Southern Mississippi Planning and Development v. ALFA General Insurance Corporation ( 2000 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2000-CA-01193-SCT
SOUTHERN MISSISSIPPI PLANNING AND DEVELOPMENT DISTRICT, A
MISSISSIPPI NON-PROFIT CORPORATION AND A PLANNING AND DEVELOPMENT
DISTRICT
v.
ALFA GENERAL INSURANCE CORPORATION
DATE OF JUDGMENT: 05/26/2000
TRIAL JUDGE: HON. WILLIAM L. STEWART
COURT FROM WHICH APPEALED: GEORGE COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT: WILLIAM W. ABBOTT, JR.
HUGH D. KEATING
ATTORNEYS FOR APPELLEE: THOMAS C. ANDERSON
DAVID M. OTT
NATURE OF THE CASE: CIVIL - REAL PROPERTY
DISPOSITION: AFFIRMED - 07/19/2001
MOTION FOR REHEARING FILED:
MANDATE ISSUED: 8/9/2001
BEFORE BANKS, P.J., WALLER AND COBB, JJ.
WALLER, JUSTICE, FOR THE COURT:
¶1. This is a contest between lien creditors concerning the priority of their secured position in real property
located in Lucedale, George County, Mississippi, on which, during better times, a business known as
Kennedy Furniture Company operated. Peoples Bank (Peoples) and Southern Mississippi Planning and
Development District (the District) loaned money to the Kennedys with Peoples having a first mortgage.
After a fire loss of questionable origin, ALFA General Insurance Company (ALFA) denied payment to
Kennedy, but paid off all of the Peoples Bank loan and all but approximately $20,000 of that owing to the
District.
¶2. Believing it had been subrogated to the priority position of Peoples, ALFA sought judicial foreclosure
of real property in the Chancery Court of George County and joined the District. The District filed an
answer and counterclaim, asserting that a deed of trust held by the District was in a first lien priority position
as compared with the assigned deed of trust held by ALFA. ALFA and the District filed motions for
summary judgment, which were considered by the court along with a "Joint stipulation of the facts"
submitted by the parties. The trial court ruled for ALFA and against the District, finding that the deed of
trust held by ALFA had rank and priority over the deed of trust held by the District. The final judgment was
certified under M.R.C.P. 54(b), the Court finding no just reason for delay. Feeling aggrieved, the District
appeals raising the following two issues:
I. WHETHER THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT
TO ALA?
II. WHETHER THE TRIAL COURT ERRED IN FAILING TO GRANT THE
DISTRICT'S MOTION FOR PARTIAL SUMMARY JUDGMENT?
¶3. Finding no error with the trial court's grant of summary judgment to ALFA, we affirm.
FACTS
¶4. The facts of this case are undisputed and taken from the factual findings set forth in the judgment of the
trial court. In June of 1996, Steven L. Kennedy d/b/a Kennedy Furniture Co. borrowed from Peoples the
sum of $87,535.50 and secured the repayment of the obligation with a deed of trust on real property
located in George County, Mississippi. Kennedy also borrowed $87,500.00 from the District and secured
the repayment of the loan with a second deed of trust on the same property.
¶5. As required by the terms of both deeds of trust, Kennedy purchased from ALFA a policy of insurance
covering the property, contents and all improvements. Both Peoples and the District were specifically listed
under the ALFA policy as mortgagees. The policy contained the following language transferring to ALFA
the rights of Peoples, the mortgage holder, to the extent of any payments made to Peoples:
If we pay the mortgage holder for any loss or damages and deny payment to you because of your
acts or because you have failed to omply with the terms of this policy:
(7) The mortgage holder's rights under the mortgage will be transferred to us to the extent of the
amount we pay; and
(8) The mortgage holder's right to recover the full amount of the mortgage holder's claim will not be
impaired.
¶6. In February of 1997 fire destroyed the insured property. ALFA denied liability for any amounts to
Kennedy. Notwithstanding this denial, ALFA, as required by Miss. Code Ann.§ 83-13-7 &- 9 (1999),
paid to Peoples the sum of $85,367.86, which represented the then outstanding balance of the obligation
owed by Kennedy to Peoples. Likewise, ALFA paid to the District $64,632.14, which was the sum
remaining under ALFA's policy. This was some $20,000 less that the outstanding balance owed to the
District.
¶7. In connection with its denial of liability to Kennedy, ALFA filed a declaratory action in federal district
court, concerning its rights and liabilities under the policy as pertained to Kennedy.(1) The district court
entered final judgment which: (1) ruled that, ALFA had no liability to Kennedy; (2) awarded ALFA a
judgment against Kennedy for $150,000, the amount of all payments paid by ALFA to Peoples and the
District as mortgagees; (3) ruled that ALFA was entitled to the assignment of any notes and any security
thereof or subrogation rights to the extent provided by Miss. Code Ann. § 83-13-9 (1999); (4) ruled that
ALFA had no obligation to defend or indemnify Kennedy; and (5) provided that the final judgment was not
binding against any person not a party to the lawsuit.
¶8. In August of 1999, Peoples assigned its note and deed of trust to ALFA. With Kennedy in default
under the terms and provisions of both the Peoples and the District's notes and deed of trusts, in September
of 1999, ALFA, claiming status as a priority lien holder, filed a complaint for judicial foreclosure of the
Kennedy property. The District responded, alleging that, as a result of Peoples' assignment to ALFA, its
deed of trust vaulted to the position of first priority, with the deed of trust assigned to ALFA properly
relegated to secondary priority.
¶9. Shortly thereafter, ALFA filed a motion for summary judgment seeking a judgment confirming its status
as a priority lien holder over the disputed deed of trust. The District filed a similar motion, asking the court
to grant it partial summary judgment, declaring its priority in the deed of trust to be paramount to the interest
assigned to ALFA. At the hearing on these two motions, the trial court granted ALFA's motion for
summary judgment, holding that the valid first lien deed of trust assigned to ALFA held priority over the
subordinate deed of trust held by the District, as it was still first in time and first in right, just as it was prior
to the fire. The trial court denied the District's motion for summary judgment, and certified the judgment as
final under M.R.C.P. 54(b).
DISCUSSION
I. WHETHER THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT
TO ALFA?
II. WHETHER THE TRIAL COURT ERRED IN FAILING TO GRANT THE
DISTRICT'S MOTION FOR PARTIAL SUMMARY JUDGMENT?
¶10. The circuit court's grant of summary judgment is reviewed by this Court de novo. Cothern v.
Vickers, Inc., 759 So. 2d 1241, 1245 (Miss. 2000). Rule 56(c) of the Mississippi Rules of Civil
Procedure allows summary judgment where there are no genuine issues of material fact such that the moving
party is entitled to judgment as a matter of law. Hare v. State, 733 So. 2d 277, 279 (Miss. 1999). "The
burden of demonstrating that no genuine issue of material fact exists is on the moving party. To defeat a
motion for summary judgment, the nonmoving party must make a showing sufficient to establish the
existence of the elements essential to his case." Pride Oil Co. v. Tommy Brooks Oil Co., 761 So. 2d
187, 191 (Miss. 2000). "If any triable issues of material fact exist, the lower court's decision to grant
summary judgment will be reversed. Otherwise, the summary judgment is affirmed." Richmond v.
Benchmark Constr. Corp., 692 So. 2d 60, 61 (Miss. 1997).
¶11. ALFA was clearly subrogated to the rights of Peoples. The record reflects that Peoples assigned its
interest in Kennedy's property to ALFA and that the District does not dispute the validity of the first deed
of trust assigned by Peoples to ALFA. Regarding assignments to a payee (ALFA) from a mortgagee
(Peoples), wherein the payee asserts no liability to the owner (Kennedy), the payee is entitled to the full
assignment of the mortgage under Miss. Code Ann. § 83-13-9 (1999), which provides in relevant part as
follows:
Whenever this company shall pay the mortgagee (or trustee) any sum for loss or damage under this
policy and shall claim that, as to the mortgagor or owner, no liability therefore existed, this company
shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the party to
whom such payment shall be made, under all security held as collateral to the mortgage debt, or may,
at its option, pay to the mortgagee (or trustee) the whole principal due or to grow due on the
mortgage with the interest, and shall thereupon receive a full assignment and transfer of the mortgage
and of all other such securities; . . . .
¶12. We have previously addressed the right of an insurer to an assignment under § 83-13-9, as it existed
in 1965,(2) finding that the insurer's right (ALFA) to assignment follows as a matter of law upon payment to
the mortgagee (Peoples). See Great Am. Ins. Co. v. Smith, 252 Miss. 62, 65-66, 172 So. 2d 558, 559
(1965). The general rule in Mississippi is that the right to receive money due or to become due under an
existing contract may be assigned. See Great S. Nat'l Bank v. McCullough Envtl. Servs., Inc., 595
So. 2d 1282, 1286 (Miss. 1992). The assignment may be enforced by the assignee (ALFA)--who
essentially "stands in the shoes" of the assignor (Peoples), taking whatever rights the assignor possessed.
See id. "The logical inversion of this rule dictates that the assignee must acquire all those rights, interests and
remedies available to assignor . . ..," Ford v. White, 495 So. 2d 494, 497 (Miss. 1986).
¶13. Once ALFA paid to Peoples the whole amount due under the note secured by the first deed of trust,
ALFA became entitled to and actually received a full assignment and transfer of the first deed of trust.
Necessarily, ALFA acquired Peoples' status as first in time, first in right. Without attacking the validity of the
assignment, the District argues that its second deed of trust should vault into a higher position than that
assigned to ALFA.
¶14. The District contends that the trial court committed error by ignoring the principles of subrogation and
the "made whole" rule, the express terms of the insurance policy, and precedents of this Court. To support
its position, the District relies heavily on a recent case where we adopted a form of the "made whole" rule.
See Hare, 733 So. 2d at 285. In Hare, a former employee of the State and still insured under the
Mississippi State and Public School Employees' Health Insurance Plan, was involved in a car accident with
an uninsured motorist. The State's health plan paid most of the employee's resulting medical expenses, and
when the employee recovered under his uninsured motorist policy, the State asserted a subrogation claim
against the monies collected by the employee. In adopting the "made whole" rule, we held until the insured
has been fully compensated, there can be no danger of a double recovery, (the general intent of
subrogation), such that the insurer had no claim to the insufficient recovery obtained by the injured
employee. See id.
¶15. Hare is easily distinguishable from the facts currently before the Court. Unlike the matter before us, in
Hare, we addressed equitable subrogation by a health insurer, not a property insurer's statutorily granted
right of assignment. Also, the insured in Hare was an individual who suffered personal injuries. Here, the
District was not an insured, but merely a third-party beneficiary, who willingly entered into a commercial
transaction with knowledge of the risks involved. Further, unlike the insured in Hare, who was not placed in
the same position he occupied prior to injury, the District, as a third-party beneficiary, remained in its same
position as possessor of a second and subordinate deed of trust. Again, Hare involved the issue of
subrogation, whereas here we are dealing with the assignment of Peoples' deed of trust to ALFA.
¶16. As such, our decision in Hare is not applicable to the facts presently before us. We affirm the trial
court's grant of summary judgment to ALFA.
CONCLUSION
¶17. As there is no dispute that ALFA received a valid assignment of Peoples' interest as a first lien holder,
ALFA necessarily stepped into Peoples' shoes, thereby taking priority over the District's subordinate lien.
Therefore, the trial court's judgment is affirmed.
¶18. AFFIRMED.
PITTMAN, C.J., BANKS, P.J., SMITH, MILLS, COBB, DIAZ AND EASLEY, JJ.,
CONCUR. McRAE, P.J., CONCURS IN RESULT ONLY.
1. See ALFA General Ins. Corp. v. Steven Lane Kennedy and Kennedy Furniture Company, Inc.,
Civil Case No. 2:97cv239PG (S.D. Miss.).
2. For this relevant part present day Miss. Code Ann. § 83-13-9 (1999) tracks the same language
contained in Miss. Code Ann. § 5695 (1956).