Court Opinion

ID: 6343661
Source: CourtListenerOpinion
Date Created: 2022-05-25 00:00:20.792916+00
Date Added: 2024-06-11T08:42:05.231706
License: Public Domain

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   opinion should not be published and is not precedent except under the limited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.
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                                    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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