Lea v. LIVERPOOL & LONDON & GLOBE INS. CO. OF LIVERPOOL, ENG.

• Decision Date: 15 July 1965
• Docket Number: Civ. A. No. 64-C-36.
• Citation: 243 F. Supp. 547
• Court: U.S. District Court — Western District of Virginia
• Parties: Herman D. LEA v. LIVERPOOL & LONDON & GLOBE INSURANCE COMPANY OF LIVERPOOL, ENGLAND and The American National Bank & Trust Company of Danville and South Enterprises, Inc. and Small Business Administration, an agency of the United States of America.

243 F. Supp. 547

Herman D. LEA v. LIVERPOOL & LONDON & GLOBE INSURANCE COMPANY OF LIVERPOOL, ENGLAND and The American National Bank & Trust Company of Danville and South Enterprises, Inc. and Small Business Administration, an agency of the United States of America.

Civ. A. No. 64-C-36.

United States District Court W. D. Virginia, Danville Division.

July 15, 1965.

Charles R. Warren, Jr., Warren, Parker & Williams, and Horace G. Bass, Danville, Va., for Herman D. Lea.

Edward A. Marks, Jr., Sands, Anderson, Marks & Clarke, Richmond, Va., for Liverpool & London & Globe Ins. Co.

Thomas B. Mason, U. S. Atty., Roanoke, Va., for Small Business Administration.

DALTON, Chief Judge.

Liverpool and London and Globe Insurance Company has paid into the Registry of this Court the sum of $24,000.00 representing the proceeds of a certain fire insurance policy on the contents of the Lea Theatre in Danville, Virginia, which were destroyed by fire May 18, 1964.

There are two claimants to the fund, namely, Herman D. Lea and Small Business Administration, an agency of the United States Government.

The claim of plaintiff Lea stems from a loss payable clause attached to the insurance policy on January 19, 1962, at which time the Insurance Company issued a mortgagee clause, payable first to American National Bank and Trust Company, second, to Herman D. Lea, and third, to American National Bank and Trust Company and Small Business Administration.

The mortgage under which Herman D. Lea claims is dated June 7, 1947 and the indebtedness exceeds the amount of insurance funds available.

The claim of Small Business Administration arises out of a deed of trust dated January 2, 1959 from Leonard W. Lea et al. to secure American National Bank and Trust Company of Danville and Small Business Administration a participating loan in the amount of $60,000.00.

Default was made in the payment of this loan and a foreclosure sale was had on April 30, 1962, which left a deficiency due Small Business Administration of $17,979.26.

Small Business Administration later resold the property for more than enough to cover the deficiency, but the Court is of the opinion that Small Business Administration was within its rights to make a profit on the sale and still assert its deficiency claim.

As background it is noted there was yet another deed of trust on the contents of Lea Theatre, dated March 9, 1948 to secure a debt due American National Bank and Trust Company. This loan was paid in 1951 and released in April 1962.

The insurance policy of Liverpool was issued June 1, 1961, for a term of three years and a loss payable clause was attached to the policy on June 14, 1961, payable first, to American National Bank and Trust Company, second, to Small Business Administration, as their interests may appear. Leonard W. Lea, President of Lea Theatre, obtained the insurance policy in the first instance, and apparently the loss payable clause of June 14, 1961 was attached at the request of the American Bank.

Leonard W. Lea, sometime between June 14, 1961 and January 19, 1962, observed the loss payable clause of June 14 and discovering that Herman D. Lea, who held the first deed of trust, was not mentioned, requested the insurance agent to add Herman's Lea's name to the loss payable clause, and in consequence of the request the insurance company issued an endorsement to the policy naming American Bank first, Herman D. Lea second, and American Bank and Small Business Administration third on the loss payable clause, and the Court is satisfied from the evidence that the agent mailed a copy to each of the parties. This was the mortgagee clause in effect when the fire occurred on May 18, 1964.

The question that is now presented is whether Herman D. Lea, the holder of the first deed of trust (June 7, 1947), or the Small Business Administration, holder of the second deed of trust (January 2, 1959), (the American Bank's deed of trust having been paid) is entitled to the insurance proceeds of $24,000 paid into Court.

The Court holds that Herman D. Lea is entitled to the fund, and for these reasons:

(1) This is in accordance with the insurance policy and the last endorsement (January 19, 1962) which were in effect at the time of the fire. The Court finds as a fact from the evidence, direct and circumstantial, together with reasonable inferences to be drawn therefrom, that notice of the change in the endorsement as to ownership and as to loss payable benefits was duly sent to all parties in interest, and that no protest or objection was made to such change.

In fact, there could hardly have been any objection because the endorsement of January 19 was in accordance with the true rights and priority of the parties.

Moreover, the Court finds that American Bank

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