United States District Court, S.D. Mississippi, Eastern Division
MEMORANDUM OPINION AND ORDER
KEITH STARRETT, District Judge.
This matter is before the Court on the Plaintiff Landmark American Insurance Company's Motion for Summary Judgment . Having considered the submissions of the parties, the record, and the applicable law, the Court finds that the motion is well taken and should be granted.
This is a declaratory judgment action concerning insurance coverage for fire damage to a two-story apartment building located at 1807 5th Avenue, Laurel, Mississippi, 39440 (the "Subject Property" or "Insured Premises"). Defendant Ryan Gatchell is the named insured under Insurance Policy No. LBA08499200 (the "Policy") [8-1], which was issued by Landmark American Insurance Company ("Landmark"). The Policy specifies a coverage period of September 22, 2010 to September 22, 2011, and provides a $90, 000.00 limit of insurance for the Insured Premises.
Gatchell claims that he paid Christopher Johansen $52, 980.00 in exchange for a 50% ownership interest in the Subject Property via a verbal agreement in May of 2007. Furthermore, Gatchell purportedly obtained the remaining interest in the Subject Property pursuant to a subsequent verbal agreement with Johansen in the summer of 2010. It is undisputed that no documents reflecting a change of ownership from Johansen to Gatchell were ever filed in the Jones County, Mississippi land records. Also, the land records clearly evidence the following chain of title pertinent to this dispute. On July 18, 2006, Johansen executed a Deed of Trust [39-4] encumbering the Subject Property in favor of PriorityOne Bank ("PriorityOne") in exchange for a loan in the amount of $54, 058.00. Johansen subsequently defaulted on his payment obligations under the Deed of Trust. ( See Substituted Trustee's Deed [39-5].) PriorityOne thus instituted foreclosure proceedings resulting in the Subject Property being sold to PriorityOne in exchange for a bid of $25, 600.00 at a foreclosure sale on September 24, 2010. ( See Substituted Trustee's Deed [39-5].) The Substituted Trustee's Deed, effecting the conveyance of the Subject Property to PriorityOne, was executed on September 29, 2010.
On November 22, 2010, a fire completely destroyed the apartment building on the Insured Premises. Gatchell subsequently submitted a claim for insurance proceeds to Landmark. Landmark then filed its Complaint for Declaratory Judgment ("Complaint")  pursuant to Federal Rule of Civil Procedure 57 and Title 28 U.S.C. § 2201. Subject matter jurisdiction is asserted on the basis of diversity of citizenship between Landmark and Gatchell. See 28 U.S.C. § 1332. The Complaint requests a judicial declaration regarding whether Gatchell possessed an insurable interest in the Subject Property at the time of the fire loss.
On January 26, 2015, Landmark filed its Motion for Summary Judgment . Landmark seeks an order holding that Gatchell is not entitled to any insurance benefits under the Policy. The motion has been fully briefed and the Court is ready to rule.
Federal Rule of Civil Procedure 56 provides that "[t]he court shall grant summary judgment 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). Initially, the movant has "the burden of demonstrating the absence of a genuine issue of material fact." Cannata v. Catholic Diocese of Austin, 700 F.3d 169, 172 (5th Cir. 2012) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). If the movant meets this burden, the nonmovant must go beyond the pleadings and point out specific facts showing the existence of a genuine issue for trial. Id. "An issue is material if its resolution could affect the outcome of the action." Sierra Club, Inc. v. Sandy Creek Energy Assocs., L.P., 627 F.3d 134, 138 (5th Cir. 2010) (quoting Daniels v. City of Arlington, Tex., 246 F.3d 500, 502 (5th Cir. 2001)). "An issue is genuine' if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party." Cuadra v. Houston Indep. Sch. Dist., 626 F.3d 808, 812 (5th Cir. 2010) (citation omitted).
The Court is not permitted to make credibility determinations or weigh the evidence. Deville v. Marcantel, 567 F.3d 156, 164 (5th Cir. 2009) (quoting Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007)). When deciding whether a genuine fact issue exists, "the court must view the facts and the inferences to be drawn therefrom in the light most favorable to the nonmoving party." Sierra Club, Inc., 627 F.3d at 138. However, "[c]onclusional allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation do not adequately substitute for specific facts showing a genuine issue for trial." Oliver v. Scott, 276 F.3d 736, 744 (5th Cir. 2002) (citation omitted). Summary Judgment is mandatory "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Brown v. Offshore Specialty Fabricators, Inc., 663 F.3d 759, 766 (5th Cir. 2011) (quoting Celotex Corp., 477 U.S. at 322).
Landmark argues that Gatchell cannot recover under the Policy because he lacked an insurable interest in the Subject Property at the time of the fire on November 22, 2010. "Mississippi follows the general rule that for a purchaser of an insurance policy to be entitled to proceeds from such policy, the purchaser must have an insurable interest in the property or life insured." First Colony Life Ins. Co. v. Sanford, 555 F.3d 177, 181 (5th Cir. 2009) (citing Se. Fid. Ins. Co. v. Gann, 340 So.2d 429, 434 (Miss. 1976); Nat'l Life & Accident Ins. Co. v. Ball, 157 Miss. 163, 127 So. 268, 268 (Miss. 1930)). The rationale for the rule is to prevent one without an interest in property from wagering on its destruction pursuant to an insurance contract. See Aetna Cas. & Sur. Co. v. Davidson, 715 F.Supp. 775, 777 (S.D.Miss. 1989) (citing Ball, 127 So. at 268). As to property insurance, the insurable interest must exist at the time the policy is issued and at the time of the loss. See, e.g., Nationwide Mut. Ins. Co. v. Baptist, No. 2:12cv97, 2013 WL 4829262, at *2 (N.D. Miss. Sept. 10, 2013), aff'd, 762 F.3d 447 (5th Cir. 2014); Rentrop v. Trustmark Nat'l Bank, No. 1:07cv384, 2008 WL 4371375, at *2 (S.D.Miss. Sept. 18, 2008); Camden Fire Ins. Ass'n v. Koch, 216 Miss. 576, 63 So.2d 103, 105 (Miss. 1953). The requisite interest may exist in a strict legal sense, such as title ownership, or be equitable in nature, such as a mortgage lender's lien on insurance proceeds. See Jackson, supra, § 15:5 (citations omitted).
Landmark contends that the pre-loss verbal agreements between Gatchell and Johansen failed to convey legal title to or ownership of the Subject Property. Gatchell does not appear to contest this point in opposition to summary judgment. Rather, Gatchell focuses on his purported equitable interest in the Subject Property. A verbal agreement to convey real property fails to pass legal title under Mississippi law. See, e.g., Miss. Code Ann. § 89-1-3; Cooper v. United States, 8 Cl. Ct. 253, 254 (Cl. Ct. 1985); Smith v. Taylor, 183 Miss. 542, 184 So. 423, 424 (Miss. 1938). Therefore, there is no genuine issue as to any material fact precluding the Court from holding that Gatchell lacked an insurable interest in the Subject Property at the time of the loss based on legal title.
Landmark further argues that "Gatchell acquired no greater interest in the property than Johansen had, and that interest, legal, equitable or otherwise, was extinguished by the pre-loss foreclosure." (Pl.'s Mem. Brief in Supp. of Mot. for SJ  at p. 15.) Gatchell does not dispute the validity of the conveyance by foreclosure. Gatchell argues that he possessed a pecuniary interest in the Subject Property at the time of the fire, which is all that is required to establish an insurable interest, notwithstanding the prior foreclosure sale. For the reasons discussed below, the Court also determines that there ...