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07/11/96 SMITH v. ROZIER

July 11, 1996

SMITH
v.
ROZIER



Before Thomas, P.j., Coleman, And Hinkebein, JJ.

The opinion of the court was delivered by: Coleman, J., For The Court:

BOBBY ARNOLD SMITH, APPELLANT v. NADINE ROZIER, APPELLEE

THIS OPINION IS NOT DESIGNATED FOR PUBLICATION AND MAY NOT BE CITED, PURSUANT TO M.R.A.P. 35-B

TRIAL JUDGE: HON. FRANK G. VOLLOR

COURT FROM WHICH APPEALED: WARREN COUNTY CIRCUIT COURT

NATURE OF THE CASE: CIVIL - INSURANCE

TRIAL COURT DISPOSITION: FIRE INSURANCE PROCEEDS APPORTIONED BETWEEN POLICY HOLDER AND BUSINESS TENANT

DISPOSITION DECLARATORY JUDGMENT OF THE WARREN COUNTY COUNTY COURT REVERSED - 6/30/98

A complaint for declaratory judgment which the appellee, Nadine Rozier, filed in the County Court of Warren County initiated this litigation. Its subject was the sum of $39,707.98 which Aetna Life and Casualty Company (Aetna) ultimately interpleaded into the registry of that court as its settlement of a claim for indemnification for the loss of a building by fire which Rozier owned, Smith occupied, and Aetna had insured. Smith had procured Aetna's coverage of the building at Rozier's behest in anticipation of his buying the building from Rozier for $40,000. Rozier and Smith anticipated that Rozier would finance Smith's purchase of her building and would secure his debt by a deed of trust to be executed by Smith when they consummated the transaction. The Warren County County Court awarded the entire sum of $39,707.98 to Rozier, and Smith appealed to the Warren County Circuit Court. The Warren County Circuit Court awarded Smith $1,363 and Rozier the balance of $38,637. Smith has appealed to contend that the county court erred by awarding Rozier any of the settlement and that the circuit court erred by awarding him only $1,363 of Aetna's settlement. We affirm in toto the judgment of the Warren County County Court.

I. FACTS

A. As established beyond dispute or by the parties' stipulations

Nadine Rozier owned the lot located at 4173 Highway 80 upon which both her home and the shop which burned on March 15, 1995, are located. Rozier and Smith are first cousins. Also, Smith had married Rozier's husband's first cousin. Smith, who did business as C & S Windows and Doors, had used this shop since 1990 with Rozier's permission to store materials for his business of manufacturing and selling windows and doors. In 1993, Rozier, whose husband had died, decided to sell the shop, and Smith and she negotiated for Smith's purchase of the shop and lot on which it was located. Beginning with the month of June 1993, Smith paid Rozier the sum of $350 per month until the building burned on March 15, 1996. *fn1 On December 1, 1994, Smith obtained a fire insurance policy from Aetna which insured the shop against loss by fire for a maximum amount of $40,000. Rozier was made the mortgagee beneficiary of the policy. However, Smith never concluded his purchase of the shop from Rozier before it burned on March 15, 1995.

After the fire, Aetna paid Smith $25,000 to indemnify him for the loss of his contents in the shop. Aetna also delivered to Rozier and Smith its check payable to both of them for $39,707.98. Because Rozier and he could not agree on the manner of dividing this sum between them, Smith refused to endorse the check. Smith's refusal to endorse Aetna's check for $39,707.98 precipitated this litigation.

B. Rozier's version of subsequent events

When Smith learned that Rozier intended to sell the shop, he visited a Vicksburg attorney, with whom he discussed the proposed transaction. Perhaps because the lot on which the shop was located was a part of Rozier's lot on which her house was located, a survey was needed to ascertain the description of the lot for inclusion in the deed and deed of trust, both of which were necessary to conclude the transaction. Rozier placed the responsibility for obtaining the survey on Smith, but regardless of who was responsible for obtaining the survey, it was never prepared. However, at trial Rozier testified that Smith's attorney prepared some of the legal instruments and documents needed to close her sale of the lot and shop to Smith.

Rozier further testified on direct examination that in June 1993 Smith began to pay her $350 per month as rent "on a month-to-month basis" for the shop until the survey and closing papers could be prepared. Thus, Rozier considered these monthly payments of $350 to be rent which Smith owed for his use of her shop. However, under Smith's counsel's cross-examination, Rozier further testified that "[Smith] was getting credit for the three-fifty towards the financed price of the forty thousand." Her answers on direct and cross-examination about the purpose of Smith's monthly payments of $350 are at best inconsistent.

Rozier insisted that Smith obtain insurance on the shop "because if something happened to it, I'd just lose a shop. He wouldn't have the money to pay... for it." Smith procrastinated in obtaining insurance coverage on the building. According to Rozier, Smith would tell her, "When I get the money, I'm going to pay it." In the latter part of September or early part of October 1994, wind blew a tree across the entrance to the ground floor of Rozier's home. It cost Rozier $50 to have it removed. This calamity motivated Rozier to tell Smith "that either he was going to have to get out or get insurance." Smith responded to Rozier's ultimatum by first obtaining an insurance policy with coverage against loss by fire in the amount of $25,000, but he soon obtained another policy with coverage in the amount of $40,000. Rozier acknowledged that she received copies of both policies from the agent who had provided Smith with the two policies.

C. Smith's version of subsequent events

Smith testified that when he bought both insurance policies from his agent, he instructed the agent to list him as "the named insured" and Rozier as "the mortgagee beneficiary." However, Smith acknowledged on direct examination that Rozier could not have become the mortgagee beneficiary until he signed a deed of trust, or mortgage, in the process of concluding the transaction with Rozier. When his counsel inquired about the nature of his interest in the building, Smith explained, "I was operating a business out of it, and I, you know, I had paid about $7,000 on the purchase price of the building." When Smith's counsel asked him, "Well, did you tell her that if the building was ever burned up or destroyed by windstorm, you'd build it back for her?," Smith replied, "No, Sir, that never come [sic] up."

Smith also explained that he had purchased the second policy with coverage in the amount of $40,000 because "[t]he first one wasn't enough to cover the mortgage on the property." When his counsel asked him, "Did you ever agree with Mrs. Rozier, Linda Smith, or anybody else to insure any interest in this building for Mrs. Rozier other than her expected mortgage?," Smith answered, "I insured the mortgage on the building." Then Smith's counsel asked his client, "Did you ever agree to do more than that?" Smith replied, "No." Finally, Smith contended in his testimony that he obtained the insurance policy "to protect his interest" in the building -- not Rozier's.

II. LITIGATION

In her complaint for declaratory judgment filed in the County Court of Warren County, Rozier requested that "the check issued by [Aetna], payable to Bobby Arnold Smith d/b/a C&S Windows and Doors and Nadine Rozier in the amount of $39,707.98 be adjudicated the monies of Nadine Rozier as full payment and satisfaction for the damages to Plaintiff's building as a matter of law." Smith responded to Rozier's complaint by filing a counterclaim and cross claim against Rozier and Aetna in which he prayed "that this court will enter judgment declaring him to be solely entitled to the benefits payable under the insurance policy for said fire loss, and further ordering [Aetna] to pay the sum of $39,707.98 exclusively to [him]." Rozier responded to Smith's counterclaim against her by raising several affirmative defenses, among which were:

(1) Smith's promise that he "would insure the interest of [Rozier] in the subject property against loss or damage by fire" as part consideration of the continued lease of the shop;

(2) there was "no enforceable obligation on the part of [Rozier] to convey the [shop to Smith;"

(3) Smith's "insurable interest" when the insurance was purchased was "that of lessee under an oral lease agreement, from month to month;" and

(4) Smith's agreement that he "would restore and repair as part consideration of his continued lease of the [shop], the premises if damaged or destroyed by fire and that [Smith] would purchase insurance, insuring the interest of [Rozier] in an amount to cover the costs of any restoration and/or repair."

Prior to the bench trial in this case, the Judge entered an agreed order by which Aetna's original check payable to Smith and Rozier was canceled, but Aetna's second check in the same amount "should be tendered into the registry of this court where it will remain until the dispute between Nadine Rozier and Bobby Arnold Smith can be resolved." The agreed order further provided that once Aetna tendered the settlement funds into the court's registry, "Aetna should be dismissed from this action with prejudice...."

At the Conclusion of what the trial Judge described as a "relatively short" trial, which lasted "about three hours," he opined as follows:

The Court feels that it would be, finds by clear and convincing evidence that it was intended for Plaintiff [Rozier] to be covered under the policy. Although some of the terms and the way she was placed on that policy were erroneous, the Court finds that by clear and convincing evidence, that any other ruling than to give Mrs. Rozier the proceeds under that portion of the policy that has to do with the building, the Court feels would be a gross miscarriage of Justice, in light of the facts the Court heard. So that will be the ruling of the Court.

Pursuant to the foregoing opinion, the county court Judge entered a declaratory judgment in which he made the following two findings of fact:

1. That the evidence is clear and convincing that it was intended that the interest of Nadine Rozier in the building owned by Nadine Rozier be covered under that certain policy of insurance....

2. That the manner in which Plaintiff [Rozier] was named in the policy was erroneous and that Plaintiff should have been named as owner of the property in the policy.

Pursuant to these two findings, the trial Judge ordered "that Nadine Rozier be, and she hereby is, declared to be entitled to the $39,707.98 in insurance proceeds tendered into the registry of this Court, plus all interest...from the date hereof, and costs."

Smith appealed the declaratory judgment to the Warren County Circuit Court. The circuit court entered its order in which it modified the declaratory judgment of the county court by awarding Smith $1,363 and Rozier the balance of $38,637. The circuit court opined that "Smith as conditional vendee had an insurable interest even though the contract was unenforceable under the Statute of Frauds.... Likewise, Rozier had an insurable interest even though she was listed as mortgagee and not vendor or owner." Citing Fry v. Jordan Auto Company , 224 Miss. 445, 80 So. 2d 53 (1955), the circuit Judge then opined that "[w]here the parties agreed as in this case 'that one of the parties shall keep the property insured for the benefit of the other, each is entitled to a proportionate interest in the proceeds of insurance.'" The circuit Judge then concluded that "[t]he proportionate interest is to be ...


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