No. 91-087 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1992 

EDWARD C. MUSSELMAN and 

PAULINE L. MUSSELMAN, husband and wife, 

Plaintiffs and Respondents, 

MOUNTAIN WEST FARM BUREAU 

MUTUAL INSURANCE COMPANY, 

Defendant and Appellant. 

APPEAL FROM: District Court of the Tenth Judicial District, 

In and for the County of Fergus, 

The Honorable Peter L. Rapkoch, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Laurence R. Martin and Randall G. Nelson; 

Felt, Martin, Frazier & Lovas, Billings, Montana. 

For Respondents: 

Robert L. Johnson, Attorney at Law, 

Lewistown, Montana. 

submitted on Briefs: September 19, 1991 3aN I 6 1992. Decided: January 16, 1992 

CLERK OF SUPREME COURT 

STATE OF IVIONTCINA 

CLerk 
Justice William E. Hunt, Sr., delivered the opinion of the Court. 

Appellant Mountain West Farm Bureau Insurance Company appeals 

from an order of the Tenth Judicial District Court, Fergus County, 

granting respondents Edward and Pauline Musselman's, cross-motion 

for summary judgment. The District Court found that respondents 

purchased a fire insurance policy from appellant. The policy 

extended coverage to the respondents' house at an agreed value of 

$66,000. The house was totally destroyed by fire. The appellant 

paid respondents only $50,000 of the agreed value. The District 

Court ruled that 33-24-102, MCA, the valued policy statute, 

controls and entered a judgment against appellant of $18,777 which 

included interests and costs. We affirm. 

The appellant raised the following issues on appeal: 

1. Whether the District Court erred when it held that 

33-24-102, MCA, controls and that respondents were entitled to 

payment under their insurance policy in an amount equal to the 

agreed property value of $66,000. 

2. Whether the District Court erred when it did not enforce 

the pro rata clause contained in the respondents' fire insurance 

policy. 

The parties have agreed to the following facts which are 

uncontroverted by the record. In May 1988, respondents purchased 

from appellant a fire insurance policy covering certain property in 

Fergus County, as well as a house located in Hamilton. By the 

terms of the policy, appellant valued the house at $66,000 and 
agreed to insure the house for that amount should the house be 

considered a total loss. 

Apparently the only road to the house went through some 

neighboring property. The neighbor closed the road. The 

respondents attempted to gain access to the house through 

litigation but were unsuccessful. 

On September 23, 1988, respondents agreed to sell the house to 

Bill Chesley for $50,000. The contract for sale was handwritten by 

one of the parties to the sale, and it is not disputed by the 

parties to this appeal that it is a valid contract for sale. 

Respondents notified appellant about the transaction with Chesley 

and continued their coverage to protect their interest in the home. 

Sometime later Chesley was able to obtain access to the house. 

Chesley then purchased a fire insurance policy from Farmers 

Insurance Group (hereinafter "FIGw) to protect his equitable 

interest in the house. The policy had an agreed value of $109,000. 

Chesley then assigned "Ed Musselmanu as loss payee to receive the 

proceeds under the FIG policy to the extent of whatever unpaid 

balance on the home Chesley should owe to the respondents. Chesley 

made only two payments on the contract for sale before defaulting. 

On March 3, 1989, a fire totally destroyed the house. No 

criminal activity was involved. Both insurance policies were in 

effect at the time of the fire. 

Initially, FIG refused to pay the respondents, arguing that 

the contract for sale was not valid and that Chesley did not have 
an insurable interest. Respondents initiated litigation against 

FIG upon which FIG paid respondents the amount of Chesley's unpaid 

balance on the home, plus interest for a total of $51,330. On 

July 17, 1989, appellant remitted $50,000 of the agreed value of 

$66,000. Appellant claimed that respondents were only entitled to 

proceeds equal to their insurable interest which appellant argues 

is the amount agreed to in the contract for sale, i.e., $50,000. 

On February 9, 1990, respondents filed their complaint in 

District Court requesting that appellant pay the remaining balance 

of the agreed value stated in the insurance policy. On April 20, 

1990, appellant filed its answer and counterclaim. On May 1, 1990, 

respondents motioned the court for summary judgment pursuant to 

Rule 56, M.R.Civ.P. On May 22, 1990, appellant filed a 

cross-motion for summary judgment and a motion for summary judgment 

on its counterclaim. On September 10, 1990, a hearing was held on 

the motions. On January 7, 1991, the District Court granted 

respondents' motion for summary judgment on their complaint and 

against appellant's counterclaim. The District Court ruled that 

5 33-24-104, MCA, controls and entered a judgment against the 

appellant for a sum of $18,648, which included interest, and an 

additional $129 for costs. Appellant appeals from the adverse 

ruling. 

For the District Court to grant summary judgment the record 

must not contain any genuine issue of material fact. Rule 56(c), 

M.R.Civ.P. Initially, the burden rests with the moving party to 
prove that no genuine issue of fact exists. Once that is done, 

then the burden shifts upon the nonmoving party to present facts of 

a substantial nature that a material issue of fact indeed does 

exist. 

In order for this Court to determine whether a district 

court's granting of summary judgment was proper, we must determine 

whether there is any genuine issue of material fact. If there is 

not, then the moving party is entitled to summary judgment as a 

matter of law. Reagan v. Union of California (1984), 208 Mont. 1, 

6, 675 P.2d 953, 956. The moving party is entitled to judqment on 

the law applicable to the facts established by the pleadings, 

depositions, answers to interrogatories, and admissions in the 

record. Jordan v. Elizabeth Manor (1979), 181 Mont. 424, 428, 593 

P.2d 1049, 1052. 

I 

Whether the District Court erred when it held that 

5 33-24-102, MCA, controls and that respondents were entitled to 

payment under their insurance policy in an amount equal to the 

agreed property value of $66,000. 

We begin our analysis with the doctrine of equitable 

conversion. Under the doctrine, a contract of purchase and sale of 

real estate vests the entire beneficial interest in the land with 

the buyer. During the course of the contract, the seller retains 

a legal title to the land as security for the purchase price. The 

buyer's interest is a real interest, while the seller's interest is 
one of personal property in the purchase price. Sharbono v. Darden 

(1984), 220 Mont. 320, 324, 715 P.2d 433, 435. Here, the 

respondents had an interest in the property to insure, as did 

Chesley. With this point in mind, we will analyze appellant's 

various arguments. 

Appellant argues that the insurable interest statue of 

5 33-15-205, MCA, conflicts with the valued policy statute of 

5 33-24-102, MCA, and that 5 33-15-205, MCA, should control, and 

that the terms of the insurance policy itself limit the respondents 

to their insurable interest stated in the contract for sale with 

Chesley. Appellant alleges that it is liable to the respondents 

only for the insurable interest of the house which is established 

by the contract for sale and not the agreed value stated in the 

insurance policy. We disagree. 

Section 33-24-102, MCA, states in part: 

Whenever any policy of insurance shall be written to 

insure any improvements upon real property in this state 

against loss or damage and the property insured is 

considered to be a total loss, without criminal fault on 

the part of the insured or his assigns, the amount of 

insurance written in such policv shall be taken 

conclusivelv to be the true value of the prowertv insured 

and the true amount of loss and measure of damages. 

[Emphasis added.] 

In Britton v. Farmers Ins. Group (1986), 221 Mont. 67, 72-73, 

721 P.2d 303, 307, we commented that the "statute determines 

automatically and conclusively the amount of loss recoverable for 

total loss," and that it "may obviate even the necessity of a proof 

of 10~s.~~ The law prevents insurers from creating a question of 
total loss "to compromise its duty to pay the full amount or to 

negotiate a lesser amount." Britton, 721 P.2d at 307. 

The enactment of valued policy laws in several jurisdictions 

rests almost entirely on public policy grounds. The purpose of the 

statute is to protect the insured by relieving him of the burden of 

trying to prove the value of a house. 45 C.J.S. Insurance § 916 

(1946). 

Appellant claims that the terms of the insurance policy limit 

the recovery to the respondents' insurable interest. The disputed 

fire insurance policy contained the following clause: 

Insurable interest and Limit of liability. 

Even if more than one person has an insurable interest in 

the property covered, we shall not be liable: 

a. To the insured for an amount greater than the 

insured's interest; nor 

b. For more than the applicable limit of liability. 

We agree with the Michigan Supreme Court's position in Wilson 

v. Fireman's Insurance Company (Mich. 1978), 269 N.W.2d 170, where 

the court held that despite language in the insurance policy 

similar to the one quoted above, the insurer was required to pay 

the insured land contract seller the full amount stated under the 

policy. In that case, the court held that the seller maintained 

insurance on the property after the sale, no evidence was 

introduced that the premium was less than the usual for such a 

house, as would happen only if a debt was due to the seller, and 

that the risk to the insurer was not increased by the transaction. 

Wilson, 269 N.W.2d at 172. 
In the case before us, respondents informed the appellant's 

agent about the contract for sale with Chesley. No evidence in the 

record indicated that appellant's risk was increased, nor did it 

adjust the respondents ' premium after the transaction. We hold 

that the terms of the insurance policy do not necessarily limit the 

respondents to the unpaid balance of the contract. 

I I 

Whether the District Court erred when it did not enforce the 

pro rata clause contained in the respondents' fire insurance 

policy. 

In McCarter v. Glacier Gen. Ass. Co. (1976), 169 Mont. 269, 

273, 546 P.2d 249, 251, we noted that pro rata policies are not 

unlawful per se but are generally valid and enforceable. The 

clause appellant is referring to stated the following: 

Other Insurance. If you are carrying other insurance on 

the property to which this policy applies, the coverage 

under this policy is null and void. We may permit other 

insurance, however, by endorsement to this policy. If 

other insurance is permitted, we will not be liable for 

a greater portion of any loss than our pro rata share on 

excess of any deductible. 

Appellant argues that the second and third sentences of the 

proration clause apply to the facts of this case and that the term 

"other insurance'' means insurance carried on the property by 

anyone. However, we note that this case involves two separate 

individuals insuring two entirely different interests. A leading 

treatise on insurance law has discussed the effect of other 

insurance clauses relating to these facts. 
By definition, other or double insurance exists where two 

or more policies of insurance are effected upon or cover 

the same interests in the same property, against the same 

risks, and in favor of, or for the benefit of, the same 

person. As all of these conditions must concur, it 

follows that if different Dersons have different 

interests in the same subject of insurance, each may 

insure his interest without effecting other or double 

insurance. [Emphasis added.] 

Couch on Insurance 2d (Rev Ed) 9 37B:104 (1985). 

In this instance, we have two separate interests being 

insured. Chesley assigned his right to proceeds from his insurance 

policy to the respondents. The assignment has allowed respondents 

to receive insurance benefits in excess of the value of the home 

and property. Although this type of situation works against the 

justification for insurance which is one of indemnification and not 

profit, we believe that insurance companies are in a better 

position to draft policies to prevent such occurrences as what 

happened here. 

Affirmed. / 

Justice 

We concur: 

Chief Justice 
January 16, 1992 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

Laurence R. Martin and Randall G. Nelson 

Felt, Martin, Frazier & Lovas 

P.O. Box 2558 

Billings, MT 59103-2558 

Robert L. Johnson 

Attorney at Law 

Ste. 507, Montana Bldg. 

Lewistown, MT 59457 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA 

BY: 

Deput