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State Farm Fire & Casualty Co. v. Hartman Contractors

United States District Court, E.D. Pennsylvania

December 7, 2017

STATE FARM FIRE & CASUALTY COMPANY, as subrogee of the Estate of Alkis J. Marland, Plaintiff,
v.
HARTMAN CONTRACTORS, JOHN GRIMLEY, trading as “JG ASSOCIATES, ” and ANTHONY ELECTRIC, Defendants.

          MEMORANDUM

          DuBois, J.

         I. INTRODUCTION

         This case arises out of a fire in a townhouse, owned by the Estate of Alkis J. Marland, and insured by plaintiff State Farm Fire & Casualty Company (“plaintiff” or “State Farm”). Plaintiff, as subrogee of the Marland Estate, asserts claims of negligence, breach of contract, and breach of express and/or implied warranties, against defendants Hartman Contractors, John Grimley, and Anthony Electric. Presently before the Court is Defendant John Grimley's Motion in Limine to Preclude Evidence of All and/or Some of the Damages Claimed by Plaintiff. (Document No. 83, filed August 7, 2017) (“Def. Grimley's Mot. in Limine”). For the reasons stated below, defendant Grimley's Motion in Limine is denied.

         II. BACKGROUND

         In 2003, Alkis Marland purchased a townhouse located in Phoenixville, Pennsylvania. Def. Grimley's Mot. in Limine ¶ 2. In February 2005, Mr. Marland contracted with defendant John Grimley to install framing and drywall to finish the basement of the townhouse. Id. ¶ 4.[1]On February 9, 2013, a fire occurred in that townhouse. Grimley's Mot. in Limine at 3. The details of the fire and the alleged cause are set forth in the Court's Memorandum dated May 17, 2017. (Document No. 70). Mr. Marland passed away on March 6, 2012, over eleven months prior to the date of the fire. Id. at 2. Upon his death the townhouse passed to his Estate. His daughters were named Co-Administrators of the Estate. Id.

         At the time of the fire, the townhouse was insured by plaintiff State Farm Fire and Casualty Company. Id. The property was subject to a primary mortgage secured by Bank of America, N.A. (“Bank of America”). Id. at Ex. D; Memo. Supp. Pl.'s Resp. Opp. to Def.'s Grimley's Motion in Limine at 3 (Document No. 85, filed August 21, 2017). The insurance policy contained a standard mortgage clause, stating “[i]f a mortgagee is named in this policy, any loss payable under Coverage A shall be paid to the mortgagee and [the insured], as interests appear.”[2] Memo. Supp. Pl.'s Resp. Opp. at 7, Ex. A. Accordingly, Bank of America had an insurable interest in the property under the policy. Id. at 4.

         On March 18, 2013, Bank of America filed an action in foreclosure on the subject property against the Marland Estate. Def. Grimley's Mot. in Limine, Ex. F. Bank of America sold the subject property on September 25, 2013, to Federal Home Loan Mortgage at a sheriff's sale for $2, 213.90. Federal Home Loan Mortgage later sold the home to a buyer for $204, 900.00. Def. Grimley's Mot. in Limine, Ex. G.

         On June 12, 2013-after Bank of America initiated the foreclosure action, but prior to the sale of the property to Federal Home Loan Mortgage-plaintiff issued a check in the amount of $365, 446.11 to the Bank pursuant to the standard mortgage clause in reimbursement of certain property damage covered under the insurance policy. Memo. Supp. Pl.'s Resp. Opp. at 4. That check was issued to Bank of America after State Farm attempted on two occasions to pay the insurance proceeds to the Marland Estate, which did not accept the check. Id. The Bank did not deposit the check issued by State Farm until January 2016. Id.

         Defendant Grimley filed this motion in limine to preclude plaintiff from introducing evidence at trial of the payment in the amount of $365, 446.11 made to Bank of America. Grimley argues that State Farm is not entitled to recover the amount paid to Bank of America because the Bank's failure to cash the check until nearly three years after State Farm issued the check rendered the payment voluntary. In response, State Farm claims that it had a legal obligation to pay Bank of America the insurance proceeds pursuant to the standard mortgage clause at the time it sent its check to the Bank, and it should not be precluded from recovery based on the Bank's delay in depositing the check. For the reasons that follow, the Court agrees with State Farm and denies defendant Grimley's Motion in Limine to Preclude Evidence of All and/or Some of the Damages.

         III. APPLICABLE LAW

         Subrogation “is an equitable doctrine involving the right of legal substitution” and “is granted as a means of placing the ultimate burden of a debt upon the one who in good conscience ought to pay it.” Kaiser v. Old Republic, 741 A.2d 748, 754 (Pa. Super. Ct. 1999). The doctrine of subrogation allows an insurance company “to stand in the shoes of the insured and assert the insured's rights against the tortfeasor.” Id.

         Under Pennsylvania law, an insurance company is not entitled to subrogation if the insurance payment was voluntary. See Union Joint Stock Land Bank of Detroit, Michigan v. Byers, 100 F.2d 82, 84 (3d Cir. 1938) (citations omitted) (“subrogation will not be decreed in favor of a mere volunteer who without any duty, legal or moral, loans money to pay the debt of another.”); Great Northern Ins. Co. v. Greenwich Ins. Co., 2008 WL 2048354 (W.D. Pa. May 12, 2008); Kemper v. National P&C Companies v. Smith, 615 A.2d 372, 376 (Pa. Super. Ct. 1992). A volunteer is “a stranger or intermeddler who has no interest to protect and is under no legal or moral obligation to pay under the circumstances.” Massachusetts Bonding & Ins. Co. v. Car & General Ins. Corp., 152 F.Supp. 477, 482 (E.D. Pa. 1957). Instead, “the payor must have acted under compulsion, and it is only in cases where the person paying the debt of another will be liable in the event of default or is compelled to pay in order to protect his own interests, or by virtue of legal process, that equity substitutes him in the place of the creditor . . . .” Kaiser, 741 A.2d at 754 (quoting Home Owners' Loan Corp. v. Crouse, 30 A.2d 330, 331 (Pa. Super. Ct. 1943)). An insurance payment is not voluntary, however, “if it is made with a reasonable or good faith belief in an obligation or personal interest in making that payment.” IAP Worldwide Services, Inc. v. UTi United States, Inc., No. 04-CV-4218, 2006 WL 305443, at *10 (E.D. Pa. Feb. 8, 2006).

         IV. DISCUSSION

         Grimley contends that State Farm's payment to Bank of America was voluntary because, at the time that Bank of America deposited the check, Bank of America no longer had an interest in the subject property and therefore had no right to payment under the insurance policy. In response, State Farm asserts that it is the date the check was issued, rather than the date the check was deposited, that is dispositive. At the time State Farm issued the check to Bank of America in 2013, it argues it was under a legal obligation to pay the Bank as the mortgagee of the subject property. When Bank of America deposited the check in January 2016, it had sold the property and failed to obtain a deficiency judgment, and therefore no longer had any interest in the subject property. So, if the payment was deemed to have been made in January 2016 when Bank of America deposited the ...


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