First Trinity Capital Corp. v. Canal Indem. Ins. Co., Civil No. 3:12CV891-HSO-RHW

FIRST TRINITY CAPITAL CORPORATION PLAINTIFF/COUNTER-DEFENDANT v. CANAL INDEMNITY INSURANCE COMPANY and SOUTHERN CROSSUNDERWRITERS, INC. DEFENDANTS/COUNTER-CLAIMANTS

Civil No. 3:12CV891-HSO-RHW

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI NORTHERN DIVISION

SO ORDERED: January 10, 2014

MEMORANDUM OPINION AND ORDER GRANTING

DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

BEFORE THE COURT is the Motion for Summary Judgment [17] filed by Defendants Canal Indemnity Insurance Company and Southern Cross Underwriters, Inc., on October 18, 2013. This Motion is now fully briefed. After due consideration of the record, the submissions on file, and relevant legal authorities, the Court finds that Defendants' Motion for Summary Judgment [17] should be granted and that Plaintiff First Trinity Capital Corporation's claims in this civil action should be dismissed with prejudice.

I. FACTS AND PROCEDURAL HISTORY

A. Factual Background

Plaintiff First Trinity Capital Corporation ["First Trinity" or "Plaintiff"] engages in the business of financing insurance premiums. First Am. Compl. [7] at15. Premium financing

involves an advance by the finance company to the insurance company or its agent of the premium due for the full term of the policy. This advance is then repaid by the insured to the finance company in amortized monthly installments which include an additional amount to cover financing charges. The finance company is secured in making this advance payment by obtaining the right to cancel the policy and to receive the return premium due upon cancellation if timely repayments are not made.

Baker & Co., Florida v. Preferred Risk Mut. Ins. Co., 569 F.2d 1347, 1348 (5th Cir. 1978).

At issue in this case are three insurance policies financed by First Trinity. First Trinity financed insurance policy premiums on behalf of Harper Trucking ["Harper"], Eddie Johnson ["Johnson"], and Anthony Greg Groves ["Groves"] [collectively, the "Insureds"] which were purportedly obtained by the Insureds from Defendant Canal Indemnity Insurance Company ["Canal"] through Central Mississippi Insurance ["CMI"]. First Am. Compl. [7] at 16-21. According to First Trinity, the Harper policy had effective dates of June 11, 2009, to June 11, 2010, the Johnson policy was issued by Canal Insurance as Policy No. PIA04839201, and the Groves policy was issued by Canal Insurance as Policy No. PIA04868901. Id. at 16, 18, 20.¹

According to the First Amended Complaint [7], First Trinity agreed to tender the annual premiums on each policy, less each Insured's down payment. Inexchange, each Insured executed a premium finance agreement² in which they promised to repay First Trinity the monies advanced plus interest and finance charges, in amortized monthly installments. Id. Each Insured also assigned all unearned premiums to First Trinity and granted First Trinity a power of attorney to cancel the policies after notice and receive the unearned premiums on the policies in the event of default under the premium finance agreement. First Am. Compl. [7] at 16-21.³

First Trinity contends that it informed Canal and Canal's general agent, Defendant Southern Cross Underwriters, Inc. ["Southern Cross"] [collectively, "Defendants"], that it had financed each Insured's premium payments and that each Insured's rights in any unearned premiums had been assigned to First Trinity. Id. at 17-21. When the Insureds defaulted on their repayment obligations, First Trinity claims that it sent Notices of Cancellation for each policy to the respective Insured, as well as to Defendants. Id. First Trinity alleges that although Defendants were obligated under Mississippi law to repay to First Trinity allunearned premiums as of the date of cancellation of each policy, they have refused to do so. Id.

B. Procedural History

First Trinity filed a Complaint [7] in the Circuit Court of Hinds County, Mississippi, First Judicial District, on August 6, 2012, naming Canal and Southern Cross as Defendants. Compl. [7] at 2. On September 4, 2012, First Trinity filed a First Amended Complaint [7], which advances claims against Defendants for breach of statutory law and negligence per se, breach of contract, negligence, fraud, constructive trust, and actual and apparent authority. First Am. Compl. [7] at 22-27.⁴ First Trinity seeks the return of the unearned premiums it paid on behalf of Harper, Johnson, and Groves, as well as punitive damages, costs, expenses, interest, and attorneys' fees.

Defendants removed the case on December 27, 2012, invoking this Court's diversity jurisdiction pursuant to 28 U.S.C. § 1332. Notice of Removal [1] at 1-2. Southern Cross and Canal each filed Answers and Counterclaims [3], [5] againstFirst Trinity. In their present Motion, Southern Cross and Canal seek dismissal of all claims asserted against them in the First Amended Complaint. Mot. [17] at 2.

First Trinity claims that Defendants failed to return unearned premiums after their receipt of notices of cancellation of the Insureds' insurance policies, as required by Mississippi law. First Am. Compl. [7] at 22-24. In the alternative, First Trinity asserts that in the event the insurance policies were not actually issued by Canal, Defendants perpetrated a fraud by and through their purported agent, CMI. First Trinity charges that Defendants were negligent in their supervision of CMI as their purported agent. Id. at 24-25. The parties indicate in their summary judgment briefing that Jan Gunn ["Gunn"], the owner of CMI, made misrepresentations and misappropriated certain premium finance funds rather than turning them over to the insurers. As a result, First Trinity has filed a number of other lawsuits in this Court against various insurance companies. See Defs.' Mem. in Supp. of Mot. for Summ. J. [18] at 5-6; Pl.'s Mem. in Supp. of Resp. [24] at 2, 7, 19; see also, e.g., First Trinity Capital Corp. v. Catlin Specialty Ins., No. 3:13cv9-TSL-JMR (S.D. Miss.); First Trinity Capital Corp. v. Arch Ins. Co., No. 3:12cv310-HTW-LRA (S.D. Miss.); First Trinity Capital Corp. v. State National Ins. Co., No. 1:12-cv-253-LG-JMR (S.D. Miss.); First Trinity Capital Corp. v. Gramercy Ins. Co., No. 3:11-cv-795-CWR-FKB (S.D. Miss.). First Trinity asserts that it first learned of Gunn's fraud in August 2009. Pl.'s Mem. in Supp. of Resp. [24] at 5; Aff. of Clarence Zahn [21-3] at 5-6.

First Trinity alleges that CMI acted as Defendants' agent because CMI exhibited actual and apparent authority to do all acts on behalf of Defendants incidental to the sale of the insurance policies and the collection of their premium payments. First Trinity further asserts that Defendants have obtained and/or are holding property which in equity and good conscience belong to First Trinity such that the Court should impose a constructive trust on the funds. Id. at 26.

Defendants argue that CMI's Gunn was not acting as their agent, but as First Trinity's agent, during the solicitation, negotiation, execution, and performing of the premium finance agreements, such that any claims based upon an agency theory fail as a matter of law. Defs.' Mem. in Supp. of Mot. for Summ. J. [18] at 4-6. Even if the Court finds that Gunn was Defendants' agent, Defendants posit that dismissal is nevertheless required because Gunn served as a dual agent. Id. at 6-7. Defendants also argue that First Trinity cannot and has not presented any evidence supporting its claims for negligence, imposition of a constructive trust, or punitive damages. Id. at 7.⁵

II. DISCUSSION

A. Summary Judgment Standard

Federal Rule of Civil Procedure 56(a) provides that summary judgment is appropriate "if the movant shows that there is no genuine dispute as to anymaterial fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). If the movant meets this burden, "the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). To rebut a properly supported motion for summary judgment, the opposing party must show, with "significant probative evidence," that there exists a genuine issue of material fact. Hamilton v. Segue Software, Inc., 232 F.3d 473, 477 (5th Cir. 2000). In deciding whether summary judgment is appropriate, the Court views facts and inferences in the light most favorable to the nonmoving party. RSR Corp. v. Int'l Ins. Co., 612 F.3d 851, 858 (5th Cir. 2010). However, if the evidence is merely colorable, or is not significantly probative, summary judgment is appropriate. Cutting Underwater Techs. USA, Inc. v. ENI U.S. Operating Co., 671 F.3d 512, 516 (5th Cir. 2012)(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)).

B. Analysis

The Court has jurisdiction over this matter pursuant to diversity of citizenship under 28 U.S.C. § 1332. "Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law." Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996); see also Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). The Court applies Mississippi law in this case. See, e.g., Truong v. Bank of America, N.A., 717 F.3d 377, 382 (5th Cir. 2013).

1. Plaintiff's Claims for Breach of Statutory Law, Negligence Per Se, and Breach of Contract

The thrust of these three claims is that Defendants failed to return unearned premiums to First Trinity after First Trinity tendered them notices of cancellation of the Insureds' policies. First Am. Compl. [7] at 22-24. Defendants argue that First Trinity cannot supply any evidence to create a genuine issue of material fact as to whether it is entitled to a refund of any unearned premiums. Defs.' Mem. in Supp. of Mot. for Summ. J. [18] at 3-4. Defendants also contend that First Trinity cannot produce valid premium finance agreements, notices of intent to cancel along with proof of delivery, or notices of cancellation for the three Insureds'...