Beneficial Standard Life Ins. Co. v. Trinity Nat. Bank

• Decision Date: 28 December 1988
• Docket Number: No. 05-88-00147-CV,05-88-00147-CV
• Citation: 763 S.W.2d 52
• Parties: BENEFICIAL STANDARD LIFE INSURANCE COMPANY, Appellant, v. TRINITY NATIONAL BANK, et al., Appellee.
• Court: Texas Court of Appeals

Page 52

763 S.W.2d 52

BENEFICIAL STANDARD LIFE INSURANCE COMPANY, Appellant, v. TRINITY NATIONAL BANK, et al., Appellee.

No. 05-88-00147-CV.

Court of Appeals of Texas Dallas.

Dec. 28, 1988.

Brian J. Hurst, Truman Spring, Dallas, for appellant.

Charles L. Perry, Renee H. Tobias, Dallas, for Trinity Nat. Bank.

James W. Litzler, Dallas, for Steven Vogds, Stephen Crawford & Roland Freeman.

Before WHITHAM, BAKER and KINKEADE, JJ.

ON MOTION FOR REHEARING

WHITHAM, Justice.

On motion for rehearing, Beneficial Standard Life Insurance Company tells us that our disposition of its first three points of error as follows renders its fourth point of error moot. Therefore, to shorten this published opinion, we grant the motion for rehearing of appellant, Beneficial Standard Life Insurance Company, and withdraw our opinion of November 7, 1988. The following is now our opinion.

In this interpleader action, appellee, American Lloyds Insurance Company, brought suit to determine who was the appropriate payee of proceeds of an insurance policy. The second lienholder, Trinity National Bank and the owners, Ronald Freeman, Steven Vogds, and Stephen Crawford d/b/a the Terrace Green Apartments, appellees, filed a motion for summary judgment against the first lienholder, the appellant, Beneficial Standard Life Insurance Company. Beneficial Standard filed a motion for summary judgment against Trinity National and the owners. The trial court granted the former motion for summary judgment and denied Beneficial Standard's motion for summary judgment. In four points of error, Beneficial Standard contends: (1) that the trial court erred in awarding the interpleaded funds to Trinity National and owners because Beneficial Standard, as first mortgagee, has an equitable lien on the insurance policy proceeds; (2) that the trial court erred in awarding the interpleaded funds to Trinity National and owners because Beneficial Standard's entitlement to the insurance policy proceeds is supported by the substitute trustee's deed; (3) that the trial court erred in taxing as costs against Beneficial Standard the interpleader's attorneys' fees; and (4) that the trial court erred in refusing to order the return of the interpleaded funds pending appeal. We disagree. Accordingly, we affirm.

On November 29, 1978, Bobby Joe Phillips Construction Company, Inc., executed and delivered to Beneficial Standard a promissory note in the amount of $300,000. The Phillips note was secured by a deed of trust, security agreement, and assignment of rents executed and delivered to Beneficial Standard. Phillips Construction's obligation to Beneficial Standard under the Phillips note was secured, through the deed of trust, by a certain tract of real property improved with apartment houses. The Phillips note and deed of trust were modified by an agreement dated April 12, 1982, between Beneficial Standard, Phillips Construction, and Stephen F. David, Jr. On May 1, 1985, Freeman, Vogds, and Crawford entered into an agreement with Beneficial Standard whereby Freeman, Vogds, and Crawford assumed Phillips Construction's obligations under the Phillips note and deed of trust, as modified by the April 12th modification agreement and further modified by a modification and assumption agreement. In connection with the execution of the May 1st modification and assumption agreement, Freeman, Vogds, and Crawford executed and delivered to Beneficial Standard a promissory note in the amount of $50,000. Pursuant to the terms of the May 1st modification and assumption agreement, the $50,000 note was also secured by a deed of trust lien upon the property securing the Phillips note. Under the May 1st modification and assumption agreement, Freeman, Vogds, and Crawford also assumed the obligation to keep the security insured against fire and other physical damage "with loss made payable to Beneficiary." On May 15, 1985, Trinity National executed and delivered to Beneficial Standard a subordination agreement whereby Trinity National agreed that its second lien on the security would be subordinate to Beneficial Standard's first lien on the security arising out of the deed of trust as modified by the April 12th modification agreement and by the May 1st modification and assumption agreement executed by Freeman, Vogds, and Crawford.

Subsequently, Freeman, Vogds, and Crawford defaulted on their indebtedness to Beneficial Standard, and Beneficial Standard posted the security for foreclosure. On January 6, 1987, Beneficial Standard purchased the security at the trustee's sale for the amount of the unpaid indebtedness, $343,187.46. Thereafter, Beneficial Standard discovered that the security had been damaged by fire on January 1, 1987, and that Trinity National had been named as the loss payee in the policy. American Lloyds filed suit and interpleaded the proceeds of the policy, totaling $124,728.93. On December 29, 1987, the trial court rendered final judgment awarding the proceeds jointly to Trinity National, Freeman, Vogds, and Crawford and taxing American Lloyds' attorneys' fees as costs against Beneficial Standard. On January 4, 1988, the Dallas County District Clerk disbursed the interpleaded funds to Trinity National, Freeman, Vogds, and Crawford, and on January 28, 1988, Beneficial Standard filed a cost bond and supersedeas bond.

In its first point of error, Beneficial Standard contends that the trial court erred in awarding the interpleaded funds to Trinity National, Freeman, Vogds, and Crawford because Beneficial Standard, as mortgagee, had an equitable lien on the insurance policy proceeds. Beneficial Standard argues that when the owner of real property agrees to insure the property against damage for the benefit of the mortgagee, the mortgagee has an equitable lien on insurance proceeds arising from damage to the property even though the mortgagee is not named in the policy. See Wade v. Seeburg, 688 S.W.2d 638, 639 (Tex.App.--Texarkana 1985, no writ). Therefore, Beneficial Standard asserts that it had a paramount equitable lien on the proceeds of the policy.

We agree that where a mortgagor is charged with the duty of obtaining insurance on property with loss payable to the mortgagee, but the policy does not contain such a provision, equity will treat the policy as having contained the loss payable provision and entitle the mortgagee to recover under the policy. State Farm Fire & Casualty Co. v. Leasing Enterprises, Inc., 716 S.W.2d 553, 554 (Tex.App.--Houston [14th Dist.] 1986, writ ref'd n.r.e.). However, we do not agree with Beneficial Standard's contention that it is entitled to the proceeds of the policy. As previously stated, Beneficial Standard bid $343,187.46 for the security at foreclosure. This amount represents the amount of the debt under the mortgage. Thus, as a matter of law, since the indebtedness had been cancelled by the bid at the foreclosure, there is no liability to Beneficial Standard on the part of Freeman, Vogds, and Crawford. See Helmer v. Texas Farmers Ins. Co., 632 S.W.2d 194, 196 (Tex.App.--Fort Worth 1982, no writ). As Helmer teaches:

It must be remembered that the purpose of the loss payable clause to the mortgagee in an insurance policy such as the one here is to protect the security interest of one who has advanced money to others for the purchase of property, and who has taken, usually, a note and deed of trust, as in this case, or mortgage on the subject property. The policy, in case of loss of or damage to the property, will pay to the extent of the mortagee's interest in the property whatever that amount is so that the mortgagee, who has advanced money on the property, will be protected.

Helmer, 632 S.W.2d at 196 (emphasis added). Therefore, if the mortgage debt is satisfied by the proceeds of sale, the mortgagee, Beneficial Standard, is entitled to no further payment on account thereof. See Fireman's Fund Ins. Co. v. Jackson Hill Marina, Inc., 704 S.W.2d 131, 136 (Tex.App.--Tyler 1986, writ ref'd n.r.e.); Helmer, 632 S.W.2d at 196; Campagna v. Underwriters at Lloyd's London, 549 S.W.2d 17, 19 (Tex.Civ.App.--Dallas 1977, writ ref'd n.r.e.). Accordingly, we overrule Beneficial Standard's first point of error.

In Beneficial Standard's second point of error, it argues that the trial court erred in awarding the interpleaded funds to...