Appeal from the United States District Court for the Northern District of Illinois. No. 71 C 1573 J. SAM PERRY, Judge.
Castle, Senior Circuit Judge, and Pell and Sprecher, Circuit Judges.
This appeal presents the troublesome question of the worth of a building that burned down shortly before it was to have been demolished.
Plaintiff owned five buildings in the same block: a seven-story building, a four-story building, a two-story building, a one-story building and a quonset hut. In April, 1970, each of the six defendant insurance companies issued identical policies totaling $300,000 against fire damage to any or all of the five buildings.
In May or June of 1970, plaintiff entered into a contract with a wrecking company for the demolition of all the buildings. All salvage would become property of the demolition company. The wreckers began work during the last week of June; it was estimated the demolition would take 90 days. On July 6, 1970, the company had demolished the quonset hut, the one-story building, part of the two-story building and a small part of the four-story building.
No wrecking or stripping of salvageable material had begun on the seven-story building. It contained $26,000 of inventory and various machinery and equipment.*fn1 An affidavit of the assistant to the president of plaintiff corporation stated that plaintiff was trying to sell the seven-story building, even while the smaller buildings were being wrecked. The building was listed with real estate brokers. If plaintiff had found a buyer, it would have halted the demolition.
On the evening of July 6, 1970, all the remaining buildings were destroyed by fire. An appraisal submitted by plaintiff placed the actual cash value of the seven-story building before the fire at $633,532. Defendants refused to pay plaintiff's claim for the total amount of coverage, $300,000.
The case was submitted to the district court on motions for summary judgment from both sides. Although the complaint alleges a claim based on loss of all the buildings, plaintiff's motion for summary judgment relies on loss of the seven-story building alone. Defendants' motion seeks judgment on the damages issue on the theory that the seven-story building had no value to plaintiff at the time of the fire because of the contract for demolition.
The district judge's opinion (reported at 353 F. Supp. 329), granting defendants' motion for summary judgment on the damage issue, follows Judge Marovitz' opinion in a related case, Aetna State Bank v. Maryland Casualty Co., 345 F. Supp. 903 (N.D. Ill. 1972). Aetna State Bank, as plaintiff's mortgagee on the buildings, sued the same defendants on the same policies. Judge Marovitz found defendants were liable on the policies, but granted summary judgment to defendants on the damages issue.
The case went to Judge Marovitz on stipulations of fact that apparently treated the five buildings as an indivisible unit.*fn2 His opinion shows no awareness that the demolition crew had not begun on the largest and most valuable building, nor that plaintiff had not yet removed inventory and equipment from the building, nor that plaintiff was trying to sell the building. On the facts presented to him, Judge Marovitz held:
We therefore find that actual cash value is not the proper criterion for determining the amount of loss for property which is in the process of being demolished and whose demolition at the time of loss is no longer a matter of conjecture or speculation . . . there is nevertheless no compensable loss in view of the fact that there is no value to buildings in the process of demolition.
Defendants did not plead collateral estoppel of the Aetna case against plaintiff. Such a pleading would have been inappropriate for two reasons. First, there is no privity between mortgagor and mortgagee; defendants cannot raise collateral estoppel against a party which did not participate in the previous case. 1B MOORE'S FEDERAL PRACTICE para. 0.411, at 1673 (2d ed., 1974). ...