Greco v. Oregon Mut. Fire Ins. Co.

• Decision Date: 28 April 1961
• Citation: 191 Cal.App.2d 674,12 Cal.Rptr. 802
• Court: California Court of Appeals Court of Appeals
• Parties: Joseph GRECO, Judson Flickinger, and J. R. Konkel and Fern Konkel, husband and wife, Plaintiffs, Cross-Defendants and Respondents, v. OREGON MUTUAL FIRE INSURANCE COMPANY, Defendant, Cross-Complainant and Appellant. Civ. 6508.

Page 802

12 Cal.Rptr. 802

191 Cal.App.2d 674

Joseph GRECO, Judson Flickinger, and J. R. Konkel and Fern Konkel, husband and wife, Plaintiffs, Cross-Defendants and Respondents, v. OREGON MUTUAL FIRE INSURANCE COMPANY, Defendant, Cross-Complainant and Appellant.

Civ. 6508.

District Court of Appeal, Fourth District, California.

April 28, 1961.

Long & Levit, Bert W. Levit and David C. Bogert, San Francisco, for appellant.

Lerrigo, Thuesen, Thompson & Thompson and Donald Thuesen; Thomas F. Lopez and Floyd H. Hyde, Fresno, for respondents.

COUGHLIN, Justice.

This is an appeal from a judgment in an action for declaratory relief seeking a determination of rights under a fire insurance policy. The plaintiffs, respondents herein, Greco, Flickinger and Konkel, respectively, were the vendor, vendee and encumbrancer of improved real property. The defendant, appellant herein, Oregon Mutual Insurance Company, sued as Oregon Mutual Fire Insurance Company, was the insurer under a policy of fire insurance issued to Greco, as owner, covering the improvements on that property. The policy of insurance was issued to Greco in 1955 and contained a loss-payable clause in favor of Konkel who was the beneficiary under a $7500 deed of trust against the property. On May 13, 1958, Greco, through escrow instructions, agreed to sell the property to persons named Ream and Fink for $10,935.83; Ream and Fink agreed to assume the $7500 trust deed in favor of Konkel and to execute a note secured by a second trust deed in favor of Greco for $3435.83; the buyers were to 'receive rentals due as of June 1, 1958'; fire insurance was to be prorated to June 1, 1958; and the escrow was to be completed within 30 days. At this time the trust deed obligation in favor of Konkel had been reduced to $4935.83. However, as a condition to the deal Konkel was to reloan $2564.17 to Greco, thus restoring the trust deed amount to $7500. Although this condition was not set forth in the foregoing escrow instructions, Konkel executed separate instructions whereby he agreed to advance the money in question; deposited $1500 to be paid to Greco forthwith; but required 45 days within which to raise the balance of the money. Contemporaneously, also through separate escrow instructions, Ream and Fink agreed to sell the property to Flickinger for $16,335.83; Flickinger agreed to assume the $7500 obligation payable to Konkel, the $3435.83 obligation payable to Greco and to execute a note for $5400 payable to Ream and Fink; the buyer was to receive the rentals due as of June 1, 1958; fire insurance was to be prorated as of June 1, 1958; and the escrow instructions were to be completed within 30 days. Deeds which would effect conveyances in accord with the foregoing agreements were deposited in the respective escrows by Greco and by Ream and Fink.

On June 7, 1958, before completion of the escrows, a fire destroyed the building on the subject property and the loss incurred was fixed by the defendant insurance company's adjuster at $19,000.

The parties had intended that the Greco fire insurance policy should be transferred to Flickinger, the ultimate purchaser. However, an assignment thereof, by its terms, could be made only with the written consent of the insurance company and this consent was never obtained.

After the fire Flickinger expressed concern about the status of the fire insurance; the escrow agreements provided that any party to the escrow could terminate the transaction upon failure of completion within the prescribed 30 day period; but upon assurance from the escrow agent that a transfer of the existing insurance always is approved, Flickinger went ahead with the deal; completion was effected June 23, 1958; the deeds theretofore deposited in escrow were delivered and recorded; the rentals and insurance premiums were prorated as agreed; and the fire policy was submitted to the defendant company for transfer but, as heretofore noted, its consent thereto never was obtained.

Two days before the fire Flickinger obtained a fire insurance policy from the Gulf Insurance Company covering the premises in question which insured him to the extent of $10,300, with loss payable to Konkel and Greco as encumbrancers. After the fire and completion of the escrow this company paid the proceeds of this policy to Flickinger, Konkel and Greco, resulting in full payment of the Konkel obligation and reduction of the Greco obligation to $1000.

After the fire the defendant insurance company's adjuster fixed the fire loss at $19,000; was told of the pending escrows and the contemplated transfer of his company's policy to Flickinger; advised that he, the adjuster, would prepare necessary proofs of loss within the prescribed period but alter, and before expiration of that period, retracted his offer. In the meantime, the adjuster had asked for and received copies of all of the documents in the escrow files. On June 24, the escrow holder, by letter, had advised the defendant company of the transfer of the property to Flickinger.

The subject insurance policy requires the insured to file a proof of loss within 60 days. Within this time, i. e., on August 6, 1958, Flickinger filed such a proof, using the form prescribed by the insurance company therefor; identified himself therein as the insured, stating that his interest in the property at the time of the loss was as owner thereof and that no other person had an interest therein except Konkel and Greco; and noted the $10,300 insurance policy obtained from the Gulf Insurance Company. On August 8, the defendant company, through their attorneys, advised Flickinger that his proof of loss was defective because it stated that he was the insured and that no assignment of the policy had been made, whereas the policy showed Greco to be the insured; and also because it stated that he was the owner of the property and at the same time stated that no change in interest in the property had occurred since the issuance of the policy. Thereupon, the attorneys for Flickinger and for the insurance company exchanged communications which, in substance, resulted in a declaration by the latter of their belief that the defendant company was not liable to Flickinger because he was the owner of the property and had not obtained its consent to an assignment of the policy to him before the loss occurred. Thereafter, Flickinger filed another but similar proof with the defendant in which he stated that the policy had been assigned to him by Greco through the aforesaid escrows. Forthwith the company denied Flickinger's claim upon the ground that it never had consented to the assignment. It should be noted that, at all times since June 24, 1958, the defendant had full knowledge of the true situation respecting the status of the property. Under date of November 24, Greco filed a proof of loss in which he stated, among other things, that at the time of the fire the property was in the 'process of being sold to Judson Flickinger'. This proof of loss was rejected because it was not filed in time as well as for other reasons. Thereupon Flickinger, Greco and Konkel brought the present action for declaratory relief, resulting in a judgment against the company in favor of Flickinger for the policy amount of $7200, from which the present appeal was taken.

The defendant contends that the judgment should be reversed because (1) Flickinger was the owner of the premises at the time of the fire and the company had not consented to an assignment of the policy to him; (2) that Greco was a 'mortgagee' within the meaning of the policy and under its terms the defendant was subrogated to his mortgage claim against the 'mortgagor', Flickinger, and that Greco destroyed this right of subrogation by acceptance of a payment upon his mortgage, and for this reason he may not recover upon the policy; (3) in a contradictory vein, that Greco, as owner and vendor of the subject premises, had a cause of action against Flickinger, which Flickinger could not avoid on account of the fire because he had gone into possession of the property and thereby assumed any risk of loss by fire, and that the company was entitled to this cause of action under the principle of equitable subrogation but Greco destroyed it by accepting payment and, therefore, is barred from recovery upon his policy; (4) that Greco's insurable interest at the time suit was filed had been reduced to $1000 and any recovery by him should be limited to this amount; (5) that Greco was guilty of misrepresentation and false swearing in his proof of loss which voided the policy; (6) that he failed to file his proof of loss within time; and (7) that Flickinger was not the real party in interest.

The trial court found that Greco was the owner of the premises in question at the time of the fire. This finding is fully supported by the evidence.

'It is the general rule that where conditions fixed for delivery of a deed are not such as are certain to happen, merely depositing the deed with an escrow holder does not pass title to the grantee.' Vierneisel v. Rhode Island Ins. Co., 77 Cal.App.2d 229, 231, 175 P.2d 63, 64; Estate of Erskine, 84 Cal.App.2d 323, 331, 190 P.2d 659.

In this case, although Greco had deposited his deed in escrow, the transaction was subject to completion of the Konkel loan and the issuance of a policy of title insurance; his deed had not been delivered to the named grantee before the fire occurred; and, therefore, he was the owner at that time. The defendant company contends that a different rule should apply here because the grantee had gone into possession of the property. This contention is not factually sound. The escrow instructions merely provided that the rents should be prorated as of June 1; there was no agreement that the grantee might take possession on that date; and there is no evidence that Ream and Fink attempted to exercise any right to possession of the property. Although the evidence shows...