Firstbank Shinnston v. West Virginia Ins. Co.

• Decision Date: 25 July 1991
• Docket Number: No. 19760,19760
• Citation: Firstbank Shinnston v. West Virginia Ins. Co., 185 W.Va. 754, 408 S.E.2d 777 (W. Va. 1991)
• Court: West Virginia Supreme Court
• Parties: FIRSTBANK SHINNSTON, a West Virginia Banking Corporation, Plaintiff Below, Appellee, v. WEST VIRGINIA INSURANCE COMPANY, a Corporation; and Frank W. Maley, Jr., Defendants Below, Appellants.

Page 777

408 S.E.2d 777

185 W.Va. 754

FIRSTBANK SHINNSTON, a West Virginia Banking Corporation Plaintiff Below, Appellee, v. WEST VIRGINIA INSURANCE COMPANY, a Corporation; and Frank W. Maley, Jr., Defendants Below, Appellants.

No. 19760.

Supreme Court of Appeals of West Virginia.

Submitted May 14, 1991.

Decided July 25, 1991.

Syllabus by the Court

1. If a fire insurance contract between an insurer and a property owner includes a standard mortgage clause naming as mortgagee the lender under a deed of trust executed by the property owner to secure a debt owing on the property, the lender under the deed of trust pursuant to that clause has an independent and distinct contract with the insurer, as if the lender under the deed of trust had taken out a separate policy with the insurer, and is deemed to be an insured to the extent of the balance due it from the property owner.

2. "A motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law." Syl. pt. 3, Aetna Casualty & Surety Company v. Federal Insurance Company of New York, 148 W.Va. 160, 133 S.E.2d 770 (1963).

3. "Whenever a policyholder substantially prevails in a property damage suit against its insurer, the insurer is liable for: (1) the insured's reasonable attorneys' fees in vindicating its claim; (2) the insured's damages for net economic loss caused by the delay in settlement[;] and [ (3) ] damages for aggravation and inconvenience." Syl. pt. 1, Hayseeds, Inc. v. State Farm Fire & Cas., 177 W.Va. 323, 352 S.E.2d 73 (1986).

4. "Where attorney's fees are sought against a third party, the test of what should be considered a reasonable fee is determined not solely by the fee arrangement between the attorney and his [or her] client. The reasonableness of attorney's fees is generally based on broader factors such as: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the undesirability of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases." Syl. pt. 4, Aetna Casualty & Surety Co. v. Pitrolo, 176 W.Va. 190, 342 S.E.2d 156 (1986).

David A. Sims, Michele W. Good, Wallace, Ross and Harris, Elkins, for appellants.

David J. Romano, Clarksburg, for appellee.

Catherine D. Munster, John E. Basilone, Clarksburg, for amicus curiae, West Virginia Ass'n of Mut. Ins. Companies.

McHUGH, Justice:

The appellant, West Virginia Insurance Company, seeks to have this Court reverse the order of the Circuit Court of Harrison County granting summary judgment in favor of the appellee, Firstbank Shinnston, and set aside the judgment entered against it in the amount of $36,740.75. Upon review of the record before us, we conclude that the order of the circuit court should be affirmed.

I

In May of 1985, Frank W. Maley, Jr., executed a simple interest note wherein he agreed to repay a loan to Firstbank in the amount of $20,000.00 plus interest. The loan was secured by a deed of trust dated May 7, 1985, wherein Mr. Maley conveyed certain real estate to trustees to secure payment of the $20,000.00 loan to Firstbank. Mr. Maley also agreed in the deed of trust to keep the premises insured against loss by fire. He subsequently obtained an insurance policy from West Virginia Insurance in the amount of $25,000.00. ¹ Firstbank was listed on the policy as mortgagee. ²

Although Mr. Maley paid the first full year's premium at the time he purchased the policy, he failed to pay an additional $30.00 premium for what is termed "extended coverage." On November 14, 1985, West Virginia Insurance mailed a notice of cancellation to Mr. Maley advising him that he had not paid the $30.00 premium for extended coverage, and that he would have ten days within which to make the payment. A copy of the notice sent to Mr. Maley was mailed to Firstbank since it was listed as mortgagee on the policy. However, the copy of the notice sent to Firstbank was returned to West Virginia Insurance with the handwritten notation "no record" on it.

Before the ten-day period specified in the notice of cancellation had expired, Mr. Maley paid the $30.00 premium for extended coverage. Another copy of the notice of cancellation previously sent to Mr. Maley was mailed to Firstbank, but this notice included a statement that Mr. Maley had paid the premium and that the policy was still in effect. It appears that this notice was also returned to West Virginia Insurance with the handwritten notation "no record." West Virginia Insurance then removed Firstbank from the insurance policy as mortgagee. There is nothing in the record which indicates that West Virginia Insurance ever notified Firstbank that its interest as the named mortgagee was being canceled.

The policy was subsequently renewed for another term of one year. However, in February, 1987, there was a fire at Mr. Maley's premises. Thereafter, Mr. Maley filed a notarized proof of loss in which he indicated that there was no other secured interest in the property. ³ On the basis of an estimate prepared by Heflin Contracting and an itemization prepared by an adjuster for West Virginia Insurance, Mr. Maley was paid a total of $18,000.00 by West Virginia Insurance. ⁴

Mr. Maley failed to repair the property and, as a result, West Virginia Insurance canceled his policy on May 25, 1987. Mr. Maley also defaulted on his deed of trust with Firstbank. Subsequently, Firstbank made demands upon Mr. Maley and West Virginia Insurance to pay it all sums due in accordance with the deed of trust and the insurance policy. Upon refusal to pay, Firstbank filed a complaint against them. In its answer to the complaint, West Virginia Insurance filed a cross-claim against Mr. Maley. West Virginia Insurance was subsequently unable to locate Mr. Maley and filed for a default judgment against him.

Both parties moved for summary judgment prior to trial, and the circuit court granted summary judgment on the issue of liability in favor of Firstbank. The circuit court also scheduled a hearing on Firstbank's claim for attorney's fees and costs. Following the hearing, the circuit court entered a final order awarding Firstbank $20,000.00 for damage to the structure, $11,073.75 in attorney's fees and costs, and prejudgment interest in the amount of $5,667.00, for a total judgment in the sum of $36,740.75. It is from this order that West Virginia Insurance now appeals.

II

West Virginia Insurance first contends that summary judgment was improperly granted in this case since a question of fact exists as to whether there was any fault of West Virginia Insurance or its agent in the removal of Firstbank as the mortgagee listed on the policy. Firstbank asserts that there were no material facts in dispute upon which West Virginia Insurance could have relied to support an effective cancellation of Firstbank's interest in the insurance policy.

Although Firstbank was listed on the policy as mortgagee, it is actually the lender for which the deed of trust was executed to secure payment of the $20,000.00 loan by the insured, Mr. Maley. However, a deed of trust is in effect a mortgage, the primary difference being the manner in which it is foreclosed. Rock v. Mathews, 35 W.Va. 531, 536, 14 S.E. 137, 139 (1891). ⁵

In Sandusky v. Faris, 49 W.Va. 150, 174, 38 S.E. 563, 573 (1901) (quoting Hoffman, Burneston & Co. v. Mackall, 5 Ohio St. 124, 130-31 (1855)), we recognized the distinction between a mortgage and a deed of trust in the nature of a mortgage:

A mortgage is the conveyance of an estate, or pledge of property, as security for the payment of money, or the performance of some other act, and conditioned to become void upon such payment or performance. A deed of trust in the nature of a mortgage, is a conveyance in trust by way of security, subject to a condition of defeasance, or redeemable at any time before the sale of the property. A deed conveying land to a trustee as mere collateral security for the payment of a debt when due, and with power to the trustee to sell the land and pay the debt, in case of default on the part of the debtor, is a deed of trust in the nature of a mortgage.

The deed of trust in the case before us is a deed of trust in the nature of a mortgage. ⁶ However, because cases from other jurisdictions, discussions in texts and treatises, and, in fact, some of the documents in this case refer to mortgages, we shall apply the legal concepts relating to mortgages to deeds of trust for purposes of resolving this case.

On the first page of the policy issued to Mr. Maley by West Virginia Insurance was a clause providing that loss on building items was to be paid to Firstbank, listed as mortgagee, subject to the provisions of the mortgage clause. The mortgage clause in the insurance policy issued to Mr. Maley provides, in relevant part:

Loss or damage, if any, under this policy, shall be payable to the mortgagee (or trustee), named on the first page of this policy, as interest may appear under all present or future mortgages upon the property herein described in which the aforesaid may have an interest as mortgagee (or trustee) in order of precedence of said mortgages, and this insurance, as to the interest of the mortgagee (or trustee) only therein, shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property, nor by any foreclosure or other proceedings or notice of sale relating to the property, nor by...