TAMARA O. MITCHELL, United States Bankruptcy Judge.
This adversary proceeding came before the Court on December 16, 2019, for a hearing on the Defendant's Motion for Summary Judgment, the Plaintiff's Response to Motion for Summary Judgment, the Motion to Strike Response to Defendant's Motion for Summary Judgment, and for a status conference on the pretrial conference and on the Defendant's Motion for Sanctions.
Mr. Johnson filed his Chapter 13 petition on August 12, 2013. On June 15, 2018, he filed this adversary proceeding against Apex. On October 21, 2019, Apex filed a Motion for Summary Judgment (the "Summary Judgment Motion," AP Doc. No. 39) and a Brief in support thereof (the "Brief," AP Doc. No. 40). Mr. Johnson's Amended Plaintiff's Response to Defendant's Motion
In his Complaint Mr. Johnson alleges that Apex misappropriated insurance proceeds that were part of the bankruptcy estate, and that by doing so, Apex violated the automatic stay. According to the Complaint, Mr. Johnson's commercial real property was struck by a car and damaged on December 31, 2016. Mr. Johnson asserts that Apex had filed a proof of claim in his bankruptcy case and that the claim had been paid in full through the trustee by March 2017, and further, that although the claim was paid in full, Apex nonetheless received $22,331.13 from Mr. Johnson's insurance company in May 2017. Mr. Johnson's position is that the insurance proceeds were property of the estate and that by receiving them Apex violated the automatic stay. In addition, Mr. Johnson asserts that Apex's willful violation caused him harm and thus he is entitled to damages and attorney fees.
Apex, however, asserts its claim in Mr. Johnson's case had not been paid off at the time Apex received money from State Farm. According to Apex in its Brief in support of the Summary Judgment Motion, it filed a proof of claim in Mr. Johnson's bankruptcy case on November 4, 2013, which was amended by this Court's Order in June 2014 to reflect a debt owed in the amount of $30,637.70. Apex claims that after the March 2017 payment, which was the last payment made to it through the Chapter 13 Trustee, the claim had a balance due of $4,949.74. Apex contends that it learned in April 2017 that State Farm had already made payments to Mr. Johnson individually on his damage claim. Believing that State Farm should have made this insurance distribution payable to both Mr. Johnson and Apex, Apex subsequently hired counsel who negotiated with State Farm. According to Apex, "[e]ventually State Farm agreed to pay funds to Apex in the amount of $22,311.13 to resolve any claims Apex may have against State Farm as a result of the breach."
At a status conference on November 5, 2018, counsel for the Chapter 13 Trustee confirmed that Apex's claim had not been paid in full as of March 2017. According to the Trustee's counsel, the Trustee's office last made a payment on Apex's claim in March 2017 because the Debtor had stopped making payments to the Trustee; however, the Trustee's office did not close
Mr. Johnson contends that the proceeds received by Apex are property of the estate, while Apex disagrees. According to Apex, the insurance policy Mr. Johnson obtained from State Farm contained a "standard mortgagee" clause as was required by the mortgage. See Summary Judgment Motion, Aff. of Boyer, AP Doc. No. 39-1; Brief, AP Doc. No. 40. Apex claims "[t]he standard clause is a
Summary Judgment Motion, Doc. No. 39-3.
Apex has moved for summary judgment on all of the claims in Mr. Johnson's Complaint. Summary judgment is governed by Rule 56 of the Federal Rules of Civil Procedure, which provides in relevant part that
Fed. R. Civ. P. 56. The party moving for summary judgment has the burden of demonstrating the absence of genuine issues of material fact and its entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court "is not to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "`[T]he court must view all evidence and make all reasonable inferences in favor of the party opposing summary judgment.'" Chapman v. Al Transp., 229 F.3d 1012, 1023 (11th Cir. 2000) (en banc) (quoting Haves v. City of Miami, 52 F.3d 918, 921 (11th Cir. 1995)); see also Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Once the moving party has satisfied its burden of proof by proving the absence of a genuine issue of material fact and that it is entitled to judgment as a matter of law, the burden shifts to the non-moving party to offer evidence of specific facts which prove the existence of a genuine issue of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Fitzpatrick v. City of Atlanta, 2 F.3d 1112 (11th Cir. 1993).
In the first count of his Complaint Mr. Johnson alleged that, by receiving funds
In its Brief, Apex contends that it did not violate the automatic stay because the insurance proceeds it received from State Farm were never property of the estate. According to Apex, State Farm paid funds to Apex pursuant to a "standard mortgagee clause" which created a separate contract in which Mr. Johnson had no interest.
"Under [a standard mortgage] clause the mortgagee is protected even if the insured does something to invalidate the mortgage. In re Alexander, 329 B.R. 919, 923 (Bankr. M.D. Ga. 2005). It has been explained that "[t]he standard mortgage clause provides mortgagees with protection against mortgagors' acts or neglect. The clause creates a separate contract of insurance between the insurer and the mortgagee, and the mortgagor's acts or neglect generally have no impact upon this contract." John W. Steinmetz and Stephen E. Goldman, The Standard Mortgage Clause in Property Insurance Policies, 33 Tort & Ins. L.J 81, 81-82 (1997). The property owner has no interest in the separate contract. 4 Couch on Ins. § 65:36 (3d ed. Dec. 2018 update). "[I]t is ... the clause that the mortgagee is not bound by the default of the insured that gives the standard mortgage clause its distinct character." Id. at § 65:9.
These principles were illustrated in In re Alexander, where arson destroyed property of the debtor, a chicken farmer. Alexander, 329 B.R. at 921. The debtor's insurance company, Georgia Farm Bureau, denied the debtor's claim for failure to cooperate with an investigation but agreed to pay the claim of the mortgage company, Wells Fargo. Id. The debtor, asserting that the Wells Fargo's insurance proceeds were cash collateral, asked the court to use the proceeds to rebuild. Id. However, Wells Fargo opposed the motion, arguing that the proceeds were not cash collateral. Id. Examining the insurance policy, the court highlighted these provisions:
Id. at 922. The court concluded, after considering relevant treatises and case law:
Id. at 923.
As in Alexander, the insurance policy in the case before this Court makes clear that even a denial of the mortgagor's claim will not affect the right of the mortgagee to recover. The Court determines that this language in Mr. Johnson's policy comprises a standard mortgagee clause which creates a separate contract between Apex and State Farm. Mr. Johnson has no interest in this separate contract, and no interest in the insurance proceeds paid by State Farm to Apex; therefore, Mr. Johnson is not entitled to relief against Apex for violation of the automatic stay.
In his Complaint Mr. Johnson seeks damages and attorney fees from Apex. Since this Court has concluded no violation of the automatic stay occurred, Mr. Johnson is likewise not entitled to damages or attorney fees. The Court notes that, instead of being harmed by Apex's receipt of funds from State Farm, Mr. Johnson actually benefitted. Apex established that its claim had not been satisfied at the time Apex received the money, and in fact, used a portion of the funds to satisfy the claim. Mr. Johnson would have still been responsible for paying the balance of Apex's claim had Apex not done so.
Apex, as the party moving for summary judgment, has met its burden of establishing that there are no genuine issues of material fact and that it is entitled to a judgment as a matter of law. Once the burden shifted to Mr. Johnson, he failed to provide evidence that a genuine issue of material fact existed. As a result, this Court determines that Apex's Summary Judgment Motion is due to be granted. Furthermore, because Apex suffered no harm or prejudice as a result of Mr. Johnson's Response, the Motion to Strike is due to be denied. In addition, Apex's Motion for Sanctions relating to the alleged failure of Mr. Johnson to respond to discovery is also due to be denied based on the Court's ruling herein regarding summary judgment. Therefore, it is
