180 Conn. 71 | Conn. | 1980
This case concerns the liability of an insurance company under a mortgage loss payable clause after the mortgagee’s foreclosure on the insured property. The plaintiff mortgagee, Burritt Mutual Savings Bank, brought an action against the defendant, Transamerica Insurance Company, to recover $15,000, which was the amount of the adjusted value of the loss insured by the defendant. The defendant filed an answer, several special defenses, and a third-party complaint against three third-party defendants, Richard Y. Pizzuto, Ricky’s Restaurant, Inc., • and the Connecticut Bank and Trust Company. The Connecticut Bank and Trust Company in turn filed a cross complaint against the other two third-party defendants, Pizzuto and Ricky’s Restaurant, Inc. After trial to the court, Missal, J., judgment was rendered in the plaintiff’s favor against the defendant Transamerica, and in the third-party plaintiff Transameriea’s favor against Pizzuto; no judgment was rendered either for or against Connecticut Bank and Trust Com
There is little dispute about the underlying facts as contained in the findings of the trial court. Burritt Mutual Savings Bank (hereinafter Burritt Mutual) lent Richard V. Pizzuto $30,000 on January 7, 1971, and received in return a promissory note and a mortgage on real property located at 209-211 Whitney Street, Hartford. This property was then covered by a multiperil insurance policy issued by the defendant Transameriea Insurance Company (hereinafter Transameriea); Burritt Mutual’s name was duly entered upon the insurance policy as first mortgagee, replacing previously designated mortgagees. Five months later, on June 17, 1971, while the policy was in full force and effect, a fire occurred on the premises causing substantial damage. Richard Pizzuto, the named insured and the mortgagor, hired a firm of insurance adjusters, and on October 15, 1971, the loss was adjusted in the amount of $15,000. Transameriea then issued a negotiable instrument
Burritt Mutual did not discover that the mortgaged property had been damaged until July 28, 1971. Although it promptly notified A. T. Lindquist Agency, Transamerica’s local agent, it did not communicate with Transameriea itself until July 21, 1972. When Burritt Mutual learned, in the process of this communication, that it had been designated as a payee on an instrument that it had not received, it repeatedly demanded payment of the fire loss from Transameriea.
The fire loss resulted in a marked deterioration in the relationship between the value of the mortgaged property and the amount of the outstanding indebtedness, since the insured did not use the insurance proceeds received from Transameriea to repair the mortgaged property.
Burritt Mutual’s cause of action is a suit for $15,000 on the basis of rights emanating from the multiperil insurance policy issued by Transamerica. It is not a suit on the negotiable instrument in that amount that was drawn by Transamerica. Presumably this choice of actions was determined by the fact that Burritt Mutual has consistently maintained, as the trial court found, that it had never received possession of this instrument. Burritt Mutual could not sue on an instrument on which it was neither holder nor transferee. Cf. General Statutes § 42a-3-804.
The insurance clause that is at issue is a “standard” or “union” mortgage loss payable clause.
Difficulties created by the language of the standard loss payable clause are, not surprisingly, at the heart of the claims that we must resolve. On the one hand, the clause states that “[l]oss . . . shall be payable to the mortgagee ... as interest may appear under all present or future mortgages,” and this wording indicates that extinction of its mortgage would be fatal to the mortgagee’s claim. On the other hand, the clause goes on to state that “as to the interest of the mortgagee,” the insurance shall not be invalidated “by my foreclosure . . . nor by my change in the title or ownership of the property,” (emphasis added) and that wording lends
It is useful first to examine the line of cases that has upheld the mortgagee’s right to recover insurance proceeds despite foreclosure proceedings that discharged the mortgage indebtedness. The cases emphasize the independence of the contract created by the standard mortgage clause; some rely on language in 8 Couch on Insurance 2d (1961), § 37:1162, p. 670, that, under a standard mortgage clause, the mortgagee’s “acquisition of title to the insured property is generally regarded as an increase of interest, rather than a change of ownership,” to buttress their conclusion that the mortgagee continues to have an insurable interest. See, e.g., Nationwide Mutual Fire Ins. Co. v. Wilborn, 291 Ala. 193, 197, 279 So. 2d 460 (1973); Federal National Mortgage Assn. v. Hanover Ins. Co., 243 Ga. 609, 255 S.E.2d 685 (1979); City of Chicago v. Maynur, 28 Ill. App. 3d 751, 754, 329 N.E.2d 312 (1975); Federal National Mortgage Assn. v. Great American Ins. Co., 157 Ind. App. 347, 350, 300 N.E.2d 117 (1973); Federal National Mortgage Assn. v. Ohio Casualty Ins. Co., 46 Mich. App. 587, 590, 208 N.W.2d 573 (1973);
These cases permitting a mortgagee to claim insurance proceeds despite satisfaction, by foreclosure, of its mortgage and mortgage debt are all however distinguishable. Possibly it matters that they involve jurisdictions in which foreclosure is foreclosure by sale, rather than strict foreclosure; in at least one of the cases, City of Chicago v. Maynur, the time for redemption had not yet expired at the time of litigation. More significant is the relationship in timing between the foreclosure and the fire. In these reported cases, the foreclosure proceedings were initiated before the occurrence of the loss covered by the insurance. “[T]he amount bid at the foreclosure was for the property in an undamaged condition and the mortgagee required the insurance proceeds to restore the property to the condition it was in at the time of the foreclosure.” City of Chicago v. Maynur, supra, 755. These eases therefore do not control the proper allocation of insurance proceeds when, as in the case before us, the fire antedates both default and foreclosure.
The alternate line of cases limits the mortgagee’s right to recover insurance proceeds to the extent that foreclosure proceedings have discharged the mortgage indebtedness. A leading case is Whitestone Savings & Loan Assn. v. Allstate Ins. Co., 28 N.Y.2d 332, 270 N.E.2d 694 (1971), in which the
This second line of cases represents factual patterns that approximate the situation presented by the case before us, in that they deal with cases in which the loss has preceded the foreclosure. In these cases, as in ours, the foreclosure sale after the
The question that remains to be resolved is whether, under the facts of the present case, it is correct to say that the foreclosure judgment should be deemed in law to represent a full satisfaction of the mortgage indebtedness. Professor Keeton cautions that “inequitable results may be produced if
We cannot, on the record before us, determine whether or not Burritt Mutual has in fact received full payment. There is no specific finding about the mortgage debt at the time of the foreclosure, although the court’s finding refers to Burritt Mutual’s Exhibit E, the judgment of strict foreclosure, which found the mortgage debt to have been $34,869.16 and ordered payment of that amount with interest and costs. Transameriea relies on other findings that fix the indebtedness, at different times, in a lower amount. We cannot resolve this ambiguity. Nor is it self-evident what value should be assigned to the property that was foreclosed. The value that must be found is the value of the property at the time of foreclosure. There
In the event that Burritt Mutual can establish that it has not received full satisfaction from the judgment of foreclosure, it will have a right to recover its loss, pro tanto, from Transameriea. Transameriea in turn will be entitled to a recovery on its third-party complaint against Pizzuto.
We have reviewed neither the findings of fact nor the conclusions of law reached by the trial court in the third-party action between Transamerica and Connecticut Bank and Trust Company. The trial court’s memorandum of decision reserved, for a further hearing, the determination of factual questions relevant to that cause of action. Presumably because that factual hearing was never held, the trial court entered no judgment for or against Connecticut Bank and Trust Company, although its finding addresses the claims that were raised. Further proceedings will be required on this matter as well.
There is error and the case is remanded for further proceedings in accordance with this opinion.
In this opinion the other judges concurred.
The appeal taken by the Connecticut Bank and Trust Company was dismissed, on motion, because of the absence of a final judgment with respect to it.
There is a dispute between some of the parties as to whether the instrument, which was payable through the Fidelity Philadelphia Trust Company, was a draft or a check. For present purposes, the question is not relevant.
Burritt Mutual had mortgage impairment insurance of its own, with another insurance carrier. That carrier was notified of Burritt’s problem with the Transameriea insurance, and a claim under that insurance is still pending.
The mortgage clause is part of the policy’s section on conditions. Conditions are designated as part IX of the policy. The mortgage clause is paragraph C in the conditions. The policy itself was Exhibit C. It reads as follows:
“Mortgage Clause: Applicable to buildings only (this entire clause is void unless name of mortgagee (or trustee) is inserted in the Declarations): Loss, if any, under this policy, shall be payable to the mortgagee (or trustee), named on the first page of this policy,
Whenever the Company shall pay the mortgagee (or trustee) any sum for loss under this poliey, and shall claim that, as to the mortgagor or owner, no liability therefor existed, the Company shall to the extent of such payment, be thereupon legally subrogated to all the rights of the party to whom such payment shall be made, under all securities held as collateral to the mortgage debt, or may at its option pay to the mortgagee (or trustee) the whole principal due or to grow due on the mortgage, with interest accrued and shall thereupon receive a full assignment and transfer of the mortgage and of all such other securities; but no subrogation shall impair the right of the mortgagee (or trustee) to recover the full amount of said mortgagee’s (or trustee’s) claim.”
Although. Transamerica’s assignment of errors challenged the trial court’s conclusion that Burritt Mutual had expressly reserved its claim to the fire loss proceeds, the brief on appeal does not address this issue and does not contest receipt of the letters from Burritt Mutual. This assignment of error is therefore deemed abandoned. Gould v. Rosenfeld, 178 Conn. 503, 506, 423 A.2d 146 (1979) ; O’Connor v. Dory Corporation, 174 Conn. 65, 70, 381 A.2d 559 (1977).
General Statutes section 49-14 in pertinent part provided: “APPRAISAL OF MORTGAGED PROPERTY AFTER FORECLOSURE. DEFICIENCY judgment. Upon the motion of any party to a foreclosure, the court shall appoint three disinterested appraisers, who shall, under oath, within ten days after the time limited for redemeption has expired, appraise the mortgaged property and shall make written report of their appraisal to the clerk of the court where such foreclosure was had. . . . [S]uch appraisal shall be final and conclusive as to the value of such mortgaged property. The mortgage creditor, in any further action upon the mortgage debt, note or obligation, shall recover only the difference between the value of the mortgaged property as fixed by such appraisal and the amount of his claim; and the court in which such action is pending may, if such appraisal and report thereof have been made, render judgment for the plaintiff for the difference between such appraisal and the plaintiff’s claim, provided application for such deficiency judgment has been made by the plaintiff within ninety days after the time limited for redemption has expired. . . .” Section 49-14 was repealed in 1979 because of this court’s decision in Society for Savings v. Chestnut Estates, Inc., 176 Conn. 563, 577, 409 A.2d 1020 (1979) and has been superseded by Public Acts 1979, No. 79-110.