Browning v. Progressive Specialty Insurance Agency, Inc., et. al.
Filing
93
MEMORANDUM OPINION AND ORDER: The Court ORDERS that the Defendant's 67 MOTION for Summary Judgment be GRANTED as to the Defendant's counter-claim for declaratory relief. Signed by Judge Irene C. Berger on 12/16/2015. (cc: attys; any unrepresented party) (slr)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
BECKLEY DIVISION
JAMES KEITH BROWNING,
Plaintiff,
v.
CIVIL ACTION NO. 5:14-cv-24560
HOMESITE INSURANCE COMPANY
OF THE MIDWEST,
Defendant.
MEMORANDUM OPINION AND ORDER
The Court has reviewed the Defendant’s Motion for Summary Judgment (Document 67),
attached exhibits, and Memorandum in Support (Document 68), the Plaintiff’s Response in
Opposition of Defendant’s Motion for Summary Judgment (Document 69) and attached exhibits,
and the Defendant’s Reply (Document 71). The Court has also reviewed the Plaintiff’s Complaint
(Document 1-2), originally filed in the Circuit Court of Wyoming County, West Virginia, and
subsequently removed to this Court on August 8, 2014, and the Defendant’s Answer and
Counterclaim for Declaratory Relief (Document 2). After careful consideration, the Court finds
that the Defendant’s motion should be granted.
PROCEDURAL HISTORY
The Plaintiff initiated this action on July 2, 2014, with the filing of a Complaint against
Defendants Progressive Specialty Insurance Agency, Inc. (“Progressive”) and Homesite Insurance
Company of the Midwest (“Homesite”) in the Circuit Court of Wyoming County, West Virginia.
(Compl., att’d as Ex. 2 to Def. Not. of Removal). The Plaintiff alleged that the Defendant
breached an insurance contract issued by Defendant Homesite Insurance Company of the Midwest
(“Homesite”) by refusing to compensate the Plaintiff for the loss of his home and belongings
resulting from a fire. (Compl. at ¶15-17.) In addition to claiming breach of contract, the Plaintiff
sought recovery on various other state law claims, including breach of the duty of good faith and
fair dealing, and violations of W. Va. Code §33-11-4(9). (Id. at ¶35-43.) On August 8, 2014,
the Defendants removed the case to federal court based on diversity jurisdiction. (Notice of
Removal, at 1-2.) On August 8, 2014, the Defendants jointly filed their answer and counterclaim
for declaratory relief, wherein they denied the Plaintiff’s allegations, and sought declaratory relief
under the Declaratory Judgment Act, 28 U.S.C. §2201, arguing that the Plaintiff had made material
misrepresentations when securing insurance coverage on his home. (Def. Ans. to Compl. Att’d
to Not. of Removal and Counterclaim for Decl. Relief, at 11-13.) On September 2, 2015, Homesite
filed the present motion. The Plaintiff filed his response in opposition on September 16, 2015,
and Homesite filed its’ reply on September 23, 2015. On a previous date, the Plaintiff agreed to
voluntarily dismiss all claims against Defendant Progressive (Document 12). Homesite’s motion
for summary judgment is, therefore, ripe for review.
STATEMENT OF FACTS
The following facts are undisputed. On May 26, 2013, the Plaintiff signed a notarized
instrument (the “receipt”) stating that he purchased property located at 9068 Interstate Highway in
Max Fork, West Virginia, (the “property”) from one James Lester on May 25, 2013 for “50,000
dollars”. (Notarized Receipt at 1, att’d as Ex. B to Def. Mot. for Summ. J.) (Document 67-1).
Mr. Lester also signed the receipt, which was notarized by Dreama England. (Id.) At her
deposition, Ms. England testified that she “typed up” this “contract” at the request of Mr. Lester
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and the Plaintiff, who had written a draft which she used as the basis for the document. (D.
England Dep. at 8:12-10:7, att’d as Ex. 5 to Pl.s’ Resp. in Opp. to Mot. for Summ. J.) Mr. Lester,
during his deposition, testified that he purchased the relevant property from “a Lester,” but could
not “remember how [he] did the deed on [the property].” (J. Lester Dep. at 14:7-15:14, att’d as
Ex. 2 to Pl.s’ Resp. in Opp. to Mot. for Summ. J.) Mr. Lester testified that he “spent ten or twelve
thousand” on the property, and subsequently invested significantly more in renovations. (Id. at
15:15-17:24.)
On May 29, 2013, the Plaintiff contacted Homesite to inquire about purchasing a
homeowners’ insurance policy for the property. (Tr. of May 29, 2013 Call at 2, att’d as Ex. A to
Def. Mot. for Summ. J.) (Document 67-1). During the call, the Plaintiff made a number of
representations, including: (1) that he was “trying” to get a home purchased; (2) that the property
was located at 9068 Interstate Highway in Max Fork, West Virginia; (3) that he was unsure of the
closing date; (4) that he was unsure of the market value of the home, but that he would be
purchasing the property for “about” $125,000; (5) that he “might” have a lien holder; and (6) that
he had yet to sign a contract, but was “trying to finish everything up”. (Id. at 2-10.) During the
call, Homesite’s agent, Ms. Ibarra, (1) indicated that she would set the closing date on the home
as June 15, 2014, and that the date could “always be changed,” (2) requested that the Plaintiff
describe the property, and based on his description, set policy coverages of $235,000 for the home,
$23,000 for “other structures,” $117,500 for the Plaintiff’s possessions, and $47,000 for other
expenses, along with $300,000 in personal liability protection, and (3) informed the Plaintiff that
“once [he] sign[ed] the contract” and set a closing date, he could “let us know” and pay the annual
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policy premium by credit card. (Id.) At the conclusion of the call, Ms. Ibarra agreed to call the
Plaintiff back on June 5, 2015, to “follow up” and add a closing date. (Id. at 10).
Two days later, the Plaintiff again contacted Homesite, and spoke with Ms. Ibarra. (Tr.
of May 31, 2015 call at 1, att’d as Exhibit 1 to Pl.s’ Resp. in Opp. to Mot. for Summ. J.) (Document
69-1). During this call, the Plaintiff provided Ms. Ibarra with a credit card, and instructed the
agent to put the policy premium on the card. (Id.) Ms. Ibarra informed the Plaintiff that the
policy had been paid for six months, and that he would be billed for the remaining six months.
(Id. at 4.) Ms. Ibarra indicated that she would send the Plaintiff a receipt, and that the “policy has
been issued.” (Id. at 2.)
The Plaintiff again spoke with Ms. Ibarra on June 20, 2013. The Plaintiff informed her
that he had yet to receive any policy documents. (Tr. of June 20, 2013 call at 14, att’d as Ex. C
to Def. Mot. for Summ. J.) Ms. Ibarra informed the Plaintiff that the home inspection was
incomplete, because the inspector had been unable to find the Plaintiff’s home. (Id.) After
confirming the Plaintiff’s address, Ms. Ibarra indicated that she would communicate with her
supervisor about scheduling a home inspection, that “th[e] policy was issued May 31,” and that
despite the absence of an inspection, “…the policy has not been cancelled.” (Id. at 15-17.)
According to Ms. Ibarra, the Plaintiff would “receiv[e] the policy” by the end of June, 2013. (Id.
at 17.) The Plaintiff noted in passing that “[w]e were just trying to get everything taken care of
at the lawyer’s office and they was[sic] needing some kind of verification on insurance …” (Id.)
During the call, the Plaintiff informed Ms. Ibarra that he was not currently living at the property
in question, but rather, was living with his mother in Hanover, West Virginia. (Id. at 15.) The
policy, as issued, excluded coverage where the insured “intentionally concealed or misrepresented
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any material fact or circumstance,” “engaged in fraudulent conduct” or made false statements.
(Def. Mem. in Supp. of Mot. for Summ. J., at 4.)
On August 1, 2013, James Lester executed a Deed of Conveyance, wherein his parents,
Russell and Amanda Lester, conferred the property at issue in this case to him for $10, and “other
valuable consideration not herein mentioned.” The Deed made no mention of any subsequent
conveyances, to the Plaintiff or otherwise. (Deed of Conveyance, att’d as Ex. D to Def. Mot. for
Summ. J., at 1.) The Deed of Conveyance was prepared by Pamela Lambert, Counsel for the
Plaintiff in this case, and notarized by Renee Jones. (Id. at 2.) The Deed indicated that the total
consideration paid for the property was $10,000. (Id.) The Deed was subsequently recorded in
the Offices of the Clerk of the County Commission for Wyoming County, West Virginia, on
August 13, 2013. (Id.) On August 17, 2013, a fire consumed the property. (Letter to Plaintiff at
1, att’d as Ex. 4 to Pl.s’ Resp. in Opp. to Mot. for Summ. J.) On August 27, 2013, James Lester
signed a second Deed of Conveyance, conveying the same property to the Plaintiff in exchange
for $10 and “other valuable consideration not herein mentioned.” (Deed of Conveyance at 1, att’d
as Ex. E to Def. Mot. for Summ. J.) This second Deed of Conveyance notes that the property was
transferred to James Lester on August 1, 2012, that the total consideration paid by the Plaintiff
was $50,000, and was also prepared by Lambert. However, it also references the deed being
recorded in Deed Book 462 at page 876, which is the same deed entered into between James Lester
and Russell and Amanda Lester on August 1, 2013. (Id. at 1-2.) The Browning/ Lester deed
was later recorded on November 14, 2014, with the Office of the Clerk of the County Commission
for Wyoming County, West Virginia. (Id.)
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The Plaintiff submitted to an examination under oath by Homesite on November 5, 2013.
During that examination, the Plaintiff testified that he paid $50,000 in cash for the property at issue
in this case. (J. Browning Examination at 45:11-13, att’d to Def. Mot. for Summ. J.) Asked
where he accumulated the assets, the Plaintiff testified that he had “ … saved a little bit here and
there.” (Id. at 45:15-16.) The Plaintiff testified that he had no appraisements of any property
contained in the house, no photographs of the premises, and no copies of the relevant insurance
policy, and had not completed a Proof of Loss and Inventory Form, as requested by Homesite. (Id.
at 46:17-48:24.) On November 26, 2013, Homesite sent the Plaintiff a letter, wherein Homestead
indicated that because the Plaintiff made material misrepresentations in connection with the
issuance of his policy, Homestead was rescinding the policy and declaring the policy as void since
inception, and denying the Plaintiff’s claim. (Letter to J. Browning at 1, att’d as Ex. 4 to Pl.s’
Resp. in Opp. to Mot. for Summ. J.) In the letter, Homesite indicated that the Plaintiff purportedly
entered into a contract with James Lester on May 26, 2013, informed Homesite on May 29, 2013,
that there was no contract, and then received a deed to the property on August 27, 2013, after the
property had been destroyed by the fire.
(Id.)
Thus, Homesite declared that the Plaintiff
“provided false information” when purchasing the policy, “and/or submitted a fraudulent contract
in conjunction with the insurance,” while also “secur[ing] insurance on a home [he] did not own.”
(Id.)
STANDARD OF REVIEW
The well-established standard in consideration of a motion for summary judgment is that
“[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
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56(a)–(c); see also Hunt v. Cromartie, 526 U.S. 541, 549 (1999); Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Hoschar v.
Appalachian Power Co., 739 F.3d 163, 169 (4th Cir. 2014). A “material fact” is a fact that could
affect the outcome of the case. Anderson, 477 U.S. at 248; News & Observer Publ’g Co. v.
Raleigh-Durham Airport Auth., 597 F.3d 570, 576 (4th Cir. 2010). A “genuine issue” concerning
a material fact exists when the evidence is sufficient to allow a reasonable jury to return a verdict
in the nonmoving party’s favor. FDIC v. Cashion, 720 F.3d 169, 180 (4th Cir. 2013); News &
Observer, 597 F.3d at 576.
The moving party bears the burden of showing that there is no genuine issue of material
fact, and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp.,
477 U.S. at 322–23. When determining whether summary judgment is appropriate, a court must
view all of the factual evidence, and any reasonable inferences to be drawn therefrom, in the light
most favorable to the nonmoving party. Hoschar, 739 F.3d at 169. However, the non-moving
party must offer some “concrete evidence from which a reasonable juror could return a verdict in
his favor.” Anderson, 477 U.S. at 256. “At the summary judgment stage, the non-moving party
must come forward with more than ‘mere speculation or the building of one inference upon
another’ to resist dismissal of the action.” Perry v. Kappos, No.11-1476, 2012 WL 2130908, at
*3 (4th Cir. June 13, 2012) (unpublished decision) (quoting Beale v. Hardy, 769 F.2d 213, 214
(4th Cir. 1985)).
In considering a motion for summary judgment, the court will not “weigh the evidence and
determine the truth of the matter,” Anderson, 477 U.S. at 249, nor will it make determinations of
credibility. N. Am. Precast, Inc. v. Gen. Cas. Co. of Wis., 2008 WL 906334, *3 (S.D. W. Va. Mar.
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31, 2008) (Copenhaver, J.) (citing Sosebee v. Murphy, 797 F.2d 179, 182 (4th Cir. 1986). If
disputes over a material fact exist that “can be resolved only by a finder of fact because they may
reasonably be resolved in favor of either party,” summary judgment is inappropriate. Anderson,
477 U.S. at 250. If, however, the nonmoving party “fails to make a showing sufficient to establish
the existence of an element essential to that party’s case,” then summary judgment should be
granted because “a complete failure of proof concerning an essential element . . . necessarily
renders all other facts immaterial.” Celotex, 477 U.S. at 322–23.
DISCUSSION
Homesite moves for summary judgment on their counterclaim for a declaratory judgment.
In so moving, Homesite make two arguments. Initially, it argues that the Plaintiff had no
insurable interest in the property, and secondly, it claims that the Plaintiff made material
misrepresentations in purchasing the policy. Under either theory, Homesite argues that the policy
was void, and therefore, they have no obligation to pay the Plaintiff’s claim.
Insurable Interest
Homesite claims the Plaintiff lacked an insurable interest in the property at the time of the
fire. To support this argument, the Defendant focuses on the absence in the record of any contract
for sale of the property between Mr. Lester and his predecessors in interest. The Defendants
acknowledge that West Virginia law allows the holder of equitable title to property to transfer that
interest prior to the “conveyance of legal title,” but argue that under the West Virginia statute of
frauds, any such conveyance must be memorialized by a written contract for sale signed by, at a
minimum, the purchaser. (Def. Mem. in Supp. of Mot. for Summ. J., at 8.) According to
Homesite, the only record of any transaction wherein Mr. Lester purchased the property is the
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Deed of Conveyance of August 1, 2013. Any prior oral agreement wherein Mr. Lester purchased
the property, in Homesite’s view, would be barred by the statute of frauds. (Id.) Thus, Homesite
claims that Mr. Lester had no equitable title to convey to the Plaintiff, and Plaintiff, therefore, had
no insurable interest in the property at the time the policy was purchased. (Id.) Homesite also
argues that the doctrine of after-acquired title does not protect the transaction, because the August
1, 2013 Deed of Conveyance does not demonstrate any intent to transfer title to the Plaintiff. (Id.)
In response, the Plaintiff argues that he clearly had equitable title to the property as of May
26, 2013, and therefore, had an insurable interest in the property at the time of the fire. (Pl.s’
Resp. in Opp. to Mot. for Summ. J., at 7.) The Plaintiff emphasizes that he purchased the property
on or before May 26, 2013, and that on that date, he and Mr. Lester requested that a notary, Ms.
England, prepare a receipt to that effect. (Id. at 9.) According to the Plaintiff, the resulting receipt,
signed by himself and Mr. Lester, satisfies the statute of frauds, as it “is a note or memorandum of
the contract, it is in writing, and it is signed by James Lester.” (Id. at 9.) The Plaintiff also
emphasizes that the seller, Mr. Lester, held “equitable title” to the property as of May 26, 2013,
and that equitable title was transferred to the Plaintiff, as reflected by the receipt. (Id.) Thus, the
Plaintiff argues that he clearly had an insurable interest in the property at the time the insurance
policy was issued. (Id.)
West Virginia law states that a property insurance contract is only enforceable if the insured
party has an “insurable interest” in the property covered by an insurance policy. W. Va. Code
§33-6-3(a). An “insurable interest” is “any actual, lawful and substantial economic interest in the
safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary
damage or impairment.” W. Va. Code §33-6-3(b). The “measure of an insurable interest in
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property” is the degree “to which the insured might be damnified by loss, injury, or impairment
thereof.” W. Va. Code §33-6-3(c). Absent an insurable interest, the policy is void. Filiatreau
v. Allstate Ins. Co., 178 W.Va. 268, 270 (1987); Shaffer v. Calvert Fire Ins. Co., 135 W.Va. 153
(1950).
In the context of a homeowners’ insurance policy, an “insurable interest” requires that the
insured possess either equitable or legal title to the insured property. Filiatreau, 178 W.Va. at
270. In the absence of legal title, a contract for the purchase of a property provides the purchaser
with equitable title to the property, sufficient to “insur[e] it against loss by fire.” Scott v. Dixie
Fire Insurance Co., 70 W.Va. 533 (1912); see also Young v. McIntyre, 223 W.Va. 60, 64 (2008)
(“After the execution of a valid contract of sale and before legal title passes by deed, the vendor is
regarded in equity as holding the legal title in trust for the vendee, and the latter as holding the
purchase money in trust for the vendor.”) When the contract is signed, the risk of loss on the
property passes from the seller to the buyer. Filiatreau, 178 W.Va. at 271, citing Maudru v.
Humphreys, 85 W.Va. 307, 310 (1919). However, “a buyer can acquire nothing more than the
seller owns and can convey.” See Wellman v. Tomblin, 140 W.Va. 342, 345 (1954).1 Under the
West Virginia statute of frauds, any such contract for the purchase of land must be “in writing and
signed by the party to be charged thereby,” but the consideration for the transaction “need not be
set forth or expressed in the writing.” W. Va. Code §36-1-3. The purpose of the statute of frauds
is to “prevent the fraudulent enforcement of unmade contracts, not the legitimate enforcement of
contracts that were in fact made.” Heartland, L.L.C. v. McIntosh Racing Stable, L.L.C., 219 W.Va.
1
While a seller may, under certain circumstances generally limited to inheritances and wills, convey property absent
ownership under the doctrine of after-acquired title, such conveyance requires a “clear intention to convey all interest
in certain described property” which the buyer may “hereafter acquire or take.” Wellman, 140 W.Va. at 347 (quotations
and citations omitted).
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140, 149 (2006), citing Timberlake v. Helfin, 180 W.Va. 644, 648 (1989). As such, the Supreme
Court of Appeals of West Virginia has observed that “T]he statute [of frauds] ... does not require
an exhaustive, integrated statement of the agreement in writing, but only a sufficient statement to
establish that there in fact was an agreement and that the party charged should be bound by it.”
Id., citing Richard A. Lord, 10 Williston on Contracts §29.4 at 437-38 (footnotes and citations
omitted). In general, only those who are party to a contract may raise the statute of frauds to a
defense to a claim arising from the contract. Tanner v. McCreary, 88 W.Va. 658 (1921) (“It is
almost universally held that the defenses arising under the statute of frauds are personal to the
parties to the contract, and no one else can take advantage of them or require the parties to do so.”)
It is undisputed that the Plaintiff did not have legal title to the property when Homesite
issued the insurance policy on the property in late May or during June 2013, as legal title did not
vest with the Plaintiff until August 27, 2013. Therefore, to determine if the Plaintiff had an
insurable interest in the property at the time the insurance policy was issued, the Court must
determine whether the evidence presented could permit a fact-finder to determine that the Plaintiff
had equitable title to the property. The Plaintiff argues that he obtained equitable title to the
property by virtue of his agreement to purchase the property from Mr. Lester, memorialized by the
receipt dated May 26, 2013. However, a threshold question is whether Mr. Lester had any title,
equitable or legal, to convey to the Plaintiff at that time. If Mr. Lester lacked legal or equitable
title in the property on May 26, 2013, he clearly could not have conveyed any interest in the
property to the Plaintiff.
Mr. Lester did not acquire legal title to the property until August 1, 2013, well after he
purportedly sold the property to the Plaintiff. Therefore, the Court must determine if there is a
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genuine issue of material fact as to whether Mr. Lester had equitable title. Under West Virginia
law, equitable title depends on the execution of a valid contract of sale which complies with the
statute of frauds, such that the purchaser acquires a protectable interest in the property. Mr. Lester
testified that he “think[s] [he] might have signed a contract or whatever” and that he “d[idn’t] even
know actually where” the contract was. (J. Lester Dep. at 11-20, att’d as Ex. 2 to Pl.s’ Resp. in
Opp. to Mot. for Summ. J.)
Viewing the evidence in the light most favorable to the Plaintiff, the Court finds that no
rational tier of fact could determine that Mr. Lester had equitable title to the property on May 26,
2013, at the time he and the Plaintiff signed the “receipt.” Lester provides no contract and only
thinks he “might” have signed one. His deposition provides no substantive information about the
nature of the transaction by which he acquired equitable title to the property. Absent equitable
title, Mr. Lester had no interest in the property and, therefore, was clearly unable to convey any
interest to the Plaintiff on May 26, 2013. Thus, the Plaintiff had no insurable interest in the
property when he purchased the policy. With no insurable interest, the policy was void. Because
the Court finds that even when viewing the evidence in the light most favorable to the Plaintiff,
there is no genuine dispute of material fact, presented by the evidence, that Mr. Lester possessed
equitable title and was able to deliver the same to the Plaintiff on May 26, 2013, it is unnecessary
to address the remaining grounds on which Homesite seeks summary judgment.
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CONCLUSION
Wherefore, following thorough review and careful consideration, the Court ORDERS that
the Defendant’s Motion for Summary Judgment (Document 67) be GRANTED as to the
Defendant’s counter-claim for declaratory relief.
The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and to
any unrepresented party.
ENTER:
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December 16, 2015
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