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TIG Insurance Co. v. Anderson

March 11, 2003


Cass County District Court File No. C901497

Considered and decided by Hudsonr, Presiding Judge, Schumacher, Judge, and Halbrooks, Judge.


When an insurer takes an assignment of a mortgage and corresponding promissory note pursuant to a standard mortgage clause in an insurance policy pursuant to Minn. Stat. § 65A.01, subd. 3 (2002), the insurer has a valid and enforceable assignment of the mortgage and note.

The opinion of the court was delivered by: Robert H. Schumacher, Judge



Appellants Christopher W. Anderson, Warren Anderson, and Linda P. Anderson argue the district court erred in granting the motions for partial summary judgment of respondents TIG Insurance Company and GenRoe, Inc., d/b/a Complete Title Service of Walker & Park Rapids, and awarding attorney fees. We affirm.


In early 1992, W. Anderson assisted his son, C. Anderson, in purchasing property from Julia R. Turner in Cass County near the Northern Lights Casino for the purpose of opening a restaurant. Turner required that the purchase be by way of a contract for deed and that W. Anderson sign as a purchaser on the contract. On March 31, 1992, a contract for deed was executed conveying the property to W. Anderson.

C. Anderson and W. Anderson constructed a restaurant on the property. C. Anderson obtained a loan from First National Bank of Walker (Walker Bank) and W. Anderson co-signed as additional obligor. The loan was to finance the construction of the restaurant, and upon completion of the construction, the loan was to be refinanced. C. Anderson and W. Anderson signed a promissory note for $57,000 in favor of Walker Bank and simultaneously gave Walker Bank a mortgage in that amount as security for the loan. The mortgage was duly registered and recorded.

At that same time, L. Anderson and W. Anderson conveyed an undivided 1/2 interest in the property to C. Anderson and retained the other 1/2 undivided interest jointly as husband and wife. In June 1993, C. Anderson purchased fire insurance on the restaurant from Secura Insurance Company, listing himself and"C W Burger" (the name of the restaurant) as the insured(s) and listing Walker Bank as the mortgagee. W. Anderson was not listed as an insured on the policy.

On March 7, 1994, a fire destroyed the restaurant. The investigation of the fire resulted in criminal arson charges being brought against C. Anderson. He agreed to enter an Alford plea to the charge of"negligent fire" in exchange for dismissal of other charges. Prior to this time, Secura paid Walker Bank the amount of its mortgage, $58,696.22, in exchange for assignment of the mortgage and promissory note of the Andersons per the standard mortgage clause set forth in the insurance policy. Walker Bank sent a letter to C. Anderson and W. Anderson at W. Anderson's address, stating that Secura had paid the full amount of the mortgage in exchange for the assignment.

C. Anderson commenced a lawsuit against Secura, seeking a declaratory judgment that the fire damage was covered under the policy and claiming a breach of the insurance contract. W. Anderson did not join in the lawsuit. Secura alleged that no coverage was owed to C. Anderson due to an exclusion in the policy for damage caused by the"dishonest or criminal acts" of the insured. After a court trial, the district court issued judgment against C. Anderson, finding that the fire and property loss were caused by the"dishonest or criminal acts" of C. Anderson and he was therefore not owed coverage.

While C. Anderson's lawsuit was still pending, he placed the property on the market. A company called JDOB, Inc. purchased the property. GenRoe was retained to perform a title search in connection with the purchase. GenRoe failed to discover the mortgage listing Walker Bank as mortgagee. The closing on the property occurred on August 16, 1996. Several documents were executed. Turner, still holding the contract for deed, executed a warranty deed conveying an undivided 1/2 interest to C. Anderson and the same to W. Anderson. L. Anderson, C. Anderson, and W. Anderson executed a warranty deed in favor of JDOB, conveying the property pursuant to the purchase agreement. Some of the proceeds from the sale were ...

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