No. 612 April Term, 1979, Appeal from the Judgment of Court of Common Pleas of Cambria County, Civil Division, at No. 1977-1010.
Edward Peduzzi, Ebensburg, for appellant.
R. Thomas Strayer, Johnstown, for appellee.
Spaeth, Wickersham and Lipez, JJ. Lipez, J., concurs in the result.
[ 297 Pa. Super. Page 475]
The instant appeal arises from an order awarding appellant, Laurel National Bank ("Laurel Bank"), insurance coverage as mortgagee under one mortgage but denying it coverage on the same property and under the same policy under its second mortgage. Laurel Bank contends that both mortgages should be covered by the insurance policy and that the amount due under the policy should not be limited to its pre-foreclosure debt.
The following transactions occurred on November 28, 1975. Dorance L. Jensen and his wife, Mary L. Jensen, conveyed a parcel of land to H. Lynn Hale and Ann Hale in consideration of a $38,000 purchase price. The Hales then executed and delivered a mortgage on this parcel in favor of
[ 297 Pa. Super. Page 476]
Laurel Bank to secure a loan for $25,000. The Hales also executed a second mortgage on the premises in favor of the Jensens to secure a loan of $27,000. The Jensens then assigned the Hales' second mortgage to Laurel Bank, the first mortgagee. The Hales also secured a homeowner's insurance policy on the newly purchased property through appellee, Mutual Benefit Insurance Company ("Mutual Benefit"). The policy provided coverage for loss from fire in the amount of $50,000 for the dwelling and $5,000 for appurtenant structures, and $25,000 for unscheduled personal property. The policy contained a standard mortgage clause naming Laurel Bank as mortgagee.
The Hales defaulted on their mortgage payments almost immediately. Laurel Bank then foreclosed on both mortgages and on personal property covered in a security agreement. A sheriff's sale was held on October 22, 1976 and the real and personal property was struck to Laurel Bank for costs, approximately $14,000.
On November 19, 1976, fire destroyed the house and personal property which were financed by the two mortgages. Mutual Benefit was notified of the fire damage by Laurel Bank soon thereafter and at that time first became aware of the mortgage foreclosure.
The only issue concerns the extent of Laurel Bank's interest in the insured property and the amount of insurance proceeds it is entitled to recover for the loss because of its interest. While a mortgagee has an insurable interest, the mortgagee is usually insured only to the extent of the mortgage debt since the amount of the debt represents its personal interest in the property. Chestnut Corporation v. Bankers Bond and Mortgage Co., 395 Pa. 153, 149 A.2d 48 (1959).
The problem in the instant case is that the bank's interest, and therefore the amount of insurance proceeds it may recover, is not easily determined. Prior to the fire, Laurel Bank bid in its interest and foreclosed its two ...