Court: Louisiana Court of Appeal; December 13, 2011; Louisiana; State Appellate Court
The district court's judgment favored Citimortgage, Inc. over Louisiana Citizens Property Insurance Corporation regarding the alleged conversion of insurance proceeds following Hurricane Katrina. The insured, Diane Broussard Poree, had a mortgage with Citimortgage and had filed a claim for insurance losses before her death in 2006. After her death, her executrix, Nikecia Chase, received a check for $56,363.27 from Louisiana Citizens, intended for both her and Citimortgage. Chase endorsed the check but failed to pay Citimortgage, instead converting the funds for personal use. Citimortgage, as a loss payee, argued that Louisiana Citizens breached its contractual obligations by issuing the check to Chase, which left Citimortgage unprotected. The district court denied Louisiana Citizens' motion for summary judgment and granted Citimortgage's motion, concluding that Citimortgage was entitled to recover the funds due to the lack of genuine dispute over the endorsement issue and the conversion of funds, which deprived Citimortgage of its rightful benefit.
Louisiana Citizens filed a timely appeal, raising two assignments of error: first, the district court incorrectly denied its motion for summary judgment, arguing that Citimortgage did not provide evidence contradicting Louisiana Citizens' fulfillment of its obligations under the policy issued to Ms. Poree; second, the district court improperly granted Citimortgage's partial motion for summary judgment for the same reason. The excerpt references a standard of review for summary judgments, emphasizing that such procedures aim for just and efficient resolutions and that appellate courts review these motions de novo. Summary judgment is warranted if there is no genuine issue of material fact and the mover is entitled to judgment as a matter of law. Once the moving party establishes a prima facie case, the burden shifts to the non-moving party to present evidence demonstrating a material factual issue, rather than relying solely on pleadings. In the context of insurance contracts, the excerpt notes that these are interpreted according to general contract rules. Clear and unambiguous policy language must be adhered to, and any failure to perform contractual obligations can result from nonperformance, defective performance, or delays, establishing liability for damages.
Louisiana Citizens contends that the district court wrongly denied its summary judgment motion, claiming Citimortgage did not provide evidence that Louisiana Citizens failed to meet its obligations under the insurance policy for Ms. Poree. Louisiana Citizens asserts it fulfilled its duties by issuing a check to the designated representative of the insured and properly identifying payees. In contrast, Citimortgage argues that Louisiana Citizens breached the insurance contract by not paying it, referencing the mortgage clause in the 'Homeowners 2 Broad Form' policy. This clause stipulates that any loss under Coverage A or B must be paid to the named mortgagee, which is Citimortgage, according to the order of precedence. The policy contains a simple mortgage clause, indicating that the insurance proceeds should first be paid to the mortgagee's interest. However, Louisiana Citizens issued a check listing Ms. Poree as the first payee and Citimortgage as the third, violating the policy’s order of payment. This discrepancy indicates a breach of duty, creating a genuine issue of material fact that prevents summary judgment in favor of Louisiana Citizens. Additionally, Louisiana Citizens argues that the district court incorrectly granted Citimortgage's partial summary judgment motion, asserting Citimortgage failed to provide evidence countering its compliance with the insurance policy.
Louisiana Citizens asserts it fulfilled its obligations by issuing an insurance check to Ms. Poree through her executrix, Ms. Chase. It claims that the check's negotiation, endorsed only by Liberty Bank and Ms. Chase, renders them liable for damages, relieving Louisiana Citizens of any further obligations post-issuance. The company argues that Liberty Bank failed to exercise reasonable care by cashing the check without proper endorsement, thereby incurring liability.
Citimortgage, in its partial motion for summary judgment, contends that Louisiana Citizens is liable for damages due to the check improperly naming 'CIT c/o Ms. Chase' as a payee, which misleadingly implied Ms. Chase represented CIT's interests. Citimortgage states it did not authorize Ms. Chase to collect funds on its behalf and that Louisiana Citizens breached its contractual obligations by allowing Ms. Chase access to the funds without proper joint payee designation.
Citimortgage further argues the check's ambiguous wording created an appearance of agency, allowing Ms. Chase to cash it without Citimortgage's endorsement. It maintains that the ambiguous payee designation constitutes a breach of the insurance contract. As a loss payee, Citimortgage claims rights as either an additional insured or third-party beneficiary under Louisiana law, enabling it to demand specific performance from Louisiana Citizens.
Citimortgage emphasizes that Louisiana Citizens improperly issued the check to multiple parties despite its obligation to pay the entitled party, as supported by an affidavit indicating Citimortgage's loan balance matched the insurance proceeds. The actions of Louisiana Citizens allegedly led to damages by allowing Ms. Chase to convert the funds intended for property restoration and loan repayment due to the ambiguous payee designation. Additionally, Louisiana Revised Statute 10:3-110(d) clarifies that a check payable to multiple persons alternatively can be negotiated by any of them in possession.
An instrument payable to multiple persons must be negotiated, discharged, or enforced by all of them unless stated otherwise. If the instrument is ambiguous regarding alternative payment, it is treated as payable to the individuals alternatively. In this case, a check listed multiple payees, which allowed any named payee to negotiate it without needing the consent of others. Citimortgage, the primary mortgagee, should have been listed as the first payee but was instead referred to as 'CIT' c/o Nikecia Chase, while Liberty Bank was named first. Louisiana Citizens was obligated to fulfill its insurance contract by paying Ms. Poree and ensuring the correct identification and order of mortgagees on the check. There were no disputed material facts regarding the improper issuance of the check, and Citimortgage is entitled to recover amounts from Louisiana Citizens for failing to meet its obligations. The judgment of the district court is affirmed.
