State Farm Fire & Casualty Co. v. Cedric Flowers

Case: 16-60310 Document: 00513969671 Page: 1 Date Filed: 04/26/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 16-60310 FILED
Summary Calendar April 26, 2017
Lyle W. Cayce
Clerk
STATE FARM FIRE & CASUALTY COMPANY,
Plaintiff - Appellee
v.
CEDRIC FLOWERS; RENEE FLOWERS; ASHLEY SIMMONS; MICHAEL
SIMMONS,
Defendants - Appellants
Appeals from the United States District Court
for the Northern District of Mississippi
Before JOLLY, SOUTHWICK, and HIGGINSON, Circuit Judges.
STEPHEN A. HIGGINSON, Circuit Judge:
Defendants-Appellants Cedric and Renee Flowers and Renee’s children,
Ashley and Michael Simmons, appeal the district court’s grant of Plaintiff-
Appellee State Farm Fire and Casualty Insurance Company’s motion for
summary judgment. State Farm brought this declaratory judgment action
seeking to have a homeowner’s insurance policy issued by State Farm to Cedric
Flowers declared void ab initio as a result of material misrepresentations made
by Cedric Flowers in his application for the policy. We AFFRIM.
Case: 16-60310 Document: 00513969671 Page: 2 Date Filed: 04/26/2017
No. 16-60310
I.
In 2008, Cedric and Renee Flowers purchased a plot of land in Courtland,
Mississippi, and asked relatives Ricky and Jennifer Scott to build a house for
them on the property for a set price. Because Cedric and Renee Flowers were
unable to obtain financing for construction of the house themselves, they
quitclaimed the property to the Scotts, who then obtained a construction loan
under their own names, using the property as collateral. According to Cedric
and Renee Flowers, the Scotts agreed to convey the property back to them upon
completion of the construction. Amid disputes with the Scotts over the cost and
scope of construction, Renee Flowers’s adult children, Ashley and Michael
Simmons, moved into the house before construction was completed. The Scotts
eventually defaulted on the construction loan and attempted to sell the
property. In 2011, unable to obtain financing to purchase the uncompleted
home, Cedric and Renee Flowers filed suit in state court to enjoin sale of the
property.
In April 2012, Cedric Flowers applied for and was issued a homeowner’s
insurance policy with State Farm. Shortly thereafter, during the night of July
17, 2012, a fire damaged the insured house and its contents. After discovering
Cedric Flowers was not actually the owner of the property, State Farm filed
suit seeking a determination that the insurance policy is void ab initio as a
result of material misrepresentations made by Cedric Flowers in his
application. Following discovery, State Farm filed a motion for summary
judgment, which the district court granted. Cedric Flowers, Renee Flowers,
Ashley Simmons, and Michael Simmons now appeal.
II.
This court reviews a district court’s grant of summary judgment de novo,
applying the same standard as the district court. Carroll v. Metro. Ins. &
Annuity Co., 166 F.3d 802, 805 (5th Cir. 1999). Summary judgment is only
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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 resolve factual controversies in favor of the nonmoving
party, but only when there is an actual controversy, that is, when both parties
have submitted evidence of contradictory facts.” Little v. Liquid Air Corp., 37
F.3d 1069, 1075 (5th Cir. 1994). Mississippi substantive law applies to this
diversity case. See Cox v. Wal-Mart Stores E., L.P., 755 F.3d 231, 233 (5th Cir.
2014).
III.
Under Mississippi law, “[i]f the applicant for insurance undertakes to
make a positive statement of a fact, if it be material to the risk, such fact must
be true.” Prudential Ins. Co. of Am. v. Estate of Russell, 274 So. 2d 113, 116
(Miss. 1973) (quoting Fidelity Mut. Life Ins. Co. v. Miazza, 46 So. 817, 819
(Miss. 1908)). An insurance contract “induced by misrepresentation or
concealment of material facts may be avoided by the party injuriously
affected[.]” Id. (quoting Miazza, 46 So. at 819); see also Carroll, 166 F.3d at 805(“Under Mississippi law, if an applicant for insurance is found to have made a
misstatement of material fact in the application, the insurer that issued a
policy based on the false application is entitled to void or rescind the policy.”).
Importantly, “[i]t is not sufficient that [the applicant] believes [the statement]
true, but it must be so in fact, or the policy will be avoided, provided, always,
that the misstatement be about a material matter[.]” Russell, 274 So. 2d at 116
(quoting Miazza, 46 So. at 819).
“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). Further,
materiality is judged at the time of the misrepresentation. Edmiston v.
Schellenger, 343 So. 2d 465, 467 (Miss. 1977). An insurer seeking to void an
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insurance contract based on a material misrepresentation must establish the
existence of the factual misstatement and its materiality by clear and
convincing evidence. See Brewster v. Bubba Oustalet, Inc., 231 So. 2d 189 (Miss.
1970) (“It has been the rule in this state for a long time that where fraud is
charged it must be shown by evidence which is clear and more convincing that
a mere preponderance.”); see also Carroll, 166 F.3d at 805 (applying
Mississippi law); Gardner v. Wilkinson, 643 F.2d 1135, 1136, n.3 (5th Cir. 1981)
(same).
Here, Appellants do not dispute that, contrary to the information
contained in the application, Cedric Flowers did not own the insured property
when he applied for the State Farm homeowner’s policy in April 2012. 1 Nor do
they dispute that Cedric Flowers’s ownership of the property was material to
State Farm’s decision to issue the insurance policy. 2 Instead, Appellants insist
that there is no evidence that he willfully misrepresented that he was the
property’s owner and argue that there is a genuine question of fact as to
whether Cedric Flowers actually told the agent who took his application that
he owned the property.
Contrary to the Appellants’ description of the decision below, the district
court did not find that Cedric Flowers “knowingly” misrepresented ownership
of the property on his application. This is because, as the district court noted,
whether the misrepresentation “was intentional, negligent, or the result of
mistake or oversight is of no consequence.” State Farm Fire & Cas. Ins. Co. v.
Flowers, No. 3:15-CV-99-SA-SAA, 2016 WL 1621997, at *2 (N.D. Miss. Apr. 19,
1 Under Mississippi law, a conveyance of quitclaim is “sufficient to pass all the estate
or interest the grantor has in the land conveyed.” Miss. Code § 89-1-39.
2 State Farm submitted an affidavit stating that it is against the company’s
underwriting guidelines to issue homeowner’s insurance policies to non-owners, and the
agent who took Cedric Flowers’s application stated in an affidavit that she would have not
issued the policy had she known Cedric Flowers was not the owner.
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2016) (quoting Republic Fire & Cas. Ins. Co. v. Azlin, No. 4:10-CV-037-SA, 2012
WL 4482355, at *6–7 (N.D. Miss. Sept. 26, 2012)); see also Russell, 274 So. 2d
at 116 (quoting Miazza, 46 So. at 819); Carroll, 166 F.3d at 805; F.D.I.C. v.
Denson, 908 F. Supp. 2d 792, 797 (S.D. Miss. 2012). Thus, we find unavailing
Appellants’ argument that there is a genuine issue of fact as to whether Cedric
Flowers “reasonably, and in good faith, believed that he was the owner of the
property.”
We are similarly unpersuaded by Appellants claim that there is a
genuine issue of fact as to whether Cedric Flowers misstated in his application
that he was the owner of the property. In support of their argument, Appellants
rely on deposition testimony in which Cedric Flowers claimed that he does not
remember the questions asked by the State Farm employee and that the
meeting was not long enough for her to have asked many questions—
suggesting instead that it was the State Farm agent who negligently assumed
that Cedric Flowers owned the insured property.
As the district court noted, however, in both his answer to State Farm’s
complaint and his response to State Farm’s request for admission, Cedric
Flowers admitted to telling the agent who took his insurance application that
he was the owner of the property and to stating as much in his application. The
district court concluded that these facts were judicially admitted, and therefore
rejected Appellants’ argument as an impermissible “attempt to create a dispute
around a material fact already admitted.” Flowers, 2016 WL 1621997, at *3
n.4; see also McCreary v. Richardson, 738 F.3d 651, n.5 (5th Cir. 2012), as
revised (Oct. 9, 2013) (“This circuit has long noted that factual statements in
pleadings constitute binding judicial admissions. . . .”). Although Appellants
continue to point to Cedric Flowers’s deposition testimony and insist that there
is a genuine issue of fact as to whether he stated in his application that he
owned the property, they do not attempt to address the district court’s finding
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that he judicially admitted facts to the contrary. See Davis v. A.G. Edwards
and Sons, Inc., 823 F.2d 105, 107–08 (5th Cir. 1987) (“Irrespective of which
document contains the more accurate account, the [litigants] are bound by the
admissions in their pleadings, and thus no factual issue can be evoked by
comparing their pleadings with [an] affidavit.”).
We therefore agree that there is no actual controversy over whether
Cedric Flowers made a material misstatement on his insurance application.
Accordingly, we AFFIRM the judgment of the district court.
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