Franklin Fire Ins. Co. v. Butts, 124.

• Citation: 42 S.W.2d 559
• Decision Date: 05 October 1931
• Docket Number: No. 124.,124.
• Parties: FRANKLIN FIRE INS. CO. v. BUTTS et al.
• Court: Supreme Court of Arkansas

42 S.W.2d 559

FRANKLIN FIRE INS. CO. v. BUTTS et al.

No. 124.

Supreme Court of Arkansas.

October 5, 1931.

Rehearing Denied November 2, 1931.

Appeal from Howard Chancery Court; C. E. Johnson, Chancellor.

Suit by A. R. Crumb against E. M. Butts and wife and another. From the decree rendered, all the parties appeal.

Affirmed in part, and reversed in part, with directions.

A. R. Crumb filed suit in the chancery court against E. M. Butts and Ellie Butts and the Franklin Fire Insurance Company to garnish the proceeds of a fire insurance policy issued by said company, to be applied to the payment of a deficiency judgment against the defendants E. M. Butts and his wife, Ellie Butts.

The Franklin Fire Insurance Company filed an answer, in which it admitted issuing the policy for $1,500 on the dwelling house to E. M. Butts, and that said policy contained a clause that the amount of loss or damage should be payable to John A. Guthrie Mortgage Company as the holder of a first mortgage on said property, as its interest might appear. The garnishee further stated that the mortgagee claimed an interest in the proceeds of said insurance policy, and denied that it was liable to the plaintiff therefor.

E. M. Butts and Ellie Butts filed an intervention in which they claimed to be entitled to the proceeds of said insurance policy.

The facts in the case are undisputed, and were agreed to between the parties. They stipulated that on July 10, 1929, the Franklin Fire Insurance Company issued a policy on a dwelling house to E. M. Butts for $1,500. The policy contained a clause that, upon the commencement of foreclosure proceedings, or in case any change takes place in the title, interest, or possession of the property, the policy shall be null and void. There was also a mortgage clause in the policy which reads as follows:

"Loss or damage, if any, on building items under this policy shall be payable to John A. Guthrie Mortgage Company, Fort Smith, Arkansas, as first mortgagee (or trustee), as interest may appear, and this insurance, as to the interest of the mortgagee only therein, shall not be invalidated by any act nor 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 any change in the title or ownership of the property," etc.

At the time of the issuance of the policy, there was a mortgage on the land which was the homestead of E. M. Butts and his wife, Ellie Butts, to the John A. Guthrie Mortgage Company for $3,000. On June 20, 1924, said mortgage company assigned its mortgage and notes to A. R. Crumb. The mortgagor made default in the payment of the mortgage indebtedness; and on September 18, 1929, A. R. Crumb commenced a foreclosure suit against E. M. Butts and Ellie Butts, his wife, in the chancery court. On the 4th day of November, 1929, judgment was rendered in favor of the plaintiff against the defendants in said foreclosure suit for the amount of the mortgage indebtedness; and at the foreclosure sale the property was bought in by A. R. Crumb for $3,250, leaving a deficiency judgment in favor of the plaintiff against the defendants in the sum of $1,475.55. The Guthrie Mortgage Company, after the assignment of said mortgage to Crumb, went out of business. A. R. Crumb is claiming as garnishee creditor and not under the mortgage clause or as assignee of the mortgage. The dwelling house insured was the home of E. M. Butts and his wife.

It was further agreed that the land was sold for taxes in 1926 for the taxes of the year 1925. A deed was executed to the tax purchaser, and he, after the expiration of two years, executed a quitclaim deed to A. R. Crumb for $448. Subsequently, for the years 1927 and 1928, E. M. Butts paid the taxes on the land. Other facts will be stated or referred to in the opinion.

The court found the issues against the plaintiff Crumb and the Franklin Fire Insurance Company and in favor of the defendant E. M. Butts. It was decreed that E. M. Butts have judgment against the insurance company in the sum of $1,386.60, which was the amount of the policy of $1,500, less the premium note for $113.40, with the accrued interest. The chancellor further held that the defendant Butts was not entitled to recover attorney's fees or penalty against the garnishee under the statute. All parties have appealed to this court.

D. D. Terry, of Little Rock, for appellant.

J. M. Jackson and J. S. McConnell, both of Nashville, for appellees.

HART, C. J. (after stating the facts).

It is first contended that A. R. Crumb acquired an interest in the land by the tax sale in 1926 for the taxes of 1925, and that thereafter E. M. Butts was not the sole and unconditional owner of the property, and therefore the fire insurance policy was null and void. We do not agree with counsel for the insurance company in this contention. We set out in our statement of facts the substance of the "sole and unconditional ownership clause" of the policy. We do not deem it necessary to set out the clause in full, for the reason that under the facts of the case we do not think that it has any application. The mortgage foreclosure suit brought by A. R. Crumb against E. M. Butts is reported in 182 Ark. 286, 31 S.W.(2d) 307. According to the pleadings in that case, as will be seen from an examination of the transcript, Crumb did not claim any interest in the land by virtue of his purchase of the tax title, but only asked that he be allowed the sum of $448 paid for the conveyance of the tax title. The defendant contested this, for the reason that the taxes only amounted to about $35. The defendant also contested the foreclosure suit on the ground of usury. Both of these contentions were found against the defendant Butts by the chancery court, and a decree was entered of record accordingly. The decree of the chancery court was affirmed upon appeal. These facts are inferentially shown by the opinion in that case, and are conclusively shown by an examination of the transcript.

But it is claimed that the Franklin Fire Insurance Company was not a party to that suit, and was not bound by the proceedings thereunder. In the first place, the insurance company could not claim any change of interest or ownership in the property which was not claimed by either of the parties to that proceeding.

In the second place, the record in the present case shows that the parties agreed that A. R. Crumb is claiming as garnishee creditor and not under the mortgage clause or as assignee of the mortgage. This shows that the parties agreed that Crumb was only asserting a right to garnishment of the proceeds of the insurance under his deficiency judgment in the foreclosure decree. This is made plain by the allegations of the complaint in the present case. The insurance company cannot claim that Crumb had any other or different interest in the property than that claimed and alleged by himself. This question was expressly adjudicated in favor of Butts in the foreclosure proceeding, and the decree in that case was affirmed upon appeal. Hence we are of the opinion that the policy did not become null and void under the so-called "sole and unconditional ownership clause."

In the present case, the policy contained a loss payable clause in favor of the John Guthrie Mortgage Company, as its interest might appear, and this showed actual knowledge of the mortgage to that company when the policy was issued. The policy having provided what the effect of that clause should be, it precludes any possible idea that the commencement of foreclosure proceedings under the mortgage should render the policy void. The stipulation that the commencement of foreclosure proceedings should render the policy null and void evidently referred to other foreclosure proceedings than that by John A. Guthrie Mortgage Company or its assignee for the policy was made payable to that company as its interest might appear, and further provided that the policy should not be invalidated by any foreclosure of the property or by any change in title or ownership under the mortgage. In the forfeiture clause of the policy, among other things, it is stipulated that, if the property or any part thereof shall hereafter become mortgaged or incumbered, or upon the commencement of foreclosure proceedings, without the written consent of the insurer, the policy shall be...