Title: Employers Mutual Casualty Co. v. Standard Drug Co.
Citation: 234 So. 2d 330
Docket Number: 45681
State: Mississippi
Issuer: Mississippi Supreme Court
Date: April 6, 1970

234 So. 2d 330 (1970) EMPLOYERS MUTUAL CASUALTY CO. and Pennsylvania Millers Mutual Insurance Co. v. STANDARD DRUG COMPANY. No. 45681. Supreme Court of Mississippi. April 6, 1970. Rehearing Denied May 11, 1970. Williams, Gunn, Eppes &amp; Crenshaw, Meridian, Watkins &amp; Eager, Jackson, for appellants. Floyd, Cameron, Deen &amp; Prichard, Meridian, for appellee. ROBERTSON, Justice. The Chancery Court of Lauderdale County, Mississippi, rendered judgment for $11,000 in favor of appellee, Standard Drug Company, and against appellants, Employers Mutual Casualty Company and Pennsylvania Millers Mutual Insurance Company. On July 5, 1962, Z.V. Baucum executed a deed of trust on his business property in Laurel, Mississippi, to Mutual Savings Life Insurance Company securing an original indebtedness of $35,000. On October 11, 1963, Z.V. Baucum and his wife, Ann Baucum, executed a second deed of trust on the same business property in Laurel to Standard Drug Company securing an indebtedness of $22,122.93. This deed of trust was recorded in Deed of Trust Book 258 at page 545 of the records in the Jones County Chancery Clerk's Office. Each of these deeds of trust provided that Baucum would keep the buildings insured for at least three-fourths of the value of such buildings with loss payable clause in favor of the mortgagee. The second deed of trust to appellee contained this provision: On August 31, 1965, Baucum insured his business property against loss by fire up to $20,000 with Union Mutual Insurance Company, which was reinsured by Employers Mutual Casualty Company. On the same day, he also insured this property for $20,000 with Pennsylvania Millers Mutual Insurance Company. Both policies contained a loss payable clause in favor of Mutual Savings Insurance Company, the first mortgagee. Neither policy mentioned Standard Drug Company, the second mortgagee. On December 26, 1966, the building covered by these two policies was damaged by fire. On February 3, 1967, the appellee, Standard Drug Company, wrote the following letter to the adjuster for the two insurers: Dear Mr. Puckett: We understand that your Company is handling the adjustment of fire loss to the Baucum Drug Store building, 412 North Magnolia, Laurel, Mississippi. This is to notify you that we hold a second mortgage deed of trust on this building, signed by Dr. Vance Baucum and by Ann Baucum, as security for a promissory note also signed by these two parties. The amount of their indebtedness to us at the present time is as follows: Our deed of trust has a clause in it with reference to payment in the event of fire. This information is being passed on to you so that you will have it at the time of settlement, and to protect any interest that we might have in the settlement. Very truly yours, Vice-President" On February 3, 1967, prior to writing the above letter, the appellee, in a telephone conversation, informed the adjuster for the appellants of its interest in the insured property. At the time of the fire, the balance of the indebtedness on the first mortgage was $27,192.20, and the balance on the second mortgage was $18,022.93. *332 On July 31, 1967, the two appellants each paid $15,500 by check to "Zeb Vance Baucum, d/b/a Baucum Drug Store, Mutual Savings Life Insurance Company, Raymond Swartzfager, Jr., Atty., and Andrew S. Scott, Jr., Atty." These two attorneys were attorneys for Baucum only. Of this $31,000, the Mutual Savings Life Insurance Company accepted $20,000 to apply on the first mortgage and the remaining $11,000 was paid to Z.V. Baucum and Ann Baucum, the mortgagors. The only real question involved is whether the absence of a mortgage clause in favor of Standard Drug Company in each policy would preclude the Standard Drug Company from recovering the $11,000 wrongfully paid to the mortgagors. Section 5694 Mississippi Code 1942 Annotated (1956) provides: Section 5695 Mississippi Code 1942 Annotated (1956) provides in part: Both of these sections were enacted into law primarily for the protection of mortgagees. In United States v. Sentinel Fire Insurance Co., 5 Cir., 178 F.2d 217 (1949), the Court construed Section 5695 Mississippi Code 1942 Annotated (1956): 5 Couch, Insurance 2d (1960) provides: Couch is backed up with these statements of the rule from American Jurisprudence and Corpus Juris Secundum: The equitable lien doctrine is followed in Mississippi. In Lititz Mutual Insurance Co. v. Miller, 210 Miss. 548, 50 So. 2d 221 (1951), we said: On February 3, 1967, the appellee gave both oral and written notice to the appellants of its deed of trust on Baucum's business property at 412 North Magnolia, Laurel, Mississippi. This was almost six months before appellants settled with Baucum and the first mortgagee. We agree with the chancellor that the appellants acted at their peril when they chose to ignore the notice so clearly given by the appellee and to settle with the mortgagors and first mortgagee only. The agreed damage to the insured premises was $31,000. Only $20,000 of this amount was applied on the first mortgage. By their own admission, the security for the second mortgage was damaged $11,000 more. It follows, therefore, that the appellee was damaged in the sum of $11,000 which should have been paid to the appellee and by it applied on the second mortgage. The judgment of the chancery court is affirmed. Affirmed. GILLESPIE, P.J., and JONES, BRADY, and INZER, JJ., concur.