Mortera v. State Farm Fire and Cslty ( 2022 )

Case: 21-60785 Document: 00516331068 Page: 1 Date Filed: 05/24/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
May 24, 2022
No. 21-60785
Lyle W. Cayce
Summary Calendar
Clerk
Gilberto Alarcon Mortera,
Plaintiff—Appellant,
versus
State Farm Fire and Casualty Company,
Defendant—Appellee.
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 1:20-CV-224
Before Smith, Stewart, and Graves, Circuit Judges.
Per Curiam:*
Plaintiff Gilberto Alarcon Mortera (“Mortera”) owns a condominium
unit at the Kona Villa complex in Diamondhead, Mississippi. Around mid-
2018, his unit was damaged after a water leak occurred in the unit above his.
The leak damaged carpeting, drywall, molding and trim, light fixtures,
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 21-60785 Document: 00516331068 Page: 2 Date Filed: 05/24/2022
No. 21-60785
window blinds, electrical outlets, plumbing fixtures, furniture, and other
accessories. Mortera suffered approximately $59,720.40 in losses. He sought
payment for his damages from State Farm Fire and Casualty Company
(“State Farm”). State Farm reviewed the policy under which Mortera
sought to recover and determined it only covered Kona Villa Owners
Association (“Kona Villa”), not Mortera, and that individual unit owners
were responsible for damages to the interior of their units. Mortera then sued
State Farm for breach of contract.
State Farm moved for summary judgment which the district court
granted after determining that Mortera was not a party to the insurance
policy in question and that he was a mere incidental beneficiary and thus
could not sue for recovery. Mortera now appeals the district court’s grant of
summary judgment for State Farm. We AFFIRM.
I.
“This court reviews de novo a district court’s grant of summary
judgment, applying the same standard as the district court.” Austin v. Kroger
Tex., L.P., 864 F.3d 326, 328 (5th Cir. 2017) (citing Ford Motor Co. v. Tex.
Dep’t of Transp., 264 F.3d 493, 498 (5th Cir. 2001)). Summary judgment is
appropriate “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. 56(a). We view all evidence in the light most favorable to
the non-moving party, drawing all reasonable inferences in its favor. Bolton v.
City of Dallas, 472 F.3d 261, 261 (5th Cir. 2006).
II.
This diversity action is governed by Mississippi substantive law. Delta
& Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 399 (5th
Cir. 2008). Under Mississippi law, a breach of contract case consists of two
elements: “‘(1) the existence of a valid and binding contract,’ and (2) a
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showing ‘that the defendant has broken, or breached it.’” Maness v. K & A
Enters. of Miss., LLC, 250 So. 3d 402, 414 (Miss. 2018) (quoting Bus.
Commc’ns, Inc. v. Banks, 90 So. 3d 1221, 1224 (Miss. 2012)).
Mississippi law requires the following elements to form a valid
contract: “(1) two or more contracting parties, (2) consideration, (3) an
agreement that is sufficiently definite, (4) parties with legal capacity to make
a contract, (5) mutual assent, and (6) no legal prohibition precluding contract
formation.” GGNSC Batesville, LLC v. Johnson, 109 So. 3d 562, 565 (Miss.
2013) (quoting Adams Cmty. Care Ctr., LLC v. Reed, 37 So. 3d 1155, 1158
(Miss. 2003)).
When interpreting an insurance policy under Mississippi law, courts
“look at the policy as a whole, consider all relevant portions together and,
whenever possible, give operative effect to every provision in order to reach
a reasonable overall result.” J & W Foods Corp. v. State Farm Mut. Auto. Ins.
Co., 723 So. 2d 550, 552 (Miss. 1998). An endorsement “controls the policy
insofar as it enlarges, modifies or restricts the terms” of the policy. Camden
Fire Ins. Ass’n v. New Buena Vista Hotel Co., 24 So. 2d 848, 850 (1946).
“[I]f a contract is clear and unambiguous, then it must be interpreted
as written.” Corban v. United Servs. Auto. Ass’n, 20 So. 3d 601, 609 (Miss.
2009) (quoting United States Fid. & Guar. Co. v. Martin, 998 So. 2d 956, 963
(Miss. 2008)). Although “ambiguities must be resolved in favor of the non-
drafting party,” they “do not exist simply because two parties disagree over
the interpretation of a policy.” Id. Instead, “[a]mbiguities exist when a policy
can be logically interpreted in two or more ways, where one logical
interpretation provides for coverage.” Id.A.
Mortera asserts that the insurance policy expressly covers this matter
because the policy contemplates coverage for unit owners and the type of
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property destroyed. As a threshold matter, the introductory language in the
policy states that for purposes of coverage, “the words ‘you’ and ‘your’ refer
to the Named Insured shown in the Declarations and any other person or
organization qualifying as a Named Insured under this policy.” Mortera’s
name does not appear under the “Named Insured” portion of the
declarations page or anywhere else in the policy. Only Kona Villa is listed as
a named insured. So, we must determine whether Mortera has coverage as
“any other person . . . qualifying as a Named Insured under this policy.” Id.As an indication of his coverage, Mortera cites the following provision
that details covered property and is contained in the Residential Community
Association Endorsement:
Any of the following types of property contained within an
individual unit, regardless of ownership:
(a) Fixtures, improvements and alterations that are a part of the
building or structure; and
(b) Appliances, such as those used for refrigerating, ventilating,
cooking, dishwashing, laundering, security or housekeeping.
Mortera argues that because some of his property damage could be
covered under the insurance policy, he is therefore a party to the contract.
However, he cites no support for the assertion that the policy’s contemplated
coverage for some of his property confers his legal status as a contracting
party who provided adequate consideration. And we decline to read such
contractual language into the policy to provide a basis for Mortera’s claim.
Mortera also argues that because another policy endorsement
identifies individual unit owners as insured under the policy, he is an insured
party. At first blush, this argument seems compelling, but we must “consider
all relevant portions together” and “give operative effect to every
provision.” J & W Foods Corp., 723 So. 2d at 552. Here, Section II of the
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Residential Community Association Endorsement to the policy defines an
“insured” as:
Any unit-owner including:
(1) The declarant, builder, sponsor, developer or promoter in
the capacity as a unit-owner, but only with respect to the
declarant’s, builder’s, sponsor’s, developer’s or promoter’s
liability arising out of:
(a) The ownership, maintenance or repair of that
portion of the premises which is not owned solely by the
declarant, builder, sponsor, developer or promoter; or
(b) The declarant’s, builder’s, sponsor’s, developer’s
or promotor’s membership in the association.
(2) Each other unit-owner of the described condominium
association or similar community association, but only with
respect to that person’s liability arising out of:
(a) The ownership, maintenance or repair of that
portion of the premises which is not owned solely by the
unit-owner; or
(b) Membership in the association
Importantly, the policy’s plain language constrains this definition: “In
SECTION II – LIABILITY, the word ‘insured’ means any person or
organization qualifying as such under SECTION II – WHO IS AN
INSURED.” Thus, if someone qualifies as an insured under Section II, he
qualifies for coverage under Section II. This is the plain meaning of the text.
Nowhere in the policy does Section II (Liability) expand its definition of
“insured” to Section I (Property). While Mortera may have Section II
liability coverage in certain instances, this provision does not demonstrate
that he is insured for property damage under Section I.
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B.
Mortera also asserts that even if he is not insured under the policy, he
has standing to sue for breach as a third-party beneficiary. Under Mississippi
law, a non-party to a contract may sue for breach of contract as a third-party
beneficiary. Burns v. Washington Savings, 171 So. 2d 322, 324 (Miss. 1965).
However, “a third[-]party beneficiary may sue for a contract breach only
when the alleged broken condition was placed in the contract for his direct
benefit.” Trammell v. State, 622 So. 2d 1257, 1260 (Miss. 1993) (emphasis
added). The Mississippi Supreme Court provides the following analysis to
determine third-party beneficiary status:
(1) When the terms of the contract are expressly broad enough
to include the third party either by name or as one of a specified
class, and (2) the said third party was evidently within the in-
tent of the terms so used, the said third party will be within its
benefits, if (3) the promisee had, in fact, a substantial and artic-
ulate interest in the welfare of the said third party in respect to
the subject of the contract.
Simmons Hous., Inc. v. Shelton, 36 So. 3d 1283, 1286 (Miss. 2010) (quoting
Yazoo & M.V.R. Co. v. Sideboard, 133 So. 669, 671 (Miss. 1931)). This court
has recognized that a third-party beneficiary under Mississippi law “must
show that ‘the condition which is alleged to have been broken was placed in
the contract [between third parties] for his direct benefit.’” Gerard J.W. Bos
& Co., Inc. v. Harkins & Co., 883 F.2d 379, 382 (5th Cir. 1989) (quoting Ivy’s
Plumbing and Elec. v. Petrochem Maint., Inc., 463 F. Supp. 543, 549 (N.D.
Miss. 1978)).
In contrast, an incidental beneficiary to a contract does not acquire any
rights under the agreement. Rosenfelt v. Miss. Dev. Auth., 262 So. 3d 511, 519
(Miss. 2018) (citing Miss. High Sch. Activities Ass’n, Inc. v. Farris ex rel. Farris,
501 So. 2d 393, 396 (Miss. 1987)). A third party who is a “mere incidental
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beneficiary” lacks standing to sue for its breach. Trammell, 622 So. 2d at
1260. The Mississippi Supreme Court has held that a third party is an inci-
dental beneficiary rather than a third-party beneficiary when the contract
benefits flow directly to the contracting party and not to the third party;
“some benefit” is insufficient to confer third-party status. See, e.g., Farris,
501 So. 2d at 396 (concluding that “[w]hile the students obviously receive
some benefit . . . the benefit is more incidental than direct”); Rein v. Bench-
mark Constr. Co., 865 So. 2d 1134, 1147 (Miss. 2004) (noting the lack of rela-
tionship between the parties to support the conclusion that there were only
“incidental benefits from the contract”).
As discussed, Mortera’s name does not appear anywhere in the policy.
Section I coverage for property damage, which the parties agree is the rele-
vant provision, does not include Mortera as a beneficiary. It exclusively
names Kona Village as a beneficiary for property damage. Section I does,
however, extend coverage to certain property that Mortera alleges was dam-
aged because of the leak. Yet Mortera presents no indication that this provi-
sion was placed in the policy “for his direct benefit,” Trammell, 622 So. 2d
at 1260, and that he was “within the intent of the terms so used,” Simmons,
36 So. 3d at 1286. Instead, the policy language indicates that coverage was not
intended for individual unit owners. After explaining what types of property
are covered under Section I, the policy states that it does not cover “personal
property owned or used by or in the care, custody or control of a unit-owner
except for personal property listed in Paragraphs (a) or (b).” This limitation
highlights the incidental nature of any benefits to Mortera. Lastly, Mortera
does not explain how the policy’s potential coverage under Section II’s lia-
bility provisions for unit owners is “broad enough to include [him]” for cov-
erage under Section I as well. Id.
Third-party beneficiary status “must spring from the terms of the
contract itself,” and Mortera cites no provision of the contract—as opposed
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to other extrinsic evidence—indicating the policy benefits directly flow to
him. Burns, 171 So. 2d at 325. And we find no indication within the policy that
the contract’s provisions directly benefit Mortera. So the district court cor-
rectly determined that, while there may be incidental benefits to Mortera, the
express terms of the contract dictate that the benefits for property damage
flow directly to Kona Village, not Mortera.
III.
Mortera has failed to create any genuine issue of material fact that he
was a party to the policy such that a breach could have occurred. And because
Mortera’s claims for damages were premised wholly on his failed breach of
contract claim, these claims likewise fail. The district court properly granted
summary judgment.
For the foregoing reasons, we AFFIRM.
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