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Marbach v. Gnadl

JULY 22, 1966.

CHRISTINE MARBACH, ET AL., PLAINTIFFS-APPELLEES,

v.

FRANK GNADL, ET AL., CITIZENS INSURANCE COMPANY OF NEW JERSEY, A CORPORATION, INSURANCE COMPANY OF NORTH AMERICA, A CORPORATION, AND UNITED STATES FIDELITY AND GUARANTY COMPANY, A CORPORATION, DEFENDANTS. FRANK GNADL AND LIESELOTTE GNADL, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County, Chancery Division; the Hon. DANIEL A. COVELLI, Judge, presiding. Affirmed and remanded.

MR. JUSTICE MCCORMICK DELIVERED THE OPINION OF THE COURT.

The defendants, Frank Gnadl and Lieselotte Gnadl, have appealed from a decree of the Circuit Court of Cook County finding that the plaintiffs, Glenn Marbach and Christine Marbach, as contract vendors of certain improved real estate, were entitled to a lien upon the proceeds of various fire insurance policies. The policies were held in defendants' names only and the proceeds of the policies represented amounts due as a result of fire damage to property covered by contract of sale between the plaintiffs and the defendants.

From the record the following facts appear to be undisputed: The plaintiffs were owners of a tract of land located in Cook County, Illinois, upon which a $30,000 building was located. On November 15, 1959, plaintiffs entered into a written contract with the defendants for the sale of these premises. The consideration to be paid by the purchasers was $35,000, of which $5,000 was paid on the execution of the contract and $500 per month was to paid thereafter; taxes were to be paid by the purchaser. In the contract the defendants agreed "as additional security to keep all buildings on aforesaid premises insured in such company or companies as the said party of the first part may direct for at least the sum of unpaid balance of purchase price." The terms of the contract with reference to the down payment were complied with and the defendants entered into possession of the subject premises.

On about May 11, 1958, Christine Marbach had obtained fire insurance coverage of $15,000 for five years on the building from Insurance Company of North America. On November 19, 1959, at the time of the sale of the subject property, Christine Marbach assigned this policy, by endorsement on the policy, to Frank Gnadl. All subsequent annual premiums were to be paid by the defendants. Thereafter, the Gnadls insured the building by additional policies of fire insurance issued by United States Fidelity and Guaranty Company and Citizens Insurance Company of New Jersey, each policy for five years with $10,000 coverage. These policies, together with the policy from the Insurance Company of North America, gave the insured protection totaling $35,000. The Gnadls retained possession of these policies and were named therein as the sole insureds. On about July 8, 1962, while the Gnadls were in possession of the premises, the building was considerably damaged by fire (the insureds maintain the damage was about $16,000, while the insurance companies contend that the damage did not exceed $7,500). No payment whatsoever was made by the insurance companies on the policies of insurance. The defendants afterwards defaulted in their payments, and on or about September 18, 1962, plaintiffs filed with the Recorder of Cook County a declaration of forfeiture, in accordance with the terms of the contract.

On October 17, 1962, the Marbachs, as plaintiffs, filed a complaint against Frank Gnadl and Lieselotte Gnadl, defendants. The complaint was originally in two counts. In the first count it was alleged that the plaintiffs and defendants had entered into articles of agreement for the purchase of certain described property; that the defendants had failed to make the payments and had failed to pay the real estate taxes as provided in the said agreement; that on September 18, 1962, the plaintiffs filed with the Recorder a declaration of forfeiture; that copies of the agreement and the declaration of forfeiture were annexed to the complaint; and that plaintiffs pray that the interest of defendants be declared null and void and be vacated and set aside as a cloud upon the title of the plaintiffs. An answer was filed by the Gnadls to Count I of the complaint, in which answer they admit that they failed to make the payments provided for in the purchase contract. Count II of the complaint will be discussed later.

On January 6, 1964, the Circuit Court of Cook County entered an order which set forth the fact that the parties had entered into the contract for the sale of the described real estate, and that the plaintiffs had filed their declaration of forfeiture; the order stated that the answer of the defendants to Count I of the complaint admitted that if the agreement for warranty deed should be determined and adjudged to be duly forfeited and determined because of the declaration of forfeiture, then the defendants would have no right, title or interest in and to the said parcel of improved real estate. The court also found that the "said written contract is hereby declared null and void, and that said written contract does not constitute and is not a cloud upon the right, title and interest of said plaintiffs in and to said parcel of improved real estate." From this order of the court no appeal is taken and it will not be discussed in the opinion except incidentally.

On October 10, 1963, the Marbachs filed an amended Count II, complaining of the defendants, Citizens Insurance Company of New Jersey, Insurance Company of North America, and United States Fidelity and Guaranty Company. The amended Count II set out, among other things, that the plaintiffs owned a certain described tract of land upon which was a building of the value in excess of $30,000; that articles of agreement for a warranty deed were entered into between the Marbachs and the Gnadls on November 15, 1959, and that the Gnadls took possession of the property under the terms of the contract; that there was a provision in the contract by which the Gnadls agreed, as additional security, to keep all buildings on the premises insured "in such company or companies as the party of the first part may direct for at least the sum of the unpaid balance of the purchase price," and that the Gnadls did insure the building in the three previously mentioned insurance companies; that the policies of insurance were obtained pursuant to the terms of the contract as additional security; that the Gnadls at the time of the issuance of the policies had an insurable interest in the property; that on July 8, 1962, the property was "destroyed by fire and damaged" to the extent of $16,000; that subsequently the Gnadls defaulted on the contract, and on September 18, 1962, a declaration of forfeiture was filed with the Recorder; that subsequent to the destruction of the property and the default of the Gnadls the plaintiffs gave notice to the three insurance companies of their interest in the property and of the declaration of forfeiture filed; that all conditions of the policies of insurance have been complied with and proofs of loss have been furnished to the defendants; that the Gnadls have failed to make payments agreed on in the contract of purchase and have refused to assign to the plaintiffs the policies of insurance which were taken out as additional security for the unpaid balance of the purchase price; that the defendants have failed and refused to pay the amounts due under the said policies of insurance, either to the plaintiffs or to the Gnadls; and further, "That by reason of the above the plaintiffs charge that they became and are entitled, in equity, to a lien upon the proceeds of said policies of insurance to the extent of the unpaid balance of the purchase price."

The Gnadls, by leave of court, filed an intervening petition to amended Count II of the complaint, which was also treated as an answer. They also filed a counterclaim against the three insurance companies. The insurance companies filed an answer to the Gnadls' counterclaim and an answer to amended Count II of the complaint, in which they deny that the building had a value of $30,000; admit that they issued their policies of insurance on the building; admit that the policies were issued in the name of the Gnadls and did not name the plaintiffs as additional insureds; admit that on or about July 8, 1962, a fire occurred in the building, but deny that the damage was in the sum of $16,000; admit that subsequent to the fire the plaintiffs gave notice to the three insurance company defendants of plaintiffs' interest in the property and of the filing of the declaration of forfeiture. The insurance companies further say that neither the Gnadls nor the plaintiffs are entitled to any payment under the provisions of the policies, and they deny that the plaintiffs are entitled to an equitable lien upon the policies.

The Gnadls filed a reply to the joint answer of the counterdefendants — the three insurance companies — and in their intervening petition to amended Count II of the complaint the Gnadls admit that there was an agreement in the original contract that insurance should be taken out by the Gnadls, but they say that the Marbachs did not at any time request that they procure such insurance. The Gnadls allege that they were the sole named insured in the policies of insurance, and that the plaintiffs have no right, title or interest in the said policies. They further say that, the contract having been forfeited by the plaintiffs, the obligations and duties under the provisions of said contract became null and void; they state that all the conditions of the policies have been complied with, but that the compliance was on the part of the Gnadls, and that the plaintiffs failed to file any proofs of loss inasmuch as they had no right, title or interest under the policies of insurance. The Gnadls admit that the insurance companies have failed to pay the insurance, and they also set out the order of January 6, 1964, where the court declared the contract to be null and void. They state that the policy issued by the Insurance Company of North America was originally issued to Christine Marbach and assigned by her, at the time of the making of the contract, to Frank Gnadl. They allege that the plaintiffs filed an amendment to the complaint designated as Count III; that the Gnadls filed motions to strike Count III, which was stricken by the court on January 6, 1964, and that the order provided that as to that count the Gnadls go hence without day. They allege that that order was an adjudication that the plaintiffs have "no right, title or interest in all or any of said policies of insurance or of the proceeds thereof."

On November 10, 1964, the court entered an order on the motion of the Gnadls for judgment on the pleadings, and in that order the court stated:

"This matter coming on to be heard on the motion of FRANK GNADL and LIESELOTTE GNADL for Judgment on the pleadings, and the Court having considered said motion and having set this entire cause down for hearing for an adjudication on the issue of whether the plaintiffs are entitled to a lien upon the proceeds of the insurance policies issued by the defendants, and the Court having considered all the pleadings herein, including the Complaint and Answer, the Counterclaim and Answer to the Counterclaim, and the Intervening Petition filed by FRANK GNADL and LIESELOTTE GNADL, and the parties having stipulated and agreed that the sole issue is whether the Declaration of Forfeiture filed by the plaintiffs herein extinguished any and all rights which the plaintiffs had in and to the policies of insurance issued by the defendants, and the Court having heard arguments by counsel for each of the respective parties and being fully advised in the premises:

"The court hereby expressly finds that the plaintiffs' rights in and to the proceeds of the policies of insurance issued by the defendants were not extinguished by the plaintiffs' filing of a Declaration of Forfeiture, which Declaration declared the contract between the plaintiffs and FRANK and LIESELOTTE GNADL, dated November 15, 1959, to be null and void.

"The Court further finds that by reason of the facts set forth in the pleadings and the arguments made by the respective counsels, the plaintiffs are entitled to a lien upon the proceeds of the policies of insurance issued by the defendants, to the extent of the unpaid balance of the purchase price under the contract for the sale of real estate executed by and between the plaintiffs and FRANK and LIESELOTTE GNADL.

"IT IS, THEREFORE, HEREBY ORDERED, ADJUDGED AND DECREED that the plaintiffs are entitled to a lien upon the proceeds of the policies of insurance issued by the defendants and described in the Complaint and Counterclaim filed herein, and that said policies of insurance be and hereby are impressed with a lien in favor of the plaintiffs to the extent of the unpaid balance of the purchase price under the aforementioned contract between the plaintiffs and FRANK and LIESELOTTE GNADL, and that the balance, ...


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