Opinion ID: 1677111
Heading Depth: 1
Heading Rank: 2

Heading: disbursement of insurance proceeds

Text: The contract between Fischer and English at the time of purchase of the house and lot in question consisted of a promissory note secured by a deed of trust. The deed of trust contained a provision which specifically covered the disbursement of insurance proceeds in the event of damage to the property. That provision states: It is agreed and stipulated that ... (Fischer) ... shall keep said property fully insured in some company or companies approved by the holder of said indebtedness (English), to whom the loss, if any, shall be payable and by whom the policy shall be kept. The parties thus specifically agreed to and embodied in their written contract that in the event of total or partial damage to the property the insurance proceeds would be paid to English. Fischer contends this provision speaks only to the possibility of a partial or full destruction of the property which would diminish its value to a sum less than that remaining unpaid on the indebtedness. It is clear from the wording of the provision that the contemplation of the parties was that the property was to be insured at its value, that English was to have possession of the insurance policy or policies and that any loss payable under the policy or policies was to be payable to English. The loss payable under the policies would not necessarily have any relation to the amount of the indebtedness, rather it would relate to the amount of insurance in force. We hold that the parties specifically contracted for the disbursement of the proceeds of the fire insurance and that English was entitled to apply such proceeds to the indebtedness and pay the remainder to Fischer. Fischer contends that Naquin v. Texas Sav. & Real Estate Inv. Ass'n, 95 Tex. 313, 67 S.W. 85, 87 (1902) is contrary to our holding. The two cases are distinguishable by the different provisions of the deeds of trust pertaining to insurance proceeds. In Naquin the deed of trust provides: It is further agreed that the said Naquin shall keep the improvements on said property insured for the benefit of [the] association .... Naquin sought to have the insurance proceeds used to liquidate the debt but the lien holder insisted upon rebuilding the house. This Court in determining the right of the parties in that particular case held that the Association was correct in rebuilding the house because they held the insurance proceeds for the benefit of both parties. In the present case the contract between the parties specifically provided that the proceeds were to be paid to English. Nowhere in the Naquin opinion did this Court suggest that the parties could not contract as to the disposition to be made on the insurance proceeds in the event of fire.