Lunceford v. Monumental Life Ins. Co.

• Citation: 641 So.2d 244
• Parties: James O. LUNCEFORD v. MONUMENTAL LIFE INSURANCE COMPANY, et al. 1921612.
• Decision Date: 04 March 1994
• Court: Alabama Supreme Court

Page 244

641 So.2d 244

James O. LUNCEFORD v. MONUMENTAL LIFE INSURANCE COMPANY, et al.

1921612.

Supreme Court of Alabama.

March 4, 1994.

Rehearing Denied April 22, 1994.

Jonathan E. Lyerly and Robert O. Driggers, Birmingham, for appellant.

James C. Huckaby, Jr., Stephen L. Poer, Charles A. McCallum III and R. Scott Williams of Haskell Slaughter Young & Johnston Professional Ass'n, Birmingham, for appellees.

INGRAM, Justice.

This appeal arises from a declaratory judgment action concerning insurance proceeds that resulted from fire damage to James Lunceford's property.

The dispositive issues on this appeal are: whether the trial court's orders of November 20, 1991, and January 13, 1992, constituted a final judgment; whether Monumental Life Insurance Company ("Monumental"), a comortgagee on the property, was appropriately awarded attorney fees for its efforts to enforce its mortgage contract; and whether the trial court properly entered a summary judgment against Lunceford on Lunceford's claim that Monumental converted an insurance check belonging in part to Lunceford.

In 1986 Lunceford obtained the property from Eleanor McDaniel through a second mortgage. The property, an apartment building, was encumbered by a 1974 mortgage to Monumental and Chubb Life Insurance Company ("Chubb"). Lunceford obtained casualty loss insurance on the property through American Liberty Insurance Company ("American"). The building burned. The property sustained a fire loss. After examining the damage from the fire, American issued $183,872 in insurance proceeds for coverage of the loss. As comortgagees, Monumental and Chubb elected to apply the proceeds toward the debt that Lunceford owed, pursuant to their mortgage contract. The mortgage contract in question requires that hazard insurance be maintained on the property, and it provides:

"In the event of loss, Mortgagors will give immediate notice by mail to the Mortgagees, who may make proof of loss, if not made promptly by the Mortgagors, and each insurance company concerned is hereby authorized and directed to make payment for such loss directly to Mortgagees instead of to the Mortgagors and Mortgagees jointly; and the insurance proceeds, or any part thereof, may be applied by the Mortgagees, at their option, either to the reduction of the indebtedness hereby secured or to the restoration or repair of the property damaged."

(Emphasis added.)

Lunceford then filed a declaratory judgment action against Monumental, Chubb, McDaniel, and American in the Jefferson County Circuit Court; he sought a judgment declaring that he was entitled to use the proceeds to rebuild the damaged building. Monumental and Chubb counterclaimed for a declaration that the proceeds had to be applied, pursuant to their election, toward the mortgage debt. American paid the proceeds into court.

On November 20, 1991, the trial court granted Monumental and Chubb's summary judgment motion, holding that they, as comortgagees, were entitled to apply the insurance proceeds toward the mortgage debt. The trial court also granted American's motion for an order discharging it from liability and awarding it attorney fees, but reserved the issue of the fee amount until a later date. The trial court did not certify the November 20 order as final pursuant to Rule 54(b), A.R.Civ.P., and did not tax costs.

While the declaratory judgment action was pending before the trial court, Lunceford was rebuilding the burned building. Under Lunceford's insurance contract with American, the reconstruction made Lunceford eligible for further insurance proceeds. On January 6, 1992, American issued another fire loss check of $77,631.21, payable to Monumental, a real estate company, McDaniel, and Lunceford. Monumental received the check. The proceeds related to the same fire loss and the same insurance policy as the earlier $183,872 payment.

On January 13, 1992, the trial court entered an order determining the amount of attorney fees to be paid to American and distributing the $183,872 to Monumental and Chubb. The trial court did not certify the January 13 order as final pursuant to Rule 54(b), A.R.Civ.P., and did not tax costs.

After discussing the second fire loss check (for $77,631.21), attorneys for Monumental and Lunceford agreed that Monumental would exchange the second insurance check for a check from Lunceford in an amount calculated to pay both the remainder of the mortgage debt and the attorney fees for Monumental. The checks were exchanged. However, the settlement negotiations eventually failed, and Monumental returned Lunceford's settlement check, and Lunceford gave the $77,631.21 check back to Monumental. Monumental's attorney wrote to Lunceford's attorney on February 21, 1992, suggesting that the $77,631.21 be deposited by American into court:

"I have yet to hear from you regarding my January 22, 1992, letter. Obviously, I do not want to be left in the position of holding onto the fire loss check indefinitely, particularly since your client is entitled to at least a portion of the proceeds.

"Please let me know if it is acceptable with your client to advise the insurance company of the dispute and to request that the insurance company deposit the funds in dispute with the Court."

On March 4, 1992, Lunceford filed another declaratory judgment action, this time in the Shelby County Circuit Court. On March 24, 1992, Monumental and Chubb amended their counterclaims in the Jefferson County action to include a claim to the proceeds of the second check. American paid the amount of the second fire loss check into the Jefferson County Circuit Court. Lunceford petitioned this Court for a writ of mandamus directing the Jefferson County Circuit Court to relinquish its jurisdiction on the matter; we denied that petition on October 9, 1992. The Shelby County action was dismissed on December 21, 1992.

Lunceford then amended his complaint in the Jefferson County action to allege conversion against Monumental, based on Monumental's handling of the second fire loss check. On June 10, 1993, the trial court entered a...