Atlantic & Gulf Properties, Inc. v. Palmer

• Decision Date: 10 March 1959
• Docket Number: No. 58-574,58-574
• Citation: 109 So.2d 768
• Parties: ATLANTIC & GULF PROPERTIES, INC., a Florida corporation, Appellant, v. Alice Margarita Tower PALMER, a widow, Appellee.
• Court: Florida District Court of Appeals

Page 768

109 So.2d 768

ATLANTIC & GULF PROPERTIES, INC., a Florida corporation, Appellant, v.Alice Margarita Tower PALMER, a widow, Appellee.

No. 58-574.

District Court of Appeal of Florida, Third District.

March 10, 1959.

Rehearing Denied April 1, 1959.

Cypen & Salmon, Miami Beach, for appellant.

George Earl Brown, Miami, for appellee.

CARROLL, CHAS., Chief Judge.

Appellant was the owner of certain improved real estate, subject to a mortgage held by the appellee in the amount of $106,500.The mortgage, made in 1953, provided for semi-annual payments of $1,500 principal, plus interest until 1963, when a balance of $78,000 was payable.Certain buildings on the property were destroyed by fire, and $18,000 fire insurance was paid on July 17, 1957.Under the mortgage the mortgagee was given the 'option to receive and apply the same on account of the indebtedness hereby secured or to permit the mortgagors to receive and use it or any part thereof for other purposes.'The mortgagee elected to receive the insurance money, and she applied it in reduction of unpaid balance of principal due in 1963.Some six months later, in January of 1958, when the next installment fell due for $1,500 principal, plus interest, the mortgagee demanded its payment.

Faced with a requirement to pay the currently maturing installment or be foreclosed the mortgagor filed suit for declaratory decree seeking (1) an order compelling the mortgagee to apply the insurance money to the first maturing payments under the mortgage, and (2) an order determining whether the insurance monies would entitle the mortgagor to partial release of certain of the property, under a release clause contained in the mortgage.

The chancellor heard the case, and entered a decree which made provision for application of the insurance money according to the justice of the case as he viewed it.Noting that the installments due prior to 1963 amounted to slightly less than one-third of the total mortgage debt, the chancellor decreed that the mortgagee should apply one-third of the insurance money on the current and next maturing installments under the mortgage, and the other two-thirds of the insurance money was permitted to be applied by the mortgagee in reduction of the balance due in 1963.The mortgagor appealed.

The rule, as stated in 2 Jones, Mortgages, § 1164, p. 637(8th Ed.1928), this insurance money received for a loss occasioned to mortgaged property by fire can not be applied to the undue mortgage debt without the consent of the mortgagor, is not applicable here, because the parties had agreed that the mortgagee could elect to apply it to the indebtedness.That agreement of the parties, as contained in the mortgage, also settled the problem of whether such insurance money should be regarded and held as security, or be applied to reduce the mortgage debt.See2 Jones, Mortgages, Id.;8 Couch, Cyclopedia of Ins. Law, § 1936d;36 Am.Jur., Mortgages, § 339;59 C.J.S.Mortgages§ 328 d(2).As provided for in the mortgage, when the mortgagee elected to receive the money, she was required by the mortgage agreement to apply it to the mortgage indebtedness, and entitled to apply it to parts of the debt not yet due.In absence of a contrary direction in the mortgage, the mortgagee could so apply it as she saw fit, and she chose to use it in reduction of the unpaid balance which would fall due in 1963.

In so doing the mortgagee acted in conformity with the rule in Florida that where a payment is made by the debtor without directing its application, the creditor may determine the application.Alford v. Leonard, 88 Fla. 532, 102 So. 885;Merker v. Lake Region Packing Ass'n, 126 Fla. 589, 172 So. 702;Farnham v. Blount, 152 Fla. 208, 11 So.2d 785.

In the Alford casethe Supreme Court said (102 So. at page 889):

'The rule as to the application of payments in this state is that the debtor who makes the payment may at the time direct its application to what account or item of indebtedness he wishes, and, if he fails to do so, the creditor may at such time make application of the payment as he desires, and, if neither the debtor nor creditor at the time of payment makes any application thereof, the law will appropriate it to the items of indebtedness according to the justice of the case, having in view the interests of third persons interested.SeeBattle v. Jennings Naval Stores Co., 74 Fla. 12, 75 So. 949;Petroutsa v. H. C. Schrader Co., 76 Fla. 574, 80 So. 486;Consolidated Naval Stores Co. v. Wilson, 82 Fla. 396, 90 So. 461, 21 A.L.R. 681.'

Earlier the rule was stated to the same effect in Battle v. Jennings Naval Stores Co., 74 Fla. 12, 75 So. 949, 952, as follows:

'The rule as to the application of payments which obtains in this state was announced by this court in Randall v. Parramore [& Smith], 1 Fla. 409, as follows:

"Where a debtor indebted on several accounts makes a payment, he may apply it to either account; if he does not, the creditor may do so.If neither does, the law will appropriate it according to the justice of the case, provided there are no other parties interested."

There was, therefore, no need for the court to alter the allocation which the mortgagee had made, as the rule provides for the court to 'appropriate it [the payment] according to the...