Cook v. American States Ins. Co.

• Decision Date: 30 November 1971
• Docket Number: No. 1070A174,No. 1,1070A174,1
• Citation: 275 N.E.2d 832,150 Ind.App. 88
• Parties: Michael L. COOK, Defendant-Appellant, v. AMERICAN STATES INSURANCE COMPANY, Plaintiff-Appellee
• Court: Indiana Appellate Court

Page 832

275 N.E.2d 832

150 Ind.App. 88

Michael L. COOK, Defendant-Appellant, v. AMERICAN STATES INSURANCE COMPANY, Plaintiff-Appellee.

No. 1070A174.

Appellate Court of Indiana, Division No. 1.

Nov. 30, 1971.

John L. Carroll, Charles C. Griffith, Johnson & Carroll, Evansville, for appellant.

Mark W. Gray, Howard J. DeTrude, Jr., John T. Lorenz, Kightlinger, Young, Gray & Hudson, Indianapolis, for appellee.

LOWDERMILK, Judge.

This action was originally brought by American States Insurance Company against Donald Lee McIntire and Michael L. Cook on a note which was secured by a mortgage and to foreclose the mortgage. That suit was dismissed and the suit at bar was brought solely against Michael L. Cook, the appellant herein.

The facts are, briefly, that on and prior to May 1, 1962, the defendant-appellant, Michael L. Cook, was the owner of a three acre tract of land lying in Vanderburgh County, Indiana, upon which a dwelling was situated. Cook had purchased the land on November 5, 1958, and sold it to McIntire about May 1st, 1962. Prior to May 1, 1962, defendant-appellant Cook had mortgaged said real estate to First Federal Savings & Loan Association of Evansville, which we shall hereafter refer to as the 'Loan Association', in the principal sum of $6,800.

Defendant-appellant Michael L. Cook conveyed said tract of real estte by warranty deed to the defendant Donald Lee McIntire, which deed provided that it was 'Subject to the unpaid balance of $5,679.77 due the Loan Association * * * which said mortgage the grantee assumes and agrees to pay.'

This deed to McIntire was made with the knowledge and consent of the Loan Association.

Although defendant-appellant Cook was in the insurance business, McIntire elected that Cook cancel his insurance and he bought a fire policy from another agent, which was accepted by the Loan Association to protect their interest through the note and mortgage.

On or about May 29, 1962, the dwelling on the premises was totally destroyed by fire. McIntire made claim to the plaintiff-appellee under his fire policy, which was declined, but payment was made by the insurance company to the Loan Association in the sum of $5,781.46, which was the balance due on the mortgage at that time. This was in compliance with the proof of loss form filed by the Loan Association with the plaintiff-appellee. Following the payment of said sum to the Loan Association, upon request of plaintiff-appellee American States Insurance Company, the Loan Association assigned all its mortgage rights to said insurance company.

Thereafter, the insurance company made demand upon defendant-appellant for payment of the balance due on the promissory note which was secured by his mortgage when he purchased the real estate and which he declined to pay.

This was followed by the appellee American States Insurance Company filing suit to foreclose the mortgage against both McIntire and Cook in Vanderburgh County. Thereafter, the suit was dismissed by the insurance company in a dismissal entry which recited 'The defendant Donald Lee McIntire has transferred his interest in the property and is no longer entitled thereto' and upon motion of the appellee insurance company the cause was dismissed as to the defendant Donald Lee McIntire. This dismissal came eight days after McIntire quitclaimed all his right, title and interest in and to said real estate to Mark W. Gray, attorney at law, acting for and representing the appellee American States Insurance Company as their attorney in this cause, as trustee for said insurance company, the appellee herein.

Following the dismissal of said original suit for foreclosure against McIntire and Cook, the appellant herein, appellee American States Insurance Company filed a new suit in the Vanderburgh Circuit Court on July 17, 1964 against Cook, which suit was entitled 'Complaint for Foreclosure of a Mortgage', but the allegations of the complaint, together with the prayer, were solely for the purpose of recovering judgment on a promissory note executed by Michael L. Cook to the Loan Association and allegedly assigned by such Loan Association to appellee American States Insurance Company. This assignment was done at the time American States Insurance Company had the title to the property covered by the mortgage which was security for the note and at such time said title was being held for them by their said trustee, Mark W. Gray, one of their attorneys.

Trial was to the court without a jury, which found for the plaintiff, that plaintiff was entitled to recover of and from the defendant Cook the sum of $5,281.46 with interest at the rate of 6% after December 28, 1962, and entered judgment thereon accordingly.

Appellant timely filed his motion for new trial and requested oral argument, which was had and the finding was taken under advisement by the court on the 18th day of December 1968.

The motion for new trial was not ruled upon until August 7, 1970, and at that time the court ruled adversely to defendant-appellant.

All of this brings us to a problem under the Supreme Court Rules which became effective January 1, 1970, as this cause was tried before the adoption and apparently the lawyers were in a quandary as to whether to file an assignment of errors under the old Rules or file some form of pleading to try to comply with the motion to correct errors under the new Rules. The record is silent on this; however, Mark W. Gray, on April 19, 1971, wrote appellant's attorney a letter which is set out in appellant's reply brief, confirming a telephone conversation between counsel to the effect that no technical question would be raised as to the form of motion for new trial and that that ground would not be placed at argument and would, if necessary, be waived before the court. It further stated that their position was that the matter should be determined on its merits. In oral argument neither the appellant nor the appellee made mention of this and any problem which may have been presented was waived.

Although this letter is in the reply brief it is not a part of the record, and the lawyers in this case being men of integrity, and there having been such great confusion at the time of the transition from the old Rules to the new, we are proceeding to hear this appeal rather than try to dispose of it on some technical error, as the briefs are sufficient so that we can ascertain what the errors relied upon are.

In defendant-appellant's motion for new trial there were five questions raised, with memorandum applying thereto containing eight specifications. And now we find that defendant-appellant relies on the fist two specifications of the motion for new trial, namely, (1) the decision of the court is not sustained by sufficient evidence, and (2) the decision of the court is contrary to law. The memorandum portion of the motion for new trial, which contains the eight specifications, reads as follows, to-wit:

'The decision of the Court is not sustained by sufficient evidence and is contrary to law in the following particulars:

'1. Plaintiff is no longer the owner of any rights against the defendant, plaintiff having settled and released the principal debtor, Donald Lee McIntire.

'2. By the acceptance of the deed from Donald Lee McIntire the mortgage and the indebtendess secured thereby were merged.

'3. The record shows as a matter of law the plaintiff has been fully paid and the obligation satisfied.

'4. Plaintiff has wholly failed to show that it has any subrogation rights against the defendant. The payment by the plaintiff to the mortgage holder was a payment in discharge of its contractual obligation under its policy of insurance and not the purchase of the mortgage obligations, so that such payment by plaintiff was satisfaction and discharge of the mortgage obligation and there remains, therefore, no debt for which the defendant was liable.

'5. The record affirmatively shows that under the facts in this case Donald Lee McIntire was the principal obligor and the defendant was, at best, a surety. The plaintiff has failed to pursue either the principal obligor or the land which was the principal fund out of which the debt should be paid.

'6. The release of McIntire by the acceptance of the quit-claim deed and the dismissal of the lawsuit against McIntire amounted to a release of the defendant herein.

'7. The plaintiff has wholly failed to bring itself within the subrogation clause of its policy, in that there was no evidence from which the Court could determine that the plaintiff was justified in denying liability to Donald Lee McIntire under its insurance contract. On the contrary, the record affirmatively shows that denial of liability was not based upon suspected arson.

'8. The acceptance of the deed by plaintiff from McIntire merged the fee with the mortgage interest, thus extinguishing the mortgage. Plaintiff has thus effectually precluded defendant from asserting any rights agianst McIntire, since: (a) the mortgage interest has since been merged, and (b) plaintiff released McIntire from liability under the note and mortgage.

'Oral argument respectfully requested.'

It is the contention of defendant-appellant that when McIntire purchased the three acre tract by warranty deed and by the terms of such deed McIntire assumed and agreed to pay the mortgage to the Loan Association that when McIntire, the grantee of the deed, assumed and agreed to pay his grantor's mortgage, the relationship between the grantee and the grantor becomes one of principal and surety respectively. In support of this contention defendant-appellant cites Hancock v. Fleming (1885), 103 Ind. 533, 535, 3 N.E. 254, 255, in which the court said:

"The difference between the purchaser's assuming the payment of the mortgage, and simply buying subject to the mortgage, is simply that in the one case he makes himself personally liable for the payment of the debt, and in the other case he does not assume such...