SOUTHERN DISCOUNT CORP. v. St. Paul Fire & Marine Ins. Co., Civ. A. No. 72H-39(R)

• Decision Date: 08 January 1974
• Docket Number: Civ. A. No. 72H-39(R),72H-40(R).
• Citation: 368 F. Supp. 1378
• Parties: SOUTHERN DISCOUNT CORPORATION, Plaintiff, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Defendant. SOUTHERN DISCOUNT CORPORATION, Plaintiff, v. AMERICAN EMPLOYERS' INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Mississippi

368 F. Supp. 1378

SOUTHERN DISCOUNT CORPORATION, Plaintiff, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Defendant.

SOUTHERN DISCOUNT CORPORATION, Plaintiff, v. AMERICAN EMPLOYERS' INSURANCE COMPANY, Defendant.

Civ. A. Nos. 72H-39(R), 72H-40(R).

United States District Court, S. D. Mississippi, Hattiesburg Division.

January 8, 1974.

Sebe Dale, Jr., Columbia, Miss., for plaintiff.

Dorrance Aultman, Hattiesburg, Miss., for defendants.

OPINION OF THE COURT

DAN M. RUSSELL, Jr., Chief Judge.

The two above styled cases have been consolidated by order of this Court and submitted on the pleadings, a stipulation of fact, oral argument and on briefs, a trial on the merits having been waived by all parties.

Plaintiff, the owner of real property in Marion County, Mississippi, sustained a fire loss on February 6, 1972, to a one-story, brick building located on said property, an auto accessory and home appliance store occupying a major portion of the building and a dry cleaning establishment occupying a minor part. At the time of the fire there was in full force and effect Policy No. 186 AC 1341 in the sum of $50,000.00 issued by St. Paul Fire & Marine Insurance Company, defendant in Cause No. 72H-39(R) above, covering the one-story, brick, approved roof building occupied by the auto and home appliance store, and insuring plaintiff as owner and Citizens Bank, Columbia, Mississippi, as mortgagee. There was also in effect at the time of the fire Policy No. A-G-11661-39, issued by American Employers' Insurance Company, defendant in Cause No. 72H-40(R), in the sum of $10,000.00 covering that portion of the building occupied by the dry cleaning shop, and Policy No. A-G-11678-26, issued by the same defendant in the sum of $90,000.00 covering that portion occupied by the auto accessory and home appliance store, both policies insuring plaintiff and First Federal Savings & Loan Association of McComb, McComb, Mississippi, as mortgagee.

Plaintiff filed a separate suit against each of the two insurers in the Circuit Court of Marion County, Mississippi, alleging that the insured premises were totally destroyed by fire at a time when said premises had a market value of $262,000.00; and that, although plaintiff had complied with all policy requirements of notice and proof of loss, each defendant had refused to honor its policy and pay the sums provided for in the policies.

Each defendant separately removed its case to this Court on grounds of diversity of citizenship, and on motion of plaintiff and defendants the actions have been consolidated. The mortgagee and trustee, originally named as defendants in the respective actions, were re-aligned as plaintiffs, Citizens Bank and William C. Callender, trustee, in Cause No. 72H-39(R), and First Federal Savings & Loan Association of McComb and Louis Alford, trustee, in Cause No. 72H-40(R).

Plaintiff has amended its complaint in each cause to charge that the respective defendants have wilfully refused to honor their policies by paying the sums due and have resorted to delay tactics by asserting an option to replace the building with like quality and material. Plaintiff in each case seeks not only the full amounts of the policies, but interest in the amount of 9½% per annum from 90 days subsequent to the fire loss, this being the amount of interest plaintiff has been required to pay its mortgagees, attorney fees of $15,000.00 in each case, and punitive damages, $75,000.00 in Cause No. 72H-39(R), and $150,000.00 in Cause No. 72H-40(R).

Both defendants, represented by the same counsel, have interposed similar defenses. Defendants deny that plaintiff has stated a cause of action, deny that the building was totally destroyed, and aver that each has the option under the respective policies to repair or replace said building, the replacement cost being less than the policy amounts.¹ Defendants also deny that plaintiff is entitled to interest, attorney fees or punitive damages.

As stated above, the parties have waived a trial on the issues and have submitted the consolidated actions to the Court on the pleadings, a stipulation, oral argument and briefs. By way of stipulation, plaintiff and defendants agree that the Court has jurisdiction of the parties and of the subject matter. They stipulate that the aforesaid policies were in effect on plaintiff's building at the time of the fire on February 6, 1972, covering a one-story, brick building, with an approved roof, occupied in major part by an auto accessory and home appliance store, and in minor part by a dry cleaning establishment. They stipulate that said property was subject to a deed of trust in favor of First Federal Savings and Loan Association of McComb, McComb, Mississippi, beneficiary, and Louis Alford, trustee, securing a promissory note in the original amount of $225,000.00. Copies of the policies, note and deed of trust are exhibits to the stipulation. The parties stipulate that the fire of February 6, 1972, damaged the insured property as shown by six photographs attached as exhibits to the stipulation. They stipulate that, following the fire, plaintiff gave the required proof of loss as required by the policies. They further stipulate that the insured plaintiff takes the position that it is entitled to the face amount of the policies as provided by the "valued policy" statute, being Section 5693, Mississippi Code of 1942, whereas the defendant insurance companies contend that they are entitled to replace the property as provided in Lines 141 through 147 of the respective policies.

The Court has examined the photographs of the damaged premises and finds that the one story building is totally destroyed. Only a portion of one wall remains. If the premises shared a party wall with...