Cherokee Ins. Co. v. First Nat. Bank of Dalton
| Decision Date | 13 November 1986 |
| Docket Number | No. 73137,73137 |
| Parties | CHEROKEE INSURANCE COMPANY v. FIRST NATIONAL BANK OF DALTON. |
| Court | Georgia Court of Appeals |
C. King Askew, Rome, for appellant.
C. Lee Daniel, III, Dalton, for appellee.
Cherokee Insurance Company filed a declaratory judgment action against appellees Roller Disco of Rome, First National Bank of Dalton, C. Kyle Gravitt and Edgar Lee Cagle, Jr., seeking to determine its liability under a fire insurance contract. The complaint stated that in April 1980, Gravitt purchased by warranty deed certain land on which he intended to construct a roller skating rink, for which he borrowed $300,000 from First National Bank. A promissory note and deed to secure debt were executed in favor of the bank securing the property, which were duly recorded in the deed records of Floyd County. In July 1980, Roller Disco was incorporated as a Georgia corporation, and although Gravitt never transferred the assets used to run the business or ownership of the building, which was insured as his own, the corporation operated a roller skating business on the property. In September 1983, Gravitt purportedly sold all the outstanding common stock of Roller Disco to Cagle, and First National Bank agreed with Gravitt and Cagle to assume Gravitt's loan on the building. Under the agreement signed by Gravitt, individually and doing business as Roller Disco, the bank and Cagle were to assume liability under a promissory note and deed to secure debt between Gravitt and the bank. The bank signed the agreement as mortgagee and Cagle, individually, as purchaser. However, the property was never transferred by Gravitt to Cagle or to any other person or entity.
Even though the property was still owned of record by Gravitt, on September 4 and 5, 1983, Cagle individually executed a promissory note in the amount of $300,000 in favor of Gravitt, naming the borrower as Roller Disco. A deed and a deed to secure debt on the property were recorded showing Roller Disco as the debtor and Gravitt as the secured party, both of which were signed by Cagle as president of Roller Disco. In conjunction with this transaction, appellant Cherokee Insurance Company issued to Roller Disco upon payment of a premium of $1,766 a fire insurance policy in the face amount of $580,000 covering the real estate and improvements on the property, designating First National Bank as mortgagee. The property was destroyed by fire on October 6, 1983; Cherokee subsequently discovered that Gravitt was the owner of record of the insured property and that Roller Disco was not indebted to the bank, as the assumption agreement had been signed by Cagle as an individual. The record discloses that on November 14, 1985, Cagle pled guilty in federal district court to the charge of arson, admitting that he conspired to burn the building and its contents to recover the insurance.
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