Opinion ID: 1119944
Heading Depth: 3
Heading Rank: 4

Heading: Under the Facts of this Case, What Effect Does the Divorce Decree and Property Division Have Upon the Respective Rights of the Parties?

Text: Atlas argues that the property division negates any claims Mistic may have had. Because Atlas proceeded only against Mr. Rutzebeck's half of the property, Atlas claims, any harm to Ms. Mistic must be premised on an interest she had in his portion of the property. Atlas contends that Judge Gonzalez's award of the property to Rutzebeck extinguished any right Mistic had in the property. Atlas also argues that Mistic is bound by Judge Gonzalez's orders under principles of res judicata and collateral estoppel because she never appealed them. Mistic argues that the divorce did not void Atlas' obligation to pay her claim under the contract. She argues that the parties' interests must be analyzed as of the date of her claim; otherwise it would encourage insurance companies to delay paying claims. Mistic asserts that Atlas did not pay her claim, but rather it bought an assignment of the deed of trust. She claims that what she lost was one-half the value of the lien because the marital estate was reduced by the amount of the lien. Mistic argues that her interest in the proceeds is a personal property interest, so it does not depend on her remaining a record owner of the property. The issue we asked the parties to brief in this section is what effect the divorce and property division had on the rights of the parties in this case. We conclude that the property division had no effect on the rights of the parties as far as Mistic's claim against Atlas is concerned. The ultimate issue is whether Atlas breached the insurance contract by paying the mortgagee and taking an assignment of the deed of trust note and deed of trust, without ever paying Mistic or crediting Mistic with the value of her claim. Judge Hunt ruled that Atlas did breach the contract. She explained: It is undisputed that plaintiff made a timely and proper claim for her insured interest under the policy. Defendant never denied the claim, which denial is a condition precedent to subrogating itself to her interest in the insured property. Therefore, when it paid the mortgagee the full value of the note, $21,000 of the amount paid was payment of plaintiff's claim under the policy. When Atlas bought the note, it had a real value of $21,378.04. When the property sold and Atlas was paid as holder of the Deed of Trust Note, it was entitled to receive only the $21,378.04 value of the note plus costs, etc. However, it was paid and accepted the full $42,378.04 value of the note thereby, in fact, receiving the benefit of subrogating itself to plaintiff's claim. Because it has not denied her claim (and having demonstrated no basis for doing so), it breached its contract with plaintiff. Thus it was the failure of Atlas, when accepting payment from Rutzebeck, to pay Mistic or credit Mistic with the value of her claim, which Judge Hunt believed triggered the breach. We agree. Although this occurred after the divorce and property division, the timing is irrelevant. Mistic's rights were fixed as of the time of the insured loss. Pursuant to Judge Gonzalez's order, Mistic quitclaimed her interest in the Halibut Cove property to Rutzebeck. Her quitclaim deed to Rutzebeck did not purport to convey her interest in the insurance proceeds, nor was this interest acknowledged or divided by the decree. We conclude that the decree has no effect on the obligation of Atlas to pay Mistic her half of the insurance proceeds. Summary judgment on the issues under review herein is AFFIRMED. This case is REMANDED for further proceedings.