Opinion ID: 1711869
Heading Depth: 2
Heading Rank: 2

Heading: Filing of Deed in Lieu of Foreclosure.

Text: In addition to obtaining an insurable interest by assignment, Conrad Bros. had an insurable interest in the buildings to the extent secured by the mortgage. 44 C.J.S. Insurance § 228(b), at 430. Even though Schott failed to name Conrad Bros. as a loss payee or mortgage holder, the mortgage covenant requiring Schott to maintain insurance gave Conrad Bros. an interest in the insurance policy. 5A John A. Appleman & Jean Appleman, Insurance Law and Practice § 3381, at 243 (rev. ed.1970) [hereinafter Appleman]; see Winneshiek Mut. Ins. Ass'n v. Roach, 257 Iowa 354, 362, 132 N.W.2d 436, 441 (1965) (mortgagee has no interest in mortgagor's insurance policy unless provided for in mortgage agreement); Johnson v. N. Minn. Land & Investment Co., 168 Iowa 340, 344, 150 N.W. 596, 598 (1915) (same). Moreover, an insurance policy should be treated as if it named the mortgage holder when a mortgagor fails to uphold its promise to do so. See 5A Appleman § 3381, at 245 n. 23. Accordingly, we have consistently held a mortgagee has an equitable lien on the proceeds of an insurance policy procured by the mortgagor for the mortgagee's benefit despite the failure to expressly include the mortgagee in the insurance policy. Kintzel, 203 N.W.2d at 804; Winneshiek, 257 Iowa at 363, 132 N.W.2d at 441; Johnson, 168 Iowa at 344, 150 N.W. at 598; Mahoney v. State Ins. Co., 133 Iowa 570, 580, 110 N.W. 1041, 1044 (1907). A mortgagee's interest in an insurance policy obtained on its behalf continues until the mortgagee extinguishes the mortgage debt. 44 C.J.S. Insurance § 228(b), at 431. John Deere contends Conrad Bros.'s interest in insurance proceeds extinguished when it filed the deed in lieu of foreclosure in complete satisfaction of the mortgage and its underlying obligations. John Deere correctly notes that the filing of the deed released Schott from further liability. Lititz Mut. Ins. Co., 694 F.Supp. at 162. However, it did not release John Deere from liability. Id. On the contrary, the mortgage agreement specifically provided that Conrad Bros. would receive the title to the buildings and the right to insurance proceeds in satisfaction of the mortgage debt. See id.; Bartlett v. Iowa State Ins. Co., 77 Iowa 86, 87-88, 41 N.W. 579, 579 (1889). As assignee of Schott's unpaid insurance claim, Conrad Bros. possessed an absolute right to receive insurance proceeds up to the amount necessary to satisfy the outstanding debt. Lititz Mut. Ins. Co., 694 F.Supp. at 162. Any claim that Conrad Bros. will be unjustly enriched by this holding is unfounded. In fact, John Deere would be the unjustly enriched party if we ruled otherwise, as it would successfully avoid paying proceeds altogether. Id. This is not a case where the mortgagor has obtained a judgment for the full amount secured by the mortgage. See Farmers & Merchants Sav. Bank v. Farm Bureau Mut. Ins. Co., 405 N.W.2d 834, 837 (Iowa 1987); Border State Bank v. Farmers Home Group, 620 N.W.2d 721, 724-25 (Minn.Ct.App.2000); see also Union Cent. Life Ins. Co. v. Bracewell, 209 Iowa 802, 807, 229 N.W. 185, 187 (1930); Tott v. Johnson, 51 Iowa 192, 196, 1 N.W. 498, 500 (1879). Likewise, this is not a case where the mortgagee had the opportunity to outbid and cut off lower bidders at a foreclosure sale. See Farmers & Merchants Sav. Bank, 405 N.W.2d at 837. On the contrary, Conrad Bros. has yet to obtain what it bargained for in the mortgage agreement. See Union Cent. Life Ins. Co., 209 Iowa at 809, 229 N.W. at 188; Bartlett, 77 Iowa at 87-88, 41 N.W. at 579-80. The right to Schott's insurance loss claims was a part of the consideration in the execution of the mortgage. See Union Cent. Life Ins. Co., 209 Iowa at 809, 229 N.W. at 188 (discussing facts in Bartlett ).