Capital Fire Ins. Co. of California v. Langhorne, 12916.

• Decision Date: 02 January 1945
• Docket Number: No. 12916.,12916.
• Citation: 146 F.2d 237
• Parties: CAPITAL FIRE INS. CO. OF CALIFORNIA v. LANGHORNE.
• Court: U.S. Court of Appeals — Eighth Circuit

146 F.2d 237 (1945)

CAPITAL FIRE INS. CO. OF CALIFORNIA v. LANGHORNE.

No. 12916.

Circuit Court of Appeals, Eighth Circuit.

January 2, 1945.

Le Roy Bowen, of Minneapolis, Minn., for appellant.

Henry W. Norton, of Minneapolis, Minn., for appellee.

Before SANBORN, THOMAS, and RIDDICK, Circuit Judges.

RIDDICK, Circuit Judge.

On August 3, 1939, appellee, John L. Langhorne, entered into a contract for a deed with one Christine Peterson by which he agreed to convey to Christine Peterson certain real property in Hennepin County, Minnesota, on which there was a dwelling house and other buildings. The consideration for the sale was $4,000, payable in installments over a period of years. The contract provided that title to the property conveyed should remain in the vendor until full payment of the purchase price had been made, and that until such time the vendee should keep the buildings insured against loss by fire, the loss, if any, to be payable to the vendor, with the obligation on his part to account to the vendee for any surplus over the amount owing the vendor at the time of the loss.

Christine Peterson took possession of the real property and procured from the appellant, Capital Fire Insurance Company of California, a policy of insurance, insuring her against loss or damage to the buildings. The policy contains the following open mortgage clause under the heading "Contract for Deed Clause":

"Notice accepted that the premises described herein have been sold to Christine Peterson under contract for deed.

"Subject to the stipulations, provisions and conditions contained in this policy, loss, if any, is payable to ______, Mortgagee; to John L. Langhorne, owner and to Christine Peterson, Contract Purchaser, as their interest may appear"; and also a union or standard mortgage clause as follows:

"If this policy shall be made payable to a mortgagee of the insured real estate, no act or default of any person other than such mortgagee, or his agents, or those claiming under him, shall affect such mortgagee's right to recover in case of loss on such real estate.

"Provided, that * * * whenever this company shall be liable to a mortgagee for any sum for loss under this policy, for which no liability exists as to the mortgagor, or owner, and this company shall elect by itself, or with others, to pay the mortgagee the full amount secured by such mortgage, then the mortgagee shall assign and transfer to the company interested, upon such payment, the said mortgage, together with the note and debts thereby secured."

There is a further provision in the policy requiring the insured, upon the payment of any loss, to assign to the insurer, to the extent of the payment, all right of the insured to recover satisfaction for the loss from any person or corporation other than insurers.

On October 30, 1940, while the policy of insurance was in force in the sum of $7,500, the insured dwelling house was damaged by fire of incendiary origin. At the time of this fire the balance due appellee on the contract for deed amounted to $3,640.97, principal and interest. The damage to the building by reason of the fire, as well as the amount of the insurance carried upon it, exceeded the amount due appellee under his contract for deed.

Following the fire Christine Peterson and Langhorne each made proof of loss as required by the policy. Neither claim was paid by the insurance company. Christine Peterson and one Anderson were indicted on charges of arson in connection with the burning of the insured premises. Anderson pleaded guilty to the indictment. Christine Peterson was tried and convicted. On the failure of the appellant insurance company to pay his claim, which was for the amount of principal and interest owing him under the contract for deed, appellee, within the time limited in the policy, instituted this action in a Minnesota court to recover the amount of his claim. On the ground of diversity of citizenship the action was removed to the United States District Court for the District of Minnesota where the proceedings were lodged on October 17, 1941. On January 22, 1942, the appellant company answered, admitting appellee's ownership of the property, his contract to convey to Christine Peterson, the policy of insurance issued by it to Christine Peterson, and damage to the insured premises by fire. It set up in defense to the action that Christine Peterson and Langhorne had each attempted to defraud the insurance company by misrepresentation of material facts in the proofs of loss filed by them, and that the fire which caused the loss had been started by Anderson at the request and under the direction of Christine Peterson.

After the admission by each party of certain facts concerning the origin of the fire, the validity of the policy at the time of the fire, and its provisions, appellee moved for a summary judgment, relying upon the union or standard mortgage clause in the policy, providing that no act or default of any person other than the mortgagee or his agents should affect the mortgagee's right to recover. The motion was denied by the district court on March 2, 1942. Langhorne v. Capital Fire Insurance Company of California, 44 F.Supp. 739. In its opinion the district court stated that the issue before it on the motion was whether the standard or union mortgage clause, protecting the mortgagee from the consequences of the acts or defaults of the insured, likewise protected a vendor in a contract for a deed. It concluded that the union mortgage clause was not applicable on the rights of a vendor under a contract to convey. This question is not involved on this appeal.

Since, in its order on appellee's motion for a summary judgment, the district court had held that any act or default on the part of Christine Peterson which avoided the policy as to her would likewise avoid it as to appellee, the appellant moved for a summary judgment, relying on the conviction of Christine Peterson in the State court on the charge of arson as proof of the fact that she had set fire to the building. This motion the district court denied on May 9, 1942, on the ground, appearing at the hearing, that Christine Peterson had appealed the judgment of conviction to the Minnesota Supreme Court where the matter was then pending. The judgment of conviction of Christine Peterson was reversed, and the motion of appellant for summary judgment was not renewed.

On March 8, 1943, appellant filed a motion for leave to file a supplemental answer. This motion was supported by an affidavit of appellant's counsel showing that Christine Peterson had brought suit, in the same court in which this action was pending, to recover upon the same policy, and that her action had been dismissed by the district court for want of jurisdiction; that, on affiant's information and belief, Christine Peterson had commenced no other action to recover on the policy within the time limited in the policy for the beginning of such actions, and that, accordingly, any right of action in Christine Peterson on the policy was barred by limitations. The motion was granted and the answer filed. Appellant then presented its second motion for a summary judgment or for a dismissal of the action, alleging that, since any action on the policy was barred as to Christine Peterson, the appellee's action was likewise barred. This motion was denied by the district court on June 29, 1943. The case was called for trial on the 14th day of October, 1943.

After a jury had been empaneled and sworn, the appellant objected to the introduction of any testimony by appellee on the following grounds: (1) That the complaint did not state facts sufficient to entitle appellee to any relief; (2) that it appeared from the pleadings that the appellee was not the real party in interest; (3) that Christine Peterson was the real party in interest or that she was a trustee of an express trust or a party in whose name a contract was made for the benefit of another, or that she had a joint interest in the action, and that in either case the appellee could not maintain the present action under Rules 17 and 19 of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c. Appellant also moved in the alternative for an order dismissing the complaint. Both motions were overruled, as well as the motions of both parties for a directed verdict at the conclusion of the testimony.

The jury returned a verdict in favor of the appellee for the full amount claimed, finding, in answer to special interrogatories propounded by the court, that Christine Peterson was not a party to a conspiracy to set fire to the insured building, that she was not guilty of any attempt to defraud the insurance company in connection with the fire, and that none of the statements in the proofs of loss filed by Peterson and appellee was knowingly false or made with intent to defraud the appellant. Appellant's motions for judgment notwithstanding the verdict and for suspension of judgment on the verdict until appellee conveyed to appellant the insured property and assigned to the appellant his rights under the contract for a deed were overruled and judgment entered for the appellee. Several grounds for these motions are assigned as errors on this appeal. They are: (1) That, by reason of the open mortgage clause in this policy and the provisions of Rules 17 and 19 of the Rules of Civil Procedure, the appellee is not entitled to maintain this action; (2) that the action is barred by limitations; (3) that, if the judgment is to stand, appellant is entitled to be subrogated to the rights of appellee under his contract for deed.

1. In this action the appellee seeks to recover only that part of the loss insured which was payable to appellee by the terms of the contract of insurance made by the appellant and Christine Peterson for the benefit of appellee. The sufficiency of the evidence to support the jury's finding that Christine Peterson was not responsible...