how the divorced wife, absent any fiduciary relationship, is in a position to demand the protection of a fire insurance policy that was not payable to her, that did not insure her interest in the property, and for which she contributed no part of the premium.

Byrd, J., joins in this dissent.