Summary
In Alberstadt, the defendant Alberstadt, owner of the property, obtained fire insurance coverage for a parcel of real property that was subsequently sold at a sheriff's sale to recoup unpaid property taxes.
Summary of this case from St. Paul Fire Marine v. Placement Fac.Opinion
November 21, 1955.
January 6, 1956.
Insurance — Fire insurance — Sale of insured property — Sheriff's sale — Loss occurring between sale and settlement — Separate policies covering record owner and sheriff's vendee — Proration of loss.
1. Where it appeared that the owner of real estate had a $3,500 fire insurance policy with company A, that the property was sold at sheriff's sale for delinquent taxes and the purchaser promptly obtained fire insurance in the amount of $2,500 from company B, that thereafter but prior to the delivery of the sheriff's deed a fire loss occurred in the amount of $3,175; and it further appeared that the original owner of the property never exercised her statutory right of redemption, it was Held that (1) the original owner was entitled to recover from company A $3,175, (2) in view of the fact that the original owner had no valuable interest in the insured property she was not entitled to retain any portion of said $3,175, and (3) since the purchaser was entitled to the $3,175 he could not recover the amount of his own policy from company B, and (4) the total recovery of $3,175 should be paid by the two insurance companies in the proportion of the amounts of their respective policies of $3,500 and $2,500. [557-62]
2. Although the person who has legal title to real property may initially recover for a fire loss under the terms of his insurance policy, in order to retain any portion of the proceeds as against the vendee he must establish that he has some valuable interest in the insured property beyond the mere ownership of the legal title, and he is not entitled to keep for himself any of the proceeds beyond the extent of that interest. [559-60]
Argued November 21, 1955. Before STERN, C. J., STEARNE, JONES, BELL, MUSMANNO and ARNOLD, JJ.
Appeals, Nos. 277, 287, 288 and 312, Jan. T., 1955, from judgments and order of Court of Common Pleas No. 5 of Philadelphia County, June T., 1953, No. 10532, in case of Insurance Company of North America and Empire Mutual Insurance Company v. Rose Alberstadt and D. Mullen Patterson. Order and judgments reversed.
Proceedings upon petition for declaratory judgment.
Order entered directing payment of damages to defendants by their respective insurance carriers, opinion by REIMEL, J. Plaintiffs, and defendant Patterson, appealed.
Robert B. Ely, III and Barrett Godwin Tawresey, with them Gerald J. Haas and Gerber Galfand, for plaintiffs, appellants.
E. C. Shapley Highley, with him Spiegel Highley, for defendant appellant.
Samuel Melnick, with him Robert B. Ely, III, and Gerald J. Haas, for appellees.
Samuel Melnick and E. C. Shapley Highley for appellees.
In this declaratory judgment proceeding we are called upon to determine, in a somewhat unusual factual situation, the obligations of two insurance companies under policies issued by them, and also the respective rights of the parties insured thereby. The facts are as follows:
A declaratory judgment proceeding is permissible in this case by way of analogy to Pa. R. C. P. 2229 and in order to avoid the unsatisfactory situation which would result from the institution of two separate suits as occurred in Dunsmore, Receiver v. Franklin Fire Insurance Co., 299 Pa. 86, 149 A. 163.
Rose Alberstadt (hereinafter called Alberstadt) was the owner of premises 2004 St. Albans Street in the City of Philadelphia, and on December 26, 1951, she obtained from the Empire Mutual Fire Insurance Company of Pennsylvania (hereinafter called Empire Company) a fire insurance policy thereon in the amount of $3,500. On February 2, 1953, her property was sold at sheriff's sale for delinquent taxes to D. Mullen Patterson, (hereinafter called Patterson) for the sum of $2,600. Four days later, on February 6, 1953, Patterson obtained from the Insurance Company of North America (hereinafter called North America Company) a coverage of fire insurance on the premises in the amount of $2,500. On February 28, 1953, a fire occurred which damaged the property to the extent of $3,175. On March 2, 1953, Patterson paid the sheriff the amount of his bid, and on March 11, 1953, the sheriff's deed for the property was acknowledged by the Prothonotary and lodged for record.
While both the Alberstadt and the Patterson policies gave the companies an option to liquidate their obligations thereunder by repairing or rebuilding the property, they lost that right by not asserting it within the time therein stipulated. Alberstadt thereupon demanded the full amount of the loss, $3,175. from Empire Company, and Patterson demanded the full amount of his policy, $2,500. from North America Company. The court below entered such judgments. The companies are willing, by proration between themselves, to pay the amount of the loss, $3,175. to the party or parties entitled thereto, but not to meet the larger joint demands of Alberstadt and Patterson.
By virtue of the Act of May 16, 1923, P. L. 207, § 32, Alberstadt had one year from the date of the acknowledgment of the sheriff's deed to redeem her property upon reimbursing Patterson for the $2,600. paid by him and all costs, charges, and expenses, plus interest at the rate of ten per centum per annum thereon. This right of redemption, not having been exercised by Alberstadt, expired on March 11, 1954.
Since Alberstadt, at the time of the fire, still retained the legal title to the property, she was entitled, under the terms of her policy, to recover from Empire Company the amount of the damage to the property caused by the fire, namely, $3,175.; Empire Company could not take advantage of the fact, as far as its relations, with Alberstadt were concerned, that the equitable title had passed to Patterson, that being a circumstance which affected only the relations between Alberstadt and Patterson: Insurance Company v. Updegraff, 21 Pa. 513; Reed v. Lukens, 44 Pa. 200; Dubin Paper Company v. Insurance Company of North America, 361 Pa. 68, 63 A.2d 85; Heidisch v. Globe and Republic Insurance Company of America, 368 Pa. 602, 84 A.2d 566; Vogel v. Northern Assurance Company, Ltd., 219 F.2d 409.
The problem then arises as to the extent to which, if at all, Alberstadt, as between herself and Patterson, is entitled to retain the amount thus recoverable by her. In each of the Updegraff, Reed v. Lukens, Dubin Paper Company, and Vogel cases above cited the insured entered into an agreement of sale of the property covered by his policy and between the time of the agreement and the time fixed for settlement a loss by fire occurred. As already stated, those cases, as well as the Heidisch case in which there was a condemnation of the property by eminent domain, all held that the insured could recover from the insurance company the full amount of the loss, but they also held that upon such recovery he became the trustee for the vendee of the proceeds of the policy, this being on the theory that while, until settlement, he remained the legal owner of the property, the entire beneficial interest had passed to the vendee upon execution of the agreement of sale. While, therefore, there may be an initial recovery by the vendor, in order to retain any portion of the proceeds as against the vendee he must establish that he has some valuable interest in the insured property beyond the mere ownership of the legal title, and he is not entitled to keep for himself any of the proceeds beyond the extent of that interest: Sweeny v. The Franklin Fire Insurance Company, 20 Pa. 337, 342; Moving Picture Company of America v. Scottish Union and National Insurance Company of Edinburgh, 244 Pa. 358, 364, 90 A. 642, 644, 645; Dunsmore, Receiver v. Franklin Fire Insurance Co., 299 Pa. 86, 149 A. 163; Heidisch v. Globe and Republic Insurance Company of America, 368 Pa. 602, 604, 84 A.2d 566, 567.
In the present case Alberstadt is, in a sense, a vendor of the property, albeit an involuntary one, the sale having been effected through the medium of the sheriff. But the situation is somewhat different from the ordinary case of vendor and vendee in that there the vendor's interest in the property ceases entirely upon payment of the purchase money and execution of the deed, whereas here Alberstadt retained a right of redemption after the legal title passed to Patterson. Did that right entitle her to retain for herself any portion of the proceeds recoverable from Empire Company? Since she had the right to regain title to the premises for the sum of $2,600 and all costs, charges and expenses, plus ten per centum per annum thereon, she had an interest of value therein to the extent, and only to the extent, that the property may have been worth more than that amount, but the record does not contain any averment as to the value of the property, and, in the absence of such an averment, the amount for which the property was sold by the sheriff at public sale must be accepted as the prima facie value of the property. Moreover, the value of the right of redemption, depending as it did not only upon a theoretical appraisal but whether or not it would actually be exercised, could not have been ascertained at the time of the fire, but now, on the principle of "certum est quod certum reddi protest," since it appears that the right was not in fact utilized no real value can be ascribed to it. In short, the law will not suffer Alberstadt to retain any portion of the $3,175 merely because of a right of redemption which she did not exercise and thereby enable her to profit by a recovery which represented no loss whatever to her but, instead, one that was really suffered by Patterson as the equitable owner of the property when the fire occurred and subsequently the legal owner thereof.
This brings us to the final problem involved in the case. Since Patterson is entitled to the $3,175 for which Alberstadt must account to him, may he also recover the amount of his own policy, $2,500, from North America Company? The answer to this question must be in the negative. Since fire insurance is only a contract of indemnity and its object is not to permit a gain by the insured but only to compensate him for a loss, it is obvious that he cannot recover insurance in an amount greater than the loss which he sustained. If he himself had had policies in these two insurance companies he could not, of course, have collected from either or both of them more than the amount of the damage occasioned by the fire, and the companies, under the pro rata clauses of their policies would have been entitled to prorate the loss. It is true that, ordinarily, double insurance occurs only when the assured makes two or more insurances on the same subject, the same risk, and the same interest: Vrabel v. Scholler, 369 Pa. 235, 243, 85 A.2d 858, 862; Yanko v. Standard Fire Insurance Co., 31 Pa. Super. 1; Swoope v. United States Fire Insurance Company, 87 Pa. Super. 349, 352. Here, however, virtually the same situation exists, because if Patterson were allowed recovery of the proceeds of both policies he would likewise be enjoying the fruit of two insurances on the same subject, the same risk, and the same interest, namely his own, and in an amount greater than his actual loss, which, as already stated, the law will not permit. His recovery is limited, therefore, to the sum of $3,175 which will be paid by the insurance companies in the proportion of the amounts of their respective policies of $3,500 and $2,500.
This determination of the rights and obligations of the parties is not only in accord with applicable legal principles but accomplishes a just result in that Patterson will recover the amount of the loss actually sustained by him while Alberstadt will receive nothing because in reality she sustained no loss whatever by the fire; the liability of the two insurance companies will properly be limited to the amount of the damage occasioned by the fire (cf. Dunsmore, Receiver v. Franklin Fire Insurance Co., 299 Pa. 86, 149 A. 163) and they will prorate their respective liabilities therefor in accordance with the terms of their policies.
It is the same result that was reached in Dubin Paper Company v. Insurance Company of North America, 361 Pa. 68, 63 A.2d 85, only in that case the terms of the proration were agreed upon by the insurance companies.
The order and judgments of the court below are reversed, and the record is remanded with direction to enter a judgment in favor of Alberstadt, Trustee for Patterson, against Empire Company in the sum of $3,175, and an order directing North America Company to pay to Empire Company five-twelfths of that amount. Costs to be divided equally among the appellants.