dissenting. The appellants have filed a petition for rehearing in this case decided by a panel of this court on June 8,1988. See Hatley v. Payne, 25 Ark. App. 8, 751 S.W.2d 20 (1988). The full court has today denied the petition, but I do not agree.
In my view, the trial court’s granting of appellee’s motion for summary judgment should be reversed. My view is adequately explained by the following quotation from the appellants’ petition for rehearing:
Appellants’ cause of action is predicated upon the covenant to insure doctrine: “This court is committed to the doctrine that if a mortgagor covenants to protect his mortgagee the latter is thereby clothed with a lien on the policy to the extent of the mortgagee’s interest, whether the policy carried a loss payable clause or not.” (emph. supp.) National Bedding v. Clark, 252 Ark. 780, 785, 481 S.W.2d 690 (1972).
The issue here is whether Appellants may invoke the doctrine when their covenanting mortgagor (Payne) is not himself entitled to the policy proceeds. The Court thought not in this case; holding that “this equitable doctrine does not, however, provide a basis for recovery for the appellants because. . . their rights to the proceeds of the policy in question are not greater than Payne’s who, because of his act of arson, could not recover.”
Yet in this case of first impression, the Court’s holding seems to be directly contrary to the basic premise upon which the doctrine is founded, i.e. “Equity will treat the policy as having contained such a provision upon the principle that equity treats that as done which should have been done.” Duval County Ranch Co. v. Alamo Lumber Co., 663 S.W.2d 627, 632 (Tex. Civ. App. 1983). The application of the maxim gives Appellants a right to loss payee status under the policy independent of that of the mortgagor’s. It is true that the loss payment clause was not “activated,” in the sense that no loss payee was named. But is a loss payment clause ever “activated” in an action brought pursuant to the covenant to insure doctrine? Clearly not; as the remedy exists solely to afford relief when the policy omits loss payees.
The doctrine should not be applied so as to condition Appellants’ recovery on the right of Payne to recover. Instead, Appellants stand in the shoes of any loss payee under the policy; which policy specifically recognizes a mortgagee’s right to recover despite defenses asserted against a mortgagor’s named insured.
I would simply add to the above the following citations of authority taken from appellants’ brief and which support appellants’ argument in this case. Wade v. Seeburg, 688 S.W.2d 638 (Tex. Ct. App. 1985); State Farm Fire and Casualty Co. v. Liggett, 689 P.2d 1187 (Kan. 1984); and Lititz Mutual Insurance Co. v. Miller, 50 So. 2d 221 (Miss. 1951). In view of the court’s opinion of June 8,1988, recognizing that the policy issued in this case contained a provision that the denial of a claim by the mortgagor (Payne) would not affect a valid claim of the mortgagee (appellants), it is difficult to understand how the court could deny recovery to appellants under the case law cited by them.