Hawthorne v. Hawthorne, 13 N.Y.2d 82 (1963)
Proceeds from a fire insurance policy on real property owned by tenants by the entirety are considered personal property and are not subject to the inseverable quality of ownership associated with the real property itself, allowing for division of the proceeds.
Summary
The case concerns whether fire insurance proceeds for property owned by a husband and wife as tenants by the entirety should be divided at the request of one owner. The court held that the insurance proceeds, being personal property derived from a contract, are not subject to the same inseverable ownership as the real property. Thus, the proceeds can be divided. The court distinguished this situation from involuntary conversions like condemnation awards, where the substituted property retains the original ownership structure, because the insurance proceeds arose from a voluntary contract.
Facts
Plaintiff wife and defendant husband owned real property as tenants by the entirety.
The property was insured under a standard fire insurance policy.
The property was damaged by fire, and insurance proceeds were paid out.
The wife sought to have the proceeds divided, while the husband argued they should be treated as held by the entirety.
Procedural History
The Special Term dismissed the wife’s complaint.
The Appellate Division affirmed the dismissal.
The wife appealed to the New York Court of Appeals.
Issue(s)
Whether the proceeds of a fire insurance policy insuring the interests of a husband and wife as tenants by the entirety are required to be divided at the demand of one owner, or whether they are impressed with the inseverable quality of ownership akin to the real property.
Holding
No, because the insurance proceeds are considered personal property derived from a contractual agreement, not an involuntary conversion of the real property itself.
Court’s Reasoning
The court reasoned that while the unity of person historically explained entireties in realty, it doesn’t dictate the relationship regarding insurance proceeds. Personal property cannot be held by the entirety.
The court distinguished this case from condemnation cases where the award substitutes the real property and retains the original ownership structure. Here, the insurance proceeds stem from a personal contract, not an operation of law on the real property.
“These proceeds have been paid pursuant to a personal contract of insurance entered into between these parties and the insurance company.”
The court emphasized that the loss of the realty was involuntary, but the draft (insurance proceeds) was the product of a voluntary contractual act.
The court cited Matter of Blumenthal, where a purchase-money bond and mortgage taken back by a husband and wife on the sale of real property held by them as tenants by the entirety were deemed to be held as tenants in common, not by the entirety. The court in Blumenthal stated, “Estates by entirety are peculiar to real estate. No such thing exists, except by analogy, as to personal property.”
The court noted that applying the incidents of a tenancy by the entirety to personal property is only by analogy and that considerations of policy and common convenience support the division of the proceeds.
The court stated: “Therefore, since it is only by analogy that the incidents of a tenancy by the entirety may apply to personal property (Matter of Albrecht, 136 N. Y. 91, supra), considerations of policy and common convenience reinforce the applicability of the reasoning of the Blumenthal case.”
Therefore, the complaint stated a valid cause of action for the compulsory division of the insurance proceeds.