Owner’s Duty to Insure Property on Behalf of Non-Occupying Common Tenants and Sharing of Insurance Proceeds
In Largo v. Turner, Alex Largo and his wife, Jeanie Largo, purchased a property on Oakwood Place in Deerfield, Illinois. The property was a family residence. Eventually, Alex Largo mortgaged the property to obtain capital to fund his business. In 1995, Jeanie Largo was terminally ill. She asked Alex Largo to remove the property from trust to convey it to their daughters, the defendants. In March of 1995, a deed was executed, granting Alex Largo undivided one-half interest in the property and granting defendants, as joint tenants, an undivided one-half interest. Largo and defendants held the property as tenants in common.
At the time of Jeanie Largo’s death, the parties expected that Alex Largo would continue to live in the house and pay all costs, expenses, and taxes while he had sole possession of the property. In 2002, the bank supplying the mortgage/line of credit collateralized by the property finally discovered that Largo’s daughters had been added as co-owners to the property’s title and demanded that a new mortgage be executed with their signatures. Largo’s attorney contacted the daughters with the request that they sign the mortgage on Alex Largo’s line of credit that he used for his real estate investments. Via his attorney, Largo promised that, in return for the daughters’ signatures, they would not be responsible for any payments on the mortgage. The letter additionally referenced an agreement to provide insurance on the property. The daughters duly executed the mortgage. On January 1, 2007, a fire broke out at the house, damaging it and rendering it uninhabitable. Largo filed a claim with his insurance company, and he received $283,804.44 on the claim. He did not use the insurance proceeds to repair the house, and he did not pay a portion to his daughters. One of his daughters discovered a “For Sale” sign in the yard of the property and questioned Largo. He claimed to have received a favorable offer on the property, but the daughters refused to allow the sale to go through. Largo averred that, at that point, he gave up trying to sell the property and turned over the responsibility to sell the property to his daughters. Eventually, the house sold for $357,000, and the outstanding mortgage was paid off from the proceeds of the sale. The remaining amount of the sale proceeds was placed in escrow, awaiting the outcome of the litigation in this case. On May 11, 2007, Largo filed a single-count complaint seeking to partition the property. While the case was pending, the property was sold and the mortgage was paid from the sale proceeds. The case continued on the daughters’ issue over the insurance proceeds.
The court addressed the question of whether Largo had a duty to insure the property on behalf of the non-occupying tenants in common and whether insurance proceeds needed to be shared among all tenants. The court determined that when one tenant in common is in possession of the commonly owned property and in receipt of all profits from the common property, he has a duty to be reasonably prudent in looking after and preserving the common property. Further, this duty would extend to keeping the property insured for the benefit of all owners. A co-tenant in sole possession and receiving all profits derived from the property is deemed to have undertaken certain duties to the other co-tenants and will be required to defray all such expenses at least to the extent of all such profits and rents. In this case,the deal with the daughters did not appear to result in any cash directly appearing in Largo’s pocket. He was still able to extend the loan and did not have to repay it. Thus, Largo was able to continue to use the proceeds of the loan for business purposes and did not have to come up with the payoff amount, as he would have had to had the loan (and the mortgage on the property) not been extended. The evidence further showed that Largo utilized the loan in his business and investments and did not directly share any proceeds from those endeavors with defendants. Thus, the evidence supports a conclusion that Largo retained all profits, benefits, and avails accruing from the property, as well as retaining sole possession.
The court held that the daughters, along with Largo, were tenants in common in a property that was rendered uninhabitable due to a fire; were entitled to a proportionate share of the insurance proceeds (notwithstanding that Largo held sole occupancy of the property); and paid taxes, maintenance, upkeep, and insurance premiums, without any contribution from Turner.
Largo v. Turner, 2013 WL 5230699 (Ill.App. 2 Dist.).
