NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 12a1045n.06

                                          No. 11-2181

                         UNITED STATES COURT OF APPEALS                              FILED
                              FOR THE SIXTH CIRCUIT                               Oct 01, 2012
                                                                            DEBORAH S. HUNT, Clerk

FRANK J. ELLIAS,                                        )
                                                        )
       Plaintiff-Appellant,                             )      ON APPEAL FROM THE
                                                        )      UNITED STATES DISTRICT
              v.                                        )      COURT FOR THE EASTERN
                                                        )      DISTRICT OF MICHIGAN
PHOENIX LIFE INSURANCE COMPANY,                         )
                                                        )
       Defendant-Appellee.                              )      OPINION
                                                        )
                                                        )



BEFORE: MOORE and COLE, Circuit Judges; and ROSE, District Judge.*

       THOMAS M. ROSE, District Judge. Frank Ellias, Trustee of the Robert Rosen Family

Irrevocable Trust1 (“RFT”) appeals the district court’s order granting Phoenix Life Insurance

Company’s (“Phoenix’s”) motion for summary judgment and denying RFT’s motion for summary

judgment. The district court determined that RFT’s breach-of-contract counterclaim was moot. For

the following reasons, we AFFIRM.

I.     JURISDICTION




       *
        The Honorable Thomas M. Rose, United States District Judge for the Southern District of
Ohio, sitting by designation.
       1
        The beneficiaries of the Rosen Family Irrevocable Trust are Rosen’s four natural children
and one foster child. R. 89 (Rosen Deposition at 80-910 (Page ID #1678-79).
No. 11-2181
Ellias v. Phoenix Life Ins. Company


       The basis for the district court’s subject matter jurisdiction was diversity of citizenship, 28

U.S.C. § 1332. Judgment was entered by the district court on September 14, 2011. This Appeal was

timely filed on September 19, 2011. Thus, this Court has appellate jurisdiction pursuant to 28 U.S.C.

§ 1291.

II.    RELEVANT FACTUAL BACKGROUND

       A.      The First Policy

       Robert Rosen (“Rosen”) applied to Phoenix for the first of two $5,000,000 life insurance

policies on March 27, 2006, naming himself as the insured and RFT as the “owner” and

“beneficiary.” R. 89 (Application for Life Insurance) (Page ID #1704). Rosen claims that he sought

the two policies to give his estate necessary liquidity to pay anticipated estate taxes upon his death.

R. 89 (Rosen Dep. at 17-18) (Page ID #1669).

       In a form that Phoenix required of all persons applying for more than $2,000,000 of life

insurance, Phoenix asked Rosen the following questions:

       (1) Is non-recourse premium financing or any other method being utilized to pay
       premiums in order to facilitate a current or future transfer, assignment or other action
       with respect to the benefits provided under the policy being applied for?

       (2) Do you intend to finance any of the premium required to pay for this policy?

R. 89 (Statement of Client Interest) (Page ID #1710). On March 27, 2006, Rosen answered “no” to

both of these questions, and affirmed that the document was “complete and true to the best of my

knowledge.” 

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Ellias v. Phoenix Life Ins. Company


       Phoenix issued the policy (the “First Policy”) on April 18, 2006. R. 96 (Phoenix Mot.

Summ. J. at 3) (Page ID #2078). Thereafter, Rosen signed an undated Policy Acceptance Form to

be completed when a policy is delivered that contained a declaration that the “statements made in

the application remain full, complete and true as of this date.” R. 89 (Policy Acceptance Form)

(Page ID #1713).

       On May 12, 2006, RFT executed an “Assignment of Life Insurance Policy as Collateral”

(“First Collateral Assignment”) to LaSalle Bank, N.A. (“LaSalle”). R. 89 (Assignment of Life

Insurance Policy as Collateral) (Page ID #1714-20). The Assignment gave LaSalle a security interest

in “all of Borrower’s claims, options, privileges, rights, title and interest in, to and under the

insurance policy … as well as the proceeds to be paid out thereunder.” 

notice of the First Collateral Assignment on May 24, 2006. R. 89 (Letter)

(Page ID # 1721). That same day, RFT and LaSalle entered into a “Policy Control Agreement,”

giving LaSalle the “beneficial ownership” of the life insurance policy in the event of a default. R.

89 (Policy Control Agreement) (Page ID #1748-60). On June 26, 2006, LaSalle and RFT executed

a Note and Security Agreement, which gave LaSalle the authority to “take the Policies away” in the

event of a default. R. 89 (Note and Security Agreement) (Page ID # 1739-47). The loan allowed

Rosen to make the initial premium payments on the first insurance policy. 

applied for a premium financing program offered by Coventry Capital LLC

(“Coventry”) on December 19, 2005. R. 93 (Submission Form and Authorization) (Page ID #2029-




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36). RFT’s insurance broker confirmed with Coventry in a letter dated February 24, 2006, that

Rosen and RFT were seeking such financing. R. 93 (Letter) (Page ID #2038-39).




       B.      The Second Policy

       On July 24, 2006, Rosen applied for a second life insurance policy, identical in all respects

to the First Policy. R. 89 (Application for Life Insurance) (Page ID #1722-27). He was again asked

about possible financing sources for the policy’s premiums, as well as any potential interests in the

policy that would be assigned to other parties, with questions that were different than those Phoenix

asked for the First Policy:

       (1) Is non-recourse premium financing or any other method being utilized to pay premiums
       in order to facilitate a current or future transfer, assignment, or other action with respect to
       the benefits provided under the policy being applied for?
       …
       (9) Is there an intention that any party, other than the Owner, will obtain any right, title or
       interest in any policy issued on the life of the Proposed Life Insured(s) as a result of this
       application?

“no” to both questions. 

the second policy on September 26, 2006. (the “Second Policy”) (The First

and Second Policies are referred to hereinafter as the “Policies.”) R. 96 (Phoenix Mot. Summ. J. at

4) (Page ID #2079). Thereafter, Rosen again signed an undated Policy Acceptance Form to be

completed when a policy is delivered that contained a declaration that the “statements made in the




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application remain full, complete and true as of this date.” R. 89 (Policy Acceptance Form) (Page

ID #1730).

       Rosen sought premium financing from LaSalle on the Second Policy as well. R. 89 (Note

and Security Agreement) (Page ID # 1761-69.) A second Note and Security Agreement was

executed on September 29, 2006. 

10, 2006, Phoenix received a Collateral

Assignment (“Second Collateral Assignment”). R. 89 (Letter) (Page ID #1731-38). LaSalle’s

interest in the Second Policy was, for all intents and purposes, identical to its interest in the First

Policy. R. 89 (Assignment of Life Insurance Policy as Collateral) (Page ID #1732-38).

       C.      Premium Financing Transaction Documents

       The transaction documents used for both policies include Assignment of Life Insurance

Policy As Collateral Agreements (the “Collateral Agreements”), Policy Control Agreements and

Note and Security Agreements. The Note and Security Agreements set forth the terms of the loan

from LaSalle to RFT. R. 89 (Note and Security Agreements) (Page ID #1739-47, 1761-69). The

loan proceeds are to be disbursed to Phoenix to pay premiums, to satisfy certain expenses, to

reimburse RFT for payment of the initial life insurance premiums and to cover the financed portion

of the loan origination fee. 

the Note and Security Agreements, RFT gives LaSalle

a security interest in the policy. 

event of default on the loan, LaSalle may, at its option,

accelerate the maturity of the loan and, among other things, terminate the coverage under the Policies

and demand the return of and receive from the insurer any amounts due to the owner. 

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Ellias v. Phoenix Life Ins. Company


       The Collateral Agreements assign all of RFT’s claims, options, privileges, rights, title and

interest in the Policies as well as the policy proceeds. R. 89 (Assignments of Life Insurance Policy

as Collateral) (Page ID #1714-20, 1732-38). So long as the policy has not been surrendered or

cancelled, RFT retains the right to designate and change the beneficiary provided that LaSalle will

continue to be the primary beneficiary to the extent of the principal amount of the loan. 

Control Agreements between RFT, as the owner, and LaSalle establish LaSalle

as both the “Policy Intermediary” and the “Secured Party.” R. 89 (Policy Control Agreements) (Page

ID #1748-60, 1770-82). These agreements establish an accounts with LaSalle to facilitate the

financing of premiums related to the Policies. 

that RFT intends to borrow monies

to fund policy premiums but does not intend to transfer or surrender ownership of the policy or the

right to designate the policy beneficiary prior to the maturity of the borrowings. 

indicate that RFT has the insurable interest in the life covered by the life insurance policy. 

Policy Control Agreements indicate that, if LaSalle forecloses on the policy or if RFT

decides to relinquish the policy in satisfaction of the Note and Security Agreement, the policy’s

beneficial ownership transfers to LaSalle.

       D.      Rescission of the Policies

       On February 2, 2007, Phoenix sent a letter to Rosen and RFT expressing concern about the

two newly-issued life insurance policies. R. 89 (Letter) (Page ID #1787-89). Phoenix informed

Rosen and RFT that it was aware of the premium financing arrangements with LaSalle, and that it

believed such agreements were “at variance” with the statements of intent Rosen made in his policy


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applications. 

that it was “not aware of any basis for stating that these insurance

policies were improperly issued and we fully expect Phoenix to comply with its contractual

obligations.” R. 89 (Letter) (Page ID #1790).

        Phoenix sent a final letter on August 7, 2007, declaring that it was rescinding the Policies.

R. 89 (Letter) (Page ID # 1791-98). After an internal investigation, Phoenix “concluded that both

policies were part of a financing and transfer of ownership transaction that was not disclosed to

Phoenix despite specific questions being asked of the insured and owner to elicit such information,”

and that the answers of Rosen and RFT to these questions were “inaccurate and misleading.” (Id.

at PAGEID #1795.) Phoenix indicated that, had it known of the nature of the financing and third

party ownership transaction, it would not have issued either of the Policies. (Id.)

        Phoenix returned the premiums that had already been paid to LaSalle. 

the

letters to rescind the Policies, Phoenix filed suit for judicial rescission. Eastern District of Michigan

Case No. 2:08-cv-11562, doc. #10 (Page ID #31-45).

        Rosen and RFT claim that the rescission was improper because the statements of intent in

the application were accurate. 

#31 (Page ID #275-80). RFT elected to sue Phoenix for

damages for unlawful rescission rather than repay the loans to LaSalle. 

and RFT

filed their counterclaim in federal district court, they defaulted on both of the premium financing

loans and LaSalle foreclosed. R. 89 (Ellias Deposition at 92-94) (Page ID # 1697-98).

        E.      The Foreclosures




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       After receiving the rescissions, RFT did not pay off the LaSalle loans for the First or Second

Policies. The loan on the First Policy matured on August 26, 2008, and LaSalle foreclosed on the

First Policy on September 11, 2008. R. 96 (letter) (Page ID #2174). The loan on the Second Policy

was in default, and LaSalle foreclosed on the Second Policy on December 1, 2008. R. 96 (letter)

(Page ID # 2176). LaSalle seized the Policies in satisfaction of the debt it held. R. 89 (Policy

Control Agreements) (Page ID # 1748-60, 1770-82).

III.   RELEVANT PROCEDURAL BACKGROUND

       On December 13, 2007, Phoenix sued the Raider-Dennis Agency in the U.S. District Court

for the Eastern District of Michigan for breach of an express contract, breach of an implied contract

and unjust enrichment. R. 1. On November 14, 2008, this case was joined with a later-filed case

in which Phoenix was the plaintiff and LaSalle, RFT, Rosen, Coventry Capital, CBI Financial, the

Raider-Dennis Agency and Larry Campagna were named defendants. R. 15

       RFT and Rosen filed a counterclaim against Phoenix in the later-filed lawsuit alleging a

breach of contract. Eastern District of Michigan Case No. 2:08-cv-11562, doc. #31. This

counterclaim was filed on October 2, 2008, and alleges that Phoenix wrongfully rescinded the two

life insurance policies. 

30, 2009, Coventry Capital was dismissed. R. 20. The court found that the

representations made by Rosen and RFT were not a part of the First Policy and could thus not be

good cause for rescission under Michigan law. 

11-2181
Ellias v. Phoenix Life Ins. Company


        On March 3, 2010, Phoenix, having successfully settled its rescission action, voluntarily

dismissed all of its claims. R. 65. The remaining defendants were dismissed over the objection of

Rosen and RFT. 

were reinstated with Bank of America (f/k/a LaSalle) having

ownership. R. 89, Ex. X. Rosen’s and RFT’s counterclaim against Phoenix remained to be

adjudicated.

        Phoenix, on one hand, and Rosen and RFT, on the other, filed cross-motions for summary

judgment on the counterclaim. R. 89, 96. The district court granted Phoenix’s motion for summary

judgment and denied Rosen’s and RFT’s motion for summary judgment on August 25, 2011. R. 110

In doing so, the district court found that Rosen’s and RFT’s counterclaim was moot. 

followed.

IV.     STANDARD OF REVIEW

        This Court reviews a district court’s decision granting summary judgment de novo using the

same standards applied by the district court. Davis v. Sodexho, Cumberland College Cafeteria, 

, 462 (6th Cir. 1998). Summary judgment may be granted if the evidence submitted shows

that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter

of law. 

also reviews the question of standing de novo. Schultz v. United States, 

, 349 (6th Cir. 2008), cert. denied, 

(2008). When jurisdiction is based upon

diversity of citizenship, as is the case here, a plaintiff must have standing under both Article III and

state law, Michigan in this case, to maintain a cause of action. Morell v. Star Taxi, 343 F. App’x 54,


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57 (6th Cir. 2009) (citing Mid-Hudson Catsill Rural Migrant Ministry, Inc. v. Fine Host Corp., 

, 173 (2d Cir. 2005)).

       A.      Article III Standing and Mootness

       A federal district court’s subject matter jurisdiction is limited by Article III of the U.S.

Constitution to actual cases or controversies. U.S. Const. Art. III, § 2. One element of the case or

controversy requirement is that the plaintiff must establish it has standing to sue. DaimlerChrysler

Corp. v. Cuno, 

, 342 (2006). A plaintiff has Article III standing to sue when she or he

can show: (1) an injury-in-fact that (2) was fairly traceable to the defendant’s allegedly unlawful

conduct and (3) is likely to be redressed via a favorable decision. 

(quoting

Prime Media, Inc. v. City of Brentwood, 

, 349 (6th Cir. 2007)). Finally, standing is

determined as of the time the complaint is filed. Cleveland Branch, N.A.A.C.P. v. City of Parma,

Ohio, 

, 524 (6th Cir. 2001).

       Mootness is distinct from standing. 

Standing concerns only whether a plaintiff

has a viable claim at the time the complaint was filed, while mootness addresses whether that

plaintiff continues to have an interest in the outcome of the litigation. 

becomes moot

when the issue is no longer “live” or the parties lack a legally cognizable interest in the outcome.

Finally, the burden of demonstrating mootness is on the party claiming mootness. 

       B.      Standing and Mootness Under Michigan Law




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        Standing under Michigan law is a limited, prudential doctrine. Lansing Sch. Educ. Ass’n v.

Lansing Bd. of Educ., 

, 699 (Mich. 2010). A plaintiff has standing under Michigan

law “whenever there is a legal cause of action.” 

cause of action is not provided at law,

a plaintiff may have standing if the plaintiff “has a special injury or right, or substantial interest, that

will be detrimentally affected in a manner different from the citizenry at large or if the statutory

scheme implies that the [Michigan] Legislature intended to confer standing on the plaintiff.” 

courts do not adjudicate” moot questions or declare principles of law that have

no practical legal effect in the case” before the court. Anglers of the Ausable, Inc. v. Dept. of Envtl.

Quality, 

, 240 (Mich. 2011).

V.      ANALYSIS

        A.      RFT’S STANDING

        The issue of whether RFT had standing is reviewed de novo by this Court. Standing is

determined at the time the complaint is filed. The complaint being considered here is a counterclaim

filed by RFT on October 2, 2008. RFT must have standing pursuant to both Article III and Michigan

law.2

        RFT had standing when its counterclaim was filed if it can show an injury-in-fact that was

“fairly traceable to the defendant’s allegedly unlawful conduct” and is “likely to be redressed” via

a favorable decision. At the time RFT’s counterclaim was filed, RFT was the owner and beneficiary


        2
        The district court held that RFT had standing under Michigan law to bring a breach-of-
contract claim arising out of the rescission of the insurance policies. Nothing is said by the district
court specifically regarding Article III standing.

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of the policies but the policies had been rescinded by Phoenix. If the policies had been wrongfully

rescinded, as claimed by RFT, RFT could show an injury in fact “fairly traceable” to Phoenix’s

allegedly unlawful conduct. Further, this alleged injury could have been redressed by a favorable

decision. Thus, RFT had Article III standing when its counterclaim was filed.

         Phoenix now argues that RFT never suffered an “injury in fact” because RFT never invested

any money in the Policies and cannot identify a possible “windfall” that it might have obtained had

it eventually decided to invest in the Policies. However, this argument is without merit.

         At the time the counterclaim was filed, LaSalle had not foreclosed on the Second Policy.

Thus, at that time, RFT still had an interest in the Second Policy and could arguably have been

injured by rescission of that policy. Presumably RFT had not yet reached the point where it was

required to invest any money in the Second Policy to avoid foreclosure. Thus, whether or not RFT

had invested any money in the Second Policy at the time its counterclaim was filed is irrelevant as

to whether RFT had suffered an injury-in-fact regarding the Second Policy. Phoenix, therefore, has

not shown that RFT did not have standing regarding the Second Policy when the counterclaim was

filed.

         The First Policy had already been foreclosed upon by LaSalle when RFT’s counterclaim was

filed.   RFT presents expert testimony that RFT suffered certain damages by Phoenix’s alleged

wrongful rescission of the First Policy. Although Phoenix attempts to discredit this expert’s opinion,

it provides enough evidence to avoid summary judgment on this issue. Thus, Phoenix has not shown

that RFT did not have standing regarding the First Policy when the counterclaim was filed.


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         Phoenix also now argues that RFT cannot show that its alleged injury is “fairly traceable”

to Phoenix’s conduct. However, RFT’s counterclaim alleges that Phoenix wrongfully rescinded the

Policies. Thus, the counterclaim alleges an injury that is fairly traceable to Phoenix’s conduct. RFT

had Article III standing to bring its counterclaim.

         RFT must also have standing under Michigan law to bring its counterclaim. RFT has

standing under Michigan law if it has a legal course of action. Under Michigan law, RFT may bring

a claim for breach of an insurance contract. Thus, RFT had standing under Michigan law to bring

its counterclaim.

         In sum, RFT had standing under Article III and Michigan law to bring its counterclaim.

Since the district court judge determined that RFT had standing under Michigan law at the time

RFT’s Counterclaim was filed, that part of his order is affirmed.

         B.     MOOTNESS

         The analysis next turns to whether RFT’s counterclaim was moot at the time the district judge

issued the order being appealed. That order was filed on August 21, 2011.

         An issue becomes moot under federal law when the issue is no longer “live” or the parties

lack a legally cognizable interest in the outcome. An issue is moot under Michigan law when the

court is asked to declare principles of law that have no practical legal effect in the case before the

court.

         In this case, Phoenix rescinded the Policies on August 7, 2007. The Note and Security

Agreement on the First Policy was foreclosed on September 11, 2008, and the Note and Security


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Agreement on the Second Policy was foreclosed on December 1, 2008. When the Note and Security

Agreements were foreclosed, RFT’s right, title and interest in the Policies were terminated.

         Thus, on August 21, 2011, when the district judge ruled on the motion for summary

judgment, RFT had no right, title or interest in the Policies. Without any right, title or interest in the

Policies, RFT had no legally cognizable interest in the outcome of the summary judgment motion.

Further, any ruling at that time by the district judge would have no practical legal effect on RFT’s

interest. Therefore, RFT’s counterclaim was moot at the time of the district judge’s ruling.

         RFT argues in its Statement of the Case that its counterclaim was not moot because of the

rule against allowing a party to take advantage of its own breach, because of the doctrine of election

of remedies and because of the duty to mitigate damages. Each of these arguments will be addressed

seriatim.

                1.      Taking Advantage of Its Own Breach

         RFT argues that Phoenix cannot take advantage of its breach of the Policies by allegedly

wrongfully rescinding them. Further, according to RFT, it had no other choice but to default on the

loans because it did not want to pay on an outstanding loan for assets which had legally ceased to

exist.

         The law provides that a party cannot benefit from its own breach. GenCorp, Inc. v. Am. Int’l

Underwriters, 

, 817 (6th Cir. 1999). Said another way, a party cannot take advantage

of his own default in the performance of a contract. 

v. Firemen’s Ins. Co., 

, 356 (Minn 1935)).


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       To rescind a contract is to abrogate and undo it from the beginning and “restore the parties

to the relative positions which they would have occupied if no such contract had ever been made.”

Old Line Life Ins’ Co. Of Am. v. Garcia, 

, 969-70 (E.D. Mich. 2004), rev’d on

other grounds, 

(6th Cir. 2005). Further, when a contract is rescinded, an action will

not lie for breach of that contract. Adam Kroehle’s Sons Co. v. Rockford Oak Leather Co., 

, 325 (Mich. 1927).

       If the Policies were rescinded, as RFT argues as the basis for not paying the loan, then an

action would not lie for breach of the Policies. If the Policies were not rescinded, then RFT should

have paid the loan. RFT had the choice as to whether or not to treat the Policies as not rescinded and

pay on the loans and elected not to. It would appear as though it is RFT that is attempting to benefit

from its decision to treat the Policies as rescinded and not Phoenix.

       In an attempt to overcome the rescission, RFT wants to hold Phoenix to the fiduciary

standard established for ERISA plan administrators. However, parties to an insurance contract deal

at arm’s length and owe no fiduciary obligations to each other. Bolden v. John Hancock Mut. Life

Ins. Co., 

, 31 (E.D. Mich. 1976).

               2.      Election of Remedies

       RFT argues that it was required by law to elect a remedy, and it elected to sue for breach of

contract. According to RFT, Phoenix was, therefore, put on notice that RFT elected to treat the

Policies as breached and seek damages for the breach.




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       The election of remedies doctrine is “a procedural rule which precludes one to whom there

are available two inconsistent remedies from pursuing both. Its purpose is not to prevent recourse

to the alternate remedies, but to prevent double redress for a single injury.” Riverview Co-op., Inc.

v. First Nat’l Bank and Trust Co. of Mich., 

, 226-27 (Mich. 1983). The essential

elements of election of remedies are: (1) the existence of two or more remedies; (2) the

inconsistency between such remedies; and (3) a choice of one of the remedies. 

All

elements must be satisfied to apply the doctrine. 

satisfy the first and second elements. RFT may believe that it had two options -

pay the premiums or sue for damages - but they were not two remedies for breach of the Policies.

RFT was not paying the premiums; LaSalle was. Thus, RFT’s options, as RFT saw them, were to

pay on the loan from LaSalle that it had committed to or sue Phoenix for breach of the Policies.

Electing whether or not to pay LaSalle on the loans was not a remedy for breach of the Policies, and

electing whether or not to pay LaSalle on the loans was not an inconsistent remedy for breach of the

Policies. Thus, the doctrine of election of remedies does not apply to the choice that RFT argues that

it had to make.

                  3.   Duty To Mitigate

       RFT argues that continuing to pay on an outstanding loan for assets which had legally ceased

to exist would have been inconsistent with its duty to mitigate its damages. However, RFT has not

cited any legal authority, and the Court is aware of none, suggesting that the duty to mitigate




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damages requires a party to default on its debt obligations thereby resulting in foreclosure on the

securitized asset in dispute.

       None of RFT’s arguments are availing. RFT’s counterclaim was moot under Article III and

Michigan law when it was to be adjudicated.




VI.    CONCLUSION

       Because we conclude that RFT’s counterclaim was moot at the time the district judge was

deciding the motions for summary judgment, we AFFIRM the judgment below. Also, since RFT’s

counterclaim was moot at the time the district judge issued the summary judgment order, RFT was

not entitled to summary judgment.




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