LaVallee, Courtland R.

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Real And Personal Property—Proceeds Of Fire Insurance Policy On Real Property Held By The Entirety May Be Divided As Of Right.

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Buffalo Law Review Volume 13 Number 2 Article 22 1-1-1964 Real And Personal Property—Proceeds Of Fire Insurance Policy On Real Property Held By The Entirety May Be Divided As Of Right. Courtland R. LaVallee Follow this and additional works at: https://digitalcommons.law.buffalo.edu/buffalolawreview  Part of the Property Law and Real Estate Commons Recommended Citation Courtland R. LaVallee, Real And Personal Property—Proceeds Of Fire Insurance Policy On Real Property Held By The Entirety May Be Divided As Of Right., 13 Buff. L. Rev. 501 (1964). Available at: https://digitalcommons.law.buffalo.edu/buffalolawreview/vol13/iss2/22 This Case Note is brought to you for free and open access by the Law Journals at Digital Commons @ University at Buffalo School of Law. It has been accepted for inclusion in Buffalo Law Review by an authorized editor of Digital Commons @ University at Buffalo School of Law. For more information, please contact lawscholar@buffalo.edu. CASE NOTESthrough some fortuity such as wealth, habitual contact with the law, or intelli-gence, retain counsel either before or immediately after arrest.The dissenting opinions unfortunately do not refer to one remarkably com-pelling argument with which the Court was faced in this case: that is, had thepolice officers not unlawfully delayed arraignment, 32 the conviction would havebeen summarily reversed on the authority of the post-arraignment right-to-counsel rule of People v. Meyer 33 This irony must have called irresistably forreversal, but the Court, in so doing, has perhaps extended its ruling farther thanconscience required. It would be sufficient to confer a right of counsel only wherethere has been an unlawful delay in arraignment.34 If the Court has indeed soruled, the conflict with efficient law enforcement which the dissenting judgesforesee in their more liberal interpretation of the case,35 would be moderated some.Yet this narrower holding does not alter the tendency of the present rule to favorpersons with ready access to counsel over those with limited access. Said differ-ently, the rule favors grand scale crime over petty crime, and this, of course, is anundesirable result. The three possible defects of the present rule (inequality ofapplication, favoritism of large scale crime, and unnecessary interference withlaw enforcement) should evoke some reconsideration.James B. DenmanREAL AND PERSONAL PROPERTY-PROCEEDS OF FIRE INSURANCEPOLICY ON REAL PROPERTY HELD BY THE ENTIRETY MAY BE DMDED AS OFRIGHT.Husband and wife were owners as tenants by the entirety of real propertywith improvements thereon. A dwelling house, covered by a fire insurance policyowned and held by them, was totally destroyed by fire. Upon execution of noticeof claim by the owners the insurance company issued a draft payable to hus-band, wife, and another who was mortgagee of the property. Husband, who hadbeen separated from the wife for some time, refused to endorse the draft. Uponwife's action for injunctive and other relief, husband moved to dismiss on thegrounds that the proceeds were impressed with the same quality of inseverabilityas the estate they replaced. The Supreme Court granted the motion,' whichwas affirmed without opinion by the Appellate Division, Fourth Department. TheCourt of Appeals, two judges dissenting without opinion, reversed; held, theproceeds of a standard fire insurance are personal property which may be dividedupon demand regardless of the nature of the estate they replace. Hawthorne v.Hawthorne, 13 N.Y.2d 82, 192 N.E.2d 20, 242 N.Y.S.2d 50 (1963).32. N.Y. Code Crim. Proc. § 165; N.Y. Penal Law § 1844.33. 11 N.Y.2d 162, 182 N.E.2d 103, 227 N.Y.S.2d 427 (1962). See Brief for Appellant,p. 37.34. See note 28 supra.35. Instant case at 159, 193 N.E.2d at 634, 243 N.Y.S.2d at 849.1. Hawthorne v. Hawthorne, 24 Misc. 2d 508, 208 N.Y.S.2d 79 (Sup. Ct. 1960).501BUFFALO LAW REVIEWTenancy by the entirety is a joint estate in lands peculiar to the husbandand wife relationship. It arose in the common law out of the unity of identityof a husband and wife.2 Today, perhaps the most important incident of thisestate is its inseverability. In general, it may be severed only by the joint act ofthe husband and wife, or by a dissolution of the marriage.8 Although one of thetenants may sell his interest in the lands, 4 the purchaser takes as tenant incommon with the spouse subject to her right of survivorship and partition cannotbe compelled. 5 What result should follow when the real property is replaced bypersonal property under circumstances beyond the control of the owners presentsproblems which the courts have resolved in various ways.As a general rule in New York, personal property cannot be held by theentirety.6 Nonetheless, the proposition has been advanced and discussed in opin-ions, but usually as dictum.7 The cases raising the issue generally fall into oneof two categories: damage awards in condemnation proceedings, and equity ofredemption following mortgage foreclosure sales. Other cases include bonds andmortgages taken upon sale of lands held by the entirety and joint bank accountsand investments held jointly. In the condemnation cases the courts have beenquite consistent in holding that the awards stood in the place of the lands. Theearlier cases so held as to the rights of mortgagees,8 which, of course, had nothingto do with tenancy by the entirety, but formed the basis for holding in a latercase that the incident of survivorship would obtain if the condemned propertywas held by the entirety. 9 The equity of redemption cases similarly follow thisrule;' 0 however, the basic concern of the courts in these cases is the protectionof the spouse's right of survivorship.11 The other cases are somewhat in conflict,but the weight of authority favors the rule that personalty cannot be held by theentirety.' 2 The main support for a contrary holding is the common law pre-sumption that the husband owned all of the wife's personalty; therefore, whenhe attempted to pass an interest to her, his intent must have been to give her2. See generally Note, Tenancies by the Entirety in New York, 1 Buffalo L. Rev. 279(1952).3. N.Y. Dom. Rel. Law § 56; Stelz v. Schreck, 128 N.Y. 263, 28 N.E. 510 (1891);Finnegan v. Humes, 163 Misc. 840, 298 N.Y. Supp. 50 (Sup. Ct. 1937).4. Hiles v. Fisher, 144 N.Y. 306, 39 N.E. 337 (1895).5. Bartkowaik v. Sampson, 73 Misc. 446, 133 N.Y. Supp. 401 (Oneida County Ct. 1911).6. In the Matter of Albrecht, 136 N.Y. 91, 32 N.E. 632 (1892); Matter of McKelway,221 N.Y. 15, 116 N.E. 348 (1917).7. See Overheiser v. Lackey, 207 N.Y. 229, 100 N.E. 738 (1913); Goodrich v. Villageof Otego, 216 N.Y. 112, 110 N.E. 162 (1915).8. Utter v. Richmond, 112 N.Y. 610, 20 N.E. 554 (1889); Bank of Auburn v. Roberts,44 N.Y. 192 (1870).9. In the Matter of City of New York (Jamaica Bay), 252 App. Div. 103, 297 N.Y.Supp. 415 (2d Dep't 1937).10. Dunning v. Ocean Nat lBank, 61 N.Y. 497 (1875); Germania Say. Bank v. Jung,28 Abb. N. Cas. 81, 18 N.Y. Supp. 709 (Sup. Ct. 1892). But see Franklin Square Nat'l Bankv. Schiller, 202 Misc. 576, 119 N.Y.S.2d 291 (Sup. Ct. 1950).11. Farmer's and Mechanic's Nat'1 Bank v. Gregory, 49 Barb. 155 (N.Y. Sup. Ct. 1867).12. In the Matter of Estate of Blumenthal, 236 N.Y. 448, 141 N.E. 911 (1923); Lokerv. Edmans, 204 App. Div. 223, 197 N.Y. Supp. 857 (3d Dep't 1923). Cf. Scutella v. CountyFire Ins. Co., 231 App. Div. 343, 247 N.Y. Supp. 689 (4th Dep't 1931).502CASE NOTESnothing greater than the right of survivorship. 13 Thus, the courts looked to anintention on the part of the husband to make a gift to his wife upon his death.This intent, or lack of proof of it, was the means of distinguishing the earliercases.14 In view of present-day rights of married women, it would seem that thepresumption would rarely be applied in modern cases.Commencing with the general proposition that there can be no holding bythe entirety in personal property, the Court found that the fire insurance policyand the proceeds paid thereunder were personalty.' 5 The dispositive question waswhether equity demanded that the personal property so acquired be ascribed withthe same quality of inseverability as the estate it replaced. Respondent urged,that since the proceeds were the result of an involuntary conversion this casewas closely analogous to the condemnation cases and the rule in those casesshould be followed. The Court distinguished the instant case from the condem-nation cases by observing that in the latter cases the forced conversion wascompletely involuntary and the loss was the legal source of the new res. In thecase at bar the subject matter of the dispute arose as the result of a purelyvoluntary contract and the fruits of that contract should be treated like anyother personal property voluntarily acquired. The Court went further, by wayof dicta, to express dissatisfaction with any rule which would allow personaltyto be held by the entirety. As a matter of policy, the Court felt that a tying-upof money, as a contrary holding would have required, would be a serious im-pediment to its enjoyment. The Supreme Court, on the other hand, felt thatpreservation of the spouse's right to survivorship overrode other considerationsof policy. Therefore, it readily found this case analogous to those involving con-demnation and equity of redemption where it was held that an "involuntaryconversion" did not destroy a tenancy by the entirety.Once, in deciding a case involving an estate held by the entirety, JudgeWilliam S. Andrews remarked, "we appeal to history and not to logic for theexplanation."' 16 Ironically, the lower court in the instant case appealed to bothhistory and logic to arrive at its conclusion. The close analogies furnished by thecondemnation and equity of redemption cases, together with the proposition thatthe basic policy consideration is the preservation of the right of survivorshipmakes the reasoning of the lower court seem quite sound. However, the idea thatthere can be joint ownership in personalty analogous to a joint estate in landshas its roots in a dictum from a case where the Court, at best, had joint tenancy,and not tenancy by the entirety in mind.1 Furthermore, as pointed out in theinstant opinion, the right of survivorship may be illusory. If a joint tenant sellshis interest, his act converts the joint tenancy into a tenancy in common, which13. West v. McCullough, 123 App. Div. 846, 108 N.Y. Supp. 493 (2d Dep't 1908). Butcf. Matter of Polizzo, 308 N.Y. 517, 127 N.E.2d 316 (1955).14. In the Matter of Estate of Blumenthal, 236 N.Y. 448, 141 N.E. 911 (1923).15. Brownell v. Board of Educ., 239 N.Y. 369, 146 N.E. 630 (1925); Galante v. Hath-away Bakeries, Inc., 6 A.D.2d 142, 176 N.Y.S.2d 87 (4th Dep't 1958).16. Matter of Lyon, 233 N.Y. 208, 210, 135 N.E. 247 (1922).17. Overheiser v. Lackey, 207 N.Y. 229, 100 N.E. 738 (1913).503BUFFALO LAW REVIEWeffectively destroys the right of survivorship.' 8 Much of the uncertainty seemsto be due to the doctrine of "equitable conversion," whereby the equity courtcan do justice by acting upon the presumed intentions of the parties.'9 This isnot a fixed rule of law, but a mere fiction based on the maxim, "equity regards asdone what ought to be done."20 Viewed in this light the cases take on new mean-ing, although they lose some of their precedential value. For example, in a casecited with approval by the Court, a husband and wife were owners as tenantsby the entirety of certain mortgaged real estate which was subsequently fore-closed. The wife, plaintiff, who had been abandoned and was legally separatedfrom her defendant husband, had obtained judgments for alimony arrears. Thehusband was not within personal jurisdiction of the court. Had the court ruledthe surplus to be inseverable, the wife would have been unable to proceed againsther husband's share. Instead, the court held that the parties held the surplusas tenants in common.21 In an earlier case under somewhat similar circumstances,the court came to an opposite conclusion; yet in that case, the judge felt con-strained to point out that the wife was not being prejudiced by the decision. 22In the condemnation cases the decisions often operated to secure an equitablelien on the damage awards in favor of mortgagees of the original land. Thus,rather than blindly applying a rule of law, the courts used their equitable powersto effect substantial justice and preserve the rights of parties who might other-wise be without remedy. Although the Court in this case based its decision uponfairly narrow grounds, it left little doubt as to the probable outcome of futurecases involving analogous holdings of personalty by the entirety. In the Court'sview, today, real estate is more the subject of commerce and less the object ofpossession and use, thereby necessitating changes in judicial thinking about howowners of property can enjoy it to its fullest extent. Whether the Court willfinally abolish any holdings of personal property by the entirety, or whether itwill distinguish it away as it did in this case, is problematical. It might be sug-gested that the latter course be adopted in order to preserve it for those caseswhere the equities demand that it be applied.Courtland R. La Vallee18. In the Matter of Suter, 258 N.Y. 104, 179 N.E. 310 (1932); cf. Loker v. Edmans,204 App. Div. 223, 197 N.Y. Supp. 857 (3d Dep't 1923).19. Dunning v. Ocean Nat'1 Bank, 61 N.Y. 497, 503 (1875) (concurring opinion).20. In the Matter of Maguire, 251 App. Div. 337, 296 N.Y. Supp. 528 (2d Dep't 1937).21. Franklin Square Nat'I Bank v. Schiller, 202 Misc. 576, 119 N.Y.S.2d 291 (Sup. Ct.1950).22. Stretz v. Zolkoski, 118 Misc. 806, 195 N.Y. Supp. 46 (Sup. Ct. 1922).

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Real And Personal Property—Proceeds Of Fire Insurance Policy On Real Property Held By The Entirety May Be Divided As Of Right.

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