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Mobile Const. Co. v. Phoenix Ins. Co.

JANUARY 7, 1970.

MOBILE CONSTRUCTION CO., AN ILLINOIS CORPORATION, ALBERT F. STROKA, AND COMMERCIAL NATIONAL BANK OF CHICAGO, FOR THE USE OF SAID MOBILE CONSTRUCTION CO. AND ALBERT F. STROKA, PLAINTIFFS-APPELLEES,

v.

THE PHOENIX INSURANCE COMPANY, A CAPITAL STOCK COMPANY, UNITED STATES FIDELITY AND GUARANTY COMPANY, A CAPITAL STOCK COMPANY, AND THE HOME INSURANCE COMPANY, A CAPITAL STOCK COMPANY, DEFENDANTS-APPELLANTS.



Appeal from Circuit Court of Cook County; the Hon. FRANK J. WILSON, Judge, presiding. Affirmed.

MR. JUSTICE DRUCKER DELIVERED THE OPINION OF THE COURT.

Rehearing denied February 24, 1970.

Defendants appeal from a summary judgment in favor of plaintiffs in the sum of $4,512.60 and from an order denying defendants' motion for summary judgment. The defendants contend that the plaintiffs did not have a valid claim to the proceeds of three fire insurance policies as subrogee of the Commercial National Bank of Chicago (hereafter called "Bank") since the Bank's insurable interest had terminated two months prior to the fire loss.

On May 28, 1963, Mr. and Mrs. Conrad Barnett borrowed $5,830 from the Bank in order to purchase a tavern known as the Lemon Twist West. They executed a promissory note to the Bank secured by a chattel mortgage on the contents of the tavern. Albert Stroka, a relative of the Barnetts, executed a written guaranty of the loan and assigned his savings account to the Bank as further security for payment.

At the time the loan was made, the Bank requested that the Barnetts obtain fire insurance policies on the tavern with lender's loss payable clauses attached naming the Bank as beneficiary. The defendants executed and delivered the policies to the Barnetts on August 9, 1963, after the first year's premium was paid by the Barnetts. The lender's loss payable clause was attached to each policy on November 18, 1963, naming the Bank as beneficiary.

Almost immediately the Barnetts became delinquent on their loan. Payments were made by Stroka and the Mobile Construction Company (hereinafter called "Mobile") to keep the loan current. The Mobile Construction Company was a corporation owned solely by Albert Stroka.

The Barnetts continued to be delinquent on the loan and on March 7, 1964, Stroka, at the demand of the Bank, paid the balance of $1,888.12 then due on the loan. Thereupon the Bank assigned the promissory note of the Barnetts and their chattel mortgage on the contents of the tavern to Mobile. Mobile, as assignee of the note, obtained a judgment against the Barnetts pursuant to the confession clause in the note in the amount of $4,512.20. The judgment remains unpaid.

On May 6, 1964, while Mobile was in the process of foreclosing the chattel mortgage, a fire occurred at the Lemon Twist West Tavern destroying the mortgaged chattels. No claim was made by the Bank nor did it file proof of loss. Subsequently the present proceeding was brought by Mobile claiming the proceeds of the insurance policies as subrogee of the Bank. Stroka was later added as a party plaintiff. The Barnetts also filed a suit, as beneficiaries of the same policies, against the defendant insurers which is still pending in the circuit court.

Both plaintiffs, Stroka and Mobile, and the defendant insurance companies moved for summary judgment. The court denied the defendants' motion and granted the plaintiffs'. Judgment was entered in favor of the plaintiffs in the amount of $4,512.60, being $1,504.20 against each of the insurers.

Defendants' petition for summary judgment stated that the lender's loss payable endorsement which was attached to and formed part of the Barnetts' insurance policies created an obligation to pay the Bank in case of fire loss to the tavern. The endorsement was attached to the policies to protect the lender Bank from destruction of the security given for the loan. The lender's loss payable clauses provided:

Loss, if any, under this policy shall be payable to Commercial National Bank of Chicago whose address is 4806 North Western Avenue, Chicago, Illinois as lender, mortgagee, or trustee, as interest may appear.

Defendants contend "that the only obligation of defendants was to the Commercial National Bank of Chicago and then only to the extent of the loan interest of the Commercial National Bank of Chicago, which at the time of the fire was nonexistent. Therefore, it had no interest under the terms of the lenders' loss payable endorsement and further had no insurable interest in the premises at the time of the fire."

In its motion for summary judgment plaintiffs contended that as a guarantor they were entitled to become subrogated to the rights of the creditor-guarantee Bank when the debt of the principal debtor was paid. In London & Lancashire Indemnity Co. of America v. Tindall, 377 Ill. 308, 313, 36 N.E.2d 334, the court stated:

Subrogation is an equitable remedy, which, in effect, makes an assignment of securities held by the creditor available to the estate or subrogee. (Bishop v. O'Conner, 69 Ill. 431.) Subrogation means the placing of one in the shoes of another, invested with all the rights of that other, in regard to certain obligations paid by him, who is thus subrogated. It is the substitution of another person in the place of a creditor or claimant, to whose rights he succeeds in ...


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