DEBRA M. BROWN, District Judge.
This declaratory judgment action is before the Court on National Security Fire & Casualty Insurance Company's motion for summary judgment. Doc. #35.
Under Rule 56 of the Federal Rules of Civil Procedure, "[s]ummary judgment is proper only when the record demonstrates that no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law." Luv N' Care, Ltd. v. Groupo Rimar, 844 F.3d 442, 447 (5th Cir. 2016). "A factual issue is genuine if the evidence is sufficient for a reasonable jury to return a verdict for the non-moving party, and material if its resolution could affect the outcome of the action." Burton v. Freescale Semiconductor, Inc., 798 F.3d 222, 226 (5th Cir. 2015) (internal quotation marks omitted). On a motion for summary judgment, a court must "consider the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in its favor." Edwards v. Cont'l Cas. Co., 841 F.3d 360, 363 (5th Cir. 2016).
In seeking summary judgment, "[t]he moving party bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact." Nola Spice Designs, L.L.C. v. Haydel Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015) (internal quotation marks and alterations omitted). If the moving party satisfies this burden, "the non-moving party must go beyond the pleadings and by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial." Id. (internal quotation marks omitted).
A motion for summary judgment cannot be granted merely because it is unopposed. Hibernia Nat. Bank v. Administracion Cent. Sociedad Anonima, 776 F.2d 1277, 1279 (5th Cir. 1985); see L.U. Civ. R. 7(b)(3)(E) ("If a party fails to respond to any motion, other than a dispositive motion, within the time allotted, the court may grant the motion as unopposed."). Summary judgment can only be granted "if the motion and supporting materials—including the facts considered undisputed—show that the movant is entitled to it. . . ." Fed. R. Civ. P. 56(e)(3); see Vasudevan v. Adm'rs of Tulane Ed. Fund, 706 Fed. App'x 147, 152 (5th Cir. 2017) (affirming grant of summary judgment on unopposed motion where supporting materials showed movant entitled to it).
McDaniel v. S.W. Bell Tel., 979 F.2d 1534, 1992 WL 352617, at *1 (5th Cir. 1992) (unpublished table decision) (internal citations omitted) (citing John v. State of Louisiana (Bd. of Trs. for State Colls. & Univs.), 757 F.2d 698, 708 (5th Cir. 1985)).
On or about November 15, 2016, Jeffery Townsend applied for homeowner's insurance coverage from National Security Fire & Casualty Insurance Company for a residence located at 5681 County Road 92 in Greenwood, Mississippi ("Property"). Doc. #35-2 at 1; Doc. #35-3 at 33-34. In his application, Townsend made several representations, including that (1) he had "full unconditional ownership" of the Property, certifying that he "own[ed] title in fee simple to any land upon which an insured building is located;" (2) no one "with a financial interest in [the] property [had] been convicted for arson, fraud, or other property crime within the last 10 years;" (3) he paid $40,000.00 for the Property; and (4) he purchased the Property on June 2, 2015. Doc. #35-2 at 1-2. Based on Townsend's application, National Security issued to Townsend homeowner's insurance policy number 1353067-783868 ("Policy") effective November 15, 2016, to November 15, 2017. Doc. #35-1 at 1.
On January 29, 2017, a fire destroyed the Property, rendering it a total loss. Doc. #35-9 at 1; see Doc. #35-3 at 21. While investigating the claim, National Security discovered "a number of inconsistencies" in Townsend's application. Doc. #35-8 at 2. Specifically, in Townsend's April 10, 2017, examination under oath, he admitted that (1) he did not have full ownership of the Property; (2) Demetrius Nellum and/or Nina Olugu was the record owner of the Property at the time he completed the application; (3) he paid $34,000.00 for the Property; and (4) he acquired title to the Property from Olugu through an "Owner Financing Mortgage Contract" that was executed September 1, 2016. Doc. #35-3 at 65-66, 99-102; see Doc. #35-10 at 1. Consequently, on May 11, 2017, National Security returned to Townsend all of the premiums he paid on the Policy and declared the Policy "void as of its date of issuance." Doc. #35-11 at 1.
Also on May 11, 2017, National Security filed a complaint for declaratory relief in this Court against Townsend seeking a judgment declaring the Policy "void ab initio" because of material misrepresentations by Townsend in his insurance application, and that it owes no further duty to Townsend. Doc. #1 at 4. After being granted an extension of time to respond to the complaint, Townsend filed his "Affirmative Defenses and Response to Motion for Declaratory Judgment" on June 30, 2017. Doc. #6; Doc. #7. On September 21, 2017, with leave of the Court, National Security filed an amended complaint adding Nellum and Olugu as defendants. Doc. #18. The amended complaint seeks a declaration that Townsend's misrepresentations rendered the Policy voidable, and that National Security, having properly voided the Policy, owes no further duty to Townsend, Nellum, or Olugu. Id. at 6.
Townsend never answered the amended complaint.
During the course of discovery, Townsend served his initial disclosures in which he admitted that "[w]hen the application was executed by defendant Townsend, Mr. Nellum was the record owner of the property." Doc. #35-5 at 2. Thereafter, National Security filed a motion for summary judgment.
National Security has moved for summary judgment both on its declaratory judgment claim and as to Olugu's counterclaim. Doc. #35 at 1.
National Security argues that Townsend made multiple material misrepresentations in his insurance application which render the Policy voidable as to Townsend and Olugu.
First, National Security contends Townsend misrepresented who owned the Property because although in his application, Townsend certified that he owned the Property, he admitted in his examination under oath that he did not own the Property when he completed the application, and he stated in his initial disclosures that Nellum was the record owner of the Property. Doc. #36 at 3. National Security asserts that had it known someone other than Townsend held legal title to the Property, it would not have issued the Policy. Id. at 4.
Second, National Security argues that Townsend made a material misrepresentation in his insurance application when he stated that no one "with a financial interest in [the] property [has] been convicted for arson, fraud, or other property crime within the last 10 years" because Nellum, as Townsend admitted in his initial disclosures, was the record owner of the Property when Townsend applied for insurance coverage; and, on July 24, 2014, Nellum pleaded guilty to insurance fraud in Harris County, Texas. Id. at 5. National Security contends that had it known Nellum—the record owner of the Property—had been convicted of fraud in 2014, it would have charged a higher premium or refused to insure the Property. Id. at 5-6.
Third, National Security contends Townsend misrepresented the amount he paid for the Property because in his application, he stated that he paid $40,000.00 for the Property but in his examination under oath, he testified the purchase price was $34,000.00. Id. at 6. National Security asserts that it is not its policy to insure newly-acquired property for more than the purchase price and that it would have only insured the Property for the price Townsend paid for it had Townsend disclosed the actual purchase price. Id.
Finally, National Security argues that Townsend misstated the date on which he purchased the Property because his application states that he purchased the Property on June 2, 2015, but in his examination under oath, he stated that he acquired title to the Property when he executed an "Owner Financing Mortgage Contract" with Olugu on September 1, 2016.
"For more than one hundred and thirty years, [the Mississippi Supreme] Court has held than an insurance company may void a policy where the insured made material misrepresentations during the application process." Jones-Smith v. Safeway Ins. Co., 174 So.3d 240, 241 (Miss. 2015) (footnote omitted); see Wilson v. State Farm Fire & Cas. Co., 761 So.2d 913, 921 (Miss. 2000) ("In Mississippi, a material misrepresentation in an application for an insurance policy allows the insurer to void or rescind the policy."). "The materiality of a representation is determined by the probable and reasonable effect which truthful answers would have had on the insurer." Sanford v. Federated Guar. Ins. Co., 522 So.2d 214, 217 (Miss. 1988).
Here, National Security seeks to void the Policy because of material misrepresentations Townsend made in his application regarding the Property's ownership, purchase price, and purchase date, and because a person with a financial interest in the Property had been convicted of fraud. The undisputed summary judgment evidence
Olugu's counterclaim seeks a declaratory judgment that she does not have a mortgage interest in the Property and a "Judgment requiring National Security to pay . . . her reasonable attorney's fees and costs incurred in having to defend herself in this matter." Doc. #25 at 5, 6. National Security moved for summary judgment on Olugu's counterclaims in its motion for summary judgment.
In her counterclaim, Olugu states that she "does not and has never had a mortgage interest on the property located at 5681 County Road 92, Greenwood, Mississippi. . . ." Doc. #24. "Normally, factual assertions in pleadings . . . are considered to be judicial admissions conclusively binding on the party that made them." White v. ARCO/Polymers, Inc., 720 F.2d 1391, 1396 (5th Cir. 1991); see McCreary v. Richardson, 738 F.3d 651, 659 n.5 (5th Cir. 2013) ("This circuit has long noted that factual statements in the pleadings constitute binding judicial admissions. . . ."). National Security does not dispute the statement by Olugu as such. See Doc. #36 at 7 ("Olugu's judicial admission, by which she said she `does not and never had a mortgage interest on the property' . . . resolves the dec action against Olugu. National Security owes no duty to Olugu under the now voided insurance contract.") (citations omitted). As explained above, because National Security was within its rights to void the Policy because of Townsend's material misrepresentations and, as such, owes no duty to Olugu, Olugu's request for a declaratory judgment that she has never had a mortgage interest in the Property will be dismissed as moot.
Olugu alleges that National Security "failed to adequately investigate this matter" before "incorrectly add[ing] her as a Defendant" in this action and states that she "does not and has never had a mortgage interest" in the Property. Id. at 5. Notably, aside from asserting that National Security failed to adequately investigate before adding her as a defendant, Olugu does not articulate a legal theory on which her counterclaim is based. Id. at 5-6.
In its motion for summary judgment, National Security argues that Olugu's counterclaim should be dismissed because (1) "failure to investigate" before initiating a suit is not a cognizable claim, Doc. #36 at 9; (2) there was an "Owner Financing Mortgage Contract" that purported to show the sale of the Property from Olugu to Townsend, Doc. #35-10; and (3) in his pre-suit examination under oath, Townsend testified that Olugu might have had a mortgagee's interest in the Property, Doc. #35-3 at 103. National Security contends that given these facts, even if "failure to investigate" is a cognizable claim, it had a reasonable basis for adding Olugu as a defendant in this action. Doc. #36 at 9.
Olugu responds that the "Owner Financing Mortgage Contract" is of "no value, a falsity, [and] a misrepresentation" that National Security "received from . . . Townsend only to try and beef up their argument that they did not `fail to investigate'" and that Townsend's pre-trial examination under oath contained "lies and misrepresentations." Doc. #44 at 5-6. Olugu also argues that National Security had the same information at the close of discovery as it did before adding her as a defendant and that "there was never an issue concerning whether . . . Olugu held a colorable mortgagee's interest" in the Property. Id. at 6. Finally, Olugu contends that the Fifth Circuit's decision in Coghlan v. Starkey, 852 F.2d 806 (5th Cir. 1988), provides authority for her claim that she is entitled to attorney's fees. Id.
In reply, National Security argues that Coghlan is inapposite because there, the Fifth Circuit imposed sanctions sua sponte under Federal Rule of Appellate Procedure 38, a rule which is of no import here. Additionally, National Security argues that assuming Olugu's vague claim is construed as a claim for abuse of process, malicious prosecution, or sanctions under Federal Rule of Civil Procedure 11, such claim must fail.
Olugu's reliance on Coghlan for the proposition that she is entitled to attorney's fees for National Security's alleged failure to adequately investigate whether she should have been added as a defendant is misplaced. In Coghlan, the Fifth Circuit, pursuant to Federal Rule of Appellate Procedure 38,
The nearest analog to Appellate Rule 38 in the Federal Rules of Civil Procedure is Rule 11. "Rule 11(b) generally requires a pleading to have a nonfrivolous basis in law and fact and a valid litigation purpose. . . ." Stevens v. Sembcorp Utils. Pte Ltd., No. 10 Civ. 4481, 2011 WL 3296063, at *4 (S.D.N.Y. Aug. 1, 2011); see Fed. R. Civ. P. 11(b). Rule 11(c) provides sanctions for parties that violate Rule 11(b). Among other things, Rule 11(c) requires that a motion for sanctions specifically allege the sanctionable conduct, be made separately from other motions, and comply with Rule 11's "safe harbor" provision by serving the motion for sanctions on the opposing party at least twenty-one days before its filing. See Fed. R. Civ. P. 11(c); 5A Charles Alan Wright & Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE § 1337 (3d ed. 2018). The Fifth Circuit has held that the procedure set by Rule 11 is mandatory. Marlin v. Moody Nat. Bank, N.A., 533 F.3d 374, 378 (5th Cir. 2008) (failure to comply with procedures of Rule 11 is plain error); Elliott v. Tilton, 64 F.3d 213, 216 (5th Cir. 1995) ("The plain language of the rule indicates that this notice and opportunity prior to filing is mandatory. Plaintiffs did not comply with this procedural prerequisite. Therefore, the sanction and payment of costs and attorneys' fees ordered by the district court cannot be upheld under Rule 11."). Olugu never filed a motion for sanctions pursuant to Rule 11. Accordingly, even if the Court did construe her counterclaim as a motion for sanctions, it must fail.
Regarding abuse of process, the Mississippi Supreme Court has instructed that there are "three elements of abuse of process . . .: (1) the party made an illegal use of a legal process, (2) the party had an ulterior motive, and (3) damage resulted from the perverted use of process." Ayles ex rel. Allen v. Allen, 907 So.2d 300, 303 (Miss. 2005). In response to the motion for summary judgment, Olugu does not provide any summary judgment evidence to dispute National Security's evidence that there was a purported mortgage contract between her and Townsend for the Property, or to challenge Townsend's statement under oath that she might have a mortgagee interest in the Property. All Olugu offers is her unsubstantiated arguments that the mortgage contract was "of no value, a falsity, [and] a misrepresentation" and that Townsend's statement was a "lie[] and misrepresentation[]." Doc. #44 at 5, 6. "It has long been settled law that a plaintiff must respond to an adequate motion for summary judgment with admissible evidence." Duplantis v. Shell Offshore, Inc., 948 F.2d 187, 191 (5th Cir. 1991). "Although a party's briefs should point the court to competent summary judgment evidence-such as affidavits, depositions or interrogatory responses . . . -in order to support the factual assertions contained in the party's briefs and pleadings, the briefs themselves . . . are not evidence." Tucker v. SAS Institute, Inc., 462 F.Supp.2d 715, 723 (N.D. Tex. 2006). Olugu's unsupported arguments do not suffice to controvert National Security's evidence that it had a reasonable basis for adding her as a defendant, let alone establish that National Security added her illegally or with an ulterior motive. Accordingly, to the extent her counterclaim is construed as a claim for abuse of process, it is without merit.
Finally, to establish the tort of malicious prosecution under Mississippi law,
Strong v. Nicholson, 580 So.2d 1288, 1293 (Miss. 1991). Olugu has not alleged nor submitted evidence that National Security instituted any criminal proceedings against her. Accordingly, even if the Court construed her counterclaim as one alleging malicious prosecution, it too must fail.
For the reasons above, National Security's motion [35] for summary judgment is
