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TALMAN FEDERAL SAVINGS & LOAN ASSOCIATION v. AMERICAN STATES INSURANCE COMPANY AND WILLIAM H. ROBERSON

MAY 01, 1985

TALMAN FEDERAL SAVINGS & LOAN ASSOCIATION
v.
AMERICAN STATES INSURANCE COMPANY AND WILLIAM H. ROBERSON



BEFORE PATTERSON, HAWKINS AND PRATHER

HAWKINS, JUSTICE, FOR THE COURT:

Talman Federal Savings & Loan Association (Talman) appeals from an adverse decree of the Chancery Court of the First Judicial District of Hinds County in favor of American States Insurance Company (American States) and William H. Roberson.

The chancellor held American States was obligated to pay Talman the amount due it under a note and deed of trust as of the date of a fire which destroyed an insured house, and that upon such payment Talman would be obligated to assign all its rights to the note and deed of trust to American States.

 The chancellor also held that Roberson was entitled to fee simple title to the realty because he had rebuilt the house following a contract for sale between himself and the owners.

 Talman has appealed, arguing that the chancellor was in error in restricting the amount due it from the insurance carrier as of the date of the fire; and making no allowance for subsequently accruing interest and attorney's fees, as provided in the deed of trust.

 American States has cross-appealed alleging that

 in view of the house being restored, Talman suffered no loss. We find no merit in the cross-appeal and reverse and render as to it.

 We also find the chancellor erred in restricting Talman's recovery, under the facts of this case, to all sums due it under the note and deed of trust as of the date of the fire.

 We further find that Roberson's interest in or title to this property is subordinate to all rights in the holder of the note and deed of trust.

 We remand on the direct appeal for proceedings consistent with this opinion.

 FACTS

 On November 19, 1976, Bernard A. Bast and Kathleen Bast executed a purchase money note and deed of trust covering a house and lot in Jackson in favor of Fidelity Mortgage Company, the deed of trust being filed of public record on November 24, 1976, and duly recorded on the deed records of the First Judicial District of Hinds County. This note and deed of trust were assigned to Talman on December 8, 1976, and the assignment filed of public record on February 2, 1977, and also recorded on the deed records.

 On December 9, 1977, this property was conveyed by warranty deed from the Basts to Edwin Valle and his wife Johnnie R. Valle expressly subject to the deed of trust, which was assumed by the grantees. The promissory note, for which the deed of trust was security, was in the principal sum of $31,000 and provided for monthly installments of $260.16, payable on the first of every month, beginning January 1, 1977, and ending December 1, 2001. The Valles paid the monthly payments on this note through September, 1980.

 On June 29, 1980, American States issued a fire insurance policy insuring the house for the maximum sum of $55,000. Talman was named as the mortgagee beneficiary in the policy. The policy covered a period from June 29, 1980, to June 29, 1983.

 On April 9, 1981, when the policy was in force, the house was substantially destroyed by fire.

 There was an investigation by the Jackson Fire

 Department, following which Valle was arrested and charged with arson. Valle made a claim on June 4, 1981, with American States for the fire loss. On June 9, 1981, American States, as authorized by the policy, examined Valle and Mrs. Valle under oath and refused to pay the claim.

 American States made inquiry of Talman regarding the pay-off on the note and deed of trust, and on July 8, 1981, Talman wrote American States the amount then due, namely $32,431.31. American States refused to pay Talman.

 Talman had been making demand on the Valles for payment on the note and deed of trust, and was preparing to institute foreclosure proceedings on August 14, 1981, against the realty. On August 11, 1981, the Valles filed a Chapter 11 Petition for Voluntary Bankruptcy in the United States Bankruptcy Court, Jackson division.

 On October 28, 1981, the Valles filed a Bill of Complaint in the First Judicial District of Hinds County, naming as defendants American States and Talman. The Bill of Complaint acknowledges the indebtedness of Talman and claims American States wrongfully refused to pay the insurance claim for the fire loss. The prayer for relief asks for judgment against American States for a fire loss of $53,000, and that Talman be enjoined from foreclosing until such time as the complainants are accorded a reasonable time to repair the damages.

 Talman answered on February 2, 1982, acknowledging the debt, that foreclosure proceedings were in progress when the bankruptcy petition was filed, and alleging it was entitled to all indebtedness and interest under the note and deed of trust as well as reasonable attorney's fees of twenty-five percent of the amount in controversy. Talman made a cross-bill against the Valles alleging that in event the court determined the Valles were entitled to recovery that the judgment be jointly in favor of the Valles and Talman; also, in the event the court found the Valles were not entitled to judgment that the court render judgment in favor of Talman. Talman also alleged that in such latter event, Talman would be entitled to foreclose and proceed against the Valles for any indebtedness remaining after receipt of the insurance proceeds.

 Talman also made a cross-bill against American States for recovery under the policy as mortgagee, for all amounts due under the note and deed of trust, including

 interest, and an attorney's fee of twenty-five percent of the amount of the decree.

 The cause was set for trial on September 13, 1982, and on September 1, 1982, American States filed an answer to Talman's cross-bill. American States admitted it had refused to pay Talman" after it learned that the insured dwelling has been fully restored to a condition better than it was in prior to the fire, "and that Talman's security" has likewise been fully restored and there being no loss or damages within the meaning of the policy . . . "

 On September 10, 1982, Roberson filed a motion to intervene in the action, which was sustained during trial. Attached to the motion were an affidavit and petition. The affidavit alleged Roberson entered into a contract for sale of the realty on December 24, 1981, deposited $3,000 in cash as earnest money, with an obligation to pay the Valles the $19,000 balance of the purchase price over a period of twelve years. The affidavit also alleged Roberson had invested approximately $45,000 in materials and services restoring the property.

 Roberson's petition likewise alleges the $45,000 investment in materials and services, that it was done in good faith and based upon a representation from Valle that fee simple title would vest in him within a year from date of the contract; that the Valles and Talman were aware ...


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