The Standard Fire Insurance Co. v. Carr

          MEMORANDUM OPINION & ORDER ^[1]

          STACI G. CORNELIUS U.S. MAGISTRATE JUDGE

         Pending before the undersigned is an unopposed motion for summary judgment filed by defendant Wells Fargo Bank, National Association. (Doc. 46; see Docs. 47-48). Also pending before the undersigned is a motion to approve a proposed settlement between the plaintiff and defendant Donald R. Carr, filed by Michael K. Beard, who serves as Mr. Carr’s appointed counsel and guardian ad litem. (Doc. 48). For the reasons discussed below, both motions are due to be granted and this action is due to be dismissed.

         I. Background

         Mr. Carr owns a home in Adamsville, Alabama (the “Property”). (Doc. 46 at 2). Standard Fire issued an insurance policy to Mr. Carr, providing coverage for fire damage sustained by the Property and its contents (the “Insurance Policy”). (Id. at 3). Wells Fargo Bank, National Association, holds a mortgage secured by the Property (the “Mortgage”). (Id. at 2).

         A fire occurred at the Property on February 19, 2016. (Id. at 4). According to Standard Fire, Donna K. McCullars, acting under a power-of-attorney granted her by Mr. Carr, submitted one or more claims under the Insurance Policy on Mr. Carr’s behalf for damage to the Property and personal property belonging to her and Steve A. Millwood, allegedly located within the Property. (Doc. 1).^[2] Wells Fargo also submitted a claim to Standard Fire for damage to the Property. (Doc. 46 at 5). Faced with competing claims to proceeds of the Policy, Standard Fire interpleaded the sum of $27, 657.73, which represents the amount required to pay off the Mortgage, pursuant to 28 U.S.C. § 1335. (Docs. 1, 5, 11, 13).

         Standard Fire also seeks declarations regarding coverage due Mr. Carr, Ms. McCullars, and Mr. Millwood under the Insurance Policy, based in part on misrepresentations made regarding the personal property alleged to have been damaged by the fire. (Doc. 1). According to Standard Fire, much of the personal property belonging to Ms. McCullars and Mr. Millwood had been removed from the Property or sold before the fire. (Id.). Ms. McCullars and Mr. Millwood were each indicted by the Jefferson County, Alabama Grand Jury on one count of arson and one count of insurance fraud related to the fire. See State of Alabama v. Millwood, 01-CC-2016-003670.00 at Doc. 2; State of Alabama v. McCullars, 01-CC-2016-003671.00 at Doc. 2. Since Standard Fire brought suit in this district court, Ms. McCullars and Mr. Millwood have pleaded guilty to the insurance fraud charges, and the arson charges have been dismissed. See State of Alabama v. Millwood, 01-CC-2016-003670.00 at Doc. 70; State of Alabama v. McCullars, 01-CC-2016-003671.00 at Docs. 39; 47.

         The undersigned appointed Mr. Beard to serve as counsel and guardian ad litem for Mr. Carr after determining Mr. Carr is not capable of protecting his interests in this action. (Docs. 32, 41). Mr. Beard, on behalf of Mr. Carr, has asserted a counterclaim against Standard Fire, alleging any wrongful acts committed by Ms. McCullars and Mr. Millwood should not be imputed to Mr. Carr and that as an innocent insured Mr. Carr is entitled to benefits recoverable under the Insurance Policy. (Doc. 40).

         II. Relevant Procedural History

         Ms. McCullars and Mr. Millwood, proceeding pro se, appeared in this action initially but subsequently failed to appear at multiple settings where their presence was required. These failures are documented in an order dated January 24, 2019. (Doc. 41). That order advised Ms. McCullars and Mr. Millwood their failure to appear at future settings could result in their dismissal from this action without further notice. (Id.). Orders entered in this action have been sent to Ms. McCullars and Mr. Millwood through both the United States Postal Service and e-mail. The physical address and e-mail addresses to which orders have been sent were provided to the court by Ms. McCullars and Mr. Millwood.^[3] The undersigned has confirmed the accuracy of the addresses on multiple occasions and also confirmed that e-mail is the best way to deliver notices regarding this case to Ms. McCullars and Mr. Millwood.

         Ms. McCullars and Mr. Millwood have failed to participate in these proceedings beyond failing to appear at settings in the case. Neither of these defendants participated in the planning meeting conducted pursuant to Rule 26 of the Federal Rules of Civil Procedure, (Doc. 44 at 1), or responded to Wells Fargo’s motion for summary judgment (Doc. 47).^[4]

         The motion for summary judgment filed by Wells Fargo and the motion for approval of a proposed settlement filed on Mr. Carr’s behalf were set for hearing on August 20, 2019. (Doc. 49). Each party was required to attend the hearing through counsel or, if not represented by counsel, on his or her own behalf. (Id.). The parties were also warned the consequence of a failure to appear would be dismissal from this action without further notice. (Id.). The hearing was reset for Monday, September 9, 2019, after Mr. Beard informed the undersigned Mr. Carr was unable to be present on August 20, 2019 for health reasons. (Doc. 50). The parties were again reminded attendance at the hearing was required and that failure to attend would result in dismissal without further notice. (Id.). The order resetting the hearing was served on Ms. McCullars and Mr. Millwood via Certified Mail and e-mail at the addresses provided by these defendants. (Id.). The court received a return receipt for the order sent to Mr. Millwood by Certified Mail. (Doc. 51). The order sent to Ms. McCullars by Certified Mail was returned to the court as undeliverable on the date of the hearing. (Doc. 52).

         On the morning of the hearing, which was scheduled to begin at 10:00 A.M., the undersigned received a phone call from Mr. Beard, stating he had just learned from Ms. McCullars that Mr. Carr had been hospitalized over the weekend and would not be able to attend the hearing. Ms. McCullars and Mr. Millwood did not attend the hearing, either.

         III. Wells Fargo’s Motion for Summary Judgment

         A. Facts^[5]

         Wells Fargo seeks entry of judgment in its favor based on the terms of the Insurance Policy and the Mortgage. (Doc. 46). The Insurance Policy provides, “If a mortgagee is named in this policy, any loss payable under Coverage A or B shall be paid to the mortgagee and [the mortgagor/insured], as interests appear.” (Id. at 3).^[6] It identifies Wells Fargo as the first and only mortgagee. (Id. at 4).

         The Mortgage provides that insurance proceeds “shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and [Wells Fargo’s] security interest is not lessened, ” but that “[i]f the restoration or repair is not economically feasible or [Wells Fargo’s] security would be lessened, the insurance proceeds shall be applied to the sums secured [under the Mortgage], whether or not then due, with the excess, if any, paid to [Mr. Carr].” (Id. at 3). The Mortgage also gives Wells Fargo the right of foreclosure upon the breach of any term, including the obligation to make loan payments when due. (Id. at 5). Mr. Carr defaulted on the ...