[Cite as Wells Fargo Bank, N.A. v. Am. Family Mut. Ins. Co., 2016-Ohio-7892.]


                 Court of Appeals of Ohio
                               EIGHTH APPELLATE DISTRICT
                                  COUNTY OF CUYAHOGA


                              JOURNAL ENTRY AND OPINION
                                      No. 104125



                           WELLS FARGO BANK, N.A.
                                                          PLAINTIFF-APPELLANT

                                                    vs.

          AMERICAN FAMILY MUTUAL INSURANCE
                      COMPANY
                                                           DEFENDANT-APPELLEE




                                           JUDGMENT:
                                            AFFIRMED


                                     Civil Appeal from the
                            Cuyahoga County Court of Common Pleas
                                   Case No. CV-14-835406

        BEFORE: Stewart, J., Keough, P.J., and E.T. Gallagher, J.

        RELEASED AND JOURNALIZED: November 23, 2016
ATTORNEYS FOR APPELLANT

James G. Vargo
Jerry L. Kaltenbach
Kaltenbach Vargo, L.L.C.
P.O. Box 20305
Columbus, OH 43220


ATTORNEY FOR APPELLEE

Mark S. Maddox
Frost & Maddox Co., L.P.A.
987 South High Street
Columbus, OH 43206
MELODY J. STEWART, J.:

        {¶1} A fire damaged a vacant house insured by defendant-appellee American

Family Mutual Insurance Company. Plaintiff-appellant Wells Fargo Bank, N.A., the

mortgagee on the property, filed an insurance claim on the property four months later.

American Family denied the claim on grounds that Wells Fargo failed to give notice of

the loss as soon as reasonably possible — the house had been demolished before Wells

Fargo gave notice of the loss and, with it, any chance of investigating the cause of the

fire.   Wells Fargo claimed that its duties as the mortgagee were limited under the

insurance policy, and that the notice requirements placed on the homeowners did not

apply to it. The parties filed cross-motions for summary judgment. The court granted

summary judgment to American Family and denied Wells Fargo’s motion for summary

judgment. The issue on appeal is whether the court erred by finding that certain notice

provisions of the insurance policy applied to Wells Fargo, as a mortgagee.1




        Wells Fargo makes no argument that, if found to have a duty to provide notice of the loss to
        1


American Family, it gave timely notice of the loss under the circumstances.
        {¶2} Civ.R. 56(C) requires the court to issue a summary judgment if “there is no

genuine issue as to any material fact” and “the moving party is entitled to judgment as a

matter of law.”      The parties filed cross-motions for summary judgment on the

interpretation of the insurance policy, acknowledging that there were no genuine issues of

material fact and that a judgment based on a construction of the insurance policy could

issue as a matter of law.

        {¶3} We look to the plain and ordinary meaning of the language used in the policy

unless another meaning is clearly apparent from the contents of the policy. Alexander v.

Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146 (1978), paragraph two of the

syllabus. If insurance policy terms are ambiguous, we construe them against the drafting

party. Thompson v. Preferred Risk Mut. Ins. Co., 32 Ohio St.3d 340, 342, 513 N.E.2d

733 (1987).

        {¶4} Section 19 of the policy describes the insured’s obligations in the event of a

loss:

        19. What You Must Do in Case of Loss. In the event of a loss to property
        that this insurance may cover, you and any person claiming Coverage under
        this policy must:

        a. give notice as soon as reasonably possible to us or our agent. Report
        any theft to the police immediately. If the loss involves a credit/debit card,
        written notice must also be given to the company that issued the card;

        b. protect the property from further damage, make reasonable and
        necessary repairs to protect the property and keep records of the cost of
        these repairs;
      c. promptly separate the damaged and undamaged personal property. Give
      us a detailed list of the damaged property, showing the quantities, when and
      where acquired, original cost, current value and the amount of loss claimed;

      d. as often as we reasonably require:

      (1) show us the damaged property before permanent repairs or replacement
      is made;

      (2) provide us with records and documents we request and permit us to
      make copies;

      (3) let us record your statements and submit to examinations under oath by
      any person named us, while not in the presence of any other insured, and
      sign the transcript of the statements and examinations[.]

      {¶5} Section 14 of the “Definitions” part of the policy defines the word “you” as

“the person or people shown as the named insured in the Declarations.” The only named

insureds under the policy were Aquilino and Carmen Martinez. Wells Fargo is listed on

the declarations page only as the mortgagee — it is not a named insured.
       {¶6} The notice requirement of Section 19 is not, however, limited to only named

insureds: it also references “any person claiming Coverage under this policy.” Section

12 of the Conditions part of the policy states: “If a mortgagee is named in this policy, any

loss payable on buildings will be paid to the mortgagee and you, as interests appear.”

There is no question that Wells Fargo, as the mortgagee, has an interest in the insurance

policy — its claim for indemnification of its loss is proof of its interest. Union Cent. Life

Ins. Co. v. Clinton Mut. Ins. Assn., 51 Ohio App. 20, 27, 199 N.E. 223 (12th Dist.1935).

In fact, mortgagees have been described as the real party in interest with respect to claims

made under an insurance policy containing the “standard” clause making the loss payable

to a mortgagee as its interests may appear. State, ex rel. Squire v. Royal Ins. Co., 58

Ohio App. 199, 16 N.E.2d 342 (8th Dist.1938) (noting that even where a mortgagee has a

superior right to the proceeds of an insurance policy, it holds any amount exceeding the

mortgage debt for the benefit of the property owner); Wojcik v. Gold (In re Daher),

Bankr.N.D.Ohio Nos. 10-17252 and 13-1232, 2014 Bankr. LEXIS 4977, *10-11 (Apr. 18,

2014); Vogt v. Guardian Royal Exch., 12th Dist. Clermont No. CA91-10-085, 1992 Ohio

App. LEXIS 3242, *3 (June 22, 1992).
       {¶7} The question then becomes whether Wells Fargo, as the mortgagee, falls

under the category of any “person” for purposes of the notice provisions contained in

Section 19. Wells Fargo argues that it, as a corporate entity, cannot be a considered a

“person” under the policy because other parts of the policy distinguish between a person

and company. It maintains that the policy contains several examples distinguishing

between a “person” and a “company,” so the policy’s failure to state that Section 19 also

applied to a company as well as a person must be construed against American Family.

       {¶8} The policy does not define the word “person,” so we give that word its plain

and ordinary meaning. Hope Academy Broadway Campus v. White Hat Mgmt., L.L.C.,

145 Ohio St.3d 29, 2015-Ohio-3716, 46 N.E.3d 665, ¶ 36.                   Ohio law includes

corporations within the definition of “persons.” See R.C. 1.59(C) (“Person includes an

individual, corporation, business trust, estate, trust, partnership, and association.”).
       {¶9} Wells Fargo argues that the General Assembly’s decision to include

corporations within the its definition of a “person” does not mean that the word “person”

must always include corporations, regardless of the setting. We agree — to a point.

The parties to a contract are free to give words special meaning, even if those words

might otherwise have a common definition. But the insurance policy at issue in this case

does not define the word “person,” so we are bound to give that word its ordinary

meaning. Wells Fargo’s insistence that the word “person” be interpreted to apply only to

natural persons ignores the reality that a mortgagee can be both a natural person and a

corporation. Given that mortgagees can claim coverage under the policy, taking Wells

Fargo’s argument to its logical conclusion would mean that with respect to Section 19,

only mortgagees who are natural persons would have the obligation to give notice in the

case of a loss, while mortgagees who are corporations would have no such obligation.

This distinction is manifestly absurd — we must construe the language of the parties’

agreement to avoid a “manifest absurdity.” Shifrin v. Forest City Ent., Inc., 64 Ohio

St.3d 635, 638, 597 N.E.2d 499 (1992).

       {¶10} Wells Fargo also argues that the obligations set forth in Section 19 were

crafted for individuals who reside in the household, and not third-party mortgagees. It

argues, for example, that the notice provisions regarding loss involving the use of a credit

or debit card apply only to individuals.
       {¶11}    While some subsections of Section 19 might be more applicable to

household residents than mortgagees, other obligations under Section 19 can be read as

being applicable to mortgagees. Wells Fargo conceded this fact below, telling the court

that “most, if not all, of [the obligations under Section 19], apply to a ‘person’ residing in

the household and not a mortgagee that would not incur most of the identified losses or be

able to provide most of the required information.” Wells Fargo motion for summary

judgment at 7. That even one obligation — the duty to give notice of a loss as soon as

reasonably possible — exists for a mortgagee claiming coverage under the policy is

enough to show that Section 19 applies to Wells Fargo.

       {¶12} Wells Fargo also argues that Section 12 of the policy, titled “Mortgage

Clause,” fully defines the obligations of mortgagees with respect to reporting a loss, to the

exclusion of the notice provisions contained in Section 19.

       {¶13} Section 12 states:

       12. Mortgage Clause.

       The word “mortgagee” includes trustee or contract of sale lienholder.

       If a mortgagee is named in this policy, any loss payable on buildings will be
       paid to the mortgagee and you, as interests appear. If more than one
       mortgagee is named, the order of payment will be the same as the order of
       precedence of the mortgages. If we deny your claim, that denial will not
       apply to a valid claim of the mortgagee, if the mortgagee:

       a. notifies us of any change in ownership, occupancy or substantial change
       in risk of which the mortgagee is aware;

       b. pays any premium due under this policy on demand if you have neglected
       to pay the premium; and
      c. submits a signed, sworn statement of loss within 60 days after receiving
      notice from us of your failure to do so.

      As to only the interest of a lienholder or mortgagee declared in this policy,
      this insurance will terminate only if we give such lienholder or mortgagee at
      least 10 days written notice of termination. If we pay the mortgagee any loss
      and deny payment to you:

      a. we are subrogated to all the rights of the mortgagee granted under the
      mortgage on the property; or

      b. at our option, we may pay to the mortgagee the whole principal on the
      mortgage plus any accrued interest. In this event, we will receive a full
      assignment and transfer of the mortgage and all securities held as collateral
      to the mortgage debt.

      Subrogation will not impair the right of the mortgagee to recover the full
      amount of the mortgagee’s claim.

      {¶14} Wells Fargo argued in its motion for summary judgment that a plain reading

of the policy shows that the duties of a mortgagee in reporting a loss are limited to those

set forth in Section 12, while the duties that apply to a named insured and other persons

claiming through a named insured as residents of households are set forth in Section 19.
       {¶15} Section 12 says nothing about a mortgagee’s obligation to notify American

Family of a loss covered by the policy. The only obligation relating to notice under

Section 12 is that a denial of coverage will not apply to a valid claim of the mortgagee, if

the mortgagee notified American Family of “any change in ownership, occupancy or

substantial change in risk of which the mortgagee is aware.” As we earlier stated, in this

case there is no distinction between mortgagees in Section 12 and persons claiming

coverage under Section 19 — Wells Fargo is both a mortgagee and a person claiming

coverage under the policy. By claiming under the policy, it had the obligation to provide

notice of the loss as required by Section 19, irrespective of Section 12 of the policy.

       {¶16} Finally, Wells Fargo argues that even if it had an obligation to notify

American Family about the fire, American Family was not prejudiced from untimely

notice of the loss because it could have engaged in an adequate appraisal of the property

to determine its value despite the house being demolished.

       {¶17} American Family showed prejudice because the demolition of the dwelling

impaired American Family’s ability to ascertain whether it would have subrogation rights

against third persons who may have caused the fire. Finally, the complete demolition of

the dwelling caused American Family prejudice because it was unable to determine the

actual value of the property prior to the fire for purposes of indemnification. Wells

Fargo failed to rebut any of these claims of prejudice.
       {¶18} We conclude that the court did not err by granting American Family’s

motion for summary judgment. Likewise, the court did not err by denying Wells Fargo’s

partial motion for summary judgment.

       {¶19} Judgment affirmed.

       It is ordered that appellee recover of appellant costs herein taxed.

       The court finds there were reasonable grounds for this appeal.

       It is ordered that a special mandate issue out of this court directing the common

pleas court to carry this judgment into execution.

       A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of

the Rules of Appellate Procedure.



______________________________________________
MELODY J. STEWART, JUDGE

KATHLEEN ANN KEOUGH, P.J., and
EILEEN T. GALLAGHER, J., CONCUR
