Case Title: Pattison v. State Farm Fire & Casualty Co.

Citation: 209 Kan. 167, 495 P.2d 975

Docket Number: 46,434

State: kansas

Court: Kansas Supreme Court

Date: 1972-04-08T00:00:00Z

Document:
209 Kan. 167 (1972)
495 P.2d 975
E.R. PATTISON and ARLIE W. PATTISON, Appellees,
v.
STATE FARM FIRE & CASUALTY COMPANY, a corporation, and CAPITOL FEDERAL SAVINGS & LOAN ASSOCIATION, a Corporation, Appellants.
No. 46,434

Supreme Court of Kansas.
Opinion filed April 8, 1972.
William Hergenreter, of Shaw, Hergenreter & Quarnstrom, of Topeka, argued the cause, and was on the brief for appellant Capitol Federal Savings & Loan Association. Brock Snyder, of Eidson, Lewis, Porter & Haynes, of Topeka, argued the cause, and Peter F. Caldwell, of the same firm was with him on the brief for appellant State Farm Fire & Casualty Company.
Floyd E. Gehrt, of Gehrt & Roberts, of Topeka, argued the cause and was on the brief for appellees.
The opinion of the court was delivered by
FATZER, C.J.:
This appeal arises out of a controversy over the existence of a fire insurance policy and the beneficiaries thereunder.
The facts are not in serious dispute.
The plaintiffs, E.R. Pattison, and his wife Arlie W. Pattison, purchased a dwelling located at 108 Widigan Road in Topeka. The property was covered by a note and mortgage held by Capitol Federal Savings & Loan Association (Capitol Federal) in the *168 amount of $18,000, which the Pattisons assumed and agreed to pay. As a part of the transaction, a policy of insurance was obtained from the State Farm Fire & Casualty Company (State Farm) in the amount of $19,000, covering the building, unscheduled personal property in the amount of $7,600, and additional living expenses in case of damages to the real estate in the amount of $3,600. There was also extensive personal liability coverage in the amount of $25,000, and medical damage and physical damage to the property of others.
The policy also had a loss payable clause in favor of the mortgagee, Capitol Federal. The effective date of the policy was April 1, 1966, and carried an endorsement designating it to be a "continuous renewal plan," subject to cancellation for default in the annual premium payments only after ten days written notice. No contention is now made by any of the parties to this litigation that the insurance policy was not in full force and effect at all material times here involved.
The Pattisons defaulted on their payments under the note and mortgage, and Capitol Federal commenced foreclosure proceedings. A judgment of foreclosure was entered and a foreclosure sale was had at which Capitol Federal purchased the property for the sum of $18,384.81, of which $60.80 was in cash and the balance was the receipt of the judgment of $18,080.31, plus interest to the date of the sale. The foreclosure sale was confirmed by the district court on March 13, 1968, and the Pattisons were granted a six month redemption period from March 7, 1968, the date of the sale.
On April 1, 1968, the date the next premium was due, the State Farm insurance policy was returned to the agent of State Farm by an employee acting on behalf of Capitol Federal, accompanied by a request to cancel the policy as of April 1, 1968. This was done without the knowledge or consent of the Pattisons. On April 1, 1968, Capitol Federal also obtained an insurance policy on the property in controversy from Kansas City Fire & Marine Insurance Company with coverage in the amount of $19,000. On April 11, 1968, State Farm sent a letter to the Pattisons, stating:
The letter was signed by the underwriter for State Farm.
At the trial, the Pattisons testified they had never received the letter and had not seen a copy until it was shown to them after the fire.
*169 The Pattisons remained in possession of the premises under their equity of redemption. On April 23, 1968, a fire occurred which resulted in extensive damage to the property. The Pattisons called the agent of State Farm who informed them they had no insurance. They then went to their attorney who immediately tendered a premium payment which was refused by State Farm. The Pattisons then brought an action against State Farm and Capitol Federal.
The district court first proceeded to try the issue of liability. The issue as to the damages recoverable in the event plaintiffs should prevail, was reserved for a later determination. The district court's statement of the contentions of the parties reads:
The district court stated the issues and its conclusions thereon in substance as follows:
1. The State Farm insurance policy was in effect during the redemption period after the foreclosure sale which occurred on March 7, 1968, unless it was cancelled in accordance with its provisions  the mortgagor continues to have an insurable interest in the mortgaged property after foreclosure and sale of the property until the expiration of the period of redemption.
2. State Farm did not have the right to cancel the policy of insurance *170 at the request of Capitol Federal, without the consent of the Pattisons.
3. The State Farm insurance policy involved here was not properly cancelled prior to the date of the fire on April 23, 1968, and was therefore in full force and effect on the date when the fire occurred.
Following the court's judgment on the issue of liability, Capitol Federal filed a cross-claim against State Farm claiming the proceeds of the policy by reason of the fire which destroyed the dwelling.
The district court then proceeded to determine the loss occurring under the policy and the claim of Capitol Federal to the proceeds from the insurance policy for damages to the real estate. It concluded:
The defendants, State Farm and Capitol Federal, have appealed. Although the two appellants have filed separate briefs, their main contentions overlap and may be considered together. It should here be noted that State Farm denies liability under the policy, but states that if it is liable thereunder, the proceeds should be paid to Capitol Federal.
Capitol Federal concedes that its points on appeal sum up the question, "Should the Pattisons or Capitol Federal be awarded the $10,000.00 for damages to the house?"
State Farm contends that only the mortgagee, the purchaser at the foreclosure sale, had a claim to the proceeds, and further, that as purchaser, Capitol Federal was not entitled to recover because of its wrongful conduct in requesting cancellation of the policy.
*171 We first turn to Capitol Federal's contention of its right to recover the proceeds of the policy.
Under the facts in this case, it would serve no useful purpose to engage in a lengthy discussion as to the right generally of a mortgagee and purchaser at a foreclosure sale to participate in the proceeds of a fire insurance policy, such as here under consideration. The question in this case must be determined on the particular facts involved. On the question of the right of Capitol Federal to the damages to the building from the proceeds of State Farm's policy, the district court stated, in part:
The facts as noted by the district court are not in dispute and under such facts, we agree with its conclusion that Capitol Federal had the right to cancel, or abandon its rights, if any, as mortgagee, or as purchaser at the foreclosure sale, under the State Farm policy issued to the Pattisons, and take out new insurance covering its insurable interest in the property to the extent of the indebtedness, which it did. Capitol Federal recovered $6,250 from its insurer, the Kansas City Fire & Marine Insurance Company. It also received $15,000 from the sale of the property, or a total of $21,250 to cover its $18,000 mortgage. We can find no logical reason for giving Capitol Federal another $10,000 from the insurance policy covering the mortgagors' interest, which it wrongfully attempted to cancel.
The district court referred to the conduct of Capitol Federal as a waiver of its right to participate in the proceeds from the State Farm policy. Whether the principle is described as equitable estoppel, quasi-estoppel, waiver, ratification, election, or as a requirement of consistency of conduct, is not very important. However Capitol Federal's conduct is to be designated, it operates as a bar against its recovery in this case. (Nogrady v. Fourth National Bank, 136 Kan. 43, 12 P.2d 787.)
In Browning v. Lefevre, 191 Kan. 397, 381 P.2d 524, this court held:
In Bowen, Administrator v. Lewis, 198 Kan. 706, 426 P.2d 244, this court said:
*173 See, also, Bank v. Jesch, 99 Kan. 797, 800, 163 Pac. 150, and Wilson v. Stephenson, 143 Kan. 91, 96, 97, 53 P.2d 874.
We now turn to State Farm's argument that,
The statement relied on is not a correct statement of the law. It is well settled that the mortgagor is entitled to rents and profits accruing during the period of redemption (Broadhurst Foundation v. New Hope Baptist Society, 194 Kan. 40, 397 P.2d 360; Topeka Savings Association v. Beck, 199 Kan. 272, 428 P.2d 779), and that a mortgagor and mortgagee may each separately insure his own distinct interest in the property. In New Hampshire Ins. Co. v. American Employers Ins. Co., 208 Kan. 532, 492 P.2d 1322, it was said:
We conclude the mortgagor has an insurable interest after the foreclosure sale and during the period of redemption, which terminates with the expiration of such right  if the mortgaged property should be damaged during the period of redemption, the mortgagors' equity of redemption might well be destroyed.
In 3 Couch on Insurance 2d, § 24:70, p. 155, the rule is stated as follows:
The same rule is stated in 4 Appleman, Insurance Law and Practice, § 2187, pp. 107-109, as follows:
See, also, Carpenter v. Providence Washington Insurance Company, 41 U.S. 495, 10 L. Ed. 1044.
As indicated, there are two separate interests in the same property to be protected. The holder of the certificate of purchase wants the property insured to protect his investment during the period of redemption. The mortgagor wants the property kept intact during the period of redemption in order that it be worthy of redemption. These interests may be insured severally, or jointly.
The district court entered judgment in favor of the Pattisons and against State Farm for $3,000 damages to personal property, $600 for additional living expense, $10,000 for damages to real estate, and $4,750 attorney fees.
State Farm has appealed only from the judgment allowing the Pattisons to recover $10,000 for damages to real estate, and from the allowance of attorney fees. It contends the district court erroneously allowed $10,000 damages to real estate, based upon the inability of the Pattisons to redeem the property because of State Farm's wrongful cancellation of the policy. Its main contention in this point is that there was no evidence to support the following finding and conclusion of the district court:
E.R. Pattison testified that after the foreclosure proceedings, he put panelling on the inside of the house because he wanted to get a new loan. The foreclosure proceedings were admitted in evidence. They disclosed that appellees filed a motion to extend their redemption period based on their inability to redeem because of the fire and the controversy over the insurance. We cannot say that there was no evidence to support the district court's finding.
What has been said disposes of the controversy over the allowance of attorney fees.
*175 A careful examination of the record discloses no trial errors which would justify a reversal of the judgment, or require the granting of a new trial.
The judgment is affirmed.
PRAGER, J., not participating.