Imperial Mortg. Corp. v. Travelers Indem. Co. of Rhode Island

• Decision Date: 26 July 1979
• Docket Number: No. 78-1219,78-1219
• Citation: 43 Colo.App. 74,599 P.2d 276
• Parties: IMPERIAL MORTGAGE CORPORATION, a Colorado Corporation, Plaintiff- Appellant, v. The TRAVELERS INDEMNITY COMPANY OF RHODE ISLAND, a Rhode Island Corporation licensed in Colorado, Defendant-Appellee. . I
• Court: Colorado Court of Appeals

Page 276

599 P.2d 276

43 Colo.App. 74

IMPERIAL MORTGAGE CORPORATION, a Colorado Corporation Plaintiff- Appellant, v. The TRAVELERS INDEMNITY COMPANY OF RHODE ISLAND, a Rhode Island Corporation licensed in Colorado, Defendant-Appellee.

No. 78-1219.

Colorado Court of Appeals, Div. I.

July 26, 1979.

Galchinsky & Silverstein, Herbert H. Galchinsky, Denver, for plaintiff-appellant.

Michael J. Barbo, Denver, for defendant-appellee.

COYTE, Judge.

Plaintiff appeals from a summary judgment which held that when a mortgagee bid the full amount owed on its mortgage at a foreclosure sale, it thereby extinguished any insurable interest which it had in the property. It could not thereafter recover from the fire insurance carrier for damages to the property caused by a fire on the property prior to the foreclosure sale. We affirm.

William J. Miller owned property in Jefferson County and had a $15,000 loan from plaintiff which was secured by a note and deed of trust. Miller also had a policy of fire insurance with defendant, Travelers Indemnity Company, which policy named plaintiff as mortgagee. The policy provided that: "(D)amage, if any to buildings insured . . . shall be payable to the mortgagee or (trustee) named in the declarations as interest may appear."

Miller had a fire on his premises and sustained $9,216 damage to the property which through inadvertence was not paid by Travelers to plaintiff, but was paid instead to Miller. Miller subsequently defaulted in making payments on his note, and plaintiff thereupon foreclosed on the note through the Public Trustee of Jefferson County. At the foreclosure sale plaintiff bid the property in for the total amount due under the mortgage including interest and costs. The note was cancelled, and a deed was eventually issued by the Public Trustee to plaintiff. Plaintiff ultimately sold the property for approximately $9,000 less than it had bid for the property at the foreclosure sale, and then brought this suit against Travelers for the amount of the damages to the property covered by defendants insurance policy, that being the amount which had previously been paid to Miller.

Travelers alleged as an affirmative defense that plaintiff's insurable interest in the property had been terminated. Each party filed a motion for summary judgment. There is no factual dispute. The trial court held that:

"(T)he plaintiff, by bidding the full amount of the indebtedness, with interest and costs, by receiving deed and title to the property, thus taking the property in full satisfaction of the debt, terminated its interest in the insurance proceeds and cannot maintain an action to recover under the mortgage interest certificate of Defendant's policy."

A mortgagee extinguishes its rights to further proceeds from the mortgagor following the satisfaction of the mortgage held on the property, and here the entire debt was satisfied when the full amount was bid and accepted on the mote. Plains Loan, Realty & Investment Co. v. Hood, 76 Colo. 322, 230 P. 1008 (1924). See also Christian v. Jewell, 82 Colo. 222, 257 P. 1082 (1927).

As stated in International Trust Co. v. Stearns Investment Co., 87 Colo. 31, 285 P. 169 (1930):

"The situation was the same as though a stranger had purchased the property at the foreclosure sale, paying therefor . . . the full amount of the principal indebtedness, with interest thereon, after first paying the costs and expenses of sale."

Plaintiff argues that the wording of the policy, which provides that "the mortgagee's interest shall not be invalidated by any foreclosure or other proceedings...